Document:

Exhibit 4.2

 

EXECUTION COPY

 

This Registration Rights Agreement (this “Agreement”) is made and entered into as of April 7, 2011, by and among DJO Finance LLC, a Delaware limited liability company (“DJO LLC”), and DJO Finance Corporation, a Delaware corporation wholly owned by DJO LLC (“DJO Corp.”, and together with DJO LLC, the “Issuers”), the Guarantors listed on Schedule A hereto (the “Guarantors”), and Credit Suisse Securities (USA) LLC (“CS Securities”), as representative of the initial purchasers listed in Annex A of the Purchase Agreement (as defined below) (collectively, the “Initial Purchasers”), who have agreed to purchase the Issuers’ 7.75% Senior Notes due 2018 (the “Initial Notes”) and the related guarantees (the “Initial Guarantees”) pursuant to the Purchase Agreement.

 

This Agreement is made pursuant to the Purchase Agreement, dated as of April 4, 2011 (the “Purchase Agreement”), by and among the Issuers, the Guarantors and CS Securities, as representative of the Initial Purchasers, (i) for the benefit of the Initial Purchasers and (ii) for the benefit of the holders from time to time of the Notes (as hereinafter defined) (including the Initial Purchasers).  In order to induce the Initial Purchasers to purchase the Initial Notes, the Issuers and the Guarantors have agreed to provide the registration rights set forth in this Agreement.  The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 5(h) of the Purchase Agreement.

 

The parties hereby agree as follows:

 

SECTION 1.                                Definitions. As used in this Agreement, the following capitalized terms shall have the following meanings:

 

Broker-Dealer:  Any broker or dealer registered under the Exchange Act.

 

Business Day:  Any day other than a Saturday, Sunday or U.S. federal holiday or a day on which banking institutions in the City of New York are authorized or obligated to be closed.

 

Closing Date:  The date of this Agreement.

 

Commission:  The Securities and Exchange Commission.

 

Consummate:  An Exchange Offer shall be deemed “Consummated” for purposes of this Agreement upon the delivery by the Issuers to the Registrar under the Indenture of Exchange Notes in the same aggregate principal amount as the aggregate principal amount of Initial Notes that were tendered by Holders thereof pursuant to the Exchange Offer.

 

Exchange Act:  The Securities Exchange Act of 1934, as amended.

 

Exchange Guarantees:  The guarantees to be issued by the Guarantors, relating to the Exchange Notes.

 

Exchange Notes:  The 7.75% Senior Notes due 2018, of the same series under the Indenture as the Initial Notes, to be issued to Holders in exchange for Transfer Restricted Securities pursuant to this Agreement.

 

 

Exchange Offer:  The registration by the Issuers and the Guarantors under the Securities Act of the Exchange Notes pursuant to a Registration Statement pursuant to which the Issuers and the Guarantors offer the Holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities held by such Holders for Exchange Notes and the Exchange Guarantees in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities tendered in such exchange offer by such Holders.

 

Exchange Offer Registration Statement:  The Registration Statement relating to the Exchange Offer, including the related Prospectus.

 

FINRA:  The Financial Industry Regulatory Authority.

 

Holders:  As defined in Section 2(b) hereof.

 

Indemnified Holder:  As defined in Section 8(a) hereof.

 

Indenture:  The Indenture, dated as of April 7, 2011, among the Issuers, the Guarantors and The Bank of New York Mellon, as trustee (the “Trustee”), pursuant to which the Notes are to be issued, as such Indenture may be amended or supplemented from time to time in accordance with the terms thereof.

 

Initial Guarantees:  As defined in the preamble hereto.

 

Initial Notes:  As defined in the preamble hereto.

 

Initial Placement Date:  The date of the issuance and sale by the Issuers of the Initial Notes to the Initial Purchasers pursuant to the Purchase Agreement.

 

Initial Purchasers:  As defined in the preamble hereto.

 

Interest Payment Date:  As defined in the Indenture and the Notes.

 

Notes:  The Initial Notes and the Exchange Notes.

 

Person:  An individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof.

 

Private Exchange:  As defined in Section 3(c) hereof.

 

Private Exchange Notes:  As defined in Section 3(c) hereof.

 

Prospectus:  The prospectus included in a Registration Statement, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus.

 

Registration Statement:  Any registration statement of the Issuers and the Guarantors relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration

 

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Statement, which is filed pursuant to the provisions of this Agreement, in each case, including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein.

 

Securities Act:  The Securities Act of 1933, as amended.

 

Shelf Registration Statement:  As defined in Section 4 hereof.

 

Transfer Restricted Securities:  Each Initial Note and the related Initial Guarantees, until the earliest to occur of (a) the date on which such Initial Note and the related Initial Guarantees are exchanged in the Exchange Offer and are entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Securities Act, (b) the date on which such Initial Note and the related Initial Guarantees have been effectively registered under the Securities Act and disposed of in accordance with a Shelf Registration Statement, (c) the date on which such Initial Note and the related Initial Guarantees are distributed to the public pursuant to Rule 144 under the Securities Act or by a Broker-Dealer pursuant to the “Plan of Distribution” contemplated by the Exchange Offer Registration Statement (including delivery of the Prospectus contained therein) and (d) two years following the date of the initial issuance of the Initial Notes and the Initial Guarantees.

 

Trust Indenture Act:  The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa 77bbbb) as in effect on the date of the Indenture.

 

Underwritten Registration or Underwritten Offering:  A registration in which securities of the Issuers are sold to an underwriter for reoffering to the public.

 

SECTION 2.                                Securities Subject to This Agreement.

 

(a)           Transfer Restricted Securities.  The securities entitled to the benefits of this Agreement are the Transfer Restricted Securities.

 

(b)           Holders of Transfer Restricted Securities.  A Person is deemed to be a holder of Transfer Restricted Securities (each, a “Holder”) whenever such Person owns Transfer Restricted Securities.

 

SECTION 3.                                Registered Exchange Offer.

 

(a)           Unless the Exchange Offer shall not be permissible under applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with), the Issuers and the Guarantors shall (i) prepare and file with the Commission an Exchange Offer Registration Statement under the Securities Act, (ii) use their reasonable efforts to cause such Exchange Offer Registration Statement to become effective under the Securities Act, (iii) in connection with the foregoing, file (A) all pre-effective amendments to such Registration Statement as may be necessary in order to cause such Registration Statement to become effective, (B) if applicable, a post-effective amendment to such Registration Statement pursuant to Rule 430A under the Securities

 

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Act and (C) all necessary filings in connection with the registration and qualification of the Exchange Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of such Registration Statement, commence the Exchange Offer.  The Exchange Offer shall be on the appropriate form permitting registration of the Exchange Notes to be offered in exchange for the Transfer Restricted Securities and to permit resales of Notes held by Broker-Dealers as contemplated by Section 3(c) below.

