-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M6Jse2VONNdqr7Szm6en69W1lMbiZ2R1bhgqEsbVdBEo3mTufd12mxAF0opEFwcv gtwaEKRKHL4LV5AlEYID5A== 0001104659-04-041144.txt : 20041223 0001104659-04-041144.hdr.sgml : 20041223 20041223152914 ACCESSION NUMBER: 0001104659-04-041144 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20041222 ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041223 DATE AS OF CHANGE: 20041223 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARDIOTECH INTERNATIONAL INC CENTRAL INDEX KEY: 0001011060 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 043186647 STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11737 FILM NUMBER: 041224179 BUSINESS ADDRESS: STREET 1: 78-E OLYMPIA AVENUE CITY: WOBURN STATE: MA ZIP: 01801-4772 BUSINESS PHONE: 7819334772 MAIL ADDRESS: STREET 1: 11 STATE ST CITY: WOBURN STATE: MA ZIP: 01801 8-K 1 a04-15265_18k.htm 8-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 8-K

 

Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

Date of Report (Date of Earliest Event Reported):  December 22, 2004

 

CardioTech International, Inc.

(Exact name of Registrant as Specified in its Charter)

 

MASSACHUSETTS

(State or Other Jurisdiction of Incorporation)

 

000-28034

04-3186647

(Commission File Number)

(I.R.S. Employer Identification Number)

 

229 Andover Street

Wilmington, Massachusetts 01887

 (Address of Principal Executive Offices, including Zip Code)

 

(978) 657-0075

 (Registrant’s Telephone Number, including Area Code)

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions (see General Instruction A.2 below):

 

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425).

 

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12).

 

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)).

 

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)).

 

 


 

Item 3.02                         Unregistered Sales of Equity Securities.

 

On December 22, 2004, we issued 1,139,586 shares of our common stock at $2.40 per share in a private placement with the following 7 investors:  Gryphon Master Fund, L.P., GSSF Master Fund, LP, Truk Opportunity Fund, LLC, Truk International Fund, LP, Meadowbrook Opportunity Fund LLC, Capital Ventures International and Iroquois Capital, L.P.  The Company received $2,735,006 in gross proceeds, less placement agent fees and related transaction costs of approximately $219,100.

 

In connection with the transaction, we issued warrants to the investors to purchase 569,793 shares of common stock at an exercise price of $3.00 per share, which are exercisable until December 22, 2009.  In addition, the investors have rights to purchase up to 1,139,586 shares of common stock at a price of $2.40 per share, which are exercisable for a period commencing on December 22, 2004 and ending on the earlier of (i) December 22, 2005 or (ii) ninety (90) days after the effective date of a registration statement, which is required to be filed no later than January 21, 2005.  We also issued warrants to the placement agent to purchase 113,959 shares of our common stock at an exercise price of $2.40 per share and 56,979 shares of our common stock at an exercise price of $3.00 per share, which are exercisable until December 22, 2009.  Should the investors exercise the additional investment rights (described above), the placement agent will receive an additional warrant up to 113,959 shares of common stock at an exercise price of $2.40 per share.

 

This private placement was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.

 

Item 9.01                         Financial Statements and Exhibits.

 

 

(c) Exhibits

 

 

 

4.1 Form of Warrant

 

 

 

4.2 Form of Placement Agent Warrant

 

 

 

4.3 Form of Additional Investment Right

 

 

 

10.1 Securities Purchase Agreement

 

 

 

10.2 Registration Rights Agreement

 

 

 

10.3 Lock-Up Agreement

 

 

 

99.1  Copy of Press Release dated December 22, 2004

 

This Current Report on Form 8-K may contain, among other things, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, (i) statements with respect to the Company’s plans, objectives, expectations and intentions; and (ii) other statements identified by words such as “may”, “could”, “would”, “should”, “believes”, “expects”, “anticipates”, “estimates”, “intends”, “plans” or similar expressions. These statements are based upon the current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. These forward-looking

 

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statements involve certain risks and uncertainties that are subject to change based on various factors (many of which are beyond the Company’s control).

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

CARDIOTECH INTERNATIONAL, INC.

 

 

 

 

By:

/s/ Michael Szycher, PhD.

 

 

 

Michael Szycher, PhD, Chairman and CEO

 

 

Date: December 22, 2004

 

 

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 EX-4.1 2 a04-15265_1ex4d1.htm EX-4.1

Exhibit 4.1

 

THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE OF THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED EXCEPT UPON DELIVERY TO THE CORPORATION OF AN OPINION OF COUNSEL SATISFACTORY IN FORM AND SUBSTANCE TO IT THAT SUCH TRANSFER WILL NOT VIOLATE THE SECURITIES ACT OF 1933, AS AMENDED

 

THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.

 

CardioTech International, Inc.

 

Warrant for the Purchase of Shares of Common Stock,

par value $0.01 per Share

 

No. W-   

        Shares

 

THIS CERTIFIES that, for value received,                  , whose address is                                           (the “Holder”), is entitled to subscribe for and purchase from CardioTech International, Inc., a Massachusetts corporation (the “Company”), upon the terms and conditions set forth herein,                shares of the Company’s Common Stock, par value $0.01 per share (“Common Stock”), at a price of $3.00 per share (the “Exercise Price”). As used herein the term “this Warrant” shall mean and include this Warrant and any Common Stock or Warrants hereafter issued as a consequence of the exercise or transfer of this Warrant in whole or in part.

 

The number of shares of Common Stock issuable upon exercise of the Warrants (the “Warrant Shares”) and the Exercise Price may be adjusted from time to time as hereinafter set forth. The Warrant Shares are entitled to the benefits, and subject to the obligations, set forth in the Registration Rights Agreement among the Company, the Holder and certain other parties dated concurrently herewith.

 

1.               Exercise Price and Exercise Period.  This Warrant may be exercised at any time or from time to time during the period commencing at 10:00 A.M. Eastern time on December 22, 2004 and ending at 5:00 P.M. Eastern Time on December 22, 2009 (the “Exercise Period”).

 

2.               Procedure for Exercise; Effect of Exercise.

 

(a)          Cash Exercise. This Warrant may be exercised, in whole or in part, by the Holder during normal business hours on any business day during the Exercise Period by (i) the presentation and surrender of this Warrant to the Company at its principal office along with a

 

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duly executed Notice of Exercise (in the form attached to this Agreement) specifying the number of Warrant Shares to be purchased, and (ii) delivery of payment to the Company of the Exercise Price for the number of Warrant Shares specified in the Notice of Exercise by cash, wire transfer of immediately available funds to a bank account specified by the Company, or by certified or bank cashier’s check.

 

(b)         Cashless Exercise.  This Warrant may also be exercised by the Holder through a cashless exercise, as described in this Section 2(b). In such case, this Warrant may be exercised, in whole or in part, by the Holder during normal business hours on any business day during the Exercise Period by the presentation and surrender of this Warrant to the Company at its principal office along with a duly executed Notice of Exercise specifying the number of Warrant Shares to be applied to such exercise. The number of shares of Common Stock to be issues upon exercise of this Warrant pursuant to this Section 2(b) shall equal the value of this Warrant (or the portion thereof being canceled) computed as of the date of delivery of this Warrant to the Company using the following formula:

 

 

X =

Y(A-B)
A

 

Where:

 

 

X  =  the number of shares of Common Stock to be issued to Holder under this Section 2(b);

 

Y  =  the number of Warrant Shares identified in the Notice of Exercise as being applied to the subject exercise;

 

A  =  the Current Market Price on such date; and

 

B  =  the Exercise Price on such date

 

For purposes of this Section 2(b), Current Market Price shall have the definition provided in Section 6(g).

 

The Company acknowledges and agrees that this Warrant was issued on the date set forth at the end of this Warrant. Consequently, the Company acknowledges and agrees that, if the Holder conducts a cashless exercise pursuant to this Section 2(b), the period during which the Holder held this Warrant may, for purposes of Rule 144 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), be “tacked” to the period during which the Holder holds the Warrant Shares received upon such cashless exercise.

 

Notwithstanding the foregoing, the Holder may conduct a cashless exercise pursuant to this Section 2(b) only after the first anniversary of the initial issuance date of this Warrant, and then only in the event that a registration statement covering the resale of the Warrant Shares is not then effective at the time that the Holder wishes to conduct such cashless exercise.

 

(c)          Effect of Exercise.  Upon receipt by the Company of this Warrant and a Notice of Exercise, together with proper payment of the Exercise Price, as provided in this Section 2,

 

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the Company agrees that such Warrant Shares shall be deemed to be issued to the Holder as the record holder of such Warrant Shares as of the close of business on the date on which this Warrant has been surrendered and payment has been made for such Warrant Shares in accordance with this Agreement and the Holder shall be deemed to be the holder of record of the Warrant Shares, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such Warrant Shares shall not then be actually delivered to the Holder. A stock certificate or certificates for the Warrant Shares specified in the Notice of Exercise shall be delivered to the Holder as promptly as practicable, and in any event within seven (7) business days, thereafter. The stock certificate(s) so delivered shall be in any such denominations as may be reasonably specified by the Holder in the Notice of Exercise.  If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the Warrant Shares subject to purchase hereunder.

 

3.               Registration of Warrants; Transfer of Warrants.  Any Warrants issued upon the transfer or exercise in part of this Warrant shall be numbered and shall be registered in a Warrant Register as they are issued. The Company shall be entitled to treat the registered holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person, and shall not be liable for any registration or transfer of Warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith.  This Warrant shall be transferable only on the books of the Company upon delivery thereof duly endorsed by the Holder or by its duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment, or authority to transfer.  In all cases of transfer by an attorney, executor, administrator, guardian, or other legal representative, duly authenticated evidence of his or its authority shall be produced.  Upon any registration of transfer, the Company shall deliver a new Warrant or Warrants to the person entitled thereto. This Warrant may be exchanged, at the option of the Holder thereof, for another Warrant, or other Warrants of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Warrant Shares, upon surrender to the Company or its duly authorized agent.

 

4.               Restrictions on Transfer.  (a) The Holder, as of the date of issuance hereof, represents to the Company that such Holder is acquiring the Warrants for its own account for investment purposes and not with a view to the distribution thereof or of the Warrant Shares.  Notwithstanding any provisions contained in this Warrant to the contrary, this Warrant and the related Warrant Shares shall not be transferable except pursuant to the proviso contained in the following sentence or upon the conditions specified in this Section 4, which conditions are intended, among other things, to insure compliance with the provisions of the Securities Act and applicable state law in respect of the transfer of this Warrant or such Warrant Shares. The Holder by acceptance of this Warrant agrees that the Holder will not transfer this Warrant or the related Warrant Shares prior to delivery to the Company of an opinion of the Holder’s counsel

 

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(as such opinion and such counsel are described in Section 4(b) hereof) or until registration of such Warrant Shares under the Securities Act has become effective or after a sale of such Warrant or Warrant Shares has been consummated pursuant to Rule 144 or Rule 144A under the Securities Act; provided, however, that the Holder may freely transfer this Warrant or such Warrant Shares (without delivery to the Company of an opinion of Counsel) (i) to one of its nominees, affiliates or a nominee thereof, (ii) to a pension or profit-sharing fund established and maintained for its employees or for the employees of any affiliate,  (iii) from a nominee to any of the aforementioned persons as beneficial owner of this Warrant or such Warrant Shares, or (iv) to a qualified institutional buyer, so long as such transfer is effected in compliance with Rule 144A under the Securities Act.

 

(b)                                 The Holder, by its acceptance hereof, agrees that prior to any transfer of this Warrant or of the related Warrant Shares (other than as permitted by Section 4(a) hereof or pursuant to a registration under the Securities Act), the Holder will give written notice to the Company of its intention to effect such transfer, together with an opinion of such counsel for the Holder as shall be reasonably acceptable to the Company, to the effect that the proposed transfer of this Warrant and/or such Warrant Shares may be effected without registration under the Securities Act.  Upon delivery of such notice and opinion to the Company, the Holder shall be entitled to transfer this Warrant and/or such Warrant Shares in accordance with the intended method of disposition specified in the notice to the Company.

 

(c)                                  Each stock certificate representing Warrant Shares issued upon exercise or exchange of this Warrant shall bear the following legend unless the opinion of counsel referred to in Section 4(b) states such legend is not required:

 

“THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED EXCEPT UPON DELIVERY TO THE CORPORATION OF AN OPINION OF COUNSEL SATISFACTORY IN FORM AND SUBSTANCE TO IT THAT SUCH TRANSFER WILL NOT VIOLATE THE SECURITIES ACT OF 1933, AS AMENDED.”

 

The Holder understands that the Company may place, and may instruct any transfer agent or depository for the Warrant Shares to place, a stop transfer notation in the securities records in respect of the Warrant Shares.

 

5.               Reservation of Shares. The Company shall at all times during the Exercise Period reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of providing for the exercise of the rights to purchase all Warrant Shares granted pursuant to the Warrants, such number of shares of Common Stock as shall, from time to time, be sufficient therefor.  The Company covenants that all shares of Common Stock issuable upon exercise of this Warrant, upon receipt by the Company of the full Exercise Price therefor, and all shares of Common Stock issuable upon conversion of this Warrant, shall be validly issued, fully paid, non-assessable, and free of preemptive rights.

 

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6.               Exercise Price Adjustments.  The Exercise Price shall be subject to adjustment from time to time as follows:

 

(a)                                  (i)  In the event that the Company shall (A) pay a dividend or make a distribution to all its stockholders, in shares of Common Stock, on any class of capital stock of the Company or any subsidiary which is not directly or indirectly wholly owned by the Company, (B) split or subdivide its outstanding Common Stock into a greater number of shares, or (C) combine its outstanding Common Stock into a smaller number of shares, then in each such case the Exercise Price in effect immediately prior thereto shall be adjusted so that the Holder of a Warrant thereafter surrendered for Exercise shall be entitled to receive the number of shares of Common Stock that such Holder would have owned or have been entitled to receive after the occurrence of any of the events described above had such Warrant been exercised immediately prior to the occurrence of such event.  An adjustment made pursuant to this Section 6(a)(i) shall become effective immediately after the close of business on the record date in the case of a dividend or distribution (except as provided in Section 6(e) below) and shall become effective immediately after the close of business on the effective date in the case of such subdivision, split or combination, as the case may be.  Any shares of Common Stock issuable in payment of a dividend shall be deemed to have been issued immediately prior to the close of business on the record date for such dividend for purposes of calculating the number of outstanding shares of Common Stock under clauses (ii) and (iii) below.

 

(ii)  In the event that the Company shall commit to issue or distribute New Securities (as defined in the Securities Purchase Agreement, of even date herewith, among the Company, the Holder and certain other Purchasers named therein), in any such case at a price less than $3.00 per share on the earliest of (A) the date the Company shall enter into a firm contract for such issuance or distribution, (B) the record date for the determination of stockholders entitled to receive any such New Securities, if applicable, or (C) the date of actual issuance or distribution of any such New Securities (provided that the issuance of Common Stock upon the exercise of New Securities that are rights, warrants, options or convertible or exchangeable securities (“New Derivative Securities”) will not cause an adjustment in the Exercise Price if no such adjustment would have been required at the time such New Derivative Security was issued), then the Exercise Price in effect immediately prior to such earliest date shall be adjusted so that the Exercise Price shall equal the price determined by multiplying the Exercise Price in effect immediately prior to such earliest date by the fraction:

 

(x) whose numerator shall be (I) the number of shares of Common Stock outstanding on such date plus (II) the number of shares of Common Stock which the aggregate offering price of the total number of New Securities so offered would have purchased at $3.00 per share (such amount, with respect to any New Derivative Securities, determined by multiplying the total number of shares of Common Stock subject thereto by the exercise price of such New Derivative Securities, and dividing the product so obtained by $3.00), and

 

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(y) whose denominator shall be (I) the number of shares of Common Stock outstanding on such date plus (II) the number of additional shares of Common Stock to be issued or distributed or receivable upon exercise of any such New Derivative Security.

 

Such adjustment shall be made successively whenever any such New Securities are issued. In determining whether any New Derivative Securities entitle the holders to subscribe for or purchase shares of Common Stock at less than $3.00 per share, and in determining the aggregate offering price of shares of Common Stock so issued, there shall be taken into account any consideration received by the Company for such Common Stock or New Derivative Securities, the value of such consideration, if other than cash, to be determined by the Board of Directors, whose determination shall be conclusive and described in a certificate filed with the records of corporate proceedings of the Company. If any New Derivative Security to purchase or acquire Common Stock, the issuance of which resulted in an adjustment in the Exercise Price pursuant to this subsection (ii) shall expire and shall not have been exercised, the Exercise Price shall immediately upon such expiration be recomputed to the Exercise Price which would have been in effect had the adjustment of the Exercise Price made upon the issuance of such New Derivative Security been made on the basis of offering for subscription, purchase or issuance, as the case may be, only of that number of shares of Common Stock actually purchased or issued upon the actual exercise of such New Derivative Security.

 

(iii)  No adjustment in the Exercise Price shall be required unless the adjustment would require an increase or decrease of at least 1% in the Exercise Price then in effect; provided, however, that any adjustments that by reason of this Section 6(a) are not required to be made shall be carried forward and taken into account in any subsequent adjustment.  All calculations under this Section 6(a) shall be made to the nearest cent or nearest 1/100th of a share.

 

(iv)  The Company from time to time may reduce the Exercise Price by any amount for any period of time in the discretion of the Board of Directors. A voluntary reduction of the Exercise Price does not change or adjust the Exercise Price otherwise in effect for purposes of this Section 6(a).

 

(v)  In the event that, at any time as a result of an adjustment made pursuant to Sections 6(a)(i) through 6(a)(iii) above, the Holder of any Warrant thereafter surrendered for exercise shall become entitled to receive any shares of the Company other than shares of the Common Stock, thereafter the number of such other shares so receivable upon exercise of any such Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Sections 6(a)(i) through 6(a)(iv) above, and the other provisions of this Section 6(a) with respect to the Common Stock shall apply on like terms to any such other shares.

 

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(b)                                 In case of any reclassification of the Common Stock (other than in a transaction to which Section 6(a)(i) applies), any consolidation of the Company with, or merger of the Company into, any other entity, any merger of another entity into the Company (other than a merger that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Company), any sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange, pursuant to which share exchange the Common Stock is converted into other securities, cash or other property, then lawful provision shall be made as part of the terms of such transaction whereby the Holder of a Warrant then outstanding shall have the right thereafter, during the period such Warrant shall be exercisable, to exercise such Warrant only for the kind and amount of securities, cash and other property receivable upon the reclassification, consolidation, merger, sale, transfer or share exchange by a holder of the number of shares of Common Stock of the Company into which a Warrant might have been able to exercise for immediately prior to the reclassification, consolidation, merger, sale, transfer or share exchange assuming that such holder of Common Stock failed to exercise rights of election, if any, as to the kind or amount of securities, cash or other property receivable upon consummation of such transaction subject to adjustment as provided in Section 6(a) above following the date of consummation of such transaction. The provisions of this Section 6(b) shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges.

 

(c)                                  If:

 

(i)                                     the Company shall take any action which would require an adjustment in the Exercise Price pursuant to Section 6(a); or

 

(ii)                                  the Company shall authorize the granting to the holders of its Common Stock generally of rights, warrants or options to subscribe for or purchase any shares of any class or any other rights, warrants or options; or

 

(iii)                               there shall be any reclassification or change of the Common Stock (other than a subdivision or combination of its outstanding Common Stock or a change in par value) or any consolidation, merger or statutory share exchange to which the Company is a party and for which approval of any stockholders of the Company is required, or the sale or transfer of all or substantially all of the assets of the Company; or

 

(iv)                              there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;

 

then, in each such case, the Company shall cause to be filed with the transfer agent for the Warrants and shall cause to be mailed to each Holder at such Holder’s address as shown on the books of the transfer agent for the Warrants, as promptly as possible, but at least 30 days prior

 

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to the applicable date hereinafter specified, a notice stating (A) the date on which a record is to be taken for the purpose of such dividend, distribution or granting of rights, warrants or options, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights, warrants or options are to be determined, or (B) the date on which such reclassification, change, consolidation, merger, statutory share exchange, sale, transfer, dissolution, liquidation or winding-up is expected to become effective or occur, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, change, consolidation, merger, statutory share exchange, sale, transfer, dissolution, liquidation or winding up.  Failure to give such notice or any defect therein shall not affect the legality or validity of the proceedings described in this Section 6(c).

 

(d)                                 Whenever the Exercise Price is adjusted as herein provided, the Company shall promptly file with the transfer agent for the Warrants a certificate of an officer of the Company setting forth the Exercise Price after the adjustment and setting forth a brief statement of the facts requiring such adjustment and a computation thereof.  The Company shall promptly cause a notice of the adjusted Exercise Price to be mailed to each Holder.

 

(e)                                  In any case in which Section 6(a) provides that an adjustment shall become effective immediately after a record date for an event and the date fixed for such adjustment pursuant to Section 6(a) occurs after such record date but before the occurrence of such event, the Company may defer until the actual occurrence of such event (i) issuing to the Holder of any Warrants exercised after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Common Stock issuable upon such exercise before giving effect to such adjustment, and (ii) paying to such holder any amount in cash in lieu of any fraction pursuant to Section 6(i).

 

(f)                                    In case the Company shall take any action affecting the Common Stock, other than actions described in this Section 6, which in the opinion of the Board of Directors would materially adversely affect the exercise right of the Holders, the Exercise Price may be adjusted, to the extent permitted by law, in such manner, if any, and at such time, as the Board of Directors may determine to be equitable in the circumstances; provided, however, that in no event shall the Board of Directors be required to take any such action.

 

(g)                                 For the purpose of any computation under Section 2(b) or this Section 6, the “Current Market Price” per share of Common Stock on any day shall mean: (i) if the principal trading market for such securities is a national or regional securities exchange, the closing price on such exchange on such day; or (ii) if sales prices for shares of Common Stock are reported by the NASDAQ National Market System (or a similar system then in use), the last reported sales price (regular way) so reported on such day; or (iii) if neither (i) nor (ii) above are applicable, and if bid and ask prices for shares of Common Stock are reported in the over-the-counter market by NASDAQ (or, if not so reported, by the National Quotation

 

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Bureau), the average of the high bid and low ask prices so reported on such day. Notwithstanding the foregoing, if there is no reported closing price, last reported sales price, or bid and ask prices, as the case may be, for the day in question, then the Current Market Price shall be determined as of the latest date prior to such day for which such closing price, last reported sales price, or bid and ask prices, as the case may be, are available, unless such securities have not been traded on an exchange or in the over-the-counter market for 30 or more days immediately prior to the day in question, in which case the Current Market Price shall be determined in good faith by, and reflected in a formal resolution of, the Board of Directors of the Company.

 

(h)                                 The Company shall not be required to issue fractions of shares of Common Stock or other capital stock of the Company upon the exercise of this Warrant.  If any fraction of a share would be issuable on the exercise of this Warrant (or specified portions thereof), the Company shall purchase such fraction for an amount in cash equal to the same fraction of the Current Market Price of such share of Common Stock on the date of exercise of this Warrant.

 

7.               Transfer Taxes. The issuance of any shares or other securities upon the exercise of this Warrant, and the delivery of certificates or other instruments representing such shares or other securities, shall be made without charge to the Holder for any tax or other charge in respect of such issuance.  The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of any certificate in a name other than that of the Holder and the Company shall not be required to issue or deliver any such certificate unless and until the person or persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

 

8.               Loss or Mutilation of Warrant. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of any Warrant (and upon surrender of any Warrant if mutilated), and upon reimbursement of the Company’s reasonable incidental expenses, the Company shall execute and deliver to the Holder thereof a new Warrant of like date, tenor, and denomination.

 

9.               No Rights as a Stockholder. The Holder of any Warrant shall not have, solely on account of such status, any rights of a stockholder of the Company, either at law or in equity, or to any notice of meetings of stockholders or of any other proceedings of the Company, except as provided in this Warrant.

 

10.         Governing Law.  This Warrant shall be construed in accordance with the laws of the State of Massachusetts applicable to contracts made and performed within such State, without regard to principles of conflicts of law.

 

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Dated: December 22, 2004

 

 

CARDIOTECH INTERNATIONAL, INC.

 

 

 

By:

 

 

 

 

Michael Szycher, Ph.D.,

 

 

Chairman & Chief Executive Officer

 

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FORM OF ASSIGNMENT

 

(To be executed by the registered holder if such holder desires to transfer the attached Warrant.)

