Exhibit 10.1
PURCHASE AGREEMENT
     THIS PURCHASE AGREEMENT (the “Agreement”) is entered into as of the 17th
day of September, 2004, by and among Sutura, Inc., a Delaware corporation (the
“Company”), and Pandora Select Partners L.P., a British Virgin Islands limited
partnership (“Pandora”), Whitebox Hedged High Yield Partners L.P., a British
Virgin Islands limited partnership (“WHHY”), Whitebox Convertible Arbitrage
Partners L.P., a British Virgin Islands limited partnership (“WCAP”), Whitebox
Intermarket Partners L.P., a British Virgin Islands limited partnership (“WIP”)
and Gary S. Kohler (“Kohler”) and Scot W. Malloy (“Malloy”), each residents of
the State of Minnesota. Pandora, WHHY, WCAP, WIP, Kohler and Malloy are
individually referred to herein as a “Purchaser” and together as the
“Purchasers.”
R E C I T A L S :
     WHEREAS, in consideration of $1,000,000, $2,000,000, $2,500,000, $800,000,
$200,000 and $50,000 (representing $6,550,000 in the aggregate), the Company
proposes to issue to Pandora, WHHY, WCAP, WIP, Kohler and Malloy, respectively,
and each such Purchaser desires to severally (and not jointly) purchase, a
corresponding secured convertible promissory note in the form attached as
Exhibit A (each, a “Note” and together, the “Notes”) and a warrant in the form
of Exhibit B (each, a “Warrant” and together, the “Warrants”) to purchase
(subject to certain adjustments) shares of the Company’s common stock, $0.001
par value (the “Common Stock”).
     NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
SECTION 1. AGREEMENT TO SELL AND PURCHASE
     1.1. Authorization of Transaction. On or prior to the closing of the
transactions contemplated in this Agreement (the “Closing”), the Company shall
have authorized the sale and issuance to each Purchaser of its respective Note,
Warrant and the shares of Common Stock issuable upon conversion of each such
Note and upon exercise of each such Warrant (collectively, the “Shares”).
     1.2. Sale and Purchase. Subject to the terms and conditions hereof, at the
Closing, the Company hereby agrees to issue and sell to each Purchaser, and each
Purchaser severally (and not jointly) agrees to purchase from the Company, such
Purchaser’s respective Note and the Warrant for an aggregate purchase price from
all Purchasers of $6,550,000 (the “Purchase Price”).
SECTION 2. CLOSING, DELIVERY AND PAYMENT
     2.1. Closing. The Closing shall take place at 10:00 a.m. on the date hereof
at the offices of the Purchasers’ legal counsel, Messerli & Kramer P.A., in
Minneapolis, Minnesota, or

 

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at such other time or place as the Company and the Purchasers may mutually agree
(the “Closing Date”). At the Closing, subject to the terms and conditions
hereof, the Company will issue, sell and deliver to each Purchaser its
respective Note and Warrant, against payment by each Purchaser of its allocable
portion of the Purchase Price by certified check or wire transfer of immediately
available funds. At that time, the Company shall also execute and deliver to the
Purchasers the Registration Rights Agreement in the form attached as Exhibit C
(the “Registration Rights Agreement”) and the Security Agreement in the form
attached as Exhibit D (the “Security Agreement”).
SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
     The Company hereby makes the following representations and warranties to
each of the Purchasers as of the Closing Date and, as to the 510(k) clearance
and CE mark described in Section 3.16, covenants to so comply with the
requirements thereof from and after the Closing Date so long as any portion of
any of the Notes remain outstanding.
     3.1. Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Except as set forth on Schedule 3.1, the Company has
no subsidiaries. The Company has all requisite corporate power and authority to
own and operate its properties and assets, to execute and deliver this
Agreement, the Notes, the Warrants, the Registration Rights Agreement and the
Security Agreement (together, the “Transaction Documents”), to pledge certain of
the Company’s assets as described on the attached Exhibit E as security for the
Notes (the “Collateral”), to issue and sell the Shares upon conversion of the
Notes and upon exercise of the Warrants, to carry out the provisions of the
Transaction Documents, and to carry on its business as presently conducted and
as presently proposed to be conducted. The Company is duly qualified to do
business and is in good standing in each jurisdiction in which the nature of its
activities and of its properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions in which failure to be
so qualified would not have a material adverse effect on the Company, or its
business or properties, taken as a whole.
     3.2. Capitalization. The authorized capital stock of the Company consists
of 5,000,000 shares of Preferred Stock, par value $0.00025 per share, of which
352,160 shares are issued and outstanding, and 10,000,000 shares of Common
Stock, par value $0.00025 per share, of which 6,874,429 shares are issued and
outstanding. Except as set forth on Schedule 3.2, the Company has no outstanding
options, warrants or other rights to acquire any capital stock, or securities
convertible or exchangeable for capital stock or for securities themselves
convertible or exchangeable for capital stock (together, “Convertible
Securities”). Except as set forth on Schedule 3.2, the Company has no agreement
or commitment to sell or issue any shares of capital stock or Convertible
Securities. All issued and outstanding shares of the Company’s capital stock
(i) have been duly authorized and validly issued, (ii) are fully paid and
nonassessable, (iii) are free from any preemptive and cumulative voting rights
and (iv) were issued pursuant to valid exemptions under federal and state
securities laws. Except as set forth