 

(b)           The Issuers and the Guarantors shall use their reasonable best efforts to cause the Exchange Offer Registration Statement to be effective continuously and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 Business Days after the date notice of the Exchange Offer is mailed to the Holders.  The Issuers and the Guarantors shall cause the Exchange Offer to comply with all applicable federal and state securities laws.  The Issuers and the Guarantors shall use commercially reasonable efforts to cause the Exchange Offer to be Consummated on or before the 360th day following the Initial Placement Date (or April 7, 2012).

 

(c)           If, prior to consummation of the Exchange Offer, any Initial Purchaser holds any Initial Notes acquired by it that have the status of an unsold allotment in the initial distribution, the Issuers, upon the request of such Initial Purchaser, shall simultaneously with the delivery of the Exchange Notes issue and deliver to such Initial Purchaser, in exchange (the “Private Exchange”) for such Initial Notes held by any such Holder, a like principal amount of notes (the “Private Exchange Notes”) of the Issuers, guaranteed by the Guarantors, that are identical in all material respects to the Exchange Notes except for the placement of a restrictive legend on such Private Exchange Notes.  The Private Exchange Notes shall be issued pursuant to the same indenture as the Exchange Notes and bear the same CUSIP number as the Exchange Notes if permitted by the CUSIP Service Bureau.

 

(d)           The Issuers acknowledge that, pursuant to current interpretations by the Commission’s staff of Section 5 of the Securities Act, in the absence of an applicable exemption therefrom, (i) each Broker-Dealer electing to exchange Initial Notes, acquired for its own account as a result of market-making activities or other trading activities, for Exchange Notes (an “Exchanging Dealer”), is required to deliver a prospectus containing the information set forth in (a) Annex A hereto on the cover, (b) Annex B hereto in the “Exchange Offer Procedures” section and the “Purpose of the Exchange Offer” section, and (c) Annex C hereto in the “Plan of Distribution” section of such prospectus in connection with a sale of any such Exchange Notes received by such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) if any Initial Purchaser elects to sell Exchange Notes acquired in exchange for Initial Notes constituting any portion of an unsold allotment, such Initial Purchaser will be required to deliver a prospectus containing the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in connection with such sale.

 

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The Issuers and the Guarantors shall use their reasonable best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for resales of Notes acquired by Broker-Dealers for their own accounts as a result of market-making activities or other trading activities, and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period ending on the earlier of (i) 90 days from the date on which the Exchange Offer Registration Statement is declared effective, (ii) the date on which a Broker-Dealer is no longer required to deliver a prospectus in connection with market-making or other trading activities and (iii) the date on which all the Notes covered by such Exchange Offer Registration Statement have been sold pursuant to such Exchange Offer Registration Statement.

 

The Issuers shall provide sufficient copies of the latest version of such Prospectus to Broker-Dealers promptly upon request at any time during such 90-day (or shorter as provided in the foregoing sentence) period in order to facilitate such resales.

 

SECTION 4.                                Shelf Registration.

 

(a)           Shelf Registration.  If (1) because of any change in law or in currently prevailing interpretations of the staff of the Commission, the Issuers are not permitted to effect the Exchange Offer, (2) the Exchange Offer is not consummated within 360 days following the Initial Placement Date, (3) any holder of Private Exchange Notes so requests in writing to the Issuers at any time within 30 days after the consummation of the Exchange Offer, or (4) in the case of any Holder that participates in the Exchange Offer, such Holder does not receive Exchange Securities on the date of the exchange that may be sold without restriction under state and federal securities laws (other than due solely to the status of such Holder as an affiliate of the Issuers within the meaning of the Securities Act) and so notifies the Issuers within 30 days after such Holder first becomes aware of such restrictions, in the case of each of clauses (1) to and including clause (4) of this sentence, then, upon such Holder’s request, the Issuers and the Guarantors shall:

 

(x)            use their reasonable best efforts to file a shelf registration statement pursuant to Rule 415 under the Securities Act, which may be an amendment to the Exchange Offer Registration Statement (in either event, the “Shelf Registration Statement”) as soon as practicable after the filing obligation arises, which Shelf Registration Statement shall provide for resales of all Transfer Restricted Securities the Holders of which shall have provided the information required pursuant to Section 4(b) hereof; and

 

(y)           use commercially reasonable efforts to cause such Shelf Registration Statement to be declared effective promptly by the Commission.

 

The Issuers and the Guarantors shall use their reasonable best efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for resales of Notes by the Holders of Transfer Restricted Securities entitled to the benefit of this

 

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Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, until the earlier of (i) two years after the Initial Placement Date of the Initial Notes or (ii) such time as all of the Initial Notes have been sold thereunder (the “Effectiveness Period”).  Notwithstanding anything to the contrary in this Agreement, at any time, the Issuers may delay the filing of any Shelf Registration Statement or delay or suspend the effectiveness thereof, for a reasonable period of time, but not in excess of 60 consecutive days or more than three times during any calendar year (each, a “Shelf Suspension Period”), if the Board of Directors of DJO LLC determines reasonably and in good faith that the filing of any such initial Shelf Registration Statement or the continuing effectiveness thereof would require the disclosure of non-public material information that, in the reasonable judgment of the Board of Directors of DJO LLC, would be detrimental to the Issuers if so disclosed or would otherwise materially adversely affect a financing, acquisition, disposition, merger or other material transaction or such action is required by applicable law.

 

(b)           Provision by Holders of Certain Information in Connection with the Shelf Registration Statement.  No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Issuers in writing, within 20 Business Days after receipt of a request therefor, such information as the Issuers may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein.  Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Issuers all information required to be disclosed in order to make the information previously furnished to the Issuers by such Holder not materially misleading.

 

SECTION 5.                                Additional Interest.

 

If (a) the Exchange Offer has not been Consummated or a Shelf Registration Statement has not been declared effective by the Commission on or prior to the 360th day after the Initial Placement Date, or (b) if applicable, a Shelf Registration Statement has been declared effective but shall thereafter cease to be effective during the Effectiveness Period (other than because of the sale of all of the Transfer Restricted Securities registered thereunder), then additional interest (“Additional Interest”) shall accrue on the principal amount of the Notes at a rate of 0.25% per annum (which rate will be increased by an additional 0.25% per annum for each subsequent 90-day period that such Additional Interest continues to accrue; provided that the rate which such Additional Interest accrues may in no event exceed 1.00% per annum) (such Additional Interest to be calculated by the Issuers) commencing on (x) the 361st day after the Initial Placement Date, in the case of clause (a) above, or (y) the day such Shelf Registration ceases to be effective in the case of clause (b) above; provided, however, that upon the exchange of the Exchange Notes for all Transfer Restricted Securities tendered, or upon the effectiveness of the applicable Shelf Registration Statement which had ceased to remain effective, Additional Interest on the Notes in respect of which such events relate as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue.  Notwithstanding any other provisions of this Section 5, the Issuers shall not be obligated to pay Additional Interest provided in this Section 5 during a Shelf Suspension Period permitted by Section 4(a) hereof.