 

FOR VALUE RECEIVED,                                                                                                   hereby sells, assigns, and transfers unto                                        a Warrant to purchase                           shares of Common Stock, par value $0.01 per share, of CardioTech International, Inc. (the “Company”), together with all right, title, and interest therein, and does hereby irrevocably constitute and appoint                                                                 attorney to transfer such Warrant on the books of the Company, with full power of substitution.

 

 

Dated:

 

 

 

 

 

 

 

 

 

By:

 

 

 

Signature

 

The signature on the foregoing Assignment must correspond to the name as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever.

 


 

To:                              CardioTech International, Inc.

229 Andover Street

Wilmington, Massachusetts  01887

Attention:  Chief Financial Officer

 

NOTICE OF EXERCISE

 

The undersigned hereby exercises his or its rights to purchase                    Warrant Shares covered by the within Warrant and tenders payment herewith in the amount of $                      by tendering cash or delivering a certified check or bank cashier’s check, payable to the order of the Company or surrendering                        shares of Common Stock received upon exercise of the attached Warrant, which shares have a Current Market Price equal to such payment] in accordance with the terms thereof, and requests that certificates for such securities be issued in the name of, and delivered to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Print Name, Address and Social Security
or Tax Identification Number)

 

and, if such number of Warrant Shares shall not be all the Warrant Shares covered by the within Warrant, that a new Warrant for the balance of the Warrant Shares covered by the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below.

 

 

Dated:

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Print Name

 

 

 

 

 

 

 

 

 

 

Signature

 

 

 

 

Address:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 EX-4.2 3 a04-15265_1ex4d2.htm EX-4.2

Exhibit 4.2

 

THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER SECURITIES LAWS, HAVE BEEN TAKEN FOR INVESTMENT, AND MAY NOT BE SOLD OR TRANSFERRED OR OFFERED FOR SALE OR TRANSFER UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS WITH RESPECT TO SUCH SECURITIES IS THEN IN EFFECT, OR IN THE OPINION OF COUNSEL (WHICH OPINION IS REASONABLY SATISFACTORY TO THE ISSUER OF THESE SECURITIES), SUCH REGISTRATION UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS IS NOT REQUIRED.

 

Date: December 22, 2004

 

Warrant to Purchase

 

 

 

***            ***

 

 

 

Shares

 

 

CARDIOTECH INTERNATIONAL, INC.

 

(Incorporated under the laws of the State of Delaware)

 

REPRESENTATIVE’S WARRANT FOR THE PURCHASE OF SHARES OF

 

COMMON STOCK [the Warrant will be for the same Securities sold in the Placement]

 

Warrant Price: $      [the same price that the Securities were sold in the Placement] per share, subject to adjustment as provided below.

 

THIS IS TO CERTIFY that, for value received, Stonegate Securities, Inc. (“Stonegate”) and its assigns (collectively, the “Holder”), is entitled to purchase, subject to the terms and conditions hereinafter set forth, up to ***      *** shares of the common stock, no par value (“Common Stock”), of Cardiotech International, Inc., a Delaware corporation (the “Company”), and to receive certificate(s) for the Common Stock so purchased.

 

1.             Exercise Period and Vesting.  The exercise period is the period beginning on the date of this Warrant (the “Issuance Date”) and ending at 5:00 p.m., Dallas, Texas time, December 22, 2009 (the “Exercise Period”).  This Warrant is vested in full as of the Issuance Date and is immediately exercisable by Holder.  This Warrant will terminate automatically and immediately upon the expiration of the Exercise Period.

 

2.             Exercise of Warrant; Cashless Exercise.  This Warrant may be exercised, in whole or in part, at any time and from time to time during the Exercise Period.  Such exercise shall be accomplished by tender to the Company of the purchase price set forth above as the warrant price (the “Warrant Price”), either (a) in cash, by wire transfer or by certified check or bank cashier’s check, payable to the order of the Company, or (b) if such exercise is after December 22, 2005 and in the event that the shares issuable upon exercise of the warrant cannot be resold pursuant to a currently effective registration statement filed by the Company with the SEC,  by surrendering such

 

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number of shares of Common Stock received upon exercise of this Warrant with a current market price equal to the Warrant Price (a “Cashless Exercise”), together with presentation and surrender to the Company of this Warrant with an executed subscription in substantially the form attached hereto as Exhibit A (the “Subscription”). Upon receipt of the foregoing, the Company will deliver to the Holder, as promptly as possible, a certificate or certificates representing the shares of Common Stock so purchased, registered in the name of the Holder or its transferee (as permitted under Section 3 below).  With respect to any exercise of this Warrant, the Holder will for all purposes be deemed to have become the holder of record of the number of shares of Common Stock purchased hereunder on the date this Warrant, a properly executed Subscription and payment of the Warrant Price is received by the Company (the “Exercise Date”), irrespective of the date of delivery of the certificate evidencing such shares, except that, if the date of such receipt is a date on which the stock transfer books of the Company are closed, such person will be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.  Fractional shares of Common Stock will not be issued upon the exercise of this Warrant.  In lieu of any fractional shares that would have been issued but for the immediately preceding sentence, the Holder will be entitled to receive cash equal to the current market price of such fraction of a share of Common Stock on the trading day immediately preceding the Exercise Date.  In the event this Warrant is exercised in part, the Company shall issue a new Warrant to the Holder covering the aggregate number of shares of Common Stock as to which this Warrant remains exercisable for.

 

If the Holder elects to conduct a Cashless Exercise, the Company shall cause to be delivered to the Holder a certificate or certificates representing the number of shares of Common Stock computed using the following formula:

 

X = Y (A-B) 

 

A

 

Where:

 

X  =

the number of shares of Common Stock to be issued to Holder;

 

 

 

Y  =

the portion of the Warrant (in number of shares of Common Stock) being exercised by Holder (at the date of such calculation);

 

 

 

A  =

the fair market value of one share of Common Stock on the Exercise Date (as calculated below); and

 

 

 

B  =

Warrant Price (as adjusted to the date of such calculation).

 

For purposes of the foregoing calculation, “fair market value of one share of Common Stock on the Exercise Date” shall mean:  (i) if the principal trading market for such securities is a national or regional securities exchange, the average closing price on such exchange for the ten (10) trading days immediately prior to such Exercise Date; (ii) if sales prices for shares of Common Stock are reported by the Nasdaq National Market System or Nasdaq Small Cap Market (or a similar system then in use), the average last reported sales price for the ten (10) trading days immediately prior to such Exercise Date; (iii) if neither (i) nor (ii) above are applicable, and if bid and ask prices for shares of Common Stock are reported in the over-the-counter market by Nasdaq (or, if not so

 

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reported, by the National Quotation Bureau), the average of the high bid and low ask prices so reported for the ten (10) trading days immediately prior to such Exercise Date; or (iv) if (i), (ii), or (iii) above is not applicable, and if sales prices for shares of Common Stock are reported by the London Stock Exchange, the average closing price on such exchange for the ten (10) trading days immediately prior to such Exercise Date.  Notwithstanding the foregoing, if there is no reported closing price, last reported sales price, or bid and ask prices, as the case may be, for the period in question, then the current market price shall be determined as of the latest ten (10) day period prior to such day for which such closing price, last reported sales price, or bid and ask prices, as the case may be, are available, unless such securities have not been traded on an exchange or in the over-the-counter market for 30 or more days immediately prior to the day in question, in which case the current market price shall be determined in good faith by, and reflected in a formal resolution of, the Board of Directors of the Company.  The Company acknowledges and agrees that this Warrant was issued on the Issuance Date.

 

Notwithstanding the foregoing, the Holder may conduct a cashless exercise pursuant to this Section 2 only after the first anniversary of the initial issuance date of this Warrant, and then only in the event that a registration statement covering the resale of the Warrant Shares is not then effective at the time that the Holder wishes to conduct such cashless exercise.

 

3.                                       Transferability and Exchange.

 

(a)           This Warrant, and the Common Stock issuable upon the exercise hereof, may not be sold, transferred, pledged or hypothecated unless the Company shall have been provided with an opinion of counsel, or other evidence reasonably satisfactory to it, that such transfer is not in violation of the Securities Act, and any applicable state securities laws.  Subject to the satisfaction of the aforesaid condition, this Warrant and the underlying shares of Common Stock shall be transferable from time to time by the Holder upon written notice to the Company.  If this Warrant is transferred, in whole or in part, the Company shall, upon surrender of this Warrant to the Company, deliver to each transferee a Warrant evidencing the rights of such transferee to purchase the number of shares of Common Stock that such transferee is entitled to purchase pursuant to such transfer.  The Company may place a legend similar to the legend at the top of this Warrant on any replacement Warrant and on each certificate representing shares issuable upon exercise of this Warrant or any replacement Warrants.  Only a registered Holder may enforce the provisions of this Warrant against the Company.  A transferee of the original registered Holder becomes a registered Holder only upon delivery to the Company of the original Warrant and an original Assignment, substantially in the form set forth in Exhibit B attached hereto.

 

(b)           This Warrant is exchangeable upon its surrender by the Holder to the Company for new Warrants of like tenor and date representing in the aggregate the right to purchase the number of shares purchasable hereunder, each of such new Warrants to represent the right to purchase such number of shares as may be designated by the Holder at the time of such surrender.

 

4.                                       Adjustments to Warrant Price and Number of Shares Subject to Warrant.  The Warrant Price and the number of shares of Common Stock purchasable upon the exercise of this Warrant are subject to adjustment from time to time upon the occurrence of any of the events

 

A-3


 

specified in this Section 4.  For the purpose of this Section 4, “Common Stock” means shares now or hereafter authorized of any class of common stock of the Company and any other stock of the Company, however designated, that has the right to participate in any distribution of the assets or earnings of the Company without limit as to per share amount (excluding, and subject to any prior rights of, any class or series of preferred stock).

 

(a)           In case the Company shall (i) pay a dividend or make a distribution in shares of Common Stock or other securities, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares, or (iv) issue by reclassification of its shares of Common Stock other securities of the Company, then the Warrant Price in effect at the time of the record date for such dividend or on the effective date of such subdivision, combination or reclassification, and/or the number and kind of securities issuable on such date, shall be proportionately adjusted so that the Holder of any Warrant thereafter exercised shall be entitled to receive the aggregate number and kind of shares of Common Stock (or such other securities other than Common Stock) of the Company, at the same aggregate Warrant Price, that, if such Warrant had been exercised immediately prior to such date, the Holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, distribution, subdivision, combination or reclassification.  Such adjustment shall be made successively whenever any event listed above shall occur.

 

(b)           In case the Company shall fix a record date for the making of a distribution to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the surviving corporation) of cash, evidences of indebtedness or assets, or subscription rights or warrants, the Warrant Price to be in effect after such record date shall be determined by multiplying the Warrant Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the current market price per share of Common Stock on such record date, less the amount of cash so to be distributed (or the fair market value (as determined in good faith by, and reflected in a formal resolution of, the Board of Directors of the Company) of the portion of the assets or evidences of indebtedness so to be distributed, or of such subscription rights or warrants, applicable to one share of Common Stock, and the denominator of which shall be such current market price per share of Common Stock.  Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Warrant Price shall again be adjusted to be the Warrant Price which would then be in effect if such record date had not been fixed.

 

(c)           For the purpose of any computation under any subsection of this Section 4, the “current market price” per share of Common Stock on any date shall be the per share price of the Common Stock on the trading day immediately prior to the event requiring an adjustment hereunder and shall be:  (i) if the principal trading market for such securities is a national or regional securities exchange, the closing price on such exchange on such day; or (ii) if sales prices for shares of Common Stock are reported by the Nasdaq National Market System or Small Cap Market System (or a similar system then in use), the last reported sales price so reported on such day; (iii) if neither (i) nor (ii) above are applicable, and if bid and ask prices for shares of Common Stock are reported in the over-the-counter market by Nasdaq (or, if not so reported, by the National Quotation Bureau), the average of the high bid and low ask prices so reported on such day; or (iv) if (i), (ii) or (iii) above is not applicable, and if sales price for shares of Common Stock are reported by the London Stock Exchange, the closing price on such exchange on such day.  Notwithstanding the foregoing, if there

 

A-4


 

is no reported closing price, last reported sales price, or bid and ask prices, as the case may be, for the day in question, then the current market price shall be determined as of the latest date prior to such day for which such closing price, last reported sales price, or bid and ask prices, as the case may be, are available, unless such securities have not been traded on an exchange or in the over-the-counter market for 30 or more days immediately prior to the day in question, in which case the current market price shall be determined in good faith by, and reflected in a formal resolution of, the Board of Directors of the Company.

 

(d)           Notwithstanding any provision herein to the contrary, no adjustment in the Warrant Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Warrant Price; provided, however, that any adjustments which by reason of this subsection (d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment.  All calculations under this Section 4 shall be made to the nearest cent or the nearest one-hundredth of a share, as the case may be.

 

(e)           In the event that at any time, as a result of an adjustment made pursuant to subsection (a) above, the Holder of any Warrant thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, thereafter the number of such other shares so receivable upon exercise of any Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares of Common Stock contained in this Section 4, and the other provisions of this Warrant shall apply on like terms to any such other shares.

 

(f)            If the Company merges or consolidates into or with another corporation or entity, or if another corporation or entity merges into or with the Company (excluding such a merger in which the Company is the surviving or continuing corporation and which does not result in any reclassification, conversion, exchange, or cancellation of the outstanding shares of Common Stock), or if all or substantially all of the assets or business of the Company are sold or transferred to another corporation, entity, or person, then, as a condition to such consolidation, merger, or sale (a “Transaction”), lawful and adequate provision shall be made whereby the Holder shall have the right from and after the Transaction to receive, upon exercise of this Warrant and upon the terms and conditions specified herein and in lieu of the shares of the Common Stock that would have been issuable if this Warrant had been exercised immediately before the Transaction, such shares of stock, securities, or assets as the Holder would have owned immediately after the Transaction if the Holder had exercised this Warrant immediately before the effective date of the Transaction.

 

5.             Registration Rights.  The Company hereby grants to Holder, with respect to the shares of Common Stock underlying this Warrant, registration rights identical to those that are granted to Purchasers in the Placement (as such terms are defined in that certain Placement Agency Agreement, dated as of July 14, 2004 by and between the Company and Stonegate); it being specifically agreed and understood that the shares of Common Stock underlying this Warrant will be included in any registration statement filed by the Company which includes shares of Common Stock, or shares of Common Stock underlying any securities, issued to Purchasers in the Placement.

 

6.             Reservation of Shares.  The Company agrees at all times to reserve and hold available out of its authorized but unissued shares of Common Stock the number of shares of Common Stock issuable upon the full exercise of this Warrant.  The Company further covenants and

 

A-5


 

agrees that all shares of Common Stock that may be delivered upon the exercise of this Warrant will, upon delivery, be fully paid and nonassessable and free from all taxes, liens and charges with respect to the purchase thereof hereunder.

 

7.             Notices to Holder.  Upon any adjustment of the Warrant Price (or number of shares of Common Stock purchasable upon the exercise of this Warrant) pursuant to Section 4, the Company shall promptly thereafter cause to be given to the Holder written notice of such adjustment.  Such notice shall include the Warrant Price (and/or the number of shares of Common Stock purchasable upon the exercise of this Warrant) after such adjustment, and shall set forth in reasonable detail the Company’s method of calculation and the facts upon which such calculations were based.  Where appropriate, such notice shall be given in advance and included as a part of any notice required to be given under the other provisions of this Section 7.

 

In the event of (a) any fixing by the Company of a record date with respect to the holders of any class of securities of the Company for the purpose of determining which of such holders are entitled to dividends or other distributions, or any rights to subscribe for, purchase or otherwise acquire any shares of capital stock of any class or any other securities or property, or to receive any other right, (b) any capital reorganization of the Company, or reclassification or recapitalization of the capital stock of the Company or any transfer of all or substantially all of the assets or business of the Company to, or consolidation or merger of the Company with or into, any other entity or person, or (c) any voluntary or involuntary dissolution or winding up of the Company, then and in each such event the Company will give the Holder a written notice specifying, as the case may be (i) the record date for the purpose of such dividend, distribution, or right, and stating the amount and character of such dividend, distribution, or right; or (ii) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, conveyance, dissolution, liquidation, or winding up is to take place and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such capital stock or securities receivable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock securities) for securities or other property deliverable upon such event.  Any such notice shall be given at least 10 days prior to the earliest date therein specified.

 

8.             No Rights as a Stockholder.  This Warrant does not entitle the Holder to any voting rights or other rights as a stockholder of the Company, nor to any other rights whatsoever except the rights herein set forth.

 

9.             Additional Covenants of the Company.  For so long as the Common Stock is listed for trading on any regional or national securities exchange or Nasdaq (National Market or Small Cap System) or the London Stock Exchange, the Company shall, upon issuance of any shares for which this Warrant is exercisable, at its expense, promptly obtain and maintain the listing of such shares.  The Company shall also comply with the reporting requirements of Sections 13 and 15(d) of the Exchange Act or any other applicable securities laws of any other applicable jurisdictions for so long as and to the extent that such requirements apply to the Company.

 

The Company shall not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant.  Without limiting the generality of the foregoing, the Company (a) will at all times

 

A-6


 

reserve and keep available, solely for issuance and delivery upon exercise of this Warrant, shares of Common Stock issuable from time to time upon exercise of this Warrant, (b) will not increase the par value of any shares of capital stock receivable upon exercise of this Warrant above the amount payable therefor upon such exercise, and (c) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable stock.

 

10.           Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the Company, the Holder and their respective successors and permitted assigns.

 

11.           Notices.  The Company agrees to maintain a ledger of the ownership of this Warrant (the “Ledger”).  Any notice hereunder shall be given by registered or certified mail if to the Company, at its principal executive office and, if to the Holder, to its address shown in the Ledger of the Company; provided, however, that the Holder may at any time on three (3) days written notice to the Company designate or substitute another address where notice is to be given.  Notice shall be deemed given and received after a certified or registered letter, properly addressed with postage prepaid, is deposited in the U.S. mail.

 

12.           Severability.  Every provision of this Warrant is intended to be severable. If any term or provision hereof is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the remainder of this Warrant.

 

13.           Governing Law.  This Warrant shall be governed by and construed in accordance with the laws of the State of Massachusetts without giving effect to the principles of choice of laws thereof.

 

14.           Attorneys’ Fees.  In any action or proceeding brought to enforce any provision of this Warrant, the prevailing party shall be entitled to recover reasonable attorneys’ fees in addition to its costs and expenses and any other available remedy.

 

15.           Entire Agreement.  This Warrant (including the Exhibits attached hereto) constitutes the entire understanding between the Company and the Holder with respect to the subject matter hereof, and supersedes all prior negotiations, discussions, agreements and understandings relating to such subject matter.

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer as of the date first set forth above.

 

 

CARDIOTECH INTERNATIONAL, INC.

 

 

 

 

 

By:

 

 

 

 

 

2.

Michael Szycher, Ph.D.,

 

 

 

3.

Chairman & Chief Executive Officer

 

 

 

 

 

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Exhibit A

 

SUBSCRIPTION FORM

 

(To be Executed by the Holder to Exercise the Rights To Purchase Common Stock Evidenced by the Within Warrant)

 

The undersigned hereby irrevocably subscribes for        shares (the “Stock”) of the Common Stock of Cardiotech International, Inc. (the “Company”) pursuant to and in accordance with the terms and conditions of the attached Warrant (the “Warrant”), and hereby makes payment of $        therefor by [tendering cash, wire transferring or delivering a certified check or bank cashier’s check, payable to the order of the Company] [surrendering        shares of Common Stock received upon exercise of the Warrant, which shares have a current market price equal to such payment as required in Section 2 of the Warrant].  The undersigned requests that a certificate for the Stock be issued in the name of the undersigned and be delivered to the undersigned at the address stated below.  If the Stock is not all of the shares purchasable pursuant to the Warrant, the undersigned requests that a new Warrant of like tenor for the balance of the remaining shares purchasable thereunder be delivered to the undersigned at the address stated below.

 

In connection with the issuance of the Stock, I hereby represent to the Company that I am acquiring the Stock for my own account for investment and not with a view to, or for resale in connection with, a distribution of the shares within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).

 

I understand that because the Stock has not been registered under the Securities Act, I must hold such Stock indefinitely unless the Stock is subsequently registered and qualified under the Securities Act or is exempt from such registration and qualification. I shall make no transfer or disposition of the Stock unless (a) such transfer or disposition can be made without registration under the Securities Act by reason of a specific exemption from such registration and such qualification, or (b) a registration statement has been filed pursuant to the Securities Act and has been declared effective with respect to such disposition.  I agree that each certificate representing the Stock delivered to me shall bear substantially the same as set forth on the front page of the Warrant.

 

I agree that each certificate representing the Stock delivered to me shall bear substantially the same legend as set forth on the front page of the Warrant.

 

I further agree that the Company may place stop orders on the certificates evidencing the Stock with the transfer agent, if any, to the same effect as the above legend.  The legend and stop transfer notice referred to above shall be removed only upon my furnishing to the Company of an opinion of counsel (reasonably satisfactory to the Company) to the effect that such legend may be removed.

 

 

Date:

 

 

Signed:

 

 

 

 

Address:

 

 

 

 

 

A-8


 

Exhibit B

 

ASSIGNMENT

 

(To be Executed by the Holder to Effect Transfer of the Attached Warrant)

 

For Value Received                                     hereby sells, assigns and transfers to                           the Warrant attached hereto and the rights represented thereby to purchase              shares of Common Stock in accordance with the terms and conditions hereof, and does hereby irrevocably constitute and appoint                                        as attorney to transfer such Warrant on the books of the Company with full power of substitution.

 

 

Dated:

 

 

Signed:

 

 

 

Please print or typewrite
name and address of
assignee:

Please insert Social Security
or other Tax Identification
Number of Assignee:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A-9

 EX-4.3 4 a04-15265_1ex4d3.htm EX-4.3

Exhibit 4.3

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.

 

ADDITIONAL INVESTMENT RIGHT

 

To Purchase shares of Common Stock of

 

CARDIOTECH INTERNATIONAL, INC.

 

THIS ADDITIONAL INVESTMENT RIGHT (this “Additional Investment Right”) CERTIFIES that, for value received,                   (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date of issuance of this Additional Investment Right (the “Initial Exercise Date”) and on or prior to the earlier to occur of (i) the 90th Business Day following the date that the Registration Statement is declared effective by the Commission, and (ii) the one year anniversary of the Closing Date (either (i) or (ii) above, the “Termination Date”), but not thereafter, to subscribe for and purchase from CardioTech International, Inc., a Massachusetts corporation (the “Company”), up to                        shares of Common Stock, par value $0.01 per share, of the Company (each such share, an “Additional Investment Right Share” and all such shares, the “Additional Investment Right Shares”), at a price of $2.40 per share (the “Exercise Price”). Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the “Securities Purchase Agreement”), dated December 22, 2004, among the Company and the Purchasers signatory thereto.

 

1.   Title to the Additional Investment Right.  Prior to the Termination Date and subject to compliance with applicable laws and Section 7 of this Additional Investment Right, this Additional Investment Right and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the Holder in person or by duly authorized attorney, upon surrender of this Additional Investment Right together with the Assignment Form annexed

 

1


 

hereto properly endorsed.  The transferee shall sign an investment letter in form and substance reasonably satisfactory to the Company.

 

2.   Authorization of Shares. The Company covenants that all Additional Investment Right Shares which may be issued upon the exercise of the purchase rights represented by this Additional Investment Right will, upon exercise of the purchase rights represented by this Additional Investment Right, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

3.   Exercise of Additional Investment Right.

 

(a)  Exercise of the purchase rights represented by this Additional Investment Right may be made at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company); provided, however, within 5 Business Days of the date said Notice of Exercise is delivered to the Company, the Holder shall have surrendered this Additional Investment Right to the Company and the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank.  Certificates for shares purchased hereunder shall be delivered to the Holder within 5 Business Days from the delivery to the Company of the Notice of Exercise Form, surrender of this Additional Investment Right and payment of the aggregate Exercise Price as set forth above.  This Additional Investment Right shall be deemed to have been exercised on the later of the date the Notice of Exercise is delivered to the Company by facsimile copy and the date the Exercise Price is received by the Company. The Additional Investment Right Shares shall be deemed to have been issued, and the Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Additional Investment Right has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 4 prior to the issuance of such shares, have been paid.

 

(b)  If this Additional Investment Right shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Additional Investment Right Shares, deliver to Holder a new Additional Investment Right evidencing the rights of Holder to purchase the unpurchased Additional Investment Right Shares called for by this Additional Investment Right, which new Additional Investment Right shall in all other respects be identical to this Additional Investment Right.