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on Schedule 3.2, there are no outstanding rights of first refusal or proxy or
shareholder agreements of any kind relating to any of the Company’s securities
to which the Company or any of its executive officers and directors is a party
or as to which the Company otherwise has knowledge of. When issued in compliance
with the provisions of the Notes and the Warrants (and upon payment as provided
by the Warrants), the Shares will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided, however,
that the Shares may be subject to restrictions on transfer under applicable
state and/or federal securities laws.
     3.3. Authorization; Binding Obligations. All corporate action on the part
of the Company, its officers, directors and shareholders necessary for the
authorization of the Transaction Documents, the performance of all obligations
of the Company hereunder and thereunder at the Closing, including the pledge of
the Collateral as security for the Notes, and the authorization, sale, issuance
and delivery of the Shares upon conversion of the Notes and upon exercise of the
Warrants has been taken or will be taken prior to Closing. The Transaction
Documents, when executed and delivered, will be valid and binding obligations of
the Company enforceable in accordance with their terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors’ rights generally,
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) to the extent that the
enforceability of the indemnification provisions of the Registration Rights
Agreement may be limited by applicable laws. The sale of the Shares upon
exercise of the Warrants or upon conversion of the Notes is not and will not be
subject to any preemptive rights or rights of first refusal.
     3.4. Financial Statements. The Company’s unaudited balance sheets at, and
the unaudited statements of operations, cash flows and changes in shareholders’
equity of the Company for the years ended, December 31, 2003 and 2002 and the
Company’s unaudited balance sheet at, and the unaudited statements of operations
and cash flows of the Company for the six months ended June 30, 2004 (all of the
foregoing together, the “Financial Statements,” with June 30, 2004 being the
“Latest Statement Date” and the financial statements at and for the six months
ended June 30, 2004 being the “Latest Financial Statements”) fairly present in
all material respects (such that no material modifications are required to
conform the financial statements to generally accepted accounting principles)
the financial condition and operating results of the Company as of the
respective dates and for the respective periods covered thereby.
     3.5. Liabilities. The Company (i) has no material liabilities and (ii) to
the best of its knowledge, has no material contingent liabilities, in each case
not otherwise disclosed in the Latest Financial Statements, except (A) current
liabilities incurred in the ordinary course of business subsequent to the Latest
Statement Date and (B) obligations under contracts and commitments incurred in
the ordinary course of business and not required under generally accepted
accounting principles to be reflected in the Latest Financial Statements, which,
in both cases have not had, either in any individual case or in the aggregate, a
material adverse effect on the Company, or its business or properties, taken as
a whole.

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     3.6. Certain Agreements and Actions. Except as disclosed in the Financial
Statements or on Schedule 3.6, the Company has not (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock during the periods covered by the Financial
Statements or since the Latest Statement Date, (ii) since the Latest Statement
Date, incurred any indebtedness for money borrowed or any other material
liabilities out of the ordinary course of business, (iii) except as set forth in
Schedule 3.6, made any loans or advances to any person, other than ordinary
advances for travel or entertainment expenses or (iv) sold, exchanged or
otherwise disposed of any of its assets or rights, other than in the ordinary
course of business.
     3.7. Obligations of or to Related Parties. Except as disclosed on
Schedule 3.7, there are no obligations of the Company to officers, directors or
key employees of the Company or, to the Company’s knowledge, to any members of
their immediate families or other affiliates, other than (i) for accrued
salaries, (ii) reimbursement for expenses reasonably incurred on behalf of the
Company and (iii) for other employee benefits made generally available to all
employees (including stock option agreements outstanding under any stock option
plan approved by the Board of Directors of the Company). Except as disclosed on
Schedule 3.7, to the Company’s knowledge, none of the officers, directors or key
employees of the Company or, to the Company’s knowledge, any members of their
immediate families or other affiliates, are indebted to the Company or have any
direct or indirect ownership interest in any firm, corporation or other entity
with which the Company is affiliated or with which the Company has a business
relationship, or any firm, corporation or other entity that competes with the
Company, except that such officers, directors, employees and members of their
immediate families may own securities (with beneficial ownership not exceeding
2%) in publicly-traded companies that compete with the Company . Except as
disclosed on Schedule 3.7, no officer, director or key employee of the Company,
or, to the Company’s knowledge, any member of their immediate families or other
affiliates, is, directly or indirectly, interested in or a party to any material
contract with the Company. Except as disclosed on Schedule 3.7 or in the
Financial Statements, the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
     3.8. Changes. Since the Latest Statement Date, and except as disclosed on
Schedule 3.8, there has not been, to the Company’s knowledge, any event or
condition of any character that, either individually or cumulatively, has
materially and adversely affected the business, assets, liabilities, financial
condition, operations or prospects of the Company.
     3.9. Title to Properties and Assets; Liens. Except as set forth on
Schedule 3.9, the Company has good and marketable title to its properties and
assets, including the properties and assets reflected in the Latest Financial
Statements, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (i) those resulting from taxes that have not
yet become delinquent, (ii) liens and encumbrances that do not materially
detract from the value of the property subject thereto or materially impair the
operations of the Company and (iii) those that have otherwise arisen in the
ordinary course of business. With respect to the property and