 

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SECTION 6.                                Registration Procedures.

 

(a)           Exchange Offer Registration Statement.  In connection with the Exchange Offer, each of the Issuers and each of the Guarantors shall comply with all of the provisions of Section 6(c) below, shall use their best efforts to effect such exchange to permit the sale of Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and shall comply with all of the following provisions:

 

(i)            If in the reasonable opinion of counsel to the Issuers there is a question as to whether the Exchange Offer is permitted by applicable law and it is advisable to do so, the Issuers and the Guarantors hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Issuers and the Guarantors to Consummate an Exchange Offer for such Initial Notes.  The Issuers and the Guarantors each hereby agree to pursue the issuance of such a decision to the Commission staff level but shall not be required to take action to effect a change of Commission policy.  The Issuers and the Guarantors each hereby agree, however, to (A) participate in telephonic conferences with the Commission, (B) deliver to the Commission staff an analysis prepared by counsel to the Issuers setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursue a resolution by the Commission staff of such submission.

 

(ii)           As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Issuers, prior to the Consummation thereof, a written representation to the Issuers (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an affiliate of the Issuers, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any Person to participate in, a distribution of the Exchange Notes to be issued in the Exchange Offer and (C) it is acquiring the Exchange Notes in its ordinary course of business.  In addition, all such Holders of Transfer Restricted Securities shall otherwise cooperate in the Issuers’ preparations for the Exchange Offer.  Each Holder, including any Holder that is a Broker-Dealer, shall acknowledge and agree that any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in Morgan Stanley & Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission’s letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (which may include any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction and that such a secondary resale transaction should be covered by an effective registration statement containing the selling security

 

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holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of Exchange Notes obtained by such Holder in exchange for Initial Notes acquired by such Holder directly from the Issuers.

 

(b)           Shelf Registration Statement.  In connection with the Shelf Registration Statement, each of the Issuers and each of the Guarantors shall comply with all the provisions of Section 6(c) below.

 

(c)           General Provisions.  In connection with any Registration Statement and any Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities (including, without limitation, any Registration Statement and the related Prospectus required to permit resales of Notes by Broker-Dealers), the Issuers and the Guarantors shall:

 

(i)            use their reasonable best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements including, if required by the Securities Act or any regulation thereunder, financial statements of the Guarantors; upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Issuers and the Guarantors shall file promptly an appropriate amendment to such Registration Statement or supplement to the Prospectus or document incorporated by reference, in the case of clause (A), correcting any such misstatement or omission, and, in the case of an amendment, use their reasonable best efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter;

 

(ii)           prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with the applicable provisions of Rules 424 and 430A under the Securities Act, as applicable, in a timely manner; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus;

 

(iii)          advise the underwriter(s), if any, and selling Holders promptly and, if requested by such Persons, confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by

 

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the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Securities Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, and (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue or that requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein not misleading.  If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Issuers and the Guarantors shall use their reasonable best efforts to obtain the withdrawal or lifting of such order at the earliest possible time;

 

(iv)          furnish without charge to counsel for the Initial Purchasers, each selling Holder named in any Registration Statement, and each of the underwriter(s), if any, at least one copy before filing with the Commission of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including, if requested in writing by any such Person, all documents incorporated by reference after the initial filing of such Registration Statement, if not available on the Commission’s EDGAR database), which Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus will be subject to the review of CS Securities and such Holders and underwriter(s) in connection with such sale, if any, for a reasonable period, and the Issuers will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus to which CS Securities or the underwriter(s), if any, shall reasonably object in writing after the receipt thereof (such objection to be deemed timely made upon confirmation of telecopy transmission within such period).  The objection of CS Securities or an underwriter, if any, shall be deemed to be reasonable if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading;

 

(v)           make reasonably available for inspection by the Initial Purchasers, any managing underwriter participating in any disposition pursuant to such Registration Statement and any attorney or accountant retained by the Initial Purchasers or any of the underwriter(s), all material financial and other records, pertinent corporate documents and properties of the Issuers and the Guarantors and cause the Issuers’ and the Guarantors’ officers and employees to supply all

 

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information reasonably requested by any such Holder, underwriter, attorney or accountant in connection with such Registration Statement subsequent to the filing thereof and prior to its effectiveness, in each case, as shall be reasonably necessary to enable such persons to conduct an investigation within the meaning of Section 11 of the Securities Act; provided, however, (A) that the foregoing inspection and information gathering shall be coordinated on behalf of the Initial Purchasers by Cravath, Swaine & Moore LLP and on behalf of any other parties by one counsel designated by and on behalf of such other parties as described in Section 7 hereof, and (B) that any information that is reasonably and in good faith designated by the Issuers in writing as confidential at the time of delivery of such information shall be kept confidential by the Initial Purchasers, the Holders, or any such underwriter, attorney, accountant or other agent, unless (1) disclosure of such information is required by court or administrative order or is necessary to respond to inquiries of regulatory authorities, (2) disclosure of such information is required by law (including any disclosure requirements pursuant to federal securities laws in connection with the filing of such Registration Statement or the use of any Prospectus), (3) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard such information by such Person or (4) such information becomes available to the Initial Purchasers, Holder, underwriter, attorney, accountant or other agent from a source other than the Issuers and such source is not known, after due inquiry, by the relevant Initial Purchaser, Holder, underwriter, attorney, accountant or other agent to be bound by a confidentiality agreement or is not otherwise under a duty of trust to the Issuers;

 

(vi)          if requested in writing by any selling Holders or the underwriter(s), if any, promptly incorporate in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the “Plan of Distribution” of the Transfer Restricted Securities, information with respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Issuers are notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment;

 

(vii)         use commercially reasonable efforts to confirm that the ratings assigned to the Initial Notes will apply to the Transfer Restricted Securities covered by the Registration Statement, if so requested by the Holders of a majority in aggregate principal amount of Notes covered thereby or the underwriter(s), if any;

 

(viii)        furnish to each selling Holder and each of the underwriter(s), if any, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including financial

 

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statements and schedules and, if requested in writing, all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference);

 

(ix)           deliver to each selling Holder and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Issuers and the Guarantors hereby consent to the use of the Prospectus and any amendment or supplement thereto by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto;

 

(x)            enter into such agreements (including an underwriting agreement), make such representations and warranties, and take all such other actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any Shelf Registration Statement contemplated by this Agreement, all to such extent as may be reasonably requested by the Initial Purchasers or by any Holder of Transfer Restricted Securities or underwriter in connection with any sale or resale pursuant to any Shelf Registration Statement contemplated by this Agreement; and, whether or not an underwriting agreement is entered into and whether or not such registration is an Underwritten Registration, the Issuers and the Guarantors shall:

 

(A)          furnish to the Initial Purchasers, each selling Holder and each underwriter, if any, in such substance and scope as they may request and as are customarily made by issuers to underwriters in primary underwritten offerings, upon the date of the effectiveness of the Shelf Registration Statement:

 

(1)           a certificate, dated the date of the effectiveness of the Shelf Registration Statement signed by (y) the President or any Vice President and (z) a principal financial or accounting officer of each of the Issuers, confirming, as of the date thereof, the matters set forth in paragraphs (i), (ii) and (iii) of Section 5(f) of the Purchase Agreement and such other matters as such parties may reasonably request;

 

(2)           an opinion, dated the date of the effectiveness of the Shelf Registration Statement of counsel for the Issuers and the Guarantors, in form, scope and substance reasonably satisfactory to the managing underwriter, addressed to the underwriters covering the matters customarily covered in opinions, reasonably requested in underwritten offerings, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Issuers and the Guarantors, representatives of the independent public accountants for the

 

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Issuers and the Guarantors, the Initial Purchasers’ representatives and the Initial Purchasers’ counsel in connection with the preparation of such Registration Statement and the related Prospectus and have considered the matters required to be stated therein and the statements contained therein, although such counsel has not independently verified the accuracy, completeness or fairness of such statements; and that such counsel advises that, on the basis of the foregoing (relying as to materiality to a large extent upon facts provided to such counsel by officers and other representatives of the Issuers and the Guarantors and without independent check or verification), no facts came to such counsel’s attention that caused such counsel to believe that the Shelf Registration Statement, at the time such Registration Statement or any post-effective amendment thereto became effective contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained in such Registration Statement as of its date contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  Without limiting the foregoing, such counsel may state further that such counsel assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of the financial statements, notes and schedules and other financial data included in any Registration Statement contemplated by this Agreement or the related Prospectus; and

 

(3)           customary comfort letters, dated as of the date of the effectiveness of the Shelf Registration Statement, in form, scope and substance reasonably satisfactory to the managing underwriter from (a) the Issuers’ and the Guarantors’ independent accountants and (b) the independent accountants of any other Person for which financial statements are included in or incorporated by reference in to such Shelf Registration Statement, in the customary form and covering matters of the type customarily covered in comfort letters by underwriters in connection with primary underwritten offerings;

 

(B)           set forth in full or incorporate by reference in the underwriting agreement, if any, the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and

 

(C)           deliver such other documents and certificates as may be reasonably requested by such parties to evidence compliance with clause (A) above and with any customary conditions contained in the

 

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underwriting agreement or other agreement entered into by the Issuers or the Guarantors pursuant to this clause (x), if any.

 

If at any time the representations and warranties of the Issuers and the Guarantors contemplated in clause (A)(1) above cease to be true and correct, the Issuers or the Guarantors shall so advise the Initial Purchasers and the underwriter(s), if any, and each selling Holder promptly, and if requested by such Persons, shall confirm such advice in writing;

 

(xi)           prior to any public offering of Transfer Restricted Securities, cooperate with the selling Holders, the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders or underwriter(s) may reasonably request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the Shelf Registration Statement; provided, however, that neither the Issuers nor the Guarantors shall be required to register or qualify as a foreign corporation where they are not then so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where they are not then so subject;

 

(xii)          shall issue, upon the request of any Holder of Initial Notes covered by and sold pursuant to the Shelf Registration Statement, Exchange Notes, having an aggregate principal amount equal to the aggregate principal amount of Initial Notes surrendered to the Issuers by such Holder in exchange therefor; such Exchange Notes to be registered in the name of the purchaser of such Notes; in return, the Initial Notes held by such Holder shall be surrendered to the Issuers for cancellation;

 

(xiii)         cooperate with the selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders or the underwriter(s), if any, may request at least two Business Days prior to any sale of Transfer Restricted Securities made by such underwriter(s);

 

(xiv)        use commercially reasonable efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (viii) above;

 

(xv)         if any fact or event contemplated by clause (c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the

 

13

 

Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading;

 

(xvi)        provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of the Registration Statement and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with the Depository Trust Issuers;

 

(xvii)       cooperate and assist in any filings required to be made with the FINRA and in the performance of any due diligence investigation by any underwriter (including any “qualified independent underwriter”) that is required to be retained in accordance with the rules and regulations of the FINRA, and use their reasonable best efforts to cause such Registration Statement to become effective and approved by such governmental agencies or authorities as may be necessary to enable the Holders selling Transfer Restricted Securities to consummate the disposition of such Transfer Restricted Securities;

 

(xviii)      otherwise use their reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to the Issuers’ security holders, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) for the twelve-month period (A) commencing at the end of any fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm or best efforts Underwritten Offering or (B) if not sold to underwriters in such an offering, beginning with the first month of the Issuers’ first fiscal quarter commencing after the effective date of the Registration Statement;

 

(xix)         cause the Indenture to be qualified under the Trust Indenture Act not later than the effective date of the first Registration Statement required by this Agreement, and, in connection therewith, cooperate with, and cause the Guarantors to cooperate with, the Trustee and the Holders of Notes to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the Trust Indenture Act; and to execute, and cause the Guarantors to execute, and use their reasonable best efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; and

 

(xx)          provide promptly to each Holder upon request each document filed with the Commission pursuant to the requirements of Section 13 and Section 15 of the Exchange Act.

 

Each Holder shall agree by acquisition of a Transfer Restricted Security that, upon receipt of any notice from the Issuers of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition of Transfer

 

14

 

Restricted Securities pursuant to the applicable Registration Statement until such Holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof, or until it is advised in writing (the “Advice”) by the Issuers that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus.  If so directed by the Issuers, each Holder will deliver to the Issuers (at the Issuers’ expense) all copies, other than permanent file copies then in such Holder’s possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such notice.  In the event the Issuers shall give any such notice, the time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and including the date when each selling Holder covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof or shall have received the Advice; however, no such extension shall be taken into account in determining whether Additional Interest is due pursuant to Section 5 hereof or the amount of such Additional Interest.

 

SECTION 7.                                Registration Expenses.

 

(a)           All expenses incident to the Issuers’ or the Guarantors’ performance of or compliance with this Agreement will be borne by the Issuers and the Guarantors, regardless of whether a Registration Statement becomes effective, including without limitation:  (i) all registration and filing fees and expenses (including filings made by the Initial Purchasers or Holders with the FINRA (and, if applicable, the fees and expenses of any “qualified independent underwriter” and its counsel that may be required by the rules and regulations of the FINRA)); (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Issuers, the Guarantors and, subject to Section 7(b) below, the Holders of Transfer Restricted Securities; (v) all fees and disbursements of independent certified public accountants of the Issuers and the Guarantors (including the expenses of any special audit and comfort letters required by or incident to such performance); and (vi) all fees and expenses of the Trustee and the exchange agent and their counsel.

 

The Issuers and the Guarantors will, in any event, bear their internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Issuers or the Guarantors.