 

4.   Charges, Taxes and Expenses. Issuance of certificates for Additional Investment Right Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in

 

2


 

the event certificates for Additional Investment Right Shares are to be issued in a name other than the name of the Holder, this Additional Investment Right when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

 

5.   Transfer, Division and Combination.

 

(a)  Subject to compliance with any applicable securities laws and the conditions set forth herein and in the Securities Purchase Agreement, this Additional Investment Right and all rights hereunder are transferable (i) to one of its nominees, affiliates or a nominee thereof, (ii) to a pension or profit-sharing fund established and maintained for its employees or for the employees of any affiliate, or (iii) from a nominee to any of the aforementioned persons as beneficial owner of this AIR or such AIR Shares, in whole or in part, upon surrender of this Additional Investment Right at the principal office of the Company, together with a written assignment of this Additional Investment Right substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Additional Investment Right or Additional Investment Rights in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Additional Investment Right evidencing the portion of this Additional Investment Right not so assigned, and this Additional Investment Right shall promptly be cancelled. An Additional Investment Right, if properly assigned, may be exercised by a new holder for the purchase of Additional Investment Right Shares without having a new Additional Investment Right issued.

 

(b)  This Additional Investment Right may be divided or combined with other Additional Investment Rights upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Additional Investment Rights are to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 5(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Additional Investment Right or Additional Investment Rights in exchange for the Additional Investment Right or Additional Investment Rights to be divided or combined in accordance with such notice.

 

(c)  The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Additional Investment Right or Additional Investment Rights under this Section 5.

 

(d)  The Company agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Additional Investment Rights.

 

(e)  If, at the time of the surrender of this Additional Investment Right in connection with any transfer of this Additional Investment Right, the transfer of this

 

3


 

Additional Investment Right shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Additional Investment Right, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee be an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the Securities Act or a qualified institutional buyer as defined in Rule 144A(a) under the Securities Act.

 

6.   No Rights as Shareholder until Exercise. This Additional Investment Right does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Additional Investment Right and the payment of the aggregate Exercise Price, the Additional Investment Right Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares and warrants, as the case may be, as of the close of business on the later of the date of such surrender or payment.

 

7.   Loss, Theft, Destruction or Mutilation of Additional Investment Right. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Additional Investment Right or any certificate relating to the Additional Investment Right Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Additional Investment Right, shall not include the posting of any bond), and upon surrender and cancellation of such Additional Investment Right or certificate, if mutilated, the Company will make and deliver a new Additional Investment Right or certificate of like tenor and dated as of such cancellation, in lieu of such Additional Investment Right or certificate.

 

8.   Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.

 

9.   Adjustments of Exercise Price and Number of Additional Investment Right Shares; Stock Splits, etc. The number Additional Investment Right Shares purchasable upon the exercise of this Additional Investment Right shall be subject to adjustment from time to time upon the happening of any of the following.  In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to holders of all of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares of its capital stock in a reclassification of the Common Stock, then the number of Additional Investment Right Shares purchasable upon exercise of this Additional Investment Right immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the number of Additional Investment

 

4


 

Right Shares or other securities of the Company which it would have owned or have been entitled to receive had this Additional Investment Right been exercised in advance thereof.  Upon each such adjustment of the number of Additional Investment Right Shares or other securities of the Company which are purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Additional Investment Right Shares or other securities resulting from such adjustment at an Exercise Price obtained by multiplying such Exercise Price in effect immediately prior to such adjustment by the number of Additional Investment Right Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of Additional Investment Right Shares or other securities of the Company that are purchasable pursuant hereto immediately after such adjustment. An adjustment made pursuant to this Section 9 shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.

 

10.     Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets.  In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or otherwise dispose of its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including Additional Investment Rights or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation (“Other Property”), are to be received by or distributed to the holders of Common Stock of the Company, then the Holder shall have the right thereafter to receive, upon exercise of this Additional Investment Right, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this Additional Investment Right is exercisable into immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Additional Investment Right to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by resolution of the Board of Directors of the Company) in order to provide for adjustments of Additional Investment Right Shares for which this Additional Investment Right is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 10.  For purposes of this Section 10, “common stock of the successor or acquiring corporation” shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any Additional Investment Rights or other rights to subscribe for or purchase any such stock.  The foregoing provisions of this Section 10 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets.

 

5


 

11.     Voluntary Adjustment by the Company. The Company may at any time during the term of this Additional Investment Right reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

 

12.     Notice of Adjustment.  Whenever the number of Additional Investment Right Shares or number or kind of securities or other property purchasable upon the exercise of this Additional Investment Right or the Exercise Price is adjusted, as herein provided, the Company shall give notice thereof to the Holder, which notice shall state the number of Additional Investment Right Shares and other securities issuable upon exercise of this Additional Investment Right (and other securities or property) purchasable upon the exercise of this Additional Investment Right and the Exercise Price of such Additional Investment Right Shares or other securities issuable upon exercise of this Additional Investment Right (as applicable) after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.

 

13.     Notice of Corporate Action.  If at any time:

 

(a)  the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or

 

(b)  there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation or,

 

(c)  there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;

 

then, in any one or more of such cases, the Company shall give to Holder (i) at least 20 days’ prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 20 days’ prior written notice of the date when the same shall take place.  Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such disposition, dissolution, liquidation or winding up.  Each such written notice shall be sufficiently given if

 

6


 

addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 15(d).

 

14.     Authorized Shares. The Company covenants that during the period the Additional Investment Right is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Additional Investment Right Shares upon the exercise of any purchase rights under this Additional Investment Right. The Company further covenants that its issuance of this Additional Investment Right shall constitute full authority to its officers who are charged with the duty of executing certificates to execute and issue the necessary certificates for the Additional Investment Right Shares upon the exercise of the purchase rights under this Additional Investment Right. The Company will take all such reasonable action as may be necessary to assure that such Additional Investment Right Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the principal trading market upon which the Common Stock may be listed.

 

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Additional Investment Right, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Additional Investment Right against impairment.  Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Additional Investment Right Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Additional Investment Right Shares upon the exercise of this Additional Investment Right, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Additional Investment Right.

 

Before taking any action which would result in an adjustment in the number of Additional Investment Right Shares for which this Additional Investment Right is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

15.     Miscellaneous.

 

(a)  Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Additional Investment Right shall be determined in accordance with the provisions of the Securities Purchase Agreement.

 

7


 

(b)  Restrictions.  The Holder acknowledges that the Additional Investment Right Shares acquired upon the exercise of this Additional Investment Right, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

 

(c)  Nonwaiver and Expenses.  No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Additional Investment Right, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

 

(d)  Notices.  Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Securities Purchase Agreement.

 

(e)  Limitation of Liability.  No provision hereof, in the absence of any affirmative action by Holder to exercise this Additional Investment Right or purchase Additional Investment Right Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

(f)  Remedies.  Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Additional Investment Right.  The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Additional Investment Right and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

 

(g)  Successors and Assigns.  Subject to applicable securities laws, this Additional Investment Right and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder.  The provisions of this Additional Investment Right are intended to be for the benefit of all Holders from time to time of this Additional Investment Right and shall be enforceable by any such Holder or holder of Additional Investment Right Shares.

 

(h)  Amendment. This Additional Investment Right may be modified or amended or the provisions hereof waived only with the written consent of the Company and the Holder.

 

(i)  Severability. Wherever possible, each provision of this Additional Investment Right shall be interpreted in such manner as to be effective and valid under

 

8


 

applicable law, but if any provision of this Additional Investment Right shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Additional Investment Right.

 

(j)  Headings. The headings used in this Additional Investment Right are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Additional Investment Right.

 

 

********************

 

9


 

IN WITNESS WHEREOF, the Company has caused this Additional Investment Right to be executed by its officer thereunto duly authorized.

 

 

Dated:  December 22, 2004

 

 

 

 

CARDIOTECH INTERNATIONAL, INC.

 

 

 

 

 

By:

 

 

 

 

Name:

Michael Szycher, Ph.D.

 

 

Title:

Chairman & Chief Executive Officer

 

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NOTICE OF EXERCISE

 

To:          CardioTech International, Inc.

 

(1)     The undersigned hereby elects to purchase            Additional Investment Right Shares of the Company pursuant to the terms of the attached Additional Investment Right (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

(2)     Please issue a certificate or certificates representing said Additional Investment Right Shares in the name of the undersigned or in such other name as is specified below:

 

 

 

The Additional Investment Right Shares shall be delivered to the following:

 

 

 

 

 

 

 

(4)     Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D under the Securities Act of 1933, as amended.

 

 

[BUYER]

 

 

 

By:

 

 

 

Name:

 

Title:

 

 

 

Dated:

 

 

 


 

ASSIGNMENT FORM

 

(To assign the foregoing Additional Investment Right, execute
this form and supply required information.
Do not use this form to exercise the Additional Investment Right.)

 

FOR VALUE RECEIVED, the foregoing Additional Investment Right and all rights evidenced thereby are hereby assigned to

 

 

whose address is

 

 

 

.

 

 

 

 

 

 

Dated:

 

,

 

 

 

 

Holder’s Signature:

 

 

 

 

 

 

 

Holder’s Address:

 

 

 

 

 

 

 

 

 

 

 

 

Signature Guaranteed:

 

 

 

NOTE:  The signature to this Assignment Form must correspond with the name as it appears on the face of the Additional Investment Right, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Additional Investment Right.

 

 EX-10.1 5 a04-15265_1ex10d1.htm EX-10.1

Exhibit 10.1

 

SECURITIES PURCHASE

 

AGREEMENT

 

 

Dated as of December 22, 2004

 

 

among

 

 

CARDIOTECH INTERNATIONAL, INC.

 

 

and

 

 

THE PURCHASERS LISTED ON EXHIBIT A

 


 

TABLE OF CONTENTS

 

ARTICLE I Purchase and Sale of Common Stock and Warrants

 

 

 

Section 1.1

Purchase and Sale of Common Stock, Warrants and Additional Investment Rights

 

Section 1.2

Purchase Price and Closing

 

Section 1.3

Warrants

 

Section 1.4

AIRs

 

Section 1.5

Warrant Shares and AIR Shares

 

 

 

 

ARTICLE II Representations and Warranties

 

 

 

 

Section 2.1

Representations and Warranties of the Company

 

Section 2.2

Representations and Warranties of the Purchasers

 

 

 

 

ARTICLE III Covenants

 

 

 

 

Section 3.1

Securities Compliance

 

Section 3.2

Registration and Listing

 

Section 3.3

Inspection Rights

 

Section 3.4

Compliance with Laws

 

Section 3.5

Keeping of Records and Books of Account

 

Section 3.6

Reporting Requirements

 

Section 3.7

Other Agreements

 

Section 3.8

Reservation of Shares

 

Section 3.9

Disclosure of Transactions and Other Material Information

 

Section 3.10

Delivery of Securities

 

Section 3.11

No Shorting of Stock

 

Section 3.12

Subsequent Financings

 

Section 3.13

Beneficial Ownership Restrictions

 

 

 

 

ARTICLE IV Conditions

 

 

 

 

Section 4.1

Conditions Precedent to the Obligation of the Company to Close and to Sell the Shares, Warrants and AIRs

 

Section 4.2

Conditions Precedent to the Obligation of the Purchasers to Close and to Purchase the Shares, the Warrants and the AIRs

 

 

 

 

ARTICLE V Transfer Restrictions and Legends

 

 

 

 

ARTICLE VI Termination

 

 

 

 

Section 6.1

Termination by Mutual Consent

 

Section 6.2

Effect of Termination

 

 

i



 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of December 22, 2004, by and among CardioTech International, Inc., a Massachusetts corporation (the “Company”), and the entities listed on Exhibit A hereto (each, a “Purchaser” and collectively, the “Purchasers”), for the purchase and sale by the Purchasers of shares of the Company’s Common Stock, par value $0.01 per share (the “Common Stock”), warrants to purchase shares of Common Stock, and additional investment rights to purchase shares of Common Stock.

 

The parties hereto agree as follows:

 

ARTICLE I

 

Purchase and Sale of Common Stock and Warrants

 

Section 1.1                                      Purchase and Sale of Common Stock, Warrants and Additional Investment Rights. Upon the following terms and conditions, the Company shall issue and sell to the Purchasers, and each Purchaser shall, severally but not jointly, purchase from the Company (i) shares of Common Stock (the “Shares”), (ii) warrants to purchase shares of Common Stock equal to 50% of the number of Shares to be purchased by such Purchaser, in substantially the form attached hereto as Exhibit B (the “Warrants”), and (iii) additional investment rights, in substantially the form attached hereto as Exhibit C (the “AIRs”), pursuant to which each Purchaser may have the right to purchase, and the Company shall be required to sell, additional shares of Common Stock, in each case, as set forth opposite each such Purchaser’s name on Exhibit A hereto, at a price per Share and related Warrants and AIRs of $2.40 for an aggregate purchase price to the Company from all Purchasers of $2,735,006.40 (the “Purchase Price”). The Company and the Purchasers are executing and delivering this Agreement in accordance with and in reliance upon the exemption from securities registration afforded by Section 4(2) of the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the “Securities Act”), including Regulation D (“Regulation D”), and/or upon such other exemption from the registration requirements of the Securities Act as may be available with respect to any or all of the investments to be made hereunder.

 

Section 1.2                                      Purchase Price and Closing. The Company agrees to issue and sell to the Purchasers and, in consideration of and in express reliance upon the representations, warranties, covenants, terms and conditions of this Agreement, the Purchasers, severally but not jointly, agree to purchase the number of Shares, Warrants and AIRs set forth opposite their respective names on Exhibit A. The closing of the purchase and sale of the Shares, Warrants and AIRs to be acquired by the Purchasers from the Company under this Agreement shall take place at the offices of the Company located at 229 Andover Street, Wilmington, Massachusetts 01887 (the “Closing”) at 10:00 a.m., Eastern Time (i) on or before December 22, 2004, provided, that all of the conditions set forth in Article IV hereof and applicable to the Closing shall have been fulfilled or waived in accordance herewith, or (ii) at such other time and place or on such date as the Purchasers and the Company may agree upon (the “Closing Date”). The

 


 

entire Purchase Price shall be paid by the Purchasers in cash, by wire transfer or in readily available funds.

 

Section 1.3                                            Warrants. At the Closing, the Company shall issue to each Purchaser such number of Warrants to purchase shares of Common Stock as is set forth opposite such Purchaser’s name on Exhibit A hereto. The Warrants shall be exercisable for five (5) years from the date of issuance and shall have an initial exercise price equal to $3.00.

 

Section 1.4                                            AIRs. At the Closing, the Company shall issue to each Purchaser such number of AIRs to purchase shares of Common Stock as is set forth opposite such Purchaser’s name on Exhibit A hereto. The AIRs shall be exercisable at any time on or after the date of the issuance of the AIR and on or prior to the 90th Business Day following the date that the Registration Statement is declared effective by the Commission (as such terms are defined in the Registration Rights Agreement to be entered into at the Closing between the Company and the Purchasers).

 

Section 1.5                                            Warrant Shares and AIR Shares. The Company has authorized and has reserved and covenants to continue to reserve, free of preemptive rights and other similar contractual rights of stockholders, a number of its authorized but unissued shares of Common Stock equal to the aggregate number of shares of Common Stock necessary to effect the exercise of the Warrants and the AIRs. Any shares of Common Stock issuable upon exercise of the Warrants (and such shares when issued) are herein referred to as the “Warrant Shares”. Any shares of Common Stock issuable upon exercise of the AIRs (and such shares when issued) are herein referred to as the “AIR Shares”. The Shares, the Warrants, the AIRs, the Warrant Shares and the AIR Shares are sometimes collectively referred to herein as the “Securities”.

 

ARTICLE II

 

Representations and Warranties

 

Section 2.1                                      Representations and Warranties of the Company. In order to induce the Purchasers to enter into this Agreement and to purchase the Shares, the Warrants and the AIRs, the Company hereby makes the following representations and warranties to the Purchasers:

 

(a)                                  Organization, Good Standing and Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Massachusetts and has the requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted.  The Company does not have any Subsidiaries (as defined in Section 2.1(g)) or own securities of any kind in any other entity, except as disclosed in the Commission Documents (as defined in Section 2.1(f)) or as set forth on Schedule 2.1(g) hereto. The Company and each such Subsidiary 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, except for any jurisdiction(s) (alone or in the aggregate) in which the failure to be so qualified will not have a Material Adverse Effect.  For the purposes of this Agreement, “Material Adverse Effect” means any adverse effect on the business, operations, properties, prospects or financial condition of the Company or its Subsidiaries and which is material to such entity or other entities controlling or

 

2


 

controlled by such entity or which is likely to materially hinder the performance by the Company of its material obligations hereunder and under the other Transaction Documents (as defined in Section 2.1(b) hereof).

 

(b)                                 Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and perform this Agreement, the Registration Rights Agreement, the Warrants, the AIRs, and the other agreements and documents contemplated hereby and thereby and executed by the Company or to which the Company is party (collectively, the “Transaction Documents”), and to issue and sell the Shares, the Warrants and the AIRs in accordance with the terms hereof.  The execution, delivery and performance of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly and validly authorized by all necessary corporate action, and, except as set forth in Schedule 2.1(b), no further consent or authorization of the Company, its Board of Directors or its stockholders is required. This Agreement has been duly executed and delivered by the Company.  The other Transaction Documents will have been duly executed and delivered by the Company at the Closing.  Each of the Transaction Documents constitutes, or shall constitute when executed and delivered, a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application.

 

(c)                                  Capitalization. The authorized capital stock of the Company and the shares thereof currently issued and outstanding as of October 30, 2004, are set forth on Schedule 2.1(c) hereto. All of the outstanding shares of the Company’s Common Stock and any other security of the Company have been duly and validly authorized. Except as disclosed in the Commission Documents or as set forth on Schedule 2.1(c) hereto, no shares of Common Stock or any other security of the Company are entitled to preemptive rights or registration rights and there are no outstanding options, warrants, scrip, rights to subscribe to, call or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company.  Furthermore, except as disclosed in the Commission Documents or as set forth on Schedule 2.1(c) hereto, there are no contracts, commitments, understandings, or arrangements by which the Company is or may become bound to issue additional shares of the capital stock of the Company or options, securities or rights convertible into shares of capital stock of the Company. Except for customary transfer restrictions contained in agreements entered into by the Company in order to sell restricted securities or as provided on Schedule 2.1(c) hereto, the Company is not a party to or bound by any agreement or understanding granting registration or anti-dilution rights to any individual, corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind (a “Person”) with respect to any of its equity or debt securities. Except as set forth on Schedule 2.1(c), the Company is not a party to, and it has no knowledge of, any agreement or understanding restricting the voting or transfer of any shares of the capital stock of the Company. Except as set forth on Schedule 2.1(c) hereto, the offer and sale of all capital stock, convertible securities, rights, warrants, or options of the Company issued prior to the Closing complied with all applicable federal and state securities laws, and no holder of such securities has a right of rescission or claim for damages with respect thereto which could have a Material Adverse Effect.

 

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The Company has furnished or made available to the Purchasers true and correct copies of the Company’s Articles of Incorporation as in effect on the date hereof (the “Articles”), and the Company’s Bylaws as in effect on the date hereof (the “Bylaws”).

 

(d)                                 Issuance of Securities. The Shares, the Warrants and the AIRs to be issued at the Closing have been duly authorized by all necessary corporate action and, when paid for or issued in accordance with the terms hereof, the Shares shall be validly issued and outstanding, fully paid and nonassessable and free and clear of all liens, encumbrances and rights of refusal of any kind and the holders shall be entitled to all rights accorded to a holder of Common Stock. When the Warrant Shares are issued and paid for in accordance with the terms of this Agreement and as set forth in the Warrants, such shares will be duly authorized by all necessary corporate action and validly issued and outstanding, fully paid and nonassessable, free and clear of all liens, encumbrances and rights of refusal of any kind and the holders shall be entitled to all rights accorded to a holder of Common Stock. When the AIR Shares are issued and paid for in accordance with the terms of the AIRs, such shares will be duly authorized by all necessary corporate action and validly issued and outstanding, fully paid and nonassessable, free and clear of all liens, encumbrances and rights of refusal of any kind and the holders shall be entitled to all rights accorded to a holder of Common Stock.

 

(e)                                  No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby do not and will not (i) violate any provision of the Articles or Bylaws or any Subsidiary’s comparable charter documents, (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, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries’ respective properties or assets are bound, (iii) create or impose a lien, mortgage, security interest, charge or encumbrance of any nature on any property or asset of the Company or any of its Subsidiaries under any agreement or any commitment to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or by which any of their respective properties or assets are bound, or (iv) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected, except, in all cases other than violations pursuant to clauses (i) or (iv) (with respect to federal and state securities laws) above, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect. The business of the Company and its Subsidiaries is not being conducted in violation of any laws, ordinances or regulations of any governmental entity, except for possible violations which singularly or in the aggregate do not and will not have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is required under federal, state, foreign or local law, rule or regulation 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 Transaction Documents or issue and sell the Securities in accordance with the terms hereof or thereof (other than any filings which may be required to be made by the Company with the Securities and Exchange

 

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Commission (the “Commission”) and/or the American Stock Exchange prior to or subsequent to the Closing, or state securities administrators prior to or subsequent to the Closing, or any registration statement which may be filed pursuant hereto or thereto).

 

(f)                                    Commission Documents; Financial Statements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and, except as disclosed on Schedule 2.1(f) hereto, the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the Commission pursuant to the reporting requirements of the Exchange Act, including material filed pursuant to Section 13(a) or 15(d) of the Exchange Act (all of the foregoing, including filings incorporated by reference therein, being referred to herein as the “Commission Documents”). The Company has delivered or made available (through the SEC EDGAR website) to the Purchasers true and complete copies of the Commission Documents filed with the Commission since December 31, 2000.  The Company has not provided to the Purchasers any material non-public information or other 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.  At the time of its filing, the Company’s Quarterly Report on Form 10-QSB for the fiscal quarter ended September 30, 2004 (the “Form 10-Q”) complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder and other federal, state and local laws, rules and regulations applicable to such documents, and the Form 10-Q did not contain 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. At the time of its filing, the Company’s Annual Report on Form 10-KSB for the fiscal year ended March 31, 2004 (the “Form 10-K”) complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder and other federal, state and local laws, rules and regulations applicable to such documents, and, at the time of its filing, the Form 10-K did not contain 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 their respective dates, the financial statements of the Company included in the Commission Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) 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 and its Subsidiaries as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

 

(g)                                 Subsidiaries. All of the outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued, and are fully paid and nonassessable. There are no outstanding preemptive, conversion or other rights, options, warrants or agreements granted or issued by or binding upon any Subsidiary for the purchase or acquisition of any shares

 

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of capital stock of any Subsidiary or any other securities convertible into, exchangeable for or evidencing the rights to subscribe for any shares of such capital stock. Neither the Company nor any Subsidiary is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of the capital stock of any Subsidiary or any convertible securities, rights, warrants or options of the type described in the preceding sentence except as set forth on Schedule 2.1(g) hereto. Neither the Company nor any Subsidiary is party to, nor has any knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock of any Subsidiary. For the purposes of this Agreement, “Subsidiary” shall mean any Person of which at least a majority of the securities or other ownership interest having ordinary voting power (absolutely or contingently) for the election of directors or other Persons performing similar functions are at the time owned directly or indirectly by the Company and/or any of its other Subsidiaries.

 

(h)                                 No Material Adverse Change. Since September 30, 2004, the Company has not experienced or suffered any Material Adverse Effect, except for operating losses incurred in the ordinary course of business.

 

(i)                                     No Undisclosed Liabilities.  Except as disclosed on Schedule 2.1(i) hereto, neither the Company nor any of its Subsidiaries has any liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) other than those set forth on the balance sheet included in the Form 10-Q or incurred in the ordinary course of the Company’s or its Subsidiaries respective businesses since September 30,  2004, and which, individually or in the aggregate, do not or would not have a Material Adverse Effect on the Company or its Subsidiaries.

 

(j)                                     No Undisclosed Events or Circumstances. Since September 30, 2004, except as disclosed on Schedule 2.1(j) hereto, no event or circumstance has occurred or exists with respect to the Company or its Subsidiaries or their respective businesses, properties, prospects, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed.