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assets it leases, the Company is in compliance with such leases in all material
respects and, to the Company’s knowledge, holds a valid leasehold interest free
of any liens, claims or encumbrances. All facilities, machinery, equipment,
fixtures and other properties owned, leased or used by the Company which are
reasonably necessary to the Company’s conduct of its business are in good
operating condition and repair and are reasonably fit and usable for the
purposes for which they are being used, reasonable wear and tear excepted.
     3.10. Patents and Trademarks. Schedule 3.10 contains a listing of all U.S.
and foreign patents and patent applications, and U.S. and foreign trademarks and
service marks and applications therefor, owned by, assigned to or licensed to
the Company. Except as set forth on Schedule 3.10, the Company owns or has a
valid right to use all patents, trademarks, service marks, trade names,
copyrights, trade secrets, information and other proprietary rights and
processes necessary for its business as now conducted and as proposed to be
conducted, without any known infringement of the rights of others. The Company
is not aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with their duties to the Company or that would
conflict with the Company’s business as now conducted or proposed to be
conducted. None of the execution or delivery of, or the performance of the
transactions contemplated by, the Transaction Documents, the pledge of the
Collateral by the Company to secure the Notes, the carrying on of the Company’s
business by the employees of the Company nor the conduct of the Company’s
business as currently conducted or proposed to be conducted will conflict with
or result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument under which any employee is
now obligated. The Company does not believe it is or will be necessary to
utilize any inventions, trade secrets or proprietary information of any of its
employees made prior to their employment by the Company, except for inventions,
trade secrets or proprietary information that have been exclusively assigned to
the Company.
     Without limiting the generality of the above, neither of Cardio Medical
Solutions, Inc. nor Nobles LAI Engineering Inc., nor any other entity owned or
controlled by officers, directors or key employees of the Company, own or
control any inventions, trade secrets or proprietary information necessary for
or desirable to the Company in connection with and directly related to its
business as now conducted or proposed to be conducted.
     Except as set forth in Schedule 3.10, (i) each of the Company’s employees
have executed agreements of confidentiality and non-disclosure as to the
Company’s confidential information, including its intellectual property and
trade secrets, and (ii) each of the Company’s employees has agreed to assign to
the Company any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not, which are
conceived or made by such employees, solely or jointly with another, during the
period of employment, and which are directly related to the business or
activities of the Company and which the employee conceives as a result of the
employee’s employment by the Company (other than inventions for which no
equipment, supplies, facility or trade secret information of the Company was
used and

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which was developed entirely on the employee’s own time and (1) which does not
relate (a) directly to the business of the Company or (b) to the Company’s
actual or demonstrably anticipated research or development or (2) which does not
result from any work performed by the employee for the Company).
     3.11. Compliance with Other Instruments. Except as disclosed on
Schedule 3.11, the Company is not in violation or default of any term of its
Certificate of Incorporation or Bylaws, or in any material respect of any
mortgage, indenture, contract, agreement, instrument or contract to which it is
party or by which it is bound or of any judgment, decree, order, writ or, to its
knowledge, any statute, rule or regulation applicable to the Company that would
materially and adversely affect the business, assets, liabilities, financial
condition, operations or prospects of the Company. The execution and delivery
of, and the performance of and compliance with the transactions contemplated by,
the Transaction Documents, and the issuance and sale of the Shares upon
conversion of the Notes or upon exercise of the Warrants, will not, with or
without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term,
or result in the creation of any mortgage, pledge, lien, encumbrance or charge
upon any of the properties or assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to the Company, its business or operations
or any of its assets or properties, except for such results that would not
materially and adversely affect the business, assets, liabilities, financial
condition, operations or prospects of the Company.
     3.12. Litigation. There is no action, suit, proceeding or investigation
pending or, to the Company’s knowledge, currently threatened against the Company
that questions the validity of this Agreement or the other Transaction Documents
or the right of the Company to enter into any of such agreements, or to
consummate the transactions contemplated hereby or thereby. Except as disclosed
on Schedule 3.12, there is no action, suit, proceeding or investigation or, to
the Company’s knowledge, currently threatened against the Company that might
result, either individually or in the aggregate, in any material adverse change
in the assets, condition, affairs or prospects of the Company, financial or
otherwise, or any change in the current equity ownership of the Company. The
foregoing includes, without limitation, actions pending or threatened involving
the prior employment of any of the employees of the Company, their use in
connection with the Company’s business of any information or techniques
allegedly proprietary to any of their former employers or their obligations
under any agreements with prior employers. The Company is not a party or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality.
     3.13. Tax Returns and Payments. The Company has filed all tax returns
(federal, state and local) required to be filed by it. All taxes shown to be due
and payable on such returns, any assessments imposed, and, to the Company’s
knowledge, all other taxes due and payable by the Company on or before the
Closing have been paid or will be paid prior to the time they become delinquent.
The Company has not been advised (i) that any of its returns, federal, state or
other, have been or are being audited as of the date hereof or (ii) of any
deficiency in assessment or proposed judgment to its federal, state or other
taxes. The Company has no