 

(b)           In connection with any Shelf Registration Statement required by this Agreement, the Issuers and the Guarantors will reimburse the Initial Purchasers and the Holders of Transfer Restricted Securities being registered pursuant to the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Cravath, Swaine & Moore LLP or such other counsel as may be chosen by the Holders of a majority in principal amount of the

 

15

 

Transfer Restricted Securities for whose benefit such Shelf Registration Statement is being prepared.

 

SECTION 8.                                Indemnification.

 

(a)           The Issuers agrees and the Guarantors, jointly and severally, agree to indemnify and hold harmless (i) each Holder and (ii) each person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) any Holder (any of the persons referred to in this clause (ii) being hereinafter referred to as a “controlling person”) and (iii) the respective officers, directors, partners, employees, representatives and agents of any Holder or any controlling person (any person referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an “Indemnified Holder”), to the fullest extent lawful, from and against any and all losses, claims, damages, liabilities, judgments, actions and expenses (including, without limitation and as incurred, reimbursement of all reasonable costs of investigating, preparing, pursuing, settling, compromising, paying or defending any claim or action, or any investigation or proceeding by any governmental agency or body, commenced or threatened, including the reasonable fees and expenses of counsel to any Indemnified Holder), joint or several, directly or indirectly caused by, related to, based upon, arising out of or in connection with any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus (or any amendment or supplement thereto), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses are caused by an untrue statement or omission or alleged untrue statement or omission that is made in reliance upon and in conformity with information relating to any of the Holders furnished in writing to the Issuers and the Guarantors by such Holder expressly for use therein.  This indemnity agreement shall be in addition to any liability which the Issuers or any Guarantor may otherwise have.

 

In case any action or proceeding (including any governmental or regulatory investigation or proceeding) shall be brought or asserted against any of the Indemnified Holders with respect to which indemnity may be sought against the Issuers or any Guarantor, such Indemnified Holder (or the Indemnified Holder controlled by such controlling person) shall promptly notify the Issuers and the Guarantors in writing (provided that the failure to give such notice shall not relieve the Issuers or the Guarantors of their respective obligations pursuant to this Agreement except to the extent they are materially prejudiced as a proximate result of such failure).  In case any such action is brought against any Indemnified Holder and such Indemnified Holder seeks or intends to seek indemnity from the Issuers or the Guarantors, the Issuers or the Guarantors will be entitled to participate in and, to the extent that it shall elect, jointly with all other indemnifying parties similarly notified, by written notice delivered to the Indemnified Holder promptly after receiving the aforesaid notice from such Indemnified Holder, to assume the defense thereof with counsel reasonably satisfactory to such Indemnified Holder; provided, however, if the defendants in any such action include both the Indemnified Holder and the Issuers or any Guarantor and the Indemnified Holder shall have reasonably concluded (based on the advice of counsel) that a conflict may arise between the positions of the Issuers or the

 

16

 

Guarantors and the Indemnified Holder in conducting the defense of any such action or that there may be legal defenses available to it and/or other Indemnified Holders which are different from or additional to those available to the Issuers or the Guarantors, the Indemnified Holder or Holders shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such Indemnified Holder or Holders.  Upon receipt of notice from the Issuers or Guarantors to such Indemnified Holder of the Issuers’ or the Guarantors’ election so to assume the defense of such action and approval by the Indemnified Holder of counsel, the Issuers or the Guarantors will not be liable to such Indemnified Holder under this Section 8 for any legal or other expenses subsequently incurred by such Indemnified Holder in connection with the defense thereof unless (i) the Indemnified Holder shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that the Issuers or the Guarantors shall not be liable for the expenses of more than one separate counsel (together with local counsel), approved by the Issuers or the Guarantors, representing the Indemnified Holders who are parties to such action) or (ii) the Issuers or the Guarantors shall not have employed counsel satisfactory to the Indemnified Holder to represent the Indemnified Holder within a reasonable time after notice of commencement of the action, in each of which cases the fees and expenses of counsel shall be at the expense of the Issuers or the Guarantors.  It is understood and agreed that the Issuers or the Guarantors shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm (together with any local counsel) for all Indemnified Holders.  Each Indemnified Holder, as a condition to indemnification hereunder, shall use all reasonable efforts to cooperate with the Issuers or the Guarantors in the defense of any such action or claim.  The Issuers shall not be liable for any settlement of any such action or proceeding effected without the Issuers’ prior written consent, but if settled with such consent or there be a final judgment for the plaintiff, the Issuers and the Guarantors agree to indemnify and hold harmless any Indemnified Holder from and against any loss, claim, damage, liability or expense by reason of such settlement or judgment.  The Issuers and the Guarantors shall not, without the prior written consent of each Indemnified Holder, settle or compromise or consent to the entry of judgment in or otherwise seek to terminate any pending or threatened action, claim, litigation or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not any Indemnified Holder is a party thereto), unless such settlement, compromise, consent or termination includes an unconditional release of each Indemnified Holder from all liability arising out of such action, claim, litigation or proceeding.

 

(b)           Each Holder of Transfer Restricted Securities shall, severally and not jointly, indemnify and hold harmless the Issuers, the Guarantors and their respective officers, directors, partners, employees, representatives and agents, and any person controlling (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) the Issuers and the Guarantors, and the respective officers, directors, partners, employees, representatives and agents of each such person, to the same extent as the foregoing indemnity from the Issuers and the Guarantors to each of the Indemnified Holders, but only with respect to claims and actions based on information relating to such Holder furnished in writing by such Holder expressly for use in any Registration Statement.  In case any action or proceeding shall be brought against the Issuers, the Guarantors, any such controlling person, or their respective officers, directors, partners,

 

17

 

employees, representatives and agents in respect of which indemnity may be sought against a Holder of Transfer Restricted Securities, such Holder shall have the rights and duties given the Issuers and the Guarantors and the Issuers, the Guarantors, such controlling person and their respective officers, directors, partners, employees, representatives and agents shall have the rights and duties given to each Indemnified Holder by Section 8(a).  In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the proceeds received by such Holder upon the sale of the Notes giving rise to such indemnification obligation.

 

(c)           If the indemnification provided for in this Section 8 is unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof (other than by reason of exceptions provided in those Sections, including by reason of failure to notify the Issuers and the Guarantors of indemnification obligations thereunder to the extent that they are materially prejudiced as a proximate result of such failure) in respect of any losses, claims, damages, liabilities, judgments, actions or expenses referred to therein, then each applicable 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, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative benefits received by the Issuers and the Guarantors, on the one hand, and the Holders, on the other hand, from the Initial Placement (which in the case of the Issuers shall be deemed to be equal to the total gross proceeds from the Initial Placement as set forth on the cover page of the Offering Circular) or if such allocation is not permitted by applicable law, the relative fault of the Issuers and the Guarantors, on the one hand, and of the Indemnified Holder, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations.  The relative fault of the Issuers, on the one hand, and of the Indemnified Holder, on the other, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuers or by the Indemnified Holder and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in the second paragraph of Section 8(a), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim.