 

(k)                                  Indebtedness. Schedule 2.1(k) hereto sets forth as of the date hereof any Material Adverse Effect to the previously reported outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments. For purposes of this Agreement: (x) “Indebtedness” of any Person means, without duplication (A) any indebtedness for borrowed money in excess of $100,000, (B) any obligations issued, undertaken or assumed as the deferred purchase price of property or services (other than trade payables entered into in the ordinary course of business) in excess of $100,000, (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) any obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) any indebtedness in excess of $100,000 created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in connection with GAAP, consistently applied for the

 

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periods covered thereby, is classified as a capital lease with a present value in excess of $100,000, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above; and (y) “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto in excess of $100,000 due under leases required to be capitalized in accordance with GAAP. Except as disclosed on Schedule 2.1(k), neither the Company nor any Subsidiary is in default with respect to any Indebtedness.

 

(l)                                     Title to Assets.  Each of the Company and the Subsidiaries has good and marketable title to all of its real and personal property, free and clear of any mortgages, pledges, charges, liens, security interests or other encumbrances of any nature whatsoever, except as disclosed in the Commission Documents, for those indicated on Schedule 2.1(l) hereto or such that, individually or in the aggregate, do not have a Material Adverse Effect.  All leases to real and personal property of the Company and each of its Subsidiaries are valid and subsisting and in full force and effect.

 

(m)                               Actions Pending. There is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary which questions the validity of this Agreement or any of the other Transaction Documents or any of the transactions contemplated hereby or thereby or any action taken or to be taken pursuant hereto or thereto. Except as set forth on Schedule 2.1(m) hereto, there is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding pending or, to the knowledge of the Company, threatened against or involving the Company, any Subsidiary or any of their respective properties or assets, which individually or in the aggregate, would have a Material Adverse Effect. There are no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against the Company or any Subsidiary or any officers or directors of the Company or any Subsidiary in their capacities as such, which individually, or in the aggregate, would have a Material Adverse Effect.

 

(n)                                 Compliance with Law.  The business of the Company and the Subsidiaries has been and is presently being conducted in accordance with all applicable federal, state and local governmental laws, rules, regulations and ordinances, except as set forth in the Commission Documents or on Schedule 2.1(n) hereto or such that, individually or in the aggregate, the noncompliance therewith would not have a Material Adverse Effect. The Company and each of its Subsidiaries have all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of its business as now being conducted by it unless the failure to possess such franchises, permits, licenses, consents and

 

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other governmental or regulatory authorizations and approvals, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

(o)                                 Taxes.  Except as set forth on Schedule 2.1(o) hereto, the Company and each of the Subsidiaries has accurately prepared and filed all federal, state and other tax returns required by law to be filed by it, has paid or made provisions for the payment of all taxes shown to be due and all additional assessments, and adequate provisions have been and are reflected in the financial statements of the Company and the Subsidiaries for all current taxes and other charges to which the Company or any Subsidiary is subject and which are not currently due and payable.  The Company has no knowledge of any additional assessments, adjustments or contingent tax liability (whether federal or state) of any nature whatsoever, whether pending or threatened against the Company or any Subsidiary for any period, nor of any basis for any such assessment, adjustment or contingency.

 

(p)                                 Certain Fees.  Except for Stonegate Securities, Inc. or as set forth on Schedule 2.1(p) hereto, the Company has not employed any broker or finder or incurred any liability for any brokerage or investment banking fees, commissions, finders’ structuring fees, financial advisory fees or other similar fees in connection with the Transaction Documents.

 

(q)                                 Disclosure. To the best of the Company’s knowledge, neither this Agreement or the Schedules hereto nor any other documents, certificates or instruments furnished to the Purchasers by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by this Agreement contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein or therein, in the light of the circumstances under which they were made herein or therein, not misleading.

 

(r)                                    Intellectual Property.  Except as set forth on Schedule 2.1(r), the Company and each of the Subsidiaries owns or possesses all the Proprietary Rights owned by it and have no knowledge that such rights are in conflict with the rights of others. As of the date of this Agreement, neither the Company nor any of its Subsidiaries has received any written notice that any Proprietary Rights have been declared unenforceable or otherwise invalid by any court or governmental agency. As of the date of this Agreement, there is, to the knowledge of the Company, no material existing infringement, misuse or misappropriation of any Proprietary Rights by others.  From September 30, 2004 to the date of this Agreement, neither the Company nor any of its Subsidiaries has received any written notice alleging that the operation of the business of the Company or any of its Subsidiaries infringes in any material respect upon the intellectual property rights of others. “Proprietary Rights” shall mean patents, trademarks, domain names (whether or not registered) and any patentable improvements or copyrightable derivative works thereof, websites and intellectual property rights relating thereto, service marks, trade names, copyrights, licenses and authorizations, and all rights with respect to the foregoing.

 

(s)                                  Environmental Compliance. Except as disclosed on Schedule 2.1(s) hereto, the Company and each of its Subsidiaries have obtained all approvals, authorization, certificates, consents, licenses, orders and permits or other similar authorizations of all governmental authorities, or from any other Person, that are required under any Environmental Laws, the absence of which would have a Material Adverse Effect.  “Environmental Laws” shall mean all applicable laws relating to the protection of the environment including, without limitation, all requirements pertaining to reporting, licensing, permitting, controlling,

 

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investigating or remediating emissions, discharges, releases or threatened releases of hazardous substances, chemical substances, pollutants, contaminants or toxic substances, materials or wastes, whether solid, liquid or gaseous in nature, into the air, surface water, groundwater or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of hazardous substances, chemical substances, pollutants, contaminants or toxic substances, material or wastes, whether solid, liquid or gaseous in nature. Except as set forth on Schedule 2.1(s) hereto, the Company has all necessary governmental approvals required under all Environmental Laws and used in its business or in the business of any of its Subsidiaries, except for such instances as would not individually or in the aggregate have a Material Adverse Effect. The Company and each of its Subsidiaries are also in compliance with all other limitations, restrictions, conditions, standards, requirements, schedules and timetables required or imposed under all Environmental Laws.  Except for such instances as would not individually or in the aggregate have a Material Adverse Effect, there are no past or present events, conditions, circumstances, incidents, actions or omissions relating to or in any way affecting the Company or its Subsidiaries that violate or may violate any Environmental Law after the Closing or that may give rise to any Environmental Liabilities, or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing, study or investigation (i) under any Environmental Law, or (ii) based on or related to the manufacture, processing, distribution, use, treatment, storage (including, without limitation, underground storage tanks), disposal, transport or handling, or the emission, discharge, release or threatened release of any hazardous substance.  “Environmental Liabilities” means all liabilities of a Person (whether such liabilities are owed by such Person to governmental authorities, third parties or otherwise) whether currently in existence or arising hereafter which arise under or relate to any Environmental Law.

 

(t)                                    Books and Records; Internal Accounting Controls. The books, records and documents of the Company and its Subsidiaries accurately reflect in all material respects the information relating to the business of the Company and the Subsidiaries, the location and collection of their assets, and the nature of all transactions giving rise to the obligations or accounts receivable of the Company or any Subsidiary. The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company’s board of directors, to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate actions are taken with respect to any differences.

 

(u)                                 Material Agreements. Except for the Transaction Documents or as set forth on Schedule 2.1(u) hereto, or those that are included as exhibits to the Commission Documents, neither the Company nor any Subsidiary is a party to any written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement, a copy of which would be required to be filed with the Commission (collectively, “Material Agreements”) if the Company or any Subsidiary were registering securities under the Securities Act. The Company and each of its Subsidiaries has in all material respects performed all the obligations required to be performed by them to date under the foregoing agreements, have received no notice of default and, to the best of the Company’s knowledge, are not in default under any Material Agreement now in

 

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effect, the result of which could cause a Material Adverse Effect. No written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement of the Company or of any Subsidiary limits or shall limit the payment of dividends on its Common Stock, except as set forth on Schedule 2.1(u) hereto.

 

(v)                                 Transactions with Affiliates. Except as disclosed in the Commission Documents or as set forth on Schedule 2.1(v) hereto, there are no loans, leases, agreements, contracts, royalty agreements, management contracts or arrangements or other continuing transactions between (a) the Company, any Subsidiary or any of their respective customers or suppliers, on the one hand, and (b) on the other hand, any officer, employee, consultant or director of the Company, or any of its Subsidiaries, or any Person owning 5% or more of the capital stock of the Company or any Subsidiary or any member of the immediate family of such officer, employee, consultant, director or 5% or greater stockholder or any corporation or other entity controlled by such officer, employee, consultant, director or stockholder, which require disclosure under applicable securities laws.

 

(w)                               Securities Act of 1933.  The Company has complied and will comply with all applicable federal and state securities laws in connection with the offer, issuance and sale of the Securities hereunder. Neither the Company nor anyone acting on its behalf, directly or indirectly, has or will sell, offer to sell or solicit offers to buy any of the Securities, or similar securities to, or solicit offers with respect thereto from, or enter into any preliminary conversations or negotiations relating thereto with, any Person, or has taken or will take any action so as to bring the issuance and sale of any of the Securities under the registration provisions of the Securities Act and applicable state securities laws. Neither the Company nor any of its affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of any of the Securities.

 

(x)                                   Governmental Approvals. Except as set forth on Schedule 2.1(x) hereto, and except for the filing of any notice prior or subsequent to the Closing that may be required under applicable state and/or federal securities laws (which if required, shall be filed on a timely basis), no authorization, consent, approval, license, exemption of, filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, is or will be necessary for, or in connection with, the execution or delivery of the Shares, the Warrants and the AIRs, or for the performance by the Company of its obligations under the Transaction Documents.

 

(y)                                 Employees. Neither the Company nor any Subsidiary has any collective bargaining arrangements or agreements covering any of its employees.  Except as set forth on Schedule 2.1(y) hereto, neither the Company nor any Subsidiary has any employment contract, agreement regarding proprietary information, non-competition agreement, non-solicitation agreement, confidentiality agreement, or any other similar contract or restrictive covenant, relating to the right of any officer, employee or consultant to be employed or engaged by the Company or such Subsidiary, which contract or agreement is required to be disclosed in the Commission Documents but which is not so disclosed. Since September 30, 2004, no officer (other than Liane Johnson), consultant or key employee of the Company or any Subsidiary whose termination, either individually or in the aggregate, could have a Material Adverse Effect,

 

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has terminated or, to the knowledge of the Company, has any present intention of terminating his or her employment or engagement with the Company or any Subsidiary.

 

(z)                                   Absence of Certain Developments.  Except as set forth in the Commission Documents or on Schedule 2.1(z) hereto, since September 30, 2004, other than options issued in the ordinary course of business and which would not result in a Material Adverse Effect, neither the Company nor any Subsidiary has:

 

(i)                                     issued any stock, bonds or other corporate securities or any rights, options or warrants with respect thereto other than under the Company’s stock option plans;

 

(ii)                                  borrowed any amount or incurred or become subject to any liabilities (absolute or contingent) except current liabilities incurred in the ordinary course of business which are comparable in nature and amount to the current liabilities incurred in the ordinary course of business during the comparable portion of its prior fiscal year, as adjusted to reflect the current nature and volume of the Company’s or such Subsidiary’s business;

 

(iii)                               discharged or satisfied any lien or encumbrance or paid any obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary course of business;

 

(iv)                              declared or made any payment or distribution of cash or other property to stockholders with respect to its stock, or purchased or redeemed, or made any agreements so to purchase or redeem, any shares of its capital stock;

 

(v)                                 sold, assigned or transferred any other tangible assets, or canceled any debts or claims, except in the ordinary course of business;

 

(vi)                              sold, assigned or transferred any patent rights, trademarks, trade names, copyrights, trade secrets or other intangible assets or intellectual property rights, or disclosed any proprietary confidential information to any Person except in the ordinary course of business or to the Purchasers or their representatives;

 

(vii)                           suffered any substantial losses or waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material amount of prospective business;

 

(viii)                        made any changes in employee compensation except in the ordinary course of business and consistent with past practices;

 

(ix)                                made capital expenditures or commitments therefor that aggregate in excess of $100,000;

 

(x)                                   entered into any other transaction other than in the ordinary course of business, or entered into any other material transaction, whether or not in the ordinary course of business;

 

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(xi)                                made charitable contributions or pledges in excess of $25,000;

 

(xii)                             suffered any material damage, destruction or casualty loss, whether or not covered by insurance;

 

(xiii)                          experienced any material problems with labor or management in connection with the terms and conditions of their employment;

 

(xiv)                         effected any two or more events of the foregoing kind which in the aggregate would cause a Material Adverse Effect; or

 

(xv)                            entered into an agreement, written or otherwise, to take any of the foregoing actions.

 

(aa)                            Use of Proceeds. Except as set forth on Schedule 2.1(aa), the proceeds from the sale of the Shares, the Warrants and the AIRs will be used by the Company for working capital purposes and, except as set forth on Schedule 2.1(aa), shall not be used to repay any outstanding Indebtedness or any loans to any officer, director, affiliate or insider of the Company.

 

(bb)                          Public Utility Holding Company Act and Investment Company Act Status.  The Company is not a “holding company” or a “public utility company” as such terms are defined in the Public Utility Holding Company Act of 1935, as amended.  The Company is not, and as a result of and immediately upon Closing will not be, an “investment company” or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.

 

(cc)                            ERISA. No liability to the Pension Benefit Guaranty Corporation has been incurred with respect to any Plan by the Company or any of its Subsidiaries which is or would cause a Material Adverse Effect. The execution and delivery of this Agreement and the issue and sale of the Shares, the Warrants and the AIRs will not involve any transaction which is subject to the prohibitions of Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”); provided that, if any Purchaser, or any Person that owns a beneficial interest in any Purchaser, is an “employee pension benefit plan” (within the meaning of Section 3(2) of ERISA) with respect to which the Company is a “party in interest” (within the meaning of Section 3(14) of ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met.  As used in this Section 2.1(cc), the term “Plan” shall mean an “employee pension benefit plan” (as defined in Section 3 of ERISA) which is or has been established or maintained, or to which contributions are or have been made, by the Company or any Subsidiary or by any trade or business, whether or not incorporated, which, together with the Company or any Subsidiary, is under common control, as described in Section 414(b) or (c) of the Code.

 

(dd)                          Delisting Notification. The Company has not received a delisting notification from the American Stock Exchange that has not been rescinded, and, to its knowledge, there are no existing facts or circumstances that could give rise to the delisting of the Common Stock from the American Stock Exchange.

 

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(ee)                            Sarbanes-Oxley Act. The Company is in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof, except where such noncompliance would not have, individually or in the aggregate, a Material Adverse Effect.

 

Section 2.2                                      Representations and Warranties of the Purchasers. Each of the Purchasers hereby makes the following representations and warranties to the Company with respect solely to itself and not with respect to any other Purchaser:

 

(a)                                  Organization and Standing of the Purchasers. If such Purchaser is an entity, such Purchaser is a corporation, limited liability company or partnership duly incorporated or organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization.

 

(b)                                 Authorization and Power. Such Purchaser has the requisite power and authority to enter into and perform the Transaction Documents and to purchase the Shares, the Warrants and the AIRs being sold to it hereunder. The execution, delivery and performance of the Transaction Documents by such Purchaser and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate or partnership action, and no further consent or authorization of such Purchaser or its Board of Directors, stockholders, or partners, as the case may be, is required. This Agreement has been duly authorized, executed and delivered by such Purchaser. The other Transaction Documents constitute, or shall constitute when executed and delivered, valid and binding obligations of such Purchaser enforceable against such Purchaser in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application.

 

(c)                                  Acquisition for Investment. Such Purchaser is purchasing the Shares and acquiring the Warrants and the AIRs solely for its own account for the purpose of investment and not with a view to or for sale in connection with the distribution thereof. Such Purchaser does not have a present intention to sell any of the Securities, nor a present arrangement (whether or not legally binding) or intention to effect any distribution of any of the Securities to or through any Person; provided, however, that by making the representations herein and subject to Section 2.2(e) below, such Purchaser does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to pledge any of the Securities for margin purposes and/or to dispose of any of the Securities at any time in accordance with federal and state securities laws applicable to such disposition. Such Purchaser acknowledges that it (i) has such knowledge and experience in financial and business matters such that such Purchaser is capable of evaluating the merits and risks of its investment in the Company, (ii) is able to bear the financial risks associated with an investment in the Securities, and (iii) has been given full access to such records of the Company and the Subsidiaries and to the officers of the Company and the Subsidiaries as it has deemed necessary or appropriate to conduct its due diligence investigation.

 

(d)                                 Rule 144. Such Purchaser understands that the Securities must be held indefinitely unless such Securities are registered under the Securities Act or an exemption from registration is available. Such Purchaser acknowledges that it is familiar with Rule 144 of the

 

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rules and regulations of the Commission, as amended, promulgated pursuant to the Securities Act (“Rule 144”), and that such Purchaser has been advised that Rule 144 permits resales only under certain circumstances. Such Purchaser understands that to the extent that Rule 144 is not available, such Purchaser will be unable to sell any Securities without either registration under the Securities Act or the existence of another exemption from such registration requirement.

 

(e)                                  General. Such Purchaser understands that the Securities are being offered and sold in reliance on a transactional exemption from the registration requirements of federal and state securities laws and the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of such Purchaser set forth herein in order to determine the applicability of such exemptions and the suitability of such Purchaser to acquire the Securities. Such Purchaser understands that no United States federal or state agency or any government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.

 

(f)                                    Opportunities for Additional Information. Such Purchaser acknowledges that such Purchaser has had the opportunity to ask questions of and receive answers from, or obtain additional information from, the executive officers of the Company concerning the financial and other affairs of the Company, and to the extent deemed necessary in light of such Purchaser’s personal knowledge of the Company’s affairs, such Purchaser has asked such questions and received answers to the full satisfaction of such Purchaser, and such Purchaser desires to invest in the Company.

 

(g)                                 No General Solicitation. Such Purchaser acknowledges that the Securities were not offered to such Purchaser by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media, or broadcast over television or radio, or (ii) any seminar or meeting to which such Purchaser was invited by any of the foregoing means of communications.

 

(h)                                 Accredited Investor. Such Purchaser is an accredited investor (as defined in Rule 501 of Regulation D), and such Purchaser has such experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Securities.  Such Purchaser acknowledges that an investment in the Securities is speculative and involves a high degree of risk.

 

ARTICLE III

 

Covenants

 

The Company covenants with each Purchaser as follows, which covenants are for the benefit of each Purchaser and their respective permitted assignees.

 

Section 3.1                                      Securities Compliance. The Company shall notify the Commission, in accordance with its rules and regulations, of the transactions contemplated by any of the Transaction Documents, and shall take all other necessary action and proceedings as

 

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may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Securities to the Purchasers, or their respective subsequent holders.

 

Section 3.2                                      Registration and Listing. The Company will cause its Common Stock to continue to be registered under Section 12(b) or 12(g) of the Exchange Act, will comply in all respects with its reporting and filing obligations under the Exchange Act, will comply with all requirements related to any registration statement filed pursuant to this Agreement, and will not take any action or file any document (whether or not permitted by the Securities Act or the rules promulgated thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under the Exchange Act or Securities Act, except as permitted herein. The Company shall use its commercially reasonable best efforts to continue the listing of its Common Stock on the American Stock Exchange or any successor market. The Company will promptly file the “Listing Application” for, or in connection with, the issuance and delivery of the Securities.

 

Section 3.3                                      Inspection Rights. In the event the Registration Statement (as defined in the Registration Rights Agreement) is not effective or has been suspended, and subject to the Purchaser signing a mutually agreeable Non-Disclosure Agreement and agreeing not to sell any of its securities if it obtains material non-public information, the Company shall, subject to Section 3.9, permit, during normal business hours and upon reasonable request and reasonable notice, a Purchaser or any employees, agents or representatives thereof, so long as a Purchaser shall be obligated hereunder to purchase the Shares or shall beneficially own the Shares, or shall own Warrant Shares or the Warrants or AIR Shares which, in the aggregate, represent more than two percent (2%) of the total combined voting power of all voting securities then outstanding, to examine and make reasonable copies of and extracts from the records and books of account of, and visit and inspect, during the term of the Warrants, the properties, assets, operations and business of the Company and any Subsidiary, and to discuss the affairs, finances and accounts of the Company and any Subsidiary with any of its officers, consultants, directors, and key employees.

 

Section 3.4                                      Compliance with Laws. The Company shall comply, and cause each Subsidiary to comply, with all applicable laws, rules, regulations and orders, the noncompliance with which could have a Material Adverse Effect.

 

Section 3.5                                      Keeping of Records and Books of Account. The Company shall keep and cause each Subsidiary to keep adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied, reflecting all financial transactions of the Company and its Subsidiaries, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made.

 

Section 3.6                                      Reporting Requirements. The Company, only to the extend not included in a Commission Document publicly filed and available for public access, shall furnish two (2) copies of the following to each Purchaser in a timely manner so long as that Purchaser shall be obligated hereunder to purchase the Shares or shall beneficially own the Shares, AIRs or Warrants, or shall own Warrant Shares or AIR Shares which, in the aggregate, represent more than one percent (1%) of the total combined voting power of all voting securities then outstanding:

 

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(a)                                  Quarterly Reports filed with the Commission on Form 10-Q as soon as available, and in any event within forty-five (45) days after the end of each of the first three (3) fiscal quarters of the Company, but in no event prior to the time that such Reports are publicly filed with the Commission or otherwise made publicly available;

 

(b)                                 Annual Reports filed with the Commission on Form 10-K as soon as available, and in any event within ninety (90) days after the end of each fiscal year of the Company, but in no event prior to the time that such Reports are publicly filed with the Commission or otherwise made publicly available; and

 

(c)                                  Copies of all notices and information, including without limitation notices and proxy statements in connection with any meetings, that are provided to holders of shares of Common Stock, contemporaneously with the delivery of such notices or information to such holders of Common Stock.

 

Section 3.7                                      Other Agreements. The Company shall not enter into any agreement in which the terms of such agreement would restrict or impair the right or ability of the Company or any Subsidiary to perform under any Transaction Document.

 

Section 3.8                                      Reservation of Shares. So long as the Warrants and/or the AIRs remain outstanding, the Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance, the maximum number of shares of Common Stock to effect the exercise of the Warrants and the AIRs.

 

Section 3.9                                      Disclosure of Transactions and Other Material Information. As soon as possible after the Closing, but in any event no later than 8:00 a.m., New York City time, on the first Business Day immediately following the Closing Date, the Company shall issue a press release with respect to the transactions contemplated by this Agreement, which press release shall be in the form attached hereto as Exhibit G. In addition, on or before 8:30 a.m., New York City time, on the second Business Day immediately following the Closing Date, the Company shall file a Current Report on Form 8-K with the Commission describing the terms of the transactions contemplated by the Transaction Documents and including as exhibits to such Current Report on Form 8-K this Agreement, a form of the Warrant, a form of the AIR, and the Registration Rights Agreement, and the schedules hereto and thereto in the form required by the Exchange Act (including all attachments, the “8-K Filing”). For purposes of this Agreement, a “Business Day” means any day except Saturday, Sunday and any day which is a legal holiday or a day on which banking institutions in the State of Massachusetts generally are authorized or required by law or other government actions to close.  As of the time of the filing of the 8-K Filing with the Commission, no Purchaser shall be in possession of any material, nonpublic information received from the Company, any of its Subsidiaries or any of their respective officers, directors, employees or agents, that is not disclosed in the 8-K Filing. The Company shall not, and shall cause each of its Subsidiaries and its and each of their respective officers, directors, employees and agents not to, provide any Purchaser with any material, nonpublic information regarding the Company or any of its Subsidiaries from and after the filing of the 8-K Filing with the Company without the express written consent of such Purchaser. Subject to the foregoing, neither the Company nor any Purchaser shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of any Purchaser, to make any other

 

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press release or other public disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing and contemporaneously therewith, and (ii) as is required by applicable law and regulations, including the applicable rules and regulations of the American Stock Exchange (provided that in the case of clause (i) above, each Purchaser shall be notified by the Company (although the consent of such Purchaser shall not be required) in connection with any such press release or other public disclosure prior to its release).

 

Section 3.10                                Delivery of Securities. At Closing or as soon thereafter as reasonably possible (but in any event no later than five Business Days immediately following the Closing Date), the Company shall deliver to each Purchaser certificates representing the Shares (in such denominations as each Purchaser may request), and the original Warrants and AIRs, acquired by such Purchaser at the Closing.