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knowledge of any liability of any tax to be imposed upon the properties or
assets of the Company as of the date of this Agreement that is not adequately
provided for.
     3.14. Employees. The Company has no collective bargaining agreements with
any of its employees. The Company is not aware of any labor union organizing
activity relating to its employees. Except as set forth on Schedule 3.14, no
employee has any agreement or contract, written or verbal, regarding his
employment. Except as disclosed on Schedule 3.14, the Company is not a party to
or bound by any currently effective employment contract, deferred compensation
arrangement, bonus plan, incentive plan, profit sharing or defined benefit plan,
retirement agreement or other employee compensation plan or agreement. To the
Company’s actual knowledge, no employee of the Company, nor any consultant with
whom the Company has contracted, is in violation of any material term of any
employment contract, proprietary information agreement or any other agreement
relating to the right of any such individual to be employed by, or to contract
with, the Company because of the nature of the business to be conducted by the
Company; and, to the Company’s knowledge, the continued employment by the
Company of its present employees, and the performance of the Company’s contracts
with its independent contractors, will not result in any such violation. The
Company has not received any written or oral notice alleging that any such
violation has occurred. Except as disclosed on Schedule 3.14, no employee of the
Company has been granted the right to continued employment by the Company or to
any material compensation following termination of employment with the Company.
The Company is not aware that any officer or key employee, or that any group of
key employees, intends to terminate their employment with the Company, nor does
the Company have a present intention to terminate the employment of any officer,
key employee or group of key employees.
     3.15. Registration Rights. Except as disclosed on Schedule 3.15 or required
pursuant to the Registration Rights Agreement, the Company is presently not
under any obligation, and has not granted any rights, to register (as defined in
the Registration Rights Agreement) any of the Company’s presently outstanding
securities or any of its securities that may hereafter be issued.
     3.16. Compliance with Laws; Permits; Company Medical Devices. Except as
disclosed on Schedule 3.16, the Company is not in violation of any applicable
statute, rule, regulation, order or restriction of any domestic or foreign
government or any instrumentality or agency thereof in respect of the conduct of
its business or the ownership of its properties that would materially and
adversely affect the business, assets, liabilities, financial condition,
operations or prospects of the Company. No governmental orders, permissions,
consents, approvals or authorizations are required to be obtained and no
registrations or declarations are required to be filed in connection with the
execution and delivery of, and the performance of the transactions contemplated
by, the Transaction Documents, the pledge of the Collateral to secure the Notes
or the issuance of the Shares upon conversion of the Notes or upon exercise of
the Warrants, except such as has been duly and validly obtained or filed, or
with respect to any filings that must be made after the Closing, as will be
filed in a timely manner. The Company has all franchises, permits, licenses and
any similar authority necessary for the conduct of its

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business as now being conducted by it, the lack of which could materially and
adversely affect the business, properties, prospects or financial condition of
the Company and the Company believes it can obtain any similar authority for the
conduct of its business as now conducted or planned to be conducted.
     With respect to the Company’s marketing and sale of minimally invasive
vessel closure devices for surgical applications (which the Company represents
are the only products that the Company manufactures, markets or sells):
     (i) The Company has received 510(k) clearance from the U.S. Food & Drug
Administration (the “FDA”) to sell its F8 & F6 SuperStitch® devices (the
“Company Medical Devices”) in the United States;
     (ii) The Company has obtained permission from its notified body to place
the CE mark on the Company Medical Devices so as to permit their sale in
European Union countries;
     (iii) The Company’s 510(k) clearance and CE mark for the Company Medical
Devices are in full force and effect and the Company has not received and
anticipates no warning letter or other notice of, and is unaware of any basis
for, revocation, limitation or modification of such 510(k) clearance or CE
marking; and
     (iv) The Company manufactures the Company Medical Devices in compliance
with FDA quality system regulations and the EU Medical Device Directive and is
otherwise in compliance with all applicable FDA rules and regulations and EU
directives (including the Medical Device Directive) relating to the manufacture,
marketing and sale of the Company Medical Devices, including with respect to
reporting of any device failures or adverse reactions, except where such failure
to comply would not materially and adversely affect the ability of the Company
to sell the Company’s Medical Devices in each EU country.
     With respect to any human clinical investigation of new or proposed medical
devices by the Company, or modifications to the Company Medical Devices, the
Company is conducting each such investigation in material compliance with
applicable rules and regulations, including by obtaining any required
Investigational Device Exemption or Institutional Review Board approvals.
     3.17. Environmental and Safety Laws. The Company is not in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety, where such violation would have a material
adverse effect on the Company, and to the Company’s knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation. Without limiting the foregoing:
        (a) with respect to any real property owned, leased or otherwise
utilized by the Company (“Real Property”), the Company is not or has not in the
past been in violation of any

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Hazardous Substance Law which violation could reasonably be expected to result
in a material liability to the Company or its properties and assets;
        (b) neither the Company nor, to the knowledge of the Company, any third
party has used, released, generated, manufactured, produced or stored, in, on,
under, or about any Real Property, or transported thereto or therefrom, any
Hazardous Substances that could reasonably be expected to result in a material
liability to the Company under any Hazardous Substance Law;
        (c) to the knowledge of the Company, there are no underground tanks,
whether operative or temporarily or permanently closed, located on any Real
Property that could reasonably be expected to result in a material liability to
the Company under any Hazardous Substance Law;
        (d) there are no Hazardous Substances used, stored or present at, or on,
or to the knowledge of the Company that could reasonably be expected to migrate
onto any Real Property, except in compliance with Hazardous Substance Laws; and
        (e) to the knowledge of the Company, there neither is nor has been any
condition, circumstance, action, activity or event that could reasonably be
expected to be a material violation by the Company of any Hazardous Substance
Law, or to result in liability to the Company under any Hazardous Substance Law.
     For purposes hereof, “Hazardous Substances” means (statutory acronyms and
abbreviations having the meaning given them in the definition below of
“Hazardous Substances Laws”) substances defined as “hazardous substances,”
“pollutants” or “contaminants” in Section 101 of the CERCLA; those substances
defined as “hazardous waste,” “hazardous materials” or “regulated substances” by
the RCRA; those substances designated as a “hazardous substance” pursuant to
Section 311 of the CWA; those substances defined as “hazardous materials” in
Section 103 of the HMTA; those substances regulated as a hazardous chemical
substance or mixture or as an imminently hazardous chemical substance or mixture
pursuant to Sections 6 or 7 of the TSCA; those substances defined as
“contaminants” by Section 1401 of the SDWA, if present in excess of permissible
levels; those substances regulated by the Oil Pollution Act; those substances
defined as a pesticide pursuant to Section 2(u) of the FIFRA; those substances
defined as a source, special nuclear or by-product material by Section 11 of the
AEA; those substances defined as “residual radioactive material” by Section 101
of the UMTRCA; those substances defined as “toxic materials” or “harmful
physical agents” pursuant to Section 6 of the OSHA; those substances defined as
hazardous wastes in 40 C.F.R. Part 261.3; those substances defined as hazardous
waste constituents in 40 C.F.R. Part 260.10,