 

The Issuers and the Guarantors agree and each Holder of Transfer Restricted Securities shall agree that it would not be just and equitable if contribution pursuant to this Section 8(c) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph.  The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or expenses referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim.  Notwithstanding the provisions of this Section 8, none of the Holders (and its related Indemnified Holders) shall

 

18

 

be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds received by such Holder from the sale of the Notes pursuant to a Registration Statement exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.  The Holders’ obligations to contribute pursuant to this Section 8(c) are several in proportion to the respective principal amount of Initial Notes held by each of the Holders hereunder and not joint.

 

SECTION 9.                                Rule 144A.

 

Each Issuer and each Guarantors hereby agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding, to make available to any Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A.

 

SECTION 10.                          Participation in Underwritten Registrations.

 

No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder’s Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such underwriting arrangements.

 

SECTION 11.                          Selection of Underwriters.

 

The Holders of Transfer Restricted Securities covered by the Shelf Registration Statement who desire to do so may sell such Transfer Restricted Securities in an Underwritten Offering.  In any such Underwritten Offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities included in such offering; provided that such investment bankers and managers must be reasonably satisfactory to the Issuers.

 

SECTION 12.                          Miscellaneous.

 

(a)           Remedies.  Each Issuer and each Guarantor each hereby 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 Agreement and hereby agrees to waive, to the

 

19

 

extent permitted by applicable law, the defense in any action for specific performance that a remedy at law would be adequate.

 

(b)           No Inconsistent Agreements.  The Issuers will not, and will cause the Guarantors to not, on or after the date of this Agreement enter into any agreement with respect to their securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof.  Neither the Issuers nor any of the Guarantors has entered into any agreement granting any registration rights with respect to its securities to any Person pursuant to which any such Person would have the right to include any securities in any Registration Statement to be filed with the Commission as required under this Agreement. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Issuers’ securities under any agreement in effect on the date hereof.

 

(c)           Adjustments Affecting the Notes.  The Issuers and the Guarantors will not take any action, or permit any change to occur, with respect to the Notes that would materially and adversely affect their ability to Consummate the Exchange Offer.

 

(d)           Amendments and Waivers.  The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless the Issuers have obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities.  Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are being tendered pursuant to the Exchange Offer and that does not affect directly or indirectly the rights of other Holders whose securities are not being tendered pursuant to such Exchange Offer may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities being tendered or registered; provided that, with respect to any matter that directly or indirectly affects the rights of any Initial Purchaser hereunder, the Issuers shall obtain the written consent of each such Initial Purchaser with respect to which such amendment, qualification, supplement, waiver, consent or departure is to be effective.

 

(e)           Notices.  All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery:

 

(i)            if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and

 

20

 

(ii)           If to the Initial Purchasers:

 

c/o Credit Suisse Securities (USA) LLC
 Eleven Madison Avenue
 New York, New York  10010-3629
 Facsimile:  (212) 583-8567
 Attention: LCD-IBD

 

with a copy to:

 

Cravath, Swaine & Moore LLP
 825 Eighth Avenue
 New York, New York  10019
 Attention:  William J. Whelan, Esq.

 

If to the Issuers or the Guarantors:

 

c/o DJO LLC

1430 Decision Street

Vista, California 92081

Facsimile: (760) 734-3536

Attention:  General Counsel

 

with a copy to:

 

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017

Facsimile:  (212) 455-2502

Attention:  Richard Fenyes, Esq.

 

All such notices and communications shall be deemed to have been duly given:  at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery.

 

Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture.

 

(f)            Successors and Assigns.  This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securities from such Holder.

 

21

 

(g)           Counterparts.  This Agreement may be executed in any number of counterparts and by the parties hereto in separate 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.

 

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

 

(i)            Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

(j)            Severability.  In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

 

(k)           Entire Agreement.  This Agreement together with the Purchase Agreement and the Indenture (as defined in the Purchase Agreement) is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein.  There are no restrictions, promises, warranties or undertakings other than those set forth or referred to herein with respect to the registration rights granted by the Issuers and the Guarantors with respect to the Transfer Restricted Securities.  This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

 

 

[Signature Page Follows]

 

22

 

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

 

 

	
 
    	
DJO   FINANCE LLC,
    
	
 
    	
 
    
	
 
    	
by
    
	
 
    	
 
    	
/s/ Donald M. Roberts
    
	
 
    	
 
    	
Name:
    	
Donald   M. Roberts
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President and General Counsel
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
DJO   FINANCE CORPORATION,
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
by
    	
 
    	
 
    
	
 
    	
 
    	
/s/ Donald M. Roberts
    
	
 
    	
 
    	
Name:
    	
Donald   M. Roberts
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President and General Counsel
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
ENCORE   MEDICAL PARTNERS, LLC
    
	
 
    	
ENCORE   MEDICAL GP, LLC
    
	
 
    	
EMPI, INC.
    
	
 
    	
ENCORE   MEDICAL ASSET CORPORATION
    
	
 
    	
DJO,   LLC
    
	
 
    	
ELASTIC   THERAPY, LLC,
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
by
    	
 
    	
 
    
	
 
    	
 
    	
/s/ Donald M. Roberts
    
	
 
    	
 
    	
Name:
    	
Donald   M. Roberts
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President and General Counsel
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
ENCORE   MEDICAL L.P.,
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
by
    	
Encore   Medical GP, LLC
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
by
    	
/s/ Donald M. Roberts
    
	
 
    	
 
    	
Name:
    	
Donald   M. Roberts
    
	
 
    	
 
    	
Title:
    	
Executive Vice President and General Counsel
    

 

Signature Page to the Registration Rights Agreement

 

 

	
 
    	
RIKCO   INTERNATIONAL, LLC
    
	
 
    	
 
    
	
 
    	
by
    
	
 
    	
 
    	
/s/ Donald M. Roberts
    
	
 
    	
 
    	
Name:
    	
Donald   M. Roberts
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President and General Counsel
    

 

Signature Page to the Registration Rights Agreement

 

 

The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written:

 

 

	
CREDIT   SUISSE SECURITIES (USA) LLC, for
   itself and as Representative of the Initial Purchasers
    	
 
    
	
 
    	
 
    
	
by
    	
 
    
	
 
    	
/s/ Sean Gardner
    	
 
    
	
 
    	
Name:   Sean Gardner
    	
 
    
	
 
    	
Title:   Director
    	
 
    

 

Signature Page to the Registration Rights Agreement

 

 

SCHEDULE A

 

Guarantors

 

	
Subsidiary
    	
 
    	
Jurisdiction of Organization
    
	
 
    	
 
    	
 
    
	
Encore   Medical, L.P.
    	
 
    	
Delaware
    
	
Encore   Medical Partners, LLC
    	
 
    	
Nevada
    
	
Encore   Medical GP, LLC
    	
 
    	
Nevada
    
	
Empi, Inc.
    	