 

Section 3.11                                No Shorting of Stock. Each Purchaser represents and warrants to the Company that, during the period beginning on the date such Purchaser was initially contacted by the Company or an agent thereof with respect to a prospective investment in the Company and ending on the date hereof, such Purchaser has not sold short (or entered into any other similar hedging transaction with respect to) the shares of the Company’s Common Stock.  Each Purchaser, severally and not jointly with the other Purchasers, understands and acknowledges that the Commission currently takes the position that coverage of short sales of shares of the Common Stock “against the box” with the Securities purchased hereunder prior to the effective date of the Registration Statement is a violation of Section 5 of the Securities Act, as set forth in Item 65, Section 5 under Section A, of the Manual of Publicly Available Telephone Interpretations, dated June 1997, compiled by the Office of Chief Counsel, Division of Corporate Finance. Accordingly, each Purchaser hereby agrees (on behalf of itself or any Person over which it has direct control) not to use any of the Securities to cover any short sales, hedging or similar transactions with the same economic effect as a short sale, made prior to the effective date of the Registration Statement. Additionally, each Purchaser, severally and not jointly with the other Purchasers, agrees to comply with Regulation M under the federal securities laws.

 

Section 3.12                                Subsequent Financings.

 

(a)                                  Until the first anniversary of the Closing Date, the Company hereby grants to each Purchaser (but not its assigns) that (A) still owns Shares purchased hereunder immediately prior to the issuance of the “New Securities” (as defined in Section 3.12(b)), (B) purchased Shares on the Closing Date, and (C) was not an officer or director of the Company as of the Closing Date (any such Purchaser, for such purpose, an “Eligible Purchaser”), a right (the “Preemptive Right”) to purchase all or any part of such Eligible Purchaser’s pro rata share of any New Securities that the Company may, from time to time, propose to sell and issue. The pro rata share for each Eligible Purchaser, for purposes of the Preemptive Right, is the ratio of (x) the number of shares of Common Stock then held or deemed to be held by such Eligible Purchaser immediately prior to the issuance of the New Securities (assuming the full exercise of the Warrants and the AIRs), to (y) the total number of shares of Common Stock of the Company outstanding immediately prior to the issuance of the New Securities (after giving effect to the full exercise of the Warrants and the AIRs).

 

(b)                                 For purposes of this Section 3.12, “New Securities” shall mean any Common Stock, whether or not authorized on the date hereof, and rights, options or warrants to

 

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purchase Common Stock and securities of any type whatsoever that are, or may become, convertible into Common Stock; provided, however, that “New Securities” does not include the following:

 

(i)                                     shares of capital stock of the Company issuable upon conversion or exercise of any currently outstanding securities or any Shares, AIRs, Warrants or New Securities issued in accordance with this Agreement (including the Warrant Shares and the AIR Shares);

 

(ii)                                  shares or options or warrants for Common Stock granted to officers, directors and employees of, and consultants to, the Company pursuant to stock option or purchase plans or other compensatory agreements approved by the Compensation Committee of the Board of Directors;

 

(iii)                               shares of Common Stock issued in connection with any pro rata stock split or stock dividend in respect of any series or class of capital stock of the Company or recapitalization by the Company;

 

(iv)                              shares of capital stock, or options or warrants to purchase capital stock, issued to a strategic investor in connection with a strategic commercial agreement or pursuant to joint ventures, partnerships, licensing agreements or other similar arrangements, as determined by the Board of Directors;

 

(v)                                 shares of capital stock, or options or warrants to purchase capital stock, issued pursuant to a commercial borrowing, secured lending or lease financing transaction approved by the Board of Directors and effected with a bank or other institutional lender;

 

(vi)                              shares of capital stock, or options or warrants to purchase capital stock, issued pursuant to the acquisition of another corporation or entity by the Company by consolidation, merger, purchase of all or substantially all of the assets, or other reorganization in which the Company acquires, in a single transaction or series of related transactions, all or substantially all of the assets of such other corporation or entity or fifty percent (50%) or more of the voting power of such other corporation or entity or fifty percent (50%) or more of the equity ownership of such other corporation or entity;

 

(vii)                           shares of capital stock issued in an underwritten public securities offering pursuant to a registration statement filed under the Securities Act;

 

(viii)                        shares of capital stock, or options or warrants to purchase capital stock, issued to current or prospective customers or suppliers of the Company or to its employees, officers or directors, approved by the Board of Directors as compensation or accommodation in lieu of other payment, compensation or accommodation to such customer, supplier, employee, officer or director;

 

(ix)                                shares of capital stock, or warrants to purchase capital stock, issued to any Person that provides services to the Company as compensation therefor pursuant to an agreement approved by the Board of Directors;

 

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(x)                                   shares of capital stock, or options or warrants to purchase capital stock, offered in a transaction where purchase of such securities by any Purchaser would cause such transaction to fail to comply with applicable federal or state securities laws or would cause an applicable registration or qualification exemption to fail to be available to the Company; provided, however, that this clause (x) shall apply only to the Purchaser or Purchasers who would cause any such failure, and not to any of the other Purchasers; and

 

(xi)                                securities issuable upon conversion or exercise of the securities set forth in paragraphs (i) – (x) above.

 

In the event that the Company proposes to undertake an issuance of New Securities, it shall give each Eligible Purchaser written notice (the “Notice”) of its intention, describing the type of New Securities, the price, and the general terms upon which the Company proposes to issue the same.  Each Eligible Purchaser shall have ten (10) Business Days after receipt of such notice to agree to purchase all or any portion of its pro rata share of such New Securities at the price and upon the terms specified in the notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased. In the event that any New Securities subject to the Preemptive Right are not purchased by the Eligible Purchaser within the ten (10) Business Day period specified above, the Company shall have sixty (60) days thereafter to sell (or enter into an agreement pursuant to which the sale of New Securities that had been subject to the Preemptive Right shall be closed, if at all, within sixty (60) days from the date of said agreement) the New Securities with respect to which the rights of the Purchaser were not exercised at a price and upon terms, including manner of payment, not substantially more favorable to the purchasers thereof than specified in the Notice. In the event the Company has not sold all offered New Securities within such sixty (60) day period (or sold and issued New Securities in accordance with the foregoing within sixty (60) days from the date of such agreement), the Company shall not thereafter issue or sell any New Securities, without first complying again with the procedures set forth in this Section 3.12.

 

Section 3.13                                Beneficial Ownership Restrictions.

 

(a)                                  Notwithstanding anything to the contrary set forth in this Agreement or any other Transaction Document (including, without limitation, the Warrant and the AIR), at no time may a Purchaser convert a Security if the number of shares of Common Stock to be issued pursuant to such conversion, when aggregated with all other shares of Common Stock owned by such Purchaser at such time, would result in such Purchaser beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act, and the rules thereunder) in excess of 4.99% of the then issued and outstanding shares of Common Stock outstanding at such time; provided, however, that upon a Purchaser providing the Company with sixty-one (61) days notice (the “Waiver Notice”) that such Purchaser would like to waive this Section 3.13(a) with regard to any or all shares of Common Stock issuable upon conversion of any Security, this Section 3.13(a) shall be of no force or effect with regard to those Securities referenced in the Waiver Notice; provided, further, that any Purchaser may waive this Section 3.13(a) by so indicating on the signature page to this Agreement, any such waiver to be effective on and as of the date of this Agreement.

 

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(b)                                 Notwithstanding anything to the contrary set forth in this Agreement or any other Transaction Document (including, without limitation, the Warrant and the AIR), at no time may a Purchaser convert a Security if the number of shares of Common Stock to be issued pursuant to such conversion, when aggregated with all other shares of Common Stock owned by such Purchaser at such time, would result in such Purchaser beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act, and the rules thereunder) in excess of 9.99% of the then issued and outstanding shares of Common Stock outstanding at such time; provided, however, that upon a Purchaser providing the Company with a Waiver Notice that such Purchaser would like to waive this Section 3.13(b) with regard to any or all shares of Common Stock issuable upon conversion of a Security, this Section 3.13(b) shall be of no force or effect with regard to those Securities referenced in the Waiver Notice.

 

(c)                                  Notwithstanding anything in this Agreement to the contrary, without (i) the prior approval of the Company’s stockholders in accordance with the rules of Rule 713 of the American Stock Exchange (“AMEX”) Rules, and (ii) the submission to AMEX of an Additional Listing Application, in no event shall the Company issue shares of Common Stock upon conversion of the Warrants or AIRs to the extent that the total aggregate number of shares of Common Stock issued or deemed to be issued at any time pursuant to this Agreement would exceed 19.99% of the issued and outstanding shares of Common Stock immediately prior to the date of this Agreement; provided, however, that this subsection (c) of this Section 3.13 shall only be applicable if the Common Stock is listed for quotation on AMEX.

 

ARTICLE IV

 

Conditions

 

Section 4.1                                      Conditions Precedent to the Obligation of the Company to Close and to Sell the Shares, Warrants and AIRs. The obligation hereunder of the Company to close and issue and sell the Shares, the Warrants and the AIRs to the Purchasers on the Closing Date is subject to the satisfaction or waiver, at or before the Closing, of the 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 Purchasers’ Representations and Warranties. The representations and warranties of each Purchaser shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time, except for representations and warranties that are expressly made as of a particular date, which shall be true and correct in all material respects as of such date.

 

(b)                                 Performance by the Purchasers. Each Purchaser 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 Purchasers at or prior to the Closing 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

 

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governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.

 

(d)                                 Delivery of Purchase Price. The Purchase Price for the Shares, the Warrants and the AIRs shall have been delivered to the Company at the Closing.

 

(e)                                  Delivery of Transaction Documents. The Transaction Documents to which the Purchasers are party shall have been duly executed and delivered by the Purchasers to the Company.

 

Section 4.2                                      Conditions Precedent to the Obligation of the Purchasers to Close and to Purchase the Shares, the Warrants and the AIRs. The obligation hereunder of the Purchasers to purchase the Shares, the Warrants and the AIRs and consummate the transactions contemplated by this Agreement is subject to the satisfaction or waiver, at or before the Closing, of each of the conditions set forth below. These conditions are for the Purchasers’ sole benefit and may be waived by the Purchasers at any time in their sole discretion.

 

(a)                                  Accuracy of the Company’s Representations and Warranties. Each of the representations and warranties of the Company in this Agreement, the Warrants, the AIRs and the Registration Rights Agreement shall be true and correct in all material respects as of the Closing Date, except for representations and warranties that speak as of a particular date, which shall be true and correct in all material respects as of such date.

 

(b)                                 Performance by the Company. The Company shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date.

 

(c)                                  No Suspension, Etc. Trading in the Common Stock shall not have been suspended by the Commission (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall be terminated prior to the Closing), and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg Financial Markets (“Bloomberg”) shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by Bloomberg, or quoted by the American Stock Exchange, nor shall a banking moratorium have been declared either by the United States or Massachusetts State authorities, nor shall there have occurred any national or international calamity or crisis of such magnitude in its effect on any financial market which, in each case, in the reasonable judgment of the Purchasers, makes it impracticable or inadvisable to purchase the Shares, the Warrants and the AIRs.

 

(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)                                  No Proceedings or Litigation. No action, suit or proceeding before any arbitrator or any governmental authority shall have been commenced, and no investigation by any governmental authority shall have been threatened, against the Company or any Subsidiary,

 

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or any of the officers, directors or affiliates of the Company or any Subsidiary, seeking to restrain, prevent or change the transactions contemplated by this Agreement, or seeking damages in connection with such transactions.

 

(f)                                    Opinion of Counsel, Etc. The Purchasers shall have received an opinion of counsel to the Company, dated the Closing Date, in the form of Exhibit D hereto, and such other certificates and documents as the Purchasers or their counsel shall reasonably require incident to the Closing.

 

(g)                                 Warrants and AIRs. The Company shall have delivered to the Purchasers the originally executed Warrants and AIRs (in such denominations as each Purchaser may request) being acquired by the Purchasers in accordance with Section 3.10.

 

(h)                                 Resolutions. The Board of Directors of the Company shall have adopted resolutions consistent with Section 2.1(b) hereof in a form reasonably acceptable to the Purchasers (the “Resolutions”).

 

(i)                                     Reservation of Shares. As of the Closing Date, the Company shall have reserved out of its authorized and unissued Common Stock, solely for the purpose of effecting the issuance of the Shares and the exercise of the Warrants and the AIRs, a number of shares of Common Stock equal to (A) the number of Warrant Shares issuable upon exercise of the Warrants, assuming the Warrants were granted on the Closing Date (after giving effect to the Warrants to be issued on the Closing Date and assuming the Warrants were fully exercisable on such date regardless of any limitation on the timing or amount of such exercises), plus (B) the number of AIR Shares issuable upon exercise of the AIRs, assuming the AIRs were granted on the Closing Date (after giving effect to the AIRs to be issued on the Closing Date and assuming the AIRs were fully exercisable on such date regardless of any limitation on the timing or amount of such exercises).

 

(j)                                     Secretary’s Certificate. The Company shall have delivered to the Purchasers a secretary’s certificate, dated as of the Closing Date, as to (i) the Resolutions, (ii) the Articles and the Bylaws, each as in effect at the Closing, and (iii) the authority and incumbency of the officers of the Company executing the Transaction Documents and any other documents required to be executed or delivered in connection therewith.

 

(k)                                  Officer’s Certificate. On the Closing Date, the Company shall have delivered to the Purchasers a certificate of an executive officer of the Company, dated as of the Closing Date, confirming the accuracy of the Company’s representations, warranties and covenants as of the Closing Date and confirming the compliance by the Company with the conditions precedent set forth in this Section 4.2 as of the Closing Date.

 

(l)                                     Fees and Expenses. As of the Closing Date, all fees and expenses required to be paid by the Company shall have been or authorized to be paid by the Company as of the Closing Date.

 

(m)                               Registration Rights Agreement. As of the Closing Date, the parties shall have entered into the Registration Rights Agreement in the Form of Exhibit E attached hereto.

 

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(n)                                 Lock-Up Agreements. Each officer, director and holder of 10% or more of the Common Stock shall have executed and delivered to the Purchasers a Lock-Up Agreement in the form attached hereto as Exhibit F.

 

(o)                                 Material Adverse Effect. No Material Adverse Effect shall have occurred.

 

ARTICLE V

 

Transfer Restrictions and Legends

 

Section 5.1                                      (a)                                  The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement, to the Company, to an Affiliate of a Purchaser or in connection with a pledge permitted by Section 5.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a Purchaser under this Agreement and the Registration Rights Agreement.

 

(b)                                 The Purchasers agree to the imprinting, so long as is required by this Section 5.1(b), of a legend on any of the Securities in the following form:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURIT IES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.

 

The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement and the Registration Rights Agreement and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and

 

23


 

no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities, including, if the Securities are subject to registration pursuant to the Registration Rights Agreement, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders thereunder, if required.

 

(c)                                  Certificates evidencing the Shares, the Warrant Shares and AIR Shares shall not contain any legend (including the legend set forth in Section 5.1(b)), (i) while a registration statement (including the Registration Statement) covering the resale of such security is effective under the Securities Act, or (ii) following any sale of such Shares, Warrant Shares or AIR Shares pursuant to Rule 144, or (iii) if such Shares, Warrant Shares or AIR Shares are eligible for sale under Rule 144(k), or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the Staff of the Commission). The Company shall cause its counsel to issue a legal opinion to the Company’s transfer agent promptly after the Effectiveness Date (as defined in the Registration Rights Agreement) if required by the Company’s transfer agent to effect the removal of the legend hereunder. If all or any portion of a Warrant or AIR is exercised at a time when there is an effective registration statement to cover the resale of the Warrant Shares or the AIR Shares, such Warrant Shares or AIR Shares shall be issued free of all legends. The Company agrees that following the Effectiveness Date or at such time as such legend is no longer required under this Section 5.1(c), it will, no later than ten (10) Business Days following the delivery by a Purchaser to the Company or the Company’s transfer agent of a certificate representing Shares, Warrant Shares or AIR Shares, as the case may be, issued with a restrictive legend (such date, the “Legend Remo val Date”), deliver or cause to be delivered to such Purchaser a certificate representing such Securities that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to any transfer agent of the Company that enlarge the restrictions on transfer set forth in this Section 5.1.

 

(d)                                 In addition to such Purchaser’s other available remedies, the Company shall pay t o a Purchaser, in cash, as liquidated damages and not as a penalty, for each $1,000 of Shares, Warrant Shares and/or AIR Shares (based on the closing price of the Common Stock on the date such Securities are submitted to the Company’s transfer agent) subject to Section 5.1(c), $10 per Business Day (increasing to $20 per Business Day five (5) Business Days after such damages have begun to accrue) for each Business Day after the Legend Removal Date until such certificate is delivered in proper form. Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Company’s failure to deliver certificates representing any Securities as required by the Transaction Documents, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.

 

(e)                                  Each Purchaser, severally and not jointly with the other Purchasers, agrees that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 5.1 is predicated upon the Company’s reliance that the Purchaser will sell

 

24


 

any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom.

 

ARTICLE VI

 

Termination

 

Section 6.1                                      Termination by Mutual Consent. This Agreement may be terminated at any time prior to the Closing Date by the mutual written consent of the Company and the Purchasers.

 

Section 6.2                                      Effect of Termination.  In the event of termination by the Company or the Purchasers, written notice thereof shall forthwith be given to the other party and the transactions contemplated by this Agreement shall be terminated without further action by any party.  If this Agreement is terminated as provided in Section 6.1 herein, this Agreement shall become void and of no further force and effect, except for Sections 8.1 and 8.2, and Article VII herein. Nothing in this Section 6.2 shall be deemed to release the Company or any Purchaser from any liability for any breach under this Agreement, or to impair the rights of the Company or such Purchaser to compel specific performance by the other party of its obligations under this Agreement.

 

ARTICLE VII

 

Indemnification

 

Section 7.1                                      General Indemnity. To the extent arising from a third-party claim by other than a Purchaser, the Company agrees to indemnify and hold harmless each Purchaser (and its respective directors, officers, employees, affiliates, agents, successors and assigns) from and against any and all losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation, reasonable attorneys’ fees, charges and disbursements) incurred by each Purchaser or any such Person as a result of any inaccuracy in or breach of the representations, warranties or covenants made by the Company herein. To the extent arising from a third-party claim, the Purchasers severally but not jointly agree to indemnify and hold harmless the Company and its directors, officers, employees, affiliates, agents, successors and assigns from and against any and all losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation, reasonable attorneys’ fees, charges and disbursements) incurred by the Company as result of any inaccuracy in or breach of the representations, warranties or covenants made by the Purchasers herein.

 

Section 7.2                                      Indemnification Procedure. Any party entitled to indemnification under this Article VII (an “indemnified party”) will give written notice to the indemnifying party of any matters giving rise to a claim for indemnification; provided, that the failure of any party entitled to indemnification hereunder to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Article VII except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any action, proceeding or claim is brought against an indemnified party in respect of which indemnification

 

25


 

is sought hereunder, the indemnifying party shall be entitled to participate in and, unless in the reasonable judgment of the indemnified party a conflict of interest between it and the indemnifying party may exist with respect to such action, proceeding or claim, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party.  In the event that the indemnifying party advises an indemnified party that it will contest such a claim for indemnification hereunder, or fails, within thirty (30) days of receipt of any indemnification notice to notify, in writing, such Person of its election to defend, settle or compromise, at its sole cost and expense, any action, proceeding or claim (or discontinues its defense at any time after it commences such defense), then the indemnified party may, at its option, defend, settle or otherwise compromise or pay such action or claim. In any event, unless and until the indemnifying party elects in writing to assume and does so assume the defense of any such claim, proceeding or action, the indemnified party’s costs and expenses arising out of the defense, settlement or compromise of any such action, claim or proceeding shall be losses subject to indemnification hereunder. The indemnified party shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the indemnified party which relates to such action or claim.  The indemnifying party shall keep the indemnified party fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto.  If the indemnifying party elects to defend any such action or claim, then the indemnified party shall be entitled to participate in such defense with counsel of its choice at its sole cost and expense.  The indemnifying party shall not be liable for any settlement of any action, claim or proceeding effected without its prior written consent.  Notwithstanding anything in this Article VII to the contrary, the indemnifying party shall not, without the indemnified party’s prior written consent, settle or compromise any claim or consent to entry of any judgment in respect thereof which imposes any future obligation on the indemnified party or which does not include, as an unconditional term thereof, the giving by the claimant or the plaintiff to the indemnified party of a release from all liability in respect of such claim. The indemnification required by this Article VII shall be made by periodic payments of the amount thereof during the course of investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred, so long as the indemnified party irrevocably agrees to refund such moneys if it is ultimately determined by a court of competent jurisdiction that such party was not entitled to indemnification. The indemnity agreements contained herein shall be in addition to (a) any cause of action or similar rights of the indemnified party against the indemnifying party or others, and (b) any liabilities the indemnifying party may be subject to pursuant to the law.

 

ARTICLE VIII

 

Miscellaneous

 

Section 8.1                                      Fees and Expenses. Each party shall pay the fees and expenses of its advisors, 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, however, that the Company shall pay a flat $30,000 to Gryphon Master Fund, L.P., the lead Purchaser (“Gryphon”), to reimburse Gryphon for the fees and expenses (including attorneys’ fees and expenses) incurred by it in connection with its due diligence review of the Company and the preparation, negotiation, execution, delivery and performance of

 

26


 

this Agreement and the other Transaction Documents and the transactions contemplated thereunder (including Gryphon’s counsel’s review of the Registration Statement (as contemplated by the Registration Rights Agreement) as special counsel to Purchasers), $5,000 of which has already been paid and is non-refundable, and the remaining $25,000 of which shall be due and payable in cash at Closing (and only if the Closing occurs). If the Closing occurs, the Company hereby authorizes and directs Gryphon to deduct $25,000 from the Purchase Price to be paid by Gryphon at Closing in payment and satisfaction of such remaining $25,000 due and payable by the Company at Closing. In addition, the Company shall pay all reasonable fees and expenses incurred by the Purchasers in connection with any amendments, modifications or waivers of this Agreement or any of the other Transaction Documents or incurred in connection with the enforcement of this Agreement and any of the other Transaction Documents, following a breach by the Company of this Agreement or any of the other Transaction Documents, including, without limitation, all reasonable attorneys’ fees, disbursements and expenses.

 

Section 8.2                                      Specific Enforcement; Consent to Jurisdiction.

 

(a)                                  The Company and the Purchasers acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement or the other Transaction Documents 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 or the other Transaction Documents and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.

 

(b)                                 The Company and each Purchaser (i) hereby irrevocably submit to the non-exclusive jurisdiction of the United States District Court sitting in the Northern District of Texas and the courts of the State of Texas located in Dallas, Texas, for the purposes of any suit, action or proceeding arising out of or relating to this Agreement or any of the other Transaction Documents or the transactions contemplated hereby or thereby, and (ii) hereby waive, and agree 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. The Company and each Purchaser consent 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 Section 8.2 shall affect or limit any right to serve process in any other manner permitted by law. The Company and the Purchasers hereby agree that the prevailing party in any suit, action or proceeding arising out of or relating to the Shares, the Warrants, the AIRs or any Transaction Document shall be entitled to reimbursement for reasonable legal fees from the non-prevailing party.

 

Section 8.3                                      Entire Agreement; Amendment. This Agreement and the Transaction Documents contain the entire understanding and agreement of the parties with respect to the matters covered hereby and, except as specifically set forth herein or in the other Transaction Documents, neither the Company nor any Purchaser make any representation, warranty, covenant or undertaking with respect to such matters, and they supersede all prior understandings and agreements with respect to said subject matter, all of which are merged herein. No provision of this Agreement may be waived or amended other than by a written

 

27


 

instrument signed by the Company and the holders of at least a majority in interest of the then-outstanding Shares, and no provision hereof may be waived other than by a written instrument signed by the party against whom enforcement of any such amendment or waiver is sought.  No such amendment shall be effective to the extent that it applies to less than all of the holders of the Shares then outstanding. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration is also offered to all of the parties to the Transaction Documents or holders of Shares, as the case may be.

 

Section 8.4                                      Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery by telecopy or facsimile at the address or number designated below (if delivered on a Business Day during normal business hours where such notice is to be received), or the first Business Day following such delivery (if delivered other than on a Business Day during normal business hours where such notice is to be received), or (b) on the second Business Day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be:

 

If to the Company:

CardioTech International, Inc.

 

229 Andover Street

 

Wilmington, Massachusetts  01887

 

Attention:  Dr. Michael Szycher, PhD.

 

Telecopier:  (978) 657-0074

 

Telephone:  (978) 657-0075

 

 

with copies (which copies
shall not constitute notice
to the Company) to:

Ellenoff Grossman & Schole LLP

 

370 Lexington Avenue

 

New York, NY 10017

 

Attention: David Selengut, Esq.