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specifically including Appendix VII and VIII of Subpart D of 40 C.F.R. Part 261;
those substances designated as hazardous substances in 40 C.F.R. Parts 116.4 and
302.4; those substances defined as hazardous substances or hazardous materials
in 49 C.F.R. Part 171.8; those substances regulated as hazardous materials,
hazardous substances, or toxic substances in 40 C.F.R. Part 1910; any chemical,
material, toxin, pollutant, or waste regulated by or in any other Hazardous
Substances Laws; and in the regulations adopted and publications promulgated
pursuant to said laws, whether or not such regulations or publications are
specifically referenced herein.
     “Hazardous Substances Law” means any of:
     (i) the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended (42 U.S.C. Section 9601 et seq.) (“CERCLA”);
     (ii) the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et
seq.) (“Clean Water Act” or “CWA”);
     (iii) the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et
seq.) (“RCRA”);
     (iv) the Atomic Energy Act of 1954 (42 U.S.C. Section 2011 et seq.)
(“AEA”);
     (v) the Clean Air Act (42 U.S.C. Section 7401 et seq.) (“CAA”);
     (vi) the Emergency Planning and Community Right to Know Act (42 U.S.C.
Section 11001 et seq.) (“EPCRA”);
     (vii) the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Section 136 et seq.) (“FIFRA”);
     (viii) the Oil Pollution Act of 1990 (33 U.S.C.A. Section 2701 et seq.);
     (ix) the Safe Drinking Water Act (42 U.S.C. Sections 300f et seq.)
(“SDWA”);
     (x) the Surface Mining Control and Reclamation Act of 1974 (30 U.S.C.
Sections 1201 et seq.) (“SMCRA”);
     (xi) the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.)
(“TSCA”);
     (xii) the Hazardous Materials Transportation Act (49 U.S.C. Section 5101 et
seq.) (“HMTA”);
     (xiii) the Uranium Mill Tailings Radiation Control Act of 1978 (42 U.S.C.
Section 7901 et seq.) (“UMTRCA”);

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     (xiv) the Occupational Safety and Health Act (29 U.S.C. Section 651 et
seq.) (“OSHA”); and
     (xv) all other federal, state and local governmental rules which govern
Hazardous Substances, and the regulations adopted and publications promulgated
pursuant to all such foregoing laws.
     3.18. Offering Valid. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 4, the offer, sale and
issuance of the Notes and the Warrants (and the Shares issuable upon conversion
of the Notes or upon exercise of the Warrants) will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
“Securities Act”), and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of the State of Minnesota.
     3.19. Full Disclosure. None of this Agreement, the Notes, the Warrants, the
Registration Rights Agreement or the Security Agreement contains any untrue
statement of a material fact nor, to the Company’s knowledge and belief, omit to
state a material fact necessary in order to make the statements contained herein
or therein not misleading.
     3.20. Insurance. The Company has fire and casualty insurance policies with
coverage customary for companies similarly situated to the Company. The
Company’s coverage for product liability is described on Schedule 3.20.
     3.21. Investment Company Act. The Company is not, and will not use the
proceeds from the Notes in a manner so as to become, an “investment company,” or
a company “controlled” by an “investment company,” within the meaning of the
Investment Company Act of 1940, as amended.
     3.22. Security Interest in Collateral. The Company owns the Collateral free
and clear of all claims, liens or encumbrances of any kind and, upon
consummation of the transactions as contemplated hereby, the Purchasers will,
together, have a first priority security interest in the Collateral.
     3.23. Foreign Corrupt Practices; Sarbanes-Oxley.
     (a) Neither the Company, nor to the knowledge of the Company, any agent or
other person acting on behalf of the Company, has (i) directly or indirectly,
used any corrupt funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political activity, (ii) made
any unlawful payment to foreign or domestic government officials or employees or
to any foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company (or made by
any person acting on its behalf of which the Company is aware) which is in
violation of law, or