 
    	
Minnesota
    
	
Encore   Medical Asset Corporation
    	
 
    	
Nevada
    
	
DJO,   LLC
    	
 
    	
Delaware
    
	
Elastic   Therapy, LLC
    	
 
    	
North   Carolina
    
	
Rikco   International, LLC
    	
 
    	
Wisconsin
    

 

A-1

 

ANNEX A

 

Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes.  The Letter of Transmittal states that, by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.  This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Initial Notes where such Initial Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities.  The Issuers have agreed that, for a period of 90 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale.  See “Plan of Distribution.”

 

 

ANNEX B

 

Each broker-dealer that receives Exchange Securities for its own account in exchange for Initial Notes, where such Initial Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes.  See “Plan of Distribution.”

 

 

ANNEX C

 

PLAN OF DISTRIBUTION

 

Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a Prospectus in connection with any resale of such Exchange Notes.  This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Initial Notes where such Initial Notes were acquired as a result of market-making activities or other trading activities.  The Issuers have agreed that, for a period of 90 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale.  In addition, until [       ], 20[  ], all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus.(1)

 

The Issuers will not receive any proceeds from any sale of Exchange Notes by broker-dealers.  Exchange Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices.  Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Notes.  Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an “underwriter” within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act.  The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

 

For a period of 90 days after the Expiration Date, the Issuers will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal.  The Issuers have agreed to pay all of its expenses incident to the Exchange Offer and the reasonable expenses of one counsel for the Holders other than commissions or concessions of any brokers or dealers and will indemnify the Holders (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.

 

(1)  In addition, the legend required by Item 502(e) of Regulation S-K will appear on the back cover page of the Exchange Offer prospectus.

 

 

ANNEX D

 

·              CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.

 

Name:                       

Address:                    

 

If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes.  If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Initial Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.ex10_1.htm

Exhibit 10.1

 

SUBSCRIPTION AND SECURITY AGREEMENT

 

This Subscription and Security Agreement (this “Agreement”) is entered into as of March 11, 2011, by and among ReGen Biologics, Inc., a Delaware corporation (together with its successors and permitted assigns, the “Issuer”), and the undersigned investor (together with its successors and permitted assigns, the “Investor”).  Capitalized terms used herein shall have the meanings set forth in Section 11.1. Capitalized terms used but not otherwise defined in Section 11.1 herein shall have the meanings set forth in the New York Uniform Commercial Code, as amended or supplemented from time to time (the “UCC”).

 

RECITALS

 

Subject to the terms and conditions of this Agreement the Issuer desires to issue and sell to the Investor an aggregate principal amount of up to $750,000 (as such amount may be increased from time to time in accordance with the terms hereof) of the Issuer’s Secured Notes substantially in the form attached hereto as Exhibit A (the “Notes”) and warrants to purchase the Issuer’s Common Stock, par value $0.01 per share (“Common Stock”) pursuant to the terms of the warrant substantially in the form attached hereto as Exhibit B (the “Warrants”), and the Investor desires to subscribe for and purchase the principal amount of such Notes.

 

The Issuer and the Investor intend that the security interest created by this Agreement in favor of the Investor shall be senior to the security interests created by that certain amended and restated Subscription and Security Agreement, dated as of September 30, 2010 and amended as of December 27, 2010, among the Company and the investors party thereto (the “Old Agreement”) and the Prior Subscription Agreement and the Issuer, the Investor and the investors party to the Old Agreement and the Prior Subscription Agreement have entered into a second amended and restated intercreditor agreement to that effect.

 

TERMS OF AGREEMENT

 

In consideration of the mutual representations and warranties, covenants and agreements contained herein, the parties hereto agree as follows:

 

1.             SUBSCRIPTION AND ISSUANCE OF NOTES.

 

1.1             Subscription and Issuance of the Notes.  At and after the Closing, upon the terms and subject to the conditions set forth herein: (a) the Issuer agrees that it will issue to the Investor (the “Offering”) an aggregate principal amount of up to $750,000 of the Notes for an aggregate purchase price (the “Aggregate Purchase Price”) of up to $750,000 (as such amount may be increased from time to time in accordance with the terms hereof) (the “Commitment Amount”), and the Investor agrees that it will acquire from the Issuer Notes in the amount up to the Aggregate Purchase Price as set forth below in Section 1.3; (b) the Issuer agrees that it will issue to the Investor, and the Investor agrees that it will acquire from the Issuer, from time to time as Notes are issued pursuant to this Agreement, an aggregate number of Warrants to purchase a number of shares of Series G Preferred Stock of Issuer not to exceed the Aggregate Purchase Price divided by $3.00; and (c) the Investor agrees to remit payment for its Commitment Amount in accordance with the provisions of Section 1.3.

  

  

  

 

1.2             Interest.  Interest (“Interest”) at the rate of 12.00% per annum shall be payable on the Due Date in arrears on the sum of the principal amount of each Note then outstanding.  Interest on the principal amount outstanding shall accrue daily and shall commence accruing from the date of issuance of each Note, and shall be computed on the basis of a 360-day year of twelve (12) 30-day months.

 

1.3             Payment for the Notes.  Within five (5) business days of the Investor’s receipt of an Interim Budget Report (or, in the case of the Interim Budget Report delivered at Closing, on the date of delivery), the Investor (unless it rejects such Interim Budget Report) shall purchase Notes, and the Issuer shall issue Notes, in an amount equal to the lesser of (i) the remaining portion of its unfunded Commitment Amount or (ii) an amount equal to the amount requested by the Issuer in such Interim Budget Report. All payments by the Investor shall be paid in cash, by wire transfer of immediately available funds, or in some other form deemed acceptable by the Issuer, to an account designated in a written notice delivered by the Issuer to the Investor not later than two (2) business days prior to the Closing.  The Investor shall have no obligation to purchase any Notes after May 1, 2011, regardless of whether the Investor has previously purchased Notes in an aggregate amount equal to its Commitment Amount.

 

1.4             Repayment.  All outstanding principal and accrued and unpaid interest with respect to the Notes shall be repaid to each Holder of Notes by no later than the Due Date.  Subject to Section 3.3 on or prior to the Due Date, all outstanding principal and accrued and unpaid interest with respect to a Note shall be repaid (a) at the election of the Investor, in (i) the form of Equity Securities of the Issuer into which the Prior Bridge Notes convert (the “Prior Note Equity Securities”) if the Prior Bridge Notes have converted (ii) the form of ReGen AG Convertible Debt upon consummation of a ReGen AG Debt Financing, or (iii) cash or (b) if no election has been made under (a) above prior to the consummation of a ReGen AG Equity Financing, then, upon such consummation, automatically in the form of ReGen AG Securities.  If the Notes are to be paid in Prior Note Equity Securities, any repayment shall be made in accordance with Section 3.1.  If the Notes are repaid in the form of ReGen AG Securities, the unpaid principal and interest balance of each Note shall be convertible in accordance with Section 3.2. If the Notes are repaid in the form of ReGen AG Convertible Debt, the unpaid principal and interest balance of each note shall be convertible in accordance with Section 3.3. Repayment or conversion of the Notes pursuant to this Section 1.4 shall include any applicable Fundamental Transaction Premium.