 

Telecopier: (212) 370-7889

 

Telephone: (212) 370-1300

 

 

If to any Purchaser:

At the address of such Purchaser set forth on Exhibit A to this Agreement.

 

Any party hereto may from time to time change its address for notices by giving at least ten (10) days written notice of such changed address to the other party hereto.

 

Section 8.5                                      Waivers. No waiver by any 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 any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.

 

28


 

Section 8.6                                      Headings. The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof.

 

Section 8.7                                      Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. After the Closing, the assignment by a party to this Agreement of any rights hereunder shall not affect the obligations of such party under this Agreement. After the Closing, the Purchasers, in compliance with all applicable securities laws, may assign the Shares, the Warrants, the AIRs and their rights under this Agreement and the other Transaction Documents and any other rights hereto and thereto without the consent of the Company.

 

Section 8.8                                      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 (other than indemnified parties, as contemplated by Article VII).

 

Section 8.9                                      Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Massachusetts, without giving effect to the choice of law provisions. This Agreement shall not be interpreted or construed with any presumption against the party causing this Agreement to be drafted.

 

Section 8.10                                Survival. The representations, warranties, agreements and covenants of the Company and the Purchasers set forth this Agreement shall survive the execution and delivery hereof and the Closing hereunder.

 

Section 8.11                                Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and shall become effective when counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart.

 

Section 8.12                                Publicity. The Company agrees that it will not disclose, and will not include in any public announcement, the names of the Purchasers without the consent of the Purchasers in accordance with Section 8.3, which consent shall not be unreasonably withheld or delayed, or unless and until such disclosure is required by law, rule or applicable regulation, and then only to the extent of such requirement.

 

Section 8.13                                Severability. The provisions of this Agreement are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement and this Agreement shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein, so that such provisions would be valid, legal and enforceable to the maximum extent possible.

 

Section 8.14                                Further Assurances. From and after the date of this Agreement, upon the request of the Purchasers or the Company, the Company and each Purchaser shall

 

29


 

execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement, the Warrants and the Registration Rights Agreement.

 

Section 8.15                                Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under any Purchaser Transaction Document. Nothing contained herein or in any other Purchaser Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser confirms that it has independently participated in the negotiation of the transactions contemplated hereby with the advice of its own counsel and advisors. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser (other than Gryphon and GSSF Master Fund, LP (“GSSF”)) hereby agrees and acknowledges that (a) Warren W. Garden, P.C. was retained solely by Gryphon and GSSF in connection with their due diligence review of the Company and the preparation, negotiation, execution, delivery and performance of this Agreement and the other Transaction Documents and the transactions contemplated thereunder, and in such capacity has provided legal services solely to Gryphon and GSSF, (b) Warren W. Garden, P.C. has not represented, nor will it represent, any Purchaser (other than Gryphon and GSSF) in connection with the preparation, negotiation, execution, delivery and performance of this Agreement or the other Transaction Documents or the transactions contemplated thereunder, and (c) each Purchaser (other than Gryphon and GSSF) should, if it wishes counsel with respect to the preparation, negotiation, execution, delivery and performance of this Agreement or the other Transaction Documents or the transactions contemplated thereunder, retain its own independent counsel with respect thereto.

 

[Remainder of page intentionally left blank. Signature pages to follow.]

 

30


 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

 

 

 

CARDIOTECH INTERNATIONAL, INC.

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

Michael Szycher, Ph.D.

 

 

Title:

Chairman & Chief Executive Officer

 

 

[Signatures of Purchasers to follow on next pages.]

 

31


 

 

PURCHASERS:

 

 

 

GRYPHON MASTER FUND, L.P.

 

 

 

 

    

 

By:

 Gryphon Partners, L.P., its General Partner

 

 

 

 

By:

 Gryphon Management Partners, L.P., its General Partner

 

 

 

 

By:

 Gryphon Advisors, L.L.C., its General Partner

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

E.B. Lyon, IV, Authorized Agent

 

 

 

 

 

 

 

o Check box and initial if the foregoing Purchaser wishes to waive
the provisions of Section 3.13(a).                 (initial here)

 

 

 

GSSF MASTER FUND, LP

 

 

 

 

 

 

By:

 Gryphon Special Situations Fund, LP, its General Partner

 

 

 

 

By:

 GSSF Management Partners, LP, its General Partner

 

 

 

 

By:

 GSSF, LLC, its General Partner

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

E.B. Lyon, IV, Authorized Agent

 

 

 

 

 

 

 

o Check box and initial if the foregoing Purchaser wishes to waive
the provisions of Section 3.13(a).                 (initial here)

 

32


 

 

TRUK OPPORTUNITY FUND, LLC

 

 

 

 

By:

Atoll Asset Management, LLC

 

 

 

 

 

 

By:

 

 

 

 

Michael E. Fein, Principal

 

 

 

 

 

o Check box and initial if the foregoing Purchaser wishes to waive
the provisions of Section 3.13(a).                 (initial here)

 

 

 

 

 

TRUK INTERNATIONAL FUND, LP

 

 

 

 

By:

Atoll Asset Management, LLC

 

 

 

 

 

 

By:

 

 

 

 

Michael E. Fein, Principal

 

 

 

 

 

o Check box and initial if the foregoing Purchaser wishes to waive
the provisions of Section 3.13(a).                 (initial here)

 

33


 

 

MEADOWBROOK OPPORTUNITY FUND LLC

 

 

 

 

 

By:

 

 

 

 

Michael Ragins, Manager

 

 

 

 

 

o Check box and initial if the foregoing Purchaser wishes to waive
the provisions of Section 3.13(a).                 (initial here)

 

34


 

 

CAPITAL VENTURES INTERNATIONAL

 

 

 

 

 

By:

 

 

 

 

Martin Kobinger, Investment Manager

 

 

 

 

 

o Check box and initial if the foregoing Purchaser wishes to waive
the provisions of Section 3.13(a).                 (initial here)

 

35


 

 

IROQUOIS CAPITAL, L.P.

 

 

 

 

 

By:

 

 

 

Name:

 

Title:

 

 

 

 

 

o Check box and initial if the foregoing Purchaser wishes to waive
the provisions of Section 3.13(a).                 (initial here)

 

36


 

Securities Purchase Agreement Schedules

 

2.1(g)  Additional Investments or Subsidiaries (2.1(a)) and obligations (2.1(g))

 

None

 

2.1(b):  Additional Consents

 

American Stock Exchange

 

2.1 (c) Additional Shares/options :

 

-As of October 30, 2004 the number of common shares outstanding was 17,694,221

 

-As of October 30, 2004 the number of options outstanding to purchase shares of the -Company’s common stock was 5,298,748 and it is anticipated that the Company will grant the remaining authorized but unissued options of 1,675,461 at October 30, 2004 to employees, directors or consultants subsequent to October 30, 2004

 

-Agreement with Dr. Eric Ryan dated July 15, 2004

 

-Agreement with Weitl Ingenieurburo dated July 15, 2004

 

-Agreement with Kai Baums dated July 15, 2004

 

-Stock option agreement with David Volpe dated March 26, 2003

 

-Fee Agreement with Ellenoff Grossman & Schole

 

-Marketing agreement with Aurelius Consulting, Inc dated July 1, 2003 and extensions thereof

 

-Asset Purchase Agreement dated November 19, 2004 between CardioTech International, Inc. and Cartika Medical, Inc.

 

-Exchange and Venture Agreement by and among Cardiotech International, Inc., Implant Sciences, Inc. and CorNov, Inc. dated March 5, 2005

 

-Placement Agency Agreement between CardioTech International, Inc. and Stonegate Securities, Inc.

 

2.1 (g) Subsidiaries

 

None

 

 

2.1(f) Commission Documents

 

The Company’s proxy statement dated August 2, 2004 was filed late

 

2.1(i)  Liabilities

 

Those related to the Asset Purchase Agreement dated November 19, 2004 by and between CardioTech International, Inc. and Cartika Medical, Inc.

 

Those related to the Placement Agency Agreement by and between CardioTech International, Inc. and Stonegate Securities, Inc.

 

2.1(j)  Disclosure

 

None

 

2.1(k)  Indebtedness

 

Related to the Asset Purchase Agreement dated November 19, 2004 by and between CardioTech International, Inc. and Cartika Medical, Inc.

 

Related to the Placement Agency Agreement by and between CardioTech International, Inc. and Stonegate Securities, Inc.

 

2.1(l) Title to Assets

 

None

 

2.1(m) Actions Pending

 

None

 

2.1(n) Compliance with Law

 

None

 

2.1(o) Taxes

 

None

 

37


 

 

2.1(p) Certain Fees

 

None

 

2.1(r) Intellectual Property

 

None

 

2.1(s) Environmental Compliance

 

None

 

2.1(u) Material Agreements

 

GE Healthcare revolving line of credit requires approval from GE prior to the payment of dividends to CardioTech

 

2.1(v) Transactions with Affiliates

 

None

 

2.1(x) Government Approvals

 

American Stock Exchange

 

2.1(y) Employees

 

Liann Johnson, former General Manager of Catheter and Disposables Technology was terminated in November 2004.

 

2.1(z) Absence of Certain Developments

 

None

 

2.1(aa) Use of Proceeds

 

None

 

 

 

38


 

EXHIBIT A

LIST OF PURCHASERS

 

Names and Addresses
of Purchasers

 

Number of Shares
Purchased

 

Number of
Warrants
Purchased

 

Number of AIRs
Purchased

 

Dollar Amount of
Investment

 

 

 

 

 

 

 

 

 

 

 

Gryphon Master Fund, L.P.
100 Crescent Court
Suite 490
Dallas, Texas  75201
Tel. No.: (214) 871-6783
Fax No.: (214) 871-6711
Attn:  Ryan R. Wolters

 

208,334

 

104,167

 

208,334

 

$

500,001.60

 

 

 

 

 

 

 

 

 

 

 

With a copy to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warren W. Garden, P.C.

100 Crescent Court, Suite 490
Dallas, Texas  75201
Tel. No.: (214) 871-6710
Fax No.: (214) 871-6711
Attn:  Warren W. Garden, Esq.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GSSF Master Fund, LP

100 Crescent Court
Suite 475
Dallas, Texas  75201
Tel. No.: (214) 871-6752
Fax No.: (214) 871-6711
Attn:  Timothy M. Stobaugh

 

208,334

 

104,167

 

208,334

 

$

500,001.60

 

 

 

 

 

 

 

 

 

 

 

With a copy to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warren W. Garden, P.C.

100 Crescent Court, Suite 490
Dallas, Texas  75201
Tel. No.: (214) 871-6710
Fax No.: (214) 871-6711
Attn:  Warren W. Garden, Esq.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Truk Opportunity Fund, LLC

One East 52nd Street
Sixth Floor
New York, New York  10022
Tel. No.: (212) 888-2224
Fax No.: (212) 888-0334
Attn:  Michael E. Fein, Principal

 

195,834

 

97,917

 

195,834

 

$

470,001.60

 

 

A-1


 

Names and Addresses
of Purchasers

 

Number of
Shares
Purchased

 

Number of Warrants
Purchased

 

Number of AIRs
Purchased

 

Dollar Amount of
Investment

 

 

 

 

 

 

 

 

 

 

 

Truk International Fund, LP
One East 52nd Street
Sixth Floor
New York, New York 10022
Tel. No.: (212) 888-2224
Fax No.: (212) 888-0334
Attn: Michael E. Fein, Principal

 

12,500

 

6,250

 

12,500

 

$

30,000.00

 

 

 

 

 

 

 

 

 

 

 

Meadowbrook Opportunity Fund LLC
520 Lake Cook Road, Suite 690
Deerfield, Illinois 60015
Tel. No.: (847) 876-1220
Fax No.: (847) 876-1221
Attn: Dan Elekman

 

150,000

 

75,000

 

150,000

 

$

360,000.00

 

 

 

 

 

 

 

 

 

 

 

Capital Ventures International
c/o Heights Capital Management, Inc.
101 California Street, Suite 3250
San Francisco, California 94111
Tel. No.: (415) 403-6500
Fax No.: (415) 403-6525
Attn: Sam Winer and Martin Kobinger

 

208,334

 

104,167

 

208,334

 

$

500,001.60

 

 

 

 

 

 

 

 

 

 

 

Iroquois Capital, L.P.
641 Lexington Avenue
26th Floor
New York, New York 10022
Tel. No.: (212) 974-3070
Fax No.: (212) 207-3452
Attn: Joshua Silverman

 

156,250

 

78,125

 

156,250

 

$

375,000.00

 

 

 

 

 

 

 

 

 

 

 

Totals

 

1,139,586

 

569,793

 

1,139,586

 

$

2,735,006.40

 

 

A-2


 

EXHIBIT B

FORM OF WARRANT

 

See Exhibit 4.1

 

B-1


 

EXHIBIT C

FORM OF AIR

 

See Exhibit 4.3

 

C-1


 

EXHIBIT D

FORM OF OPINION

 

1.                                       The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Massachusetts and has the requisite corporate power to own, lease and operate its properties and assets, and to carry on its business as presently conducted.  The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the failure to so qualify would have a Material Adverse Effect.

 

2.                                       The Company has the requisite corporate power and authority to enter into and perform its obligations under the Transaction Documents and to issue the Shares, the Warrants, the Warrant Shares, the AIRs and the AIR Shares. The execution, delivery and performance of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly and validly authorized by all necessary corporate action and no further consent or authorization of the Company or its Board of Directors is required. Each of the Transaction Documents have been duly executed and delivered, and the Shares, the Warrants and the AIRs have been duly executed, issued and delivered by the Company and each of the Transaction Documents constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its respective terms. Neither the Shares, the Warrant Shares nor the AIR Shares are subject to any preemptive rights under the Articles or the Bylaws.

 

3.                                       The Shares have been duly authorized and, when delivered against payment in full as provided in the Purchase Agreement, will be validly issued, fully paid and nonassessable.  The Warrant Shares have been duly authorized and reserved for issuance, and, when delivered upon exercise or against payment in full as provided in the Warrants, will be validly issued, fully paid and nonassessable. The AIR Shares have been duly authorized and reserved for issuance, and, when delivered upon exercise or against payment in full as provided in the AIRs, will be validly issued, fully paid and nonassessable.

 

4.                                       The execution, delivery and performance of and compliance with the terms of the Transaction Documents and the issuance of the Shares, the Warrants, the AIRs, the Warrant Shares and the AIR Shares do not (a) violate any provision of the Articles or Bylaws, (b) 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 material agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company is a party and which is known to us, (c) create or impose a lien, charge or encumbrance on any property of the Company under any agreement or any commitment known to us to which the Company is a party or by which the Company is bound or by which any of its respective properties or assets are bound, or (d) to our knowledge, result in a violation of any Federal, state, local or foreign statute, rule, regulation, order, judgment, injunction 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, in all cases other than violations pursuant to clauses (a) and (d) above,

 

D-1


 

for such conflicts, default, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect.

 

5.                                       No consent, approval or authorization of or designation, declaration or filing with any governmental authority on the part of the Company is required under Federal, state or local law, rule or regulation in connection with the valid execution, delivery and performance of the Transaction Documents, or the offer, sale or issuance of the Shares, the Warrants, the Warrant Shares, the AIRs and the AIR Shares, other than filings as may be required by applicable Federal and state securities laws and regulations, the NASD rules and regulations or as required by the American Stock Exchange.

 

6.                                       To our knowledge, there is no action, suit, claim, investigation or proceeding pending or threatened against the Company which questions the validity of the Agreement or the transactions contemplated thereby or any action taken or to be taken pursuant thereto. To our knowledge, other than as set forth in the Schedules or the Commission Documents, there is no action, suit, claim, investigation or proceeding pending, or threatened, against or involving the Company or any of its properties or assets and which, if adversely determined, is reasonably likely to result in a Material Adverse Effect.  To our knowledge, there are no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against the Company or any officers or directors of the Company in their capacities as such.

 

7.                                       The offer, issuance and sale of the Shares, the Warrants and the AIRs to the Purchasers, and the offer, issuance and sale of the Warrant Shares to the Purchasers pursuant to the Warrants and the AIR Shares to the Purchasers pursuant to the AIRs, are exempt from the registration requirements of the Securities Act of 1933, as amended.

 

D-2


 

EXHIBIT E

FORM OF REGISTRATION RIGHTS AGREEMENT

 

See Exhibit 10.2

 

E-1


 

EXHIBIT F

FORM OF LOCK-UP AGREEMENT

 

See Exhibit 10.3

 

F-1


 

EXHIBIT G

FORM OF PRESS RELEASE

 

See Exhibit 99.1

 

G-1

 EX-10.2 6 a04-15265_1ex10d2.htm EX-10.2

Exhibit 10.2

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”) is made and entered into as of December 22, 2004, by and among CardioTech International, Inc., a Massachusetts corporation (the “Company”), and the persons and entities listed on Exhibit A hereto (each, a “Purchaser” and, collectively, the “Purchasers”).

 

WHEREAS, upon the terms and subject to the conditions of the Securities Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”), the Company has agreed to issue and sell to the Purchasers shares of its Common Stock, Warrants to purchase shares of its Common Stock, and additional investment rights to purchase shares of its Common Stock; and

 

WHEREAS, to induce the Purchasers to execute and deliver the Purchase Agreement and to purchase the Shares, the Warrants and the AIRs, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, with respect to the Shares, the Warrant Shares and the AIR Shares.

 

NOW, THEREFORE, in consideration of the representations, warranties and agreements contained herein and other good and valuable consideration, the receipt and legal adequacy of which are hereby acknowledged by the parties, the Company and the Purchasers hereby agree as follows:

 

1.                                       Definitions.

 

Capitalized terms used but not otherwise defined herein shall have the meanings given such terms in the Purchase Agreement.  As used in this Agreement, the following terms shall have the following meanings:

 

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls or is controlled by or under common control with such Person.  For the purposes of this definition, “control,” when used with respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms “affiliated,” “controlling” and “controlled” have meanings correlative to the foregoing.

 

“AIR Shares” shall have the meaning set forth in the definition of “Registrable Securities.”

 

“Blackout Period” shall have the meaning set forth in Section 3(m).

 

“Board” shall have the meaning set forth in Section 3(m).

 


 

“Business Day” means any day except Saturday, Sunday and any day which is a legal holiday or a day on which banking institutions in the state of Massachusetts generally are authorized or required by law or other government actions to close.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Shares” shall have the meaning set forth in the definition of “Registrable Securities.”

 

“Common Stock” means the Company’s Common Stock, $.01 par value.

 

“Effectiveness Date” means with respect to the Registration Statement the earlier of (i) the 90th day following the Closing Date (or the 120th day following the Closing Date in the event that the Registration Statement is “reviewed” by the Commission), before which the Company will use its best efforts to cause the Registration Statement to become effective, and (ii) the date which is within five (5) Business Days of the date on which the Commission informs the Company (a) that the Commission will not review the Registration Statement, or (b) that the Company may request the acceleration of the effectiveness of the Registration Statement.

 

“Effectiveness Period” shall have the meaning set forth in Section 2.

 

“Event” shall have the meaning set forth in Section 8(d).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Holder” means, collectively, each holder from time to time of Registrable Securities including, without limitation, each Purchaser and its assignees. To the extent this Agreement refers to an election, consent, waiver, request or approval of or by the Holder, such reference shall mean an election, consent, waiver, request or approval by the holders of a majority in interest of the then-outstanding Registrable Securities (on an as exercised basis).

 

“Indemnified Party” shall have the meaning set forth in Section 6(c).

 

“Indemnifying Party” shall have the meaning set forth in Section 6(c).

 

“Liquidated Damages” shall have the meaning set forth in Section 8(d).

 

“Losses” shall have the meaning set forth in Section 6(a).

 

“Person” means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.

 

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

2


 

“Prospectus” means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference in such Prospectus.

 

“Registrable Securities” means (i) the shares of Common Stock issued or issuable pursuant to the Purchase Agreement, and upon any stock split, stock dividend, recapitalization or similar event with respect to such shares of Common Stock and any other securities issued in exchange of or replacement of such shares of Common Stock (collectively, the “Common Shares”); until in the case of any of the Common Shares (a) a Registration Statement covering such Common Share has been declared effective by the Commission and continues to be effective during the Effectiveness Period, or (b) such Common Share is sold in compliance with Rule 144 or may be sold pursuant to Rule 144(k), after which time such Common Share shall not be a Registrable Security; (ii) the shares of Common Stock issued and issuable pursuant to the exercise of the Warrants, and upon any stock split, stock dividend, recapitalization or similar event with respect to such shares of Common Stock and any other securities issued in exchange of or replacement of such shares of Common Stock (collectively, the “Warrant Shares”); until in the case of any of the Warrant Shares (a) a Registration Statement covering such Warrant Share has been declared effective by the Commission and continues to be effective during the Effectiveness Period, or (b) such Warrant Share is sold in compliance with Rule 144 or may be sold pursuant to Rule 144(k), after which time such Warrant Share shall not be a Registrable Security; and (iii) the shares of Common Stock issued and issuable pursuant to the exercise of the AIRs, and upon any stock split, stock dividend, recapitalization or similar event with respect to such shares of Common Stock and any other securities issued in exchange of or replacement of such shares of Common Stock (collectively, the “AIR Shares”); until in the case of any of the AIR Shares (a) a Registration Statement covering such AIR Share has been declared effective by the Commission and continues to be effective during the Effectiveness Period, or (b) such AIR Share is sold in compliance with Rule 144 or may be sold pursuant to Rule 144(k), after which time such AIR Share shall not be a Registrable Security.

 

“Registration Statement” means the registration statement, including the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference in such registration statement, for the Shares, the Warrant Shares and the AIR Shares required to be filed by the Company with the Commission pursuant to this Agreement.

 

“Required Filing Date” means the thirtieth (30th) day immediately following the Closing Date.

 

 “Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

3


 

“Rule 158” means Rule 158 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Special Counsel” means any special counsel to Holder, for which Holder will be reimbursed by the Company pursuant to Section 5 of this Agreement and Section 8.1 of the Purchase Agreement.

 

“Warrant Shares” shall have the meaning set forth in the definition of “Registrable Securities.”

 

2.                                       Registration. On or prior to the Required Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the resale of the Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance with the Securities Act and the rules promulgated thereunder) and shall contain (except if otherwise directed by the Purchasers) the “Plan of Distribution” substantially in the form attached hereto as Exhibit B. The Company shall (i) not permit any securities other than the Registrable Securities to be included in the Registration Statement, (ii) use its best efforts to cause the Registration Statement to be declared effective under the Securities Act (including filing with the Commission a request for acceleration of effectiveness in accordance with Rule 12dl-2 promulgated under the Exchange Act within five (5) Business Days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that the Registration Statement will not be “reviewed,” or not be subject to further review) as soon as possible after the filing thereof, but in any event prior to the Effectiveness Date, and (iii) keep such Registration Statement continuously effective under the Securities Act for a period of two years from the Effectiveness Date (the “Effectiveness Period”).

 

3.                                       Registration Procedures; Company’s Obligations.

 

In connection with the registration of the Registrable Securities, the Company shall:

 

(a)                                  Prepare and file with the Commission on or prior to the Required Filing Date, a Registration Statement on Form S-3 (or if the Company is not then eligible to register for resale the Registrable Securities on Form S-3 such registration shall be on another appropriate form in accordance with the Securities Act and the Rules promulgated thereunder) in accordance with the method or methods of distribution thereof as specified by the Holder (except if otherwise directed by the Holder), and use its best efforts to cause the Registration Statement to become effective and remain effective as provided herein; provided, however, that not less than two (2) Business Days prior to the filing of the Registration Statement or any related Prospectus

 

4


 

or any amendment or supplement thereto (including any document that would be incorporated therein by reference), the Company shall (i) furnish to the Holder and any Special Counsel, copies of all such documents proposed to be filed, which documents (other than those incorporated by reference) will be subject to the timely review of and comment by such Special Counsel, and (ii) at the request of the Holder cause its officers and directors, counsel and independent certified public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of such Special Counsel, to conduct a reasonable investigation within the meaning of the Securities Act.  The Company shall not file the Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holder or any Special Counsel shall reasonably object in writing within two (2) Business Days of their receipt thereof.

 

(b)                                 (i) Prepare and file with the Commission such amendments, including post-effective amendments, to the Registration Statement as may be necessary to keep the Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period in order to register for resale under the Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; (iii) respond promptly to any comments received from the Commission with respect to the Registration Statement or any amendment thereto and promptly provide the Holder true and complete copies of all correspondence from and to the Commission relating to the Registration Statement; and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by the Registration Statement during the applicable period in accordance with the intended methods of disposition by the Holder set forth in the Registration Statement as so amended or in such Prospectus as so supplemented.