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(iv) violated in any material respect any provision of the Foreign Corrupt
Practices Act of 1977, as amended.
     (b) The Company is in compliance in all material respects with all
provisions of the Sarbanes-Oxley Act of 2002 that are applicable to it as of the
Closing Date.
     3.24. Brokers or Finders. Except as set forth in Schedule 3.24, the Company
has not incurred nor will incur, directly or indirectly, any liability for any
brokerage or finders’ fees or agent’s commissions or any similar charges
(whether payable in cash, in equity securities or by a combination thereof) in
connection with this Agreement or any transaction contemplated hereby.
     3.25. Proposed Merger with Millenium Holding Group, Inc. The Company has
entered into an Agreement and Plan of Merger dated July 9, 2004 (the “Merger
Agreement”) with Millenium Holding Group, Inc., a Nevada corporation
(“Millenium”), pursuant to which the Company is to merge into Millenium (the
“Merger”). The Merger Agreement, in the form filed by Millenium as an exhibit to
a Current Report on Form 8-K dated July 12, 2004, is a true and correct copy of
the agreement between the Company and Millenium and is in full force and effect.
From and after the date hereof, the Company will not amend, modify, replace,
terminate or abandon the Merger Agreement and the proposed Merger without first
obtaining the written consent of Whitebox Advisors, LLC, as agent for the
Purchasers (“Whitebox Advisors”), unless with respect to such abandonment or
termination, a majority of the members of the Board of Directors of the Company
determine that such abandonment or termination is in the best interests of the
Company and its stockholders.
     3.26. Use of Proceeds. The Company will use the proceeds from the purchase
of the Notes and Warrants to retire in full the convertible notes and certain
securities issued by the Company to Al Novak and Bruce Barrows, and will
otherwise use the transaction proceeds for general corporate purposes.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
     Each Purchaser hereby severally, but not jointly, represents and warrants
to the Company as of the Closing Date, and agrees, as follows:
     4.1. Authorization. Such Purchaser has full power and authority to enter
into this Agreement and each of the Transaction Documents, and each such
agreement, when executed and delivered by such Purchaser, will be valid and
binding obligations of the Purchaser enforceable in accordance with their terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies and (iii) to the extent that the enforceability of the indemnification
provisions of the Registration Rights Agreement may be limited by applicable
laws.

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     4.2. Investment Representations. The Purchaser understands that neither the
offer nor the sale of the Purchaser’s Note, the Warrant or the Shares has been
registered under the Securities Act. The Purchaser also understands that the
Purchaser’s Note and Warrant are being offered and sold pursuant to an exemption
from registration contained in the Securities Act based in part upon the
Purchaser’s representations contained in the Agreement. The Purchaser hereby
represents and warrants as follows:
     (a) Purchaser Bears Economic Risk. The Purchaser has substantial experience
in evaluating and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of evaluating the merits
and risks of its investment in the Company and has the capacity to protect its
own interests. The Purchaser must bear the economic risk of this investment
indefinitely unless the Purchaser’s respective Note or Warrant (or the Shares)
are registered pursuant to the Securities Act, or an exemption from registration
is available. Except as contemplated by the Registration Rights Agreement, the
Purchaser has no present intention of selling or otherwise transferring its
respective Note, the Warrant or the Shares, or any interest therein. The
Purchaser also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow the Purchaser to transfer all or any
portion of the Purchaser’s respective Note, the Warrant or the Shares under the
circumstances, in the amounts or at the times the Purchaser might propose.
     (b) Acquisition for Own Account. Except as contemplated by the Registration
Rights Agreement, the Purchaser is acquiring its respective Note, the Warrant
and the Shares for the Purchaser’s own account for investment only, and not with
a view towards their public distribution.
     (c) Purchaser Can Protect Its Interest. The Purchaser represents that by
reason of its, or of its management’s, business or financial experience, the
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement, the Note, the Warrant and the
Registration Rights Agreement. Further, the Purchaser is aware of no publication
of any advertisement in connection with the transactions contemplated in the
Agreement.
     (d) Accredited Investor. The Purchaser represents that it is an accredited
investor within the meaning of Rule 501 of Regulation D of the Securities Act
     (e) Residence. The Purchaser represents that, if it is an entity, it is
organized under the laws of the British Virgin Islands and that its principal
office is located in the State of Minnesota and that, if the Purchaser is an
individual, he is a resident of the State of Minnesota.
     (f) Rule 144. The Purchaser acknowledges and agrees that its respective
Note and Warrant, and, if issued, its Shares, must be held indefinitely unless
they are subsequently registered under the Securities Act or an exemption from
such registration is available. The

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Purchaser has been advised or is aware of the provisions of Rule 144 promulgated
under the Securities Act, which permits limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions, including,
among other things: the availability of certain current public information about
the Company, the resale occurring not less than one year after a party has
purchased and paid for the security to be sold, the sale being through an
unsolicited “broker’s transaction” or in transactions directly with a market
maker (as such term is defined under the Securities Exchange Act of 1934, as
amended) and the number of shares being sold during any three-month period not
exceeding specified limitations.
     (g) Disclosure of Information. Such Purchaser believes it has received all
the information it considers necessary or appropriate for deciding whether to
purchase the securities of the Company contemplated by this Agreement and the
Transaction Documents. Such Purchaser further represents that it or he has had
an opportunity to ask questions and receive answers from the Company regarding
the securities being issued by the Company pursuant to this Agreement and the
Transaction Documents and Company’s business, properties, prospects and
financial condition.
     4.3. Transfer Restrictions. The Purchaser acknowledges and agrees that its
respective Note and Warrant and, if issued, its Shares, are subject to
restrictions on transfer and will bear restrictive legends.
     4.4. Limitation on Short Selling of Millenium Common Stock. The Purchaser
has not and agrees not to engage in any “short sale” (as such term is defined in
Rule 3b-3 of the Securities Exchange Act of 1934, as amended) of Millenium’s
Common Stock or any hedging transaction, which establishes a net short position
of Millenium’s Common Stock (i) from and after the Closing Date and until the
effective date of the Merger (or, if sooner, until the termination or
abandonment of the Merger Agreement or the Merger) and (ii) if the Company
effects the Merger into Millenium, during the period consisting of the sixty
(60) consecutive trading days ending on the date that is one year following the
effective date of the Merger. The foregoing covenant shall lapse if the Company
defaults in the timely payment of any amount due under the Purchaser’s Note.
SECTION 5. CONDITIONS FOR CLOSING
     5.1. Conditions for the Company to Satisfy. The several obligations of each
Purchaser to purchase its respective Note and Warrant as contemplated by this
Agreement is subject to satisfaction of the following contingencies at or prior
to Closing:
     (a) The Company shall have obtained all third party consents required in
connection herewith, including consents to pledge the Collateral to the
Purchasers as security for the Notes.
     (b) The Company shall have executed and delivered to the Purchasers at
Closing the Transaction Documents.