 

1.5             Fundamental Transaction Premium. Upon the consummation of a Fundamental Transaction (whether prior to, on or subsequent to the Due Date), each holder of Notes must elect to have such Notes repaid in cash or converted into Prior Note Equity Securities, ReGen AG Convertible Debt or ReGen AG Securities. Prior to repayment or conversion of the Notes, a premium shall be applied to the principal amount of each Note then outstanding equal to 300% of the outstanding principal amount of such Note (the “Fundamental Transaction Premium”) the day immediately preceding the consummation of such Fundamental Transaction and thereafter interest shall accrue in accordance with Section 1.2 on the principal amount of such Note the day immediately preceding the consummation of such Fundamental Transaction plus the premium applied pursuant to this Section 1.5 (such sum totaling four times the amount of outstanding principal the day immediately preceding the consummation of such Fundamental Transaction).

  

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1.6             Legend.  Any certificate or certificates representing (i) the Notes or any Prior Bridge Note Securities or ReGen AG Securities into which any Note converts, (ii) any ReGen AG Convertible Debt or any equity securities into which the ReGen AG Convertible Debt converts or (iii) any Warrants or any shares issuable upon exercise of any Warrants shall bear the following legend, in addition to any legend that may be required by any Requirements of Law:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF ANY STATE WITH RESPECT THERETO OR IN ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND ALSO MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH ANY APPLICABLE RULES OF THE SECURITIES AND EXCHANGE COMMISSION.

 

2.             CLOSINGS; TERMINATION.

 

         2.1           Closing

 

 The initial closing of the transactions contemplated herein (the “Closing”) shall take place on a date designated by the Issuer, which date shall be March 11, 2011.  The Closing shall take place at the offices of Pillsbury Winthrop Shaw Pittman LLP, counsel for the Issuer, 2300 N Street, NW, Washington, DC 20037 or such other location as determined by the Issuer.  At the Closing (i) the Investor shall remit any payment in accordance with Section 1.3; (ii) the Issuer shall issue to the Investor a Note representing the amount of such payment by the Investor; (iii) the Issuer shall issue to the Investor Warrants to purchase a number of shares of Series G Preferred Stock of Issuer equal to the principal amount of the Note issued to the Investor divided by $3.00, exercisable on the terms and conditions to exercisability provided in the Warrants; and (iv) all other actions referred to in this Agreement which are required to be taken for the Closing shall be taken and all other agreements and other documents referred to in this Agreement which are required for the Closing (including, without limitation, the Consent Agreement) shall be executed and delivered.

 

 2.2           Termination.  This Agreement may be terminated at any time prior to the Closing or, upon conversion of the Notes in accordance with the terms of this Agreement or payment in full by Issuer of any Notes issued in connection with the Closing:

 

 (a)           by mutual written consent of the Issuer and the Investor constituting the Required Consent;

 

 (b)           with respect to the Investor’s obligations hereunder, by the Investor, upon a materially inaccurate representation or breach of any material warranty, covenant or agreement on the part of the Issuer set forth in this Agreement, in either case such that the conditions in Section 10.1 would be reasonably incapable of being satisfied on or prior to the date of the Closing; or

  

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 (c)           by the Issuer, upon a materially inaccurate representation or breach of any material warranty, covenant or agreement on the part of the Investor set forth in this Agreement, in either case such that the conditions in Section 10.2 would be reasonably incapable of being satisfied on or prior to the date of the Closing.

 

2.3             Effect of Termination.  In the event of termination of this Agreement pursuant to Section 2.2, this Agreement shall forthwith become void, there shall be no liability on the part of the Issuer or the Investor to each other and all rights and obligations of any party hereto shall cease; provided, however, that nothing herein shall relieve any party from liability for the willful breach of any of its representations and warranties, covenants or agreements set forth in this Agreement. For the avoidance of doubt, for so long as the Issuer has any outstanding indebtedness under any of the Notes, the Lien on the Collateral and the security interest granted hereunder shall remain in effect for the benefit of the Investor or holders of the Notes then outstanding.

 

3.             CONVERSION TERMS.

 

3.1             Conversion into Prior Note Equity Securities.  If repayment of a Note is to be made in the form of Prior Note Equity Securities, then the number of shares of Prior Note Equity Securities to be issued in repayment of such Note will be determined by dividing (a) the principal amount (including the Fundamental Transaction Premium, if applicable) and any accrued and unpaid interest on that Note by (b) the purchase price per share at which the Prior Bridge Notes convert into the Prior Note Equity Securities..  The Prior Note Equity Securities into which the Notes convert shall be subject to and limited by the same terms of and granted the same rights as the Prior Note Equity Securities issued to holders of the Prior Bridge Notes.

 

3.2             Conversion into ReGen AG Securities.  If repayment of a Note is to be made in the form of ReGen AG Securities in connection with a ReGen AG Equity Financing, then the number of shares of ReGen AG Securities to be issued in repayment of each Note will be determined by dividing (a) the principal amount (including the Fundamental Transaction Premium, if applicable) and any accrued and unpaid interest on that Note by (b) the product of 0.80 multiplied by the price per share of the ReGen AG Securities paid by the investors in the ReGen AG Equity Financing.  Except as otherwise provided in the foregoing sentence, the ReGen AG Securities into which the Notes convert shall be subject to and limited by the same terms of and granted the same rights as the ReGen AG Securities otherwise issued by ReGen AG in the ReGen AG Equity Financing.  After the Due Date, if the Notes have not otherwise been repaid or converted, upon receipt by the Issuer of the Required Consent requesting a conversion into ReGen AG Securities, each Note shall be converted into the number of shares of ReGen AG Securities determined by dividing (a) the principal amount (including the Fundamental Transaction Premium, if applicable) and any accrued and unpaid interest on that Note by (b) 100 CHF.

 

3.3             Conversion into ReGen AG Convertible Debt.  If, at a time when any principal or interest balance remains outstanding under the Notes, ReGen AG shall issue any debt security that is convertible into any ReGen AG Securities (the “ReGen AG Convertible Debt”), then, upon obtaining the Required Consent, the entire outstanding principal (including the Fundamental Transaction Premium, if applicable) and interest balance of the Notes shall convert into ReGen AG Convertible Debt, with any unpaid principal (including the Fundamental Transaction Premium, if applicable) under the Notes being treated as principal under the ReGen AG Convertible Debt and any interest accrued but unpaid on the Notes being treated as accrued interest under the ReGen AG Convertible Debt; provided, that the amount of the principal (including the Fundamental Transaction Premium, if applicable) and interest under the Notes, which shall be in U.S. Dollars, shall be converted into Swiss Francs based on the Exchange Rate on