 

(c)                                  Notify the Holder of Registrable Securities to be sold and any Special Counsel promptly (and, in the case of (i)(A) below, not less than three (3) Business Days prior to such filing and, in the case of (i)(C) below, no later than the first Business Day following the date on which the Registration Statement becomes effective) and (if requested by any such Person) confirm such notice in writing no later than three (3) Business Days following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to the Registration Statement is proposed to be filed, (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement, and (C) with respect to the Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any request by the Commission or any other Federal or state governmental authority for amendments or supplements to the Registration Statement or Prospectus or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (v) of the occurrence of any event that makes any statement made in the Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to

 

5


 

the Registration Statement, Prospectus or other documents so that, in the case of the Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

The Company shall promptly furnish to the Special Counsel, without charge, (i) any correspondence from the Commission or the Commission’s staff to the Company or its representatives relating to any Registration Statement, and (ii) promptly after the same is prepared and filed with the Commission, a copy of any written response to the correspondence received from the Commission.

 

(d)                                 Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of, (i) any order suspending the effectiveness of the Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any U.S. jurisdiction, at the earliest practicable moment.

 

(e)                                  If requested by the Holder, (i) promptly incorporate in a Prospectus supplement or post-effective amendment to the Registration Statement such information as the Company reasonably agrees should be included therein, and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment.

 

(f)                                    Furnish to the Holder and any Special Counsel, without charge, at least one conformed copy of each Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission.

 

(g)                                 Promptly deliver to the Holder and any Special Counsel, without charge, as many copies of the Registration Statement, Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request; and the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by the selling Holder in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto. Should Holder offer or sell the Registrable Securities, Holder agrees to comply with all applicable securities laws.

 

(h)                                 Prior to any public offering of Registrable Securities, use its best efforts to register or qualify or cooperate with the selling Holder and any Special Counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as the Holder reasonably requests in writing, to keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things necessary or advisable to enable the disposition

 

6


 

in such jurisdictions of the Registrable Securities covered by a Registration Statement; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or subject the Company to any tax in any such jurisdiction where it is not then so subject.

 

(i)                                     Cooperate with the Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold pursuant to a Registration Statement and to enable such Registrable Securities to be in such denominations and registered in such names as the Holder may request.

 

(j)                                     Upon the occurrence of any event contemplated by Section 3(c)(v), promptly prepare a supplement or amendment, including a post-effective amendment, to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

(k)                                  Use its best efforts to cause all Registrable Securities relating to such Registration Statement to be listed on the American Stock Exchange and any other securities exchange, quotation system, market or over-the-counter bulletin board, if any, on which the same securities issued by the Company are then listed as and when required pursuant to the Purchase Agreement.

 

(l)                                     Comply in all material respects with all applicable rules and regulations of the Commission and make generally available to its security holders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 not later than forty-five (45) days after the end of any twelve (12) month period (or ninety (90) days after the end of any twelve (12) month period if such period is a fiscal year) commencing on the first day of the first fiscal quarter of the Company after the effective date of the Registration Statement, which statement shall conform to the requirements of Rule 158.

 

(m)                               If (i) there is material non-public information regarding the Company which the Company’s Board of Directors (the “Board”) reasonably determines not to be in the Company’s best interest to disclose and which the Company is not otherwise required to disclose, or (ii) there is a significant business opportunity (including, but not limited to, the acquisition or disposition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer or other similar transaction) available to the Company which the Board reasonably determines not to be in the Company’s best interest to disclose and which the Company would be required to disclose under the Registration Statement, then the Company may suspend effectiveness of a Registration Statement and suspend the sale of Registrable Securities under a Registration Statement one (1) time every three (3) months or three (3) times in any twelve month period, provided that the Company may not suspend its obligation for more than thirty (30) days in the aggregate in any twelve month period if suspension is for any of the reasons listed above or sixty (60) days in the aggregate in any twelve month period for any other

 

7


 

reason (each, a “Blackout Period”); provided, however, that no such suspension shall be permitted for more than twenty (20) consecutive days, arising out of the same set of facts, circumstances or transactions.

 

(n)                                 Within two (2) Business Days after the Registration Statement which includes the Registrable Securities is ordered effective by the Commission, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Holder whose Registrable Securities are included in such Registration Statement) confirmation that the Registration Statement has been declared effective by the Commission in the form attached hereto as Exhibit C.

 

4.                                       Registration Procedures; Holder’s Obligations

 

In connection with the registration of the Registrable Securities, the Holder shall:

 

(a)                                  If the Registration Statement refers to the Holder by name or otherwise as the holder of any securities of the Company, have the right to require (if such reference to the Holder by name or otherwise is not required by the Securities Act or any similar federal statute then in force) the deletion of the reference to the Holder in any amendment or supplement to the Registration Statement that will be filed subsequent to the time that such reference ceases to be required.

 

(b)                                 (i) not sell any Registrable Securities under the Registration Statement until it has received copies of the Prospectus as then amended or supplemented as contemplated in Section 3(g) and notice from the Company that such Registration Statement and any post-effective amendments thereto have become effective as contemplated by Section 3(c), (ii) comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to the Registration Statement, and (iii) furnish to the Company information regarding such Holder and the distribution of such Registrable Securities as is required by law to be disclosed in the Registration Statement, and the Company may exclude from such registration the Registrable Securities of the Holder if it fails to furnish such information within a reasonable time prior to the filing of each Registration Statement, supplemented Prospectus and/or amended Registration Statement.

 

(c)                                  upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(m), forthwith discontinue disposition of such Registrable Securities under the Registration Statement until the Holder’s receipt of the copies of the supplemented Prospectus and/or amended Registration Statement contemplated by Section 3(j), or until it is advised in writing by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement.

 

(d)                                 Each Purchaser agrees to furnish to the Company a completed Questionnaire in the form attached hereto as Exhibit D as soon as practicable after the Closing.

 

8


 

5.                                       Registration Expenses

 

All reasonable fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company whether or not the Registration Statement is filed or becomes effective and whether or not any Registrable Securities are sold pursuant to the Registration Statement.  The fees and expenses referred to in the foregoing sentence shall include, without limitation, the following: (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with the American Stock Exchange and each other securities exchange or other market on which Registrable Securities are required hereunder to be listed, (B) with respect to filings required to be made with the Commission, and (C) in compliance with state securities or Blue Sky laws); (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses if the printing of prospectuses is requested by the holders of a majority of the Registrable Securities included in the Registration Statement); (iii) messenger, telephone and delivery expenses of the Company; (iv) fees and disbursements of counsel for the Company; and (v) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement, including, without limitation, the Company’s independent public accountants (including the expenses of any comfort letters or costs associated with the delivery by independent public accountants of a comfort letter or comfort letters).  In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder.

 

6.                                       Indemnification

 

(a)                                  Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Purchaser, its permitted assignees, officers, directors, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and employees, each Person who controls any such Purchaser or permitted assignee (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, agents and employees of each such controlling Person, and the respective successors, assigns, estate and personal representatives of each of the foregoing, to the fullest extent permitted by applicable law, from and against any and all claims, losses, damages, liabilities, penalties, judgments, costs (including, without limitation, costs of investigation) and expenses (including, without limitation, reasonable attorneys’ fees and expenses) resulting from a third-party claim (collectively, “Losses”), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any Prospectus, as supplemented or amended, if applicable, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, except (i) to the extent, but only to the extent, that such untrue statements or omissions are based solely upon information regarding the Holder furnished in writing to the

 

9


 

Company by the Holder expressly for use therein, which information was reviewed and expressly approved by the Holder or Special Counsel expressly for use in the Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto, or (ii) as a result of the failure of the Holder to deliver a Prospectus, as amended or supplemented, to a purchaser in connection with an offer or sale or (iii) solely related to an act or lack of action of Holder.  The Company shall notify the Holder promptly of the institution, threat or assertion of any Proceeding of which the Company is aware in connection with the transactions contemplated by this Agreement.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of an Indemnified Party (as defined in Section 6(c) hereof) and shall survive the transfer of the Registrable Securities by the Holder.

 

(b)                                 Indemnification by Purchaser.  Each Purchaser and its permitted assignees shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, and the respective successors, assigns, estate and personal representatives of each of the foregoing, to the fullest extent permitted by applicable law, from and against any and all Losses, as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any Prospectus, as supplemented or amended, if applicable, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, to the extent, but only to the extent, that (i) such untrue statement or omission is contained in or omitted from any information so furnished in writing by the Holder or the Special Counsel to the Company specifically for inclusion in the Registration Statement or such Prospectus, and (ii) such information was reasonably relied upon by the Company for use in the Registration Statement, such Prospectus or such form of prospectus or, to the extent that such information relates to the Holder or the Holder’s proposed method of distribution of Registrable Securities, was reviewed and expressly approved in writing by the Holder expressly for use in the Registration Statement, such Prospectus or such form of Prospectus Supplement. Notwithstanding anything to the contrary contained herein, the Holder shall be liable under this Section 6(b) for only that amount as does not exceed the net proceeds to the Holder as a result of the sale of Registrable Securities pursuant to such Registration Statement.

 

(c)                                  Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity pursuant to Section 6(a) or 6(b) hereunder (an “Indemnified Party”), such Indemnified Party promptly shall notify the Person from whom indemnity is sought (the “Indemnifying Party) in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have materially and adversely prejudiced the Indemnifying Party.

 

10


 

An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (iii) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party).  The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld, conditioned or delayed.  No Indemnifying Party shall, without the prior written consent of the Indemnified Party, which consent shall not unreasonably be withheld, conditioned or delayed, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.

 

All reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within thirty (30) Business Days of written notice thereof to the Indemnifying Party, provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder or pursuant to applicable law.

 

(d)                                 Contribution.  If a claim for indemnification under Section 6(a) or 6(b) is unavailable to an Indemnified Party because of a failure or refusal of a governmental authority to enforce such indemnification in accordance with its terms (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission.  The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 6(c), any reasonable attorneys’ or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for under Section 6(a) or 6(b) was available to such

 

11


 

party in accordance with its terms. Notwithstanding anything to the contrary contained herein, the Holder shall be liable or required to contribute under this Section 6(d) for only that amount as does not exceed the net proceeds to the Holder as a result of the sale of Registrable Securities pursuant to the Registration Statement.

 

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph.  No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

 

The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

 

7.                                       Rule 144.

 

As long as the Holder owns Registrable Securities, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act. As long as the Holder owns Registrable Securities, if the Company is not required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the Holder and make publicly available in accordance with Rule 144(c) promulgated under the Securities Act annual and quarterly financial statements, together with a discussion and analysis of such financial statements in form and substance substantially similar to those that would otherwise be required to be included in reports required by Section 13(a) or 15(d) of the Exchange Act, as well as any other information required thereby, in the time period that such filings would have been required to have been made under the Exchange Act. The Company further covenants that it will take such further action as the Holder may reasonably request, all to the extent required from time to time to enable the Holder to sell Common Shares, Warrant Shares and AIR Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act, including providing any legal opinions of counsel to the Company referred to in the Purchase Agreement.  Upon the request of any Holder, the Company shall deliver to such Holder a written certification of a duly authorized officer as to whether it has complied with such requirements.

 

8.                                       Miscellaneous.

 

(a)                                  Remedies. The remedies provided in this Agreement and the Purchase Agreement are cumulative and not exclusive of any remedies provided by law.  In the event of a breach by the Company or by the Holder of any of their obligations under this Agreement, the Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement.  The Company and the Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the

 

12


 

event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate.

 

(b)                                 No Inconsistent Agreements. Neither the Company nor any of its Affiliates has as of the date hereof entered into, nor shall the Company or any of its Affiliates, on or after the date of this Agreement, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the Holder in this Agreement or otherwise conflicts with the provisions hereof.  Without limiting the generality of the foregoing, without the written consent of the Holder, the Company shall not grant to any Person the right to request the Company to register any securities of the Company under the Securities Act if the rights so granted are inconsistent with the rights granted to the Holder set forth herein, or otherwise prevent the Company with complying with all of its obligations hereunder.

 

(c)                                  No Piggyback on Registrations. Neither the Company nor any of its security holders (other than the Holder in such capacity pursuant hereto) may include securities of the Company in the Registration Statement.

 

(d)                                 Failure to File Registration Statement and Other Events. The Company and the Holder agree that the Holder will suffer damages if the Registration Statement is not filed on or prior to the Required Filing Date or is not declared effective by the Commission on or prior to the Effectiveness Date and maintained in the manner contemplated herein during the Effectiveness Period or if certain other events occur.  The Company and the Holder further agree that it would not be feasible to ascertain the extent of such damages with precision.  Accordingly, if (i) the Registration Statement is not filed on or prior to the Required Filing Date, or is not declared effective by the Commission on or prior to the Effectiveness Date, or (ii) the Company fails to file with the Commission a request for acceleration in accordance with Rule 12dl-2 promulgated under the Exchange Act within five (5) Business Days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that a Registration Statement will not be “reviewed,” or not subject to further review, or (iii) the Registration Statement is filed with and declared effective by the Commission but thereafter ceases to be effective or available as to all Registrable Securities for 30 days during the Effectiveness Period, without being succeeded within a reasonable period by a subsequent Registration Statement filed with and declared effective by the Commission, or (iv) the Company suspends the use of the Prospectus forming a part of such Registration Statement for more than thirty (30) days in any period of 365 consecutive days if the Company suspends in reliance on its ability to do so due to the existence of a development that, in the good faith discretion of the Board, makes it appropriate to so suspend or which renders the Company unable to comply with the Commission requirements, or the Company suspends the use of the Prospectus forming a part of such Registration Statement for more than sixty (60) days in any period of 365 consecutive days for any other reason (any such failure or breach being referred to as an “Event”), the Company shall pay as liquidated damages for such failure or breach and not as a penalty (the “Liquidated Damages”) to the Holder an amount equal to two percent (2%) of the purchase price of the Shares, Warrants and AIRs paid by the Holder pursuant to the Purchase Agreement for each thirty (30) day period, pro rated for any period less than thirty (30) days, following the Event until the applicable Event has been cured. Payments to be made pursuant to this Section 8(d) shall be due and payable in cash in arrears at the end of each thirty (30) day period. The parties agree that the Liquidated Damages represent a reasonable estimate on the part of the parties, as

 

13


 

of the date of this Agreement, of the amount of damages that may be incurred by the Holder if the Registration Statement is not filed on or prior to the Required Filing Date or has not been declared effective by the Commission on or prior to the Effectiveness Date and maintained in the manner contemplated herein during the Effectiveness Period or if any other Event as described herein has occurred.

 

(e)                                  Consent to Jurisdiction. The Company and each Purchaser (i) hereby irrevocably submit to the non-exclusive jurisdiction of the United States District Court for the Northern District of Texas and the courts of the State of Texas located in Dallas County for the purposes of any suit, action or proceeding arising out of or relating to this Agreement or the Purchase Agreement, and (ii) hereby waive, and agree 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.  The Company and each Purchaser consent 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 Section 8(e) shall affect or limit any right to serve process in any other manner permitted by law.

 

(f)                                    Amendments and Waivers.  The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Purchasers.

 

(g)                                 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earlier of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified for notice prior to 5:00 p.m., Eastern Time, on a Business Day, (ii) the first Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified for notice later than 5:00 p.m., Eastern Time, on any date and earlier than 11:59 p.m., Eastern Time, on such date, (iii) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) actual receipt by the party to whom such notice is required to be given.

 

(x)                                   if to the Company:

 

CardioTech International, Inc.

229 Andover Street

Wilmington, Massachusetts  01887

Attention:  Dr. Michael Szycher, Ph.D.

Telecopier:  (978) 657-0074

Telephone:  (978) 657-0075

 

with a copy to:

 

14


 

Ellenoff Grossman & Schole LLP

370 Lexington Avenue

New York, NY 10017

Attention: David Selengut, Esq.

Telecopier: (212) 370-7889

Telephone: (212) 370-1300

 

(y)                                 if to any Purchaser:

 

At the address of such Purchaser set forth on Exhibit A to this Agreement.

 

or to such other address or addresses or facsimile number or numbers as any such party may most recently have designated in writing to the other parties hereto by such notice.

 

(h)                                 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns and shall inure to the benefit of the Holder and its successors and assigns. The Company may not assign this Agreement or any of its respective rights or obligations hereunder without the prior written consent of the Purchasers.  Each Purchaser may assign its rights hereunder in the manner and to the Persons as permitted under the Purchase Agreement.

 

(i)                                     Assignment of Registration Rights. The rights of the Holder hereunder, including the right to have the Company register for resale Registrable Securities in accordance with the terms of this Agreement, shall be assignable by each Holder to any transferee of the Holder of all or a portion of the shares of Registrable Securities if:  (i) the Holder agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment; (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (A) the name and address of such transferee or assignee, and (B) the securities with respect to which such registration rights are being transferred or assigned; (iii) following such transfer or assignment the further disposition of such securities by the transferee or assignees is restricted under the Securities Act and applicable state securities laws; (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this Section, the transferee or assignee agrees in writing with the Company to be bound by all of the provisions of this Agreement; and (v) such transfer shall have been made in accordance with the applicable requirements of the Purchase Agreement and shall be for no less than 10% of the Registrable Securities.  In addition, the Holder shall have the right to assign its rights hereunder to any other Person with the prior written consent of the Company, which consent shall not be unreasonably withheld, conditioned or delayed.  The rights to assignment shall apply to the Holder (and to subsequent) successors and assigns.  In the event of an assignment pursuant to this Section 8(i), the Purchaser shall pay all incremental costs and expenses incurred by the Company in connection with filing a Registration Statement (or an amendment to the Registration Statement) to register the shares of Registrable Securities assigned to any assignee or transferee of the Purchaser.

 

15


 

(j)                                     Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, and all of which taken together shall constitute one and the same Agreement.  In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof.

 

(k)                                  Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Massachusetts, without regard to principles of conflicts of law thereof. This Agreement shall not be interpreted or construed with any presumption against the party causing this Agreement to be drafted.

 

(l)                                     Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

 

(m)                               Termination. This Agreement shall terminate on the date on which all remaining Registrable Securities may be sold without restriction pursuant to Rule 144(k) of the Securities Act.

 

(n)                                 Severability. If any term, provision, covenant or restriction of this Agreement is held to be invalid, illegal, void or unenforceable in any respect, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction.  It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

(o)                                 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.

 

[Remainder of page intentionally left blank. Signature pages to follow.]

 

16


 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized persons as of the date first indicated above.

 

 

 

CARDIOTECH INTERNATIONAL, INC.

 

 

 

 

 

By:

 

 

 

 

Name:

Michael Szycher, Ph.D.

 

 

Title:

Chairman & Chief Executive Officer

 

 

[Signatures of Purchasers to follow on next pages.]

 


 

 

PURCHASERS:

 

 

 

 

 

GRYPHON MASTER FUND, L.P.

 

 

 

 

By:

Gryphon Partners, L.P., its General Partner

 

 

 

 

By:

Gryphon Management Partners, L.P., its General Partner

 

 

 

 

By:

Gryphon Advisors, L.L.C., its General Partner

 

 

 

 

 

 

By:

 

 

 

E.B. Lyon, IV, Authorized Agent

 

 

 

GSSF MASTER FUND, LP

 

 

 

 

By:

Gryphon Special Situations Fund, LP, its General Partner

 

 

 

 

By:

GSSF Management Partners, LP, its General Partner

 

 

 

 

By:

GSSF, LLC, its General Partner

 

 

 

 

 

 

By:

 

 

 

E.B. Lyon, IV, Authorized Agent

 

 

 

MEADOWBROOK OPPORTUNITY FUND LLC

 

 

 

 

 

By:

 

 

 

 

Michael Ragins, Manager

 

 

 

CAPITAL VENTURES INTERNATIONAL

 

 

 

 

 

By:

 

 

 

 

Martin Kobinger, Investment Manager

 


 

 

TRUK OPPORTUNITY FUND, LLC

 

 

 

 

 

 

By:

Atoll Asset Management, LLC

 

 

 

 

 

 

By:

 

 

 

Michael E. Fein, Principal

 

 

 

TRUK INTERNATIONAL FUND, LP

 

 

 

 

 

 

By:

Atoll Asset Management, LLC

 

 

 

 

 

 

By:

 

 

 

Michael E. Fein, Principal

 

 

 

IROQUOIS CAPITAL, L.P.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 


 

EXHIBIT A

PURCHASERS

 

Gryphon Master Fund, L.P.

100 Crescent Court

Suite 490

Dallas, Texas  75201

Tel. No.: (214) 871-6783

Fax No.: (214) 871-6711

Attn:  Ryan R. Wolters

 

With a copy to:

 

Warren W. Garden, P.C.

100 Crescent Court, Suite 490

Dallas, Texas  75201

Tel. No.: (214) 871-6710

Fax No.: (214) 871-6711

Attn:  Warren W. Garden, Esq.

 

GSSF Master Fund, LP

100 Crescent Court

Suite 475

Dallas, Texas  75201

Tel. No.: (214) 871-6752

Fax No.: (214) 871-6711

Attn:  Timothy M. Stobaugh

 

With a copy to:

 

Warren W. Garden, P.C.

100 Crescent Court, Suite 490

Dallas, Texas  75201

Tel. No.: (214) 871-6710

Fax No.: (214) 871-6711

Attn:  Warren W. Garden, Esq.

 

Meadowbrook Opportunity Fund LLC

520 Lake Cook Road, Suite 690

Deerfield, Illinois  60015

Tel. No.: (847) 876-1220

Fax No.: (847) 876-1221

Attn:  Dan Elekman

 

A-1


 

Truk Opportunity Fund, LLC

One East 52nd Street

Sixth Floor

New York, New York  10022

Tel. No.: (212) 888-2224

Fax No.: (212) 888-0334

Attn:  Michael E. Fein, Principal

 

Truk International Fund, LP

One East 52nd Street

Sixth Floor

New York, New York  10022

Tel. No.: (212) 888-2224

Fax No.: (212) 888-0334

Attn:  Michael E. Fein, Principal

 

Capital Ventures International

c/o Heights Capital Management, Inc.

101 California Street, Suite 3250

San Francisco, California  94111

Tel. No.: (415) 403-6500

Fax No.: (415) 403-6525

Attn:  Sam Winer and Martin Kobinger

 

Iroquois Capital, L.P.

641 Lexington Avenue

26th Floor

New York, New York  10022

Tel. No.: (212) 974-3070

Fax No.: (212) 207-3452

Attn: Joshua Silverman

 

A-2


 

EXHIBIT B

PLAN OF DISTRIBUTION

 

We are registering the shares of common stock on behalf of the selling stockholders. The common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market prices, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected at various times in one or more of the following transactions, or in other kinds of transactions:

 

•                  transactions on the American Stock Exchange or on any other national securities exchange or U.S. inter-dealer system of a registered national securities association on which the common stock may be listed or quoted at the time of sale;

 

•                  in the over-the-counter market;

 

•                  in private transactions and transactions otherwise than on these exchanges or systems or in the over-the-counter market;

 

•                  in connection with short sales of the shares after the date of this prospectus;

 

•                  by pledge to secure or in payment of debt and other obligations;

 

•                  through the writing of options, whether the options are listed on an options exchange or otherwise;

 

•                  in connection with the writing of non-traded and exchange-traded call options, in hedge transactions and in settlement of other transactions in standardized or over-the-counter options; or

 

•                  through a combination of any of the above transactions.

 

The selling stockholders and their successors, including their transferees, pledgees or donees or their successors, may sell the common stock directly to purchasers or through underwriters, broker-dealers or agents, who may receive compensation in the form of discounts, concessions or commissions from the selling stockholders or the purchasers. These discounts, concessions or commissions as to any particular underwriter, broker-dealer or agent may be in excess of those customary in the types of transactions involved.

 

In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 of the Securities Act may be sold under Rule 144 rather than pursuant to this prospectus.

 

We entered into a registration rights agreement for the benefit of the selling stockholders to register the common stock under applicable federal and state securities laws. The registration rights agreement provides for cross-indemnification of the selling stockholders and us and our respective directors, officers and controlling persons against specific liabilities in connection

 

B-1


 

with the offer and sale of the common stock, including liabilities under the Securities Act. We will pay substantially all of the expenses incurred by the selling stockholders incident to the offering and sale of the common stock.