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     (c) The Company shall have satisfied all judgment liens against it filed of
record with the U.S. Patent and Trademark Office or otherwise.
     (d) The Company shall have obtained the written consent of Fusion Capital
Fund II, LLC, an Illinois limited liability company and prospective funding
source for Millenium upon consummation of the Merger, to the transactions
contemplated hereby in such form as the Purchasers shall require.
     (e) The Company shall have paid Whitebox Advisors a $180,000 cash
origination fee related to the transactions contemplated hereby.
     (f) Sheppard, Mullin, Richter & Hampton LLP, legal counsel to the Company
(“SMRH”), shall have delivered an opinion to the Purchasers with respect to the
following matters (which opinion may contain customary exclusions and
limitations that are reasonably acceptable to counsel for the Purchasers):
     (i) The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware. The Company has all
corporate power and authority necessary to own its properties and to conduct its
business as, to SMRH’s knowledge, it is presently conducted. The Company is
qualified to do business and is in good standing in each state where it owns or
leases any material property or conducts any material business, except where a
failure to so qualify would not have a material adverse effect on the Company.
     (ii) The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under the Transaction Documents.
     (iii) The Transaction Documents have been duly authorized by all necessary
corporate action on the part of the Company.
     (iv) The authorized capital stock of the Company consists of 10,000,000
shares of Common Stock, par value $0.00025 per share, 6,874,429 shares of which
to SMRH’s knowledge are issued and outstanding prior to the Closing, and
5,000,000 shares of Preferred Stock, par value $0.00025 per share, 352,160
shares of which to SMRH’s knowledge are issued and outstanding prior to the
Closing. To SMRH’s knowledge, except as described in the Purchase Agreement
(including the schedules and exhibits thereto), there are no other presently
outstanding preemptive rights to purchase from the Company any of the authorized
but unissued stock of the Company.
     (v) Each of the Transaction Documents, when executed and delivered by the
Company, will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms.
     (vi) When issued in compliance with the provisions of the Notes and
Warrants (and upon payment as provided by the Warrants), the Shares will be
validly issued, fully paid and nonassessable.

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     (vii) The execution and delivery of the Transaction Documents by the
Company will not result in (i) a violation of the Company’s Certificate of
Incorporation or Bylaws, as amended or (ii) a violation of any judgment or order
specifically identified on the Schedules to the Purchase Agreement, if any.
     (g) The Company shall have procured, at its expense, UCC-type insurance in
form and amount satisfactory to the Purchasers as to the perfection and priority
of the Purchasers’ security interest in the Collateral.
SECTION 6. MISCELLANEOUS
     6.1. Governing Law. This Agreement shall be governed by the laws of the
State of Minnesota as such laws are applied to agreements between Minnesota
residents entered into and performed entirely in Minnesota.
     6.2. Survival. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by the parties and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
     6.3. Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of the Notes, the Warrants or the Shares from time to time.
     6.4. Entire Agreement. The Transaction Documents and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and no party
shall be liable or bound to any other in any manner by any representations,
warranties, covenants and agreements except as specifically set forth herein and
therein.
     6.5. Severability. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
     6.6. Amendment and Waiver. This Agreement may be amended or modified, and
any provision hereunder may be waived, only upon the written consent of the
Company and Whitebox Advisors, as agent for the Purchasers.
     6.7. Notices. All notices, requests, consents, and other communications
hereunder shall be in writing and shall be deemed effectively given and received
when delivered in person

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or by national overnight courier service or by certified or registered mail,
return receipt requested, or by telecopier, addressed as follows:

         
 
  (a)   if to the Company, at
 
       
 
      Sutura, Inc.
17080 Newhope Street
Fountain Valley, California 92708
Attention: Anthony A. Nobles, President and Chief Executive Officer
Facsimile: (714) 427-6354
 
       
 
      with a copy to:
 
       
 
      Sheppard, Mullin, Richter & Hampton LLP
650 Town Center Drive, Fourth Floor
Costa Mesa, California 92626
Attention: Richard J. Babcock, Esq.
Facsimile: (714) 513-5130
 
       
 
  (b)   if to the Purchasers, in care of:
 
       
 
      Whitebox Advisors, LLC
3033 Excelsior Boulevard, Suite 300
Minneapolis, Minnesota 55416
Attention: Jonathan Wood, Chief Financial Officer
Facsimile: (612) 253-6151
 
       
 
      with a copy to:
 
       
 
      Messerli & Kramer P.A.
150 South Fifth Street, Suite 1800
Minneapolis, Minnesota 55402
Attention: Jeffrey C. Robbins, Esq.
Facsimile: (612) 672-3777.

     6.8. Indemnification by the Company. The Company agrees to indemnify and
hold the Purchasers harmless against any loss, liability, damage or expense
(including reasonable legal fees and costs) that the Purchasers may suffer,
sustain or become subject to as a result of or in connection with the breach by
the Company of any representation, warranty, covenant or agreement of the
Company contained in this Agreement, the Notes, the Warrants, the Security
Agreement or the Patent and Trademark Security Agreement, dated as of this date,
among the Company and the Purchasers.

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     6.9. Expenses. At Closing, the Company shall pay the Purchaser’s counsel,
Messerli & Kramer P.A., $17,000 for its legal fees and expenses in representing
the Purchasers in connection with the transactions contemplated hereby. In
addition, the Purchaser agrees to pay or reimburse the Purchasers for their
reasonable legal fees and expenses that they may incur after the date hereof in
connection with the review and approval of any matter relating to the Merger or
the granting of any waiver with respect to, the modification of any of the terms
or provisions of or the enforcement of any of the Transaction Documents.
     6.10. Titles and Subtitles. The titles of the sections and subsections of
the Agreement are for convenience of reference only and are not to be considered
in construing this Agreement.
     6.11. Counterparts. This Agreement may be delivered via facsimile or other
means of electronic communication, and may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
     IN WITNESS WHEREOF, the parties hereto have hereunto affixed their
signatures.

                  Sutura, Inc.       Pandora Select Partners L.P.,
            Whitebox Hedged High Yield Partners L.P.,
            Whitebox Intermarket Partners L.P. and
            Whitebox Convertible Arbitrage

By
              Partners L.P.
 
               
 
  Anthony A. Nobles, President and
Chief Executive Officer            
 
               
 
          By    
 
               
 
               
 
          Their    
 
               
 
                                            Gary S. Kohler  
 
                                          Scot W. Malloy

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Exhibit A
Form of Notes

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Exhibit B
Form of Warrants

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Exhibit C
Form of Registration Rights Agreement

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Exhibit D
Form of Security Agreement

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Exhibit E
Description of Collateral
     All assets of Sutura, Inc., a Delaware corporation (the “Company”),
including without limitation, the following:
     Inventory: All inventory of the Company as that term is defined in the
Uniform Commercial Code, whether now owned or hereafter acquired or in which the
Company obtains rights, whether consisting of whole goods, spare parts or
components, supplies or materials whether acquired, held or furnished for sale,
for lease or for any other arrangements, or under contracts or for manufacture
or processing, and wherever located worldwide;
     Equipment: All equipment of the Company, whether now owned or hereafter
acquired, including all present and future machinery, vehicles, furniture,
fixtures, office and recordkeeping equipment, parts, tools, jigs, supplies and
all other goods (except inventory) used or bought for use by the Company for any
business or enterprise and including specifically (without limitation) all
accessions thereto, all substitutions and replacements thereof, and all like or
similar property now owned or hereafter acquired by the Company, and all of
which is owned by the Company, and all deposits made on any such equipment;
     Deposit Accounts and Other Cash: All deposits and deposit accounts with any
bank, savings and loan association, credit union or like organization, and all
funds and amounts therein, and whether or not held in trust, or in custody or
safekeeping, or otherwise restricted or designated for a particular purpose, and
all other cash or marketable securities on hand, whether held in-vault or
otherwise;
     Receivables: Each and every right of the Company to the payment of money,
whether such right to payment now exists or hereafter arises, whether such right
to payment arises out of a sale, lease or other disposition of goods or other
property, out of a rendering of services, or of a loan, out of the overpayment
of taxes or other liabilities, or any other transaction or event, whether such
right to payment is created, generated or earned by the Company or by some other
person who subsequently transfers his, her or its interest to the Company,
whether such right to payment is or is not already earned by performance, and
howsoever such right to payment may be evidenced, together with all other rights
and interests (including all liens and other security interests) which the
Company may at any time have by law or agreement against any account debtor or
other person obligated to make such payment or against any property of such
account debtor or other persons including, but not limited to, all present and
future accounts, contract rights, chattel paper, bonds, notes and other debt
instruments, and rights to payment in the nature of general intangibles; and to
include, without limitation, each and every right of the Company to the payment
of money, whether such right to payment now exists or hereafter arises, out of a
sale, lease or other disposition of Inventory or Equipment;
     General Intangibles: All general intangibles of the Company whether now
owned or hereafter acquired, including (without limitation) all present and
future U.S. and foreign patents,

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patent applications, copyrights, trademarks, trade names, trade secrets,
customer or supplier lists and contracts, manuals, operating instructions,
permits, franchises, the right to use the Company’s name, the Company’s internet
domain names and address and the goodwill of the Company’s business.
     Securities: All securities and other equity interests now owned or
hereafter acquired by the Company, including shares of capital stock of any now
owned or hereafter acquired wholly owned or partially owned subsidiary of the
Company.
     The Collateral shall include (i) all substitutes and replacements for and
proceeds of any and all of the foregoing property, and in the case of all
tangible Collateral, all accessions, accessories, attachments, parts, equipment
and repairs now or hereafter attached or affixed to or use in connection with
any such goods and (ii) all warehouse receipts, bills of lading and other
documents of title now or hereafter covering such goods.

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Schedule 3.1
Subsidiaries

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Schedule 3.2
Stock Matters

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Schedule 3.6
Certain Agreements and Actions

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Schedule 3.7
Related Party Matters

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Schedule 3.8
Changes

- 29 -

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Schedule 3.9
Properties Matters

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Schedule 3.10
Intellectual Property Matters

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Schedule 3.11
Compliance Matters

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Schedule 3.12
Litigation

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Schedule 3.14
Employment Matters

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Schedule 3.15
Registration Rights

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Schedule 3.16
Violations

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Schedule 3.20
Product Liability Insurance

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Schedule 3.22
Encumbrances on Collateral

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Schedule 3.24
Brokers or Finders
     The Company owes a cash payment of $360,000 to Catalina Capital Advisors or
its assigns in connection with the closing on the transactions contemplated by
this Agreement.

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