 

Each selling stockholder has been advised, and has acknowledged to us, that the Commission currently takes the position that coverage of short sales of shares of our common stock “against the box” made prior to the effective date of the registration statement of which this prospectus is a part with any security covered by this prospectus is a violation of Section 5 of the Securities Act, as set forth in Item 65, Section 5 under Section A, of the Manual of Publicly Available Telephone Interpretations, dated June 1997, compiled by the Office of Chief Counsel, Division of Corporate Finance. Accordingly, each selling stockholder has agreed (on behalf of itself or any person over which it has direct control) not to use any of the securities covered by this prospectus to cover any short sales, hedging or similar transactions with the same economic effect as a short sale, made prior to the effective date of the registration statement. In addition, each selling stockholder has agreed to comply with Regulation M under the federal securities laws.

 

B-2


 

EXHIBIT C

 

FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT

 

[Name and address of Transfer Agent]

 

 

 

 

 

 

Attn: 

 

 

 

Re:                               CardioTech International, Inc.

 

Ladies and Gentlemen:

 

We are counsel to CardioTech International, Inc., a Massachusetts corporation (the “Company”), and have represented the Company in connection with that certain Securities Purchase Agreement (the “Purchase Agreement”), dated as of December 22, 2004, by and among the Company and the purchasers (the “Purchasers” and the “Holders”) named therein pursuant to which the Company issued to the Purchasers shares of its Common Stock, $0.01 par value. Pursuant to the Purchase Agreement, the Company has also entered into a Registration Rights Agreement with the Purchasers (the “Registration Rights Agreement”), dated as of December 22, 2004, pursuant to which the Company agreed, among other things, to register the Registrable Securities (as defined in the Registration Rights Agreement), under the Securities Act of 1933, as amended (the “1933 Act”). In connection with the Company’s obligations under the Registration Rights Agreement, on                               , 2004, the Company filed a Registration Statement on Form S-3 (File No. 333-               ) (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) relating to the resale of the Registrable Securities which names the Holders as selling stockholders thereunder.

 

In connection with the foregoing, we advise you that a member of the SEC’s staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and, accordingly, the Registrable Securities are available for resale under the 1933 Act in the manner specified in, and pursuant to the terms of, the Registration Statement.

 

 

Very truly yours,

 

 

 

 

 

By:

 

 

 

cc:                                 [PURCHASERS]

 

C-1


 

EXHIBIT D

 

CardioTech International, Inc.

 

FORM OF SELLING STOCKHOLDER NOTICE AND QUESTIONNAIRE

 

The undersigned beneficial owner (the “Selling Stockholder”) of common stock, par value $0.01 per share (the “Common Stock”), of CardioTech International, Inc., a Massachusetts corporation (the “Company”) or Common Stock issuable upon the exercise of warrants or conversion of other securities (the “Registrable Securities”), understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-3 (the “Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities, in accordance with registration rights granted to the Selling Stockholder under that certain Registration Rights Agreement, dated December 22, 2004, among the Company, the Selling Stockholder and the other Purchasers named therein (the “Registration Rights Agreement”). Capitalized terms used in this Questionnaire but not otherwise defined herein will have the meanings ascribed to such terms in the Registration Rights Agreement.

 

The Company will use the information supplied in this Questionnaire to ensure that certain information included in the Form S-3 is accurate, correct and complete.  The Company will also use this information as part of its effort to comply with certain legal requirements.  Accordingly, please exercise great care in answering this Questionnaire.

 

It is extremely important that there be no material misstatements or omissions in the Form S-3 and that all legal matters be resolved satisfactorily.  Accordingly, please be thorough when answering each question.  If you have any doubts as to whether a matter should be reported, please report it on this Questionnaire so that the Company and its attorneys can consider the matter and decide whether it must be included in the Form S-3.

 

Certain legal consequences arise from being named as a selling stockholder in the Registration Statement and the related prospectus.  Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling stockholder in the Registration Statement and the related prospectus.

 

NOTICE

 

The Selling Stockholder hereby elects to include the Registrable Securities owned by it and listed below in Item 3 (unless otherwise specified under such Item 3) in the Registration Statement.

 

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The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate:

 

QUESTIONNAIRE

 

1.                                                                                      Name.

 

(a)                                  Full Legal Name of Selling Stockholder

 

 

 

 

(b)                                 Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities Listed in Item 3 below are held:

 

 

 

 

(c)                                  Full Legal Name of Natural Control Person (which means a natural person who directly or indirectly alone or with others has power to vote or dispose of the securities covered by this Questionnaire):

 

 

 

 

2.  Address for Notices to Selling Stockholder:

 

 

 

 

Telephone:

 

Fax:

 

Contact Person:

 

 

3.  Beneficial Ownership of Registrable Securities:

 

(a)                                  Type and Principal Amount of Registrable Securities beneficially owned:

 

 

 

 

 

D-2


 

4.  Broker-Dealer Status:

 

(a)                                  Are you a broker-dealer?

 

Yes   o                                                       No   o

 

Note:                   If yes, the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

 

(b)                                 Are you an affiliate of a broker-dealer?

 

Yes   o                                                       No   o

 

(c)                                  If you are an affiliate of a broker-dealer, do you certify that you bought the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities?

 

Yes   o                                                       No   o

 

Note:                   If no, the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

 

5.  Beneficial Ownership of Other Securities of the Company Owned by the Selling Stockholder.

 

Except as set forth below in this Item 5, the undersigned is not the beneficial or registered owner of any securities of the Company other than the Registrable Securities listed above in Item 3.

 

(a)                                  Type and Amount of Other Securities beneficially owned by the Selling Stockholder:

 

 

 

 

(b)           Disclaimer of Beneficial Ownership.  Do you wish to disclaim beneficial ownership of any of the securities reported in your responses?

 

Yes   o                  No   o

 

If the answer is “Yes”, please furnish the following information with respect to the person or persons who should be shown as the beneficial owner(s) of the shares in question.

 

D-3


 

Name and Address of
Actual Beneficial Owner

 

Relationship of
Such Person to You

 

Number of Shares
Beneficially Owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6.  Relationships with the Company:

 

Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.

 

State any exceptions here:

 

 

 

 

7.                                      If you do not have the sole right to vote or sell the securities listed in No. 3 above, please explain the nature of any holdings listed in your response to question No. 3.

 

8.                                      Please describe any relationship or agreement pursuant to which any person or entity exercises voting power with respect to the shares of equity securities of the Company owned by the Selling Stockholder and if this arrangement is in writing please attach a copy of such arrangement.

 

9.                                      Please state the name of any person or entity who exercises ultimate “control” (See Definition in Exhibit B) over the Selling Stockholder either directly or through one or more intermediary entities and the relationship of the Selling Stockholder to such “controlling” person or entity.

 

10.                               Does the Selling Stockholder presently intend to employ any underwriter in connection with the sale of the Common Stock?

 

YES   o    NO   o

 

If YES, please give the name of the principal underwriter, state the amounts to be underwritten by each principal underwriter and describe the nature of the underwriters’ obligation

 

D-4


 

(i.e. is the underwriter committed to take and pay for all of the Common Stock if any are taken or is there merely a “best efforts” arrangement):

 

11.                               Has the Selling Stockholder entered into any arrangements, understandings or agreements with one or more brokers or dealers for the resale of the Common Stock?

 

YES   o    NO   o

 

If YES, please identify each such broker or dealer and briefly describe the provision of the arrangement, understanding or agreement including the amount of Common Stock to be offered by each such broker or dealer and that condition, if any, under which the arrangement, understanding or agreement may be terminated.

 

12.                               Exhibit A which is attached hereto is the proposed Plan of Distribution to be used in the Form S-3.  Does Exhibit A adequately describe the plan of distribution of the Selling Stockholder of the Common Stock to be registered?

 

YES   o    NO   o

 

If your answer is NO:

 

(a)                                  Describe in full the plan of distribution of any Common Stock which will be offered otherwise than as described in response to Questions 10 and 11.

 

 

(b)                                 Describe all discounts or commissions to be allowed or paid to underwriters, brokers or dealers, including all cash, securities, contracts or other consideration to be received by any such party in connection with the resale of the Common Stock.  Also describe any commissions to be paid by persons other than you and any finders’ fees or similar payments to be paid to you.

 

13.                         Will the Common Stock be sold at the market price?

 

YES   o    NO   o

 

If your answer is NO:

 

D-5


 

Please set forth below the price at which the Common Stock will be sold or if you are unable to state the price at this time, please explain the method by which the price will be determined.

 

14.                               The Selling Stockholder agrees to comply with Regulation M promulgated under the federal securities laws. In addition, the Selling Stockholder agrees to offer and sell, and agrees to instruct its broker or brokers to offer and sell, its Registrable Securities pursuant to the Form S-3 only in those states or other United States jurisdictions in which the Registrable Securities are qualified or registered for offer and sale under applicable securities or blue sky securities laws or are exempt from such qualification or registration. The undersigned will cause each such broker or brokers to deliver a prospectus at or prior to confirmation of a sale in accordance with the Securities Act. You should consult with your counsel regarding the application of other requirements prior to any disposition of any of the Registrable Securities.

 

15.                               The Selling Stockholder understands and acknowledges that the Commission currently takes the position that coverage of short sales of shares of the Common Stock “against the box” with the Securities purchased under the Purchase Agreement made prior to the Effectiveness Date is a violation of Section 5 of the Securities Act, as set forth in Item 65, Section 5 under Section A, of the Manual of Publicly Available Telephone Interpretations, dated July 1997, compiled by the Office of Chief Counsel, Division of Corporate Finance. Accordingly, the Selling Stockholder hereby agrees not to use any of the Securities to cover any short sales made prior to the Effectiveness Date.

 

16.                               Without obviating the terms and provisions of the Registration Rights Agreement (including without limitation, Sections 3(m) and 8(d) thereof), the Selling Stockholder acknowledges and agrees that:

 

(a)                                  The Company may postpone effecting a registration or require the Selling Stockholder to refrain from disposing of any of its securities if (i) the Company is in possession of material non-public information, the disclosure of which during the period specified in such notice the Company reasonably believes would materially and adversely affect the interests of the Company if disclosed, (ii) the Company is in possession of material nonpublic information that the Company would be required to disclose in the Form S-3 and that is not, but for the registration, otherwise required to be disclosed at the time of such registration, the disclosure of which, in its good faith judgment, would have a material adverse effect on the business, operations, prospects or competitive position of the Company, (iii) the Company has been requested by the Commission or any other federal or state governmental authority to amend or supplement the Form S-3 or related prospectus or requested additional information to be included in the Form S-3 or prospectus or otherwise, (iv)  the Commission issues any stop order suspending the effectiveness of the Form S-3 or the initiation or threatening of any proceedings for that purpose, (v) any state securities commission or other regulatory authority issues any order suspending the qualification or exemption from qualification of any of the securities under state securities or “blue sky” laws or the initiation of any proceedings for that purpose, or (vi)  any event occurs which makes any statement made in the Form S-3 or related prospectus or any document incorporated or deemed to be incorporated by reference therein untrue or which requires the making of any changes in such Form S-3, prospectus or documents so that they will

 

D-6


 

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 not misleading.

 

(b)                                 The Selling Stockholder will refrain from disposing its securities upon receipt of written notice to the Selling Stockholder from the Company (a “Suspension Notice”), setting forth the limitations that shall apply to the Selling Stockholder.

 

(c)                                  Each Selling Stockholder shall comply with the Suspension Notice until it is advised in writing by the Company that the use of the Form S-3 or related prospectus may be resumed, and has received copies of any additional or supplemental filings which are incorporated by reference in the Form S-3 or related prospectus.

 

This Questionnaire has been answered to the best knowledge and belief of the undersigned and is filed with the Company (i) for use in any Registration Statement or related prospectus or any amendment or supplement thereto, or any preliminary prospectus in connection with the preparation of the Form S-3, and (ii) for use in connection with any filings that may be made with the NASD in connection with such Form S-3. The undersigned is aware that the Company, any potential underwriter, the Commission, the NASD and the recipients of the prospectus will be relying on the accuracy and completeness of the information provided herein and the undersigned hereby consents to the use of the information provided herein for the purposes stated above.  The undersigned will promptly notify the Company of any changes in the foregoing answers which would be made as a result of any deve1opments occurring after the date hereof and prior to the effective date of the Form S-3 and will finish the Company with such supplementary information as may be appropriate.

 

If, at any time prior to the date of effectiveness of the S-3, any of the information set forth in the undersigned’s responses to this Questionnaire has changed due to passage of time, or any development occurs which requires a change in any of the undersigned’s answers, or has for any other reason become incorrect, the undersigned agrees immediately to furnish to the individual to whom a copy of this Questionnaire is to be sent, as indicated and at the address shown below, any necessary or appropriate correcting information.  Otherwise, the Company is to understand that the above information continues to be, to the best of the undersigned’s knowledge, information and belief, complete and correct as of the date hereof and as of the date of effectiveness

 

The undersigned understands that the information that the undersigned is furnishing will be used by the Company in the preparation of its Registration Statement on Form S-3.

 

By signing below, the undersigned consents to the disclosure of the information contained herein in its answers and the inclusion of such information in the Registration Statement and the related prospectus.  The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus.

 

If there is a conflict between the terms and provisions of this Questionnaire, and the terms and provisions of the Registration Rights Agreement, the terms and provisions of the Registration Rights Agreement shall control.

 

D-7


 

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.

 

Dated:

 

 

Beneficial Owner:

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

D-8


 

Exhibit A

 

PLAN OF DISTRIBUTION

 

We are registering the shares of common stock on behalf of the selling stockholders. The common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market prices, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected at various times in one or more of the following transactions, or in other kinds of transactions:

 

•                  transactions on the American Stock Exchange or on any other national securities exchange or U.S. inter-dealer system of a registered national securities association on which the common stock may be listed or quoted at the time of sale;

 

•                  in the over-the-counter market;

 

•                  in private transactions and transactions otherwise than on these exchanges or systems or in the over-the-counter market;

 

•                  in connection with short sales of the shares after the date of this prospectus;

 

•                  by pledge to secure or in payment of debt and other obligations;

 

•                  through the writing of options, whether the options are listed on an options exchange or otherwise;

 

•                  in connection with the writing of non-traded and exchange-traded call options, in hedge transactions and in settlement of other transactions in standardized or over-the-counter options; or

 

•                  through a combination of any of the above transactions.

 

The selling stockholders and their successors, including their transferees, pledgees or donees or their successors, may sell the common stock directly to purchasers or through underwriters, broker-dealers or agents, who may receive compensation in the form of discounts, concessions or commissions from the selling stockholders or the purchasers. These discounts, concessions or commissions as to any particular underwriter, broker-dealer or agent may be in excess of those customary in the types of transactions involved.

 

In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 of the Securities Act may be sold under Rule 144 rather than pursuant to this prospectus.

 

We entered into a registration rights agreement for the benefit of the selling stockholders to register the common stock under applicable federal and state securities laws. The registration rights agreement provides for cross-indemnification of the selling stockholders and us and our

 

D-9


 

respective directors, officers and controlling persons against specific liabilities in connection with the offer and sale of the common stock, including liabilities under the Securities Act. We will pay substantially all of the expenses incurred by the selling stockholders incident to the offering and sale of the common stock.

 

Each selling stockholder has been advised, and has acknowledged to us, that the Commission currently takes the position that coverage of short sales of shares of our common stock “against the box” made prior to the effective date of the registration statement of which this prospectus is a part with any security covered by this prospectus is a violation of Section 5 of the Securities Act, as set forth in Item 65, Section 5 under Section A, of the Manual of Publicly Available Telephone Interpretations, dated June 1997, compiled by the Office of Chief Counsel, Division of Corporate Finance. Accordingly, each selling stockholder has agreed (on behalf of itself or any person over which it has direct control) not to use any of the securities covered by this prospectus to cover any short sales, hedging or similar transactions with the same economic effect as a short sale, made prior to the effective date of the registration statement. In addition, each selling stockholder has agreed to comply with Regulation M under the federal securities laws.

 

D-10


 

Exhibit B

 

1.

“Affiliates”

The term “Affiliates” means, with respect to any specified entity, any individual or organization which directly or indirectly controls (See Definition No. 3), is controlled by or is under common control with the specified entity; a “parent” is an “affiliate which directly or indirectly “controls” the other entity.

 

 

 

2.

“Beneficial Ownership”

The term “Beneficial Ownership” means any direct or indirect interest in securities which gives a person or entity (acting alone or with others) the power to vote, dispose of or direct the voting or disposition of the securities. It also includes any securities of which such person or entity has the right to acquire (acting alone or with others) beneficial ownership within sixty days after a given date through exercise of an option, warrant or conversion right or the power of revocation or automatic termination of a trust, discretionary account or similar arrangement. Securities beneficially owned by you for these purposes may include, for example, shares held by you in a fiduciary capacity which you have the power to vote or sell, certain securities in which you have a beneficial interest under a trust, will or partnership agreement, securities owned by corporation in which you have a substantial interest or securities owned by your spouse, minor children or other relatives who reside with you.

 

 

 

3.

“Control”

The term “Control” means the power to direct or cause the direction of the management and policies of the entity (for purposes of this Questionnaire, please assume that ownership of 10% or more of any class of equity securities of a company also constitutes “control”).

 

D-11

 

 EX-10.3 7 a04-15265_1ex10d3.htm EX-10.3

Exhibit 10.3

 

LOCK-UP AGREEMENT

 

Lock-Up Agreement (this “Agreement”) is entered into as of December 22, 2004, by and between CardioTech International, Inc., a Massachusetts corporation (the “Company”), and the shareholder of the Company named on the signature page hereof (the “Shareholder”).

 

RECITALS:

 

A.                                   The Company and certain purchasers (the “Purchasers”), have entered into a Securities Purchase Agreement dated as of December 22, 2004 (the “Purchase Agreement”), pursuant to which the Purchasers have agreed to purchase, and the Company has agreed to sell, shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), warrants to purchase shares of Common Stock, and additional investment rights to purchase shares of Common Stock.

 

B.                                     Shareholder is a shareholder of the Company and owns and/or controls shares of Common Stock (the “Shares”).

 

C.                                     As a condition to the Purchasers entering into the Purchase Agreement, Shareholder has agreed to the lock-up set forth in Section 1 hereof.

 

D.                                    Capitalized terms used in this Agreement but not otherwise defined herein shall have the meanings ascribed to such terms in the Purchase Agreement.

 

AGREEMENTS:

 

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.                                       Lock-Up. Shareholder hereby agrees that, except as set forth in Section 2 below, from the date hereof until the 90th day following the date that the Registration Statement is declared effective by the Commission (the “Lock-up Period”), without the prior written consent of the Company and the Purchasers, he will not offer, pledge, sell, contract to sell, grant any options for the sale of or otherwise transfer, distribute or dispose of, directly or indirectly (collectively “Dispose of”), any Shares (the “Lock-up”). On and after the 1st day following the last day of the Lock-up Period, no Shares shall be subject to the Lock-up.

 

2.                                       Permitted Dispositions. The following dispositions of Shares shall not be subject to the Lock-up set forth in Section 1:

 

1


 

(a)                                  Shareholder may Dispose of Shares to his spouse, siblings, parents or any natural or adopted children or other descendants or to any personal trust in which any such family member or Shareholder retains the entire beneficial interest;

 

(b)                                 Shareholder may Dispose of Shares on his death to Shareholder’s estate, executor, administrator or personal representative or to Shareholder’s beneficiaries pursuant to a devise or bequest or by laws of descent and distribution;

 

(c)                                  Shareholder may Dispose of Shares as a gift or other transfer without consideration;

 

(d)                                 Shareholder may make a bona fide pledge of Shares to a lender; and

 

(e)                                  Shareholder may Dispose of, through bona fide market sale transactions, up to 15,000 Shares during the Lock-up Period.

 

provided, however, that in the case of any transfer of Shares pursuant to clauses (a), (c), and (d), the transferor shall, at the request of the Company, provide evidence (which may include, without limitation, an opinion of counsel satisfactory in form, scope and substance to the Company in its sole discretion as the issuer thereof) satisfactory to the Company that the transfer is exempt from the registration requirements of the Securities Act of 1933, as amended.

 

In the event Shareholder Disposes of Shares described in this Section 2, such Shares shall remain subject to this Agreement and, as a condition of the validity of such disposition, the transferee shall be required to execute and deliver a counterpart of this Agreement. Thereafter, such transferee shall be deemed to be the Shareholder for purposes of this Agreement.

 

3.                                       Miscellaneous.

 

(a)                                  Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given other than as initially agreed upon in writing by the Company, Shareholder and the Purchasers.

 

(b)                                 Successors and Assigns. Shareholder shall not assign any rights or benefits under this Agreement without the prior written consent of the Company and the Purchasers.

 

(c)                                  Counterparts. This Agreement may be executed in a number of identical counterparts and it shall not be necessary for the Company and Shareholder to execute each of such counterparts, but when each has executed and delivered one or more of such counterparts, the several parts, when taken together, shall be deemed to constitute one and the same instrument, enforceable against each in accordance with its terms.  In making proof of this Agreement, it shall not be necessary to produce or account for more than one such counterpart executed by the party against whom enforcement of this Agreement is sought.

 

2


 

(d)                                 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

 

(e)                                  Governing Law; Venue. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MASSACHUSETTS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OR CHOICE OF LAW. The Company and Shareholder (i) hereby irrevocably submit to the non-exclusive jurisdiction of the United States District Court sitting in the Northern District of Texas and the courts of the State of Texas located in Dallas County for the purposes of any suit, action or proceeding arising out of or relating to this Agreement, and (ii) hereby waive, and agree not to assert in any such suit, action or proceeding, any claim that he or 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.

 

(f)                                    Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of each such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

 

(g)                                 Entire Agreement. This Agreement is intended by the Company and the Shareholder as a final expression of their agreement and is intended to be a complete and exclusive statement of their agreement and understanding in respect of the subject matter contained herein.  This Agreement supersedes all prior agreements and understandings between the Company and the Shareholder with respect to such subject matter.

 

(h)                                 Third Party Beneficiaries. This Agreement is intended for the benefit of the Company, Shareholder and the Purchasers and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person or entity. The Company and Shareholder each specifically acknowledge and agree that each Purchaser is a third party beneficiary of this Agreement.

 

3


 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

 

CARDIOTECH INTERNATIONAL, INC.

 

 

 

By:

 

 

 

Michael Szycher, Ph.D., Chairman & CEO

 

 

 

 

 

“SHAREHOLDER”:

 

 

 

 

 

Name:

 

 

 

 

 

 

By:

 

 

 

 

(signature)

 

 

 

Title of signatory:

 

 

 

(if not an individual)

 

4

 EX-99.1 8 a04-15265_1ex99d1.htm EX-99.1

Exhibit 99.1

 

CardioTech International Inc. Closes $2.735 Million Private Placement with Institutional Investors

WILMINGTON, MA, December 22, 2004; CardioTech International, Inc. (AMEX:  CTE), announced today the closing of a $2,735,006 million private placement of its common stock with 7 institutional investors. The offering was priced at $2.40 per share resulting in an initial issuance of 1,139,586 shares of CardioTech’s common stock. The investors also received five-year warrants to purchase an additional 569,793 shares of common stock at an exercise price of $3.00 per share and additional investment rights to purchase 1,139,586 shares of CardioTech’s common stock at $2.40 per share during the period commencing on the closing date and ending 90 days after the effective date of a registration statement that we intend to file. CardioTech has undertaken to file such registration statement covering the common stock issued in the placement, the common stock underlying the warrants and the common stock underlying the additional investment rights.

 

Michael Szycher, PhD., CEO of CardioTech, commented, “This financing is an important step in the growth of CardioTech.  We believe that the financing represents a vote of confidence by the institutional investors in our Company, in our business plan and our management’s ability to execute on the plan.

 

About CardioTech

 

CardioTech International, Inc. maintains operations in Wilmington, Massachusetts, Plymouth, Minnesota and Rancho Santa Margarita, California. CardioTech focuses on developing, manufacturing and marketing devices to surgically treat cardiovascular disease. Current revenue sources for CardioTech include patented polyurethanes, contract manufacturing, and disposables used during cardiopulmonary bypass procedures. CardioTech is currently in human clinical trials with a synthetic coronary artery bypass graft that addresses a $1.5 billion annual market. Additionally, CardioTech has partnered with Implant Sciences and CorNova to develop a drug-eluting stent that addresses a $1 billion international market.

 

CardioTech believes that this release contains forward-looking statements that are subject to risks and uncertainties. Such statements are based on management’s current expectations and are subject to facts that could cause results to differ materially from the forward-looking statements. For further information you are encouraged to review CardioTech’s filings with the Securities and Exchange Commission.

 

 

Investor contact:

 

Aurelius Consulting Group:

 

Dave Gentry or Ed Sasso, 407/644-4256

 

dave@aurcg.com

 

http://www.runonideas.com

 

 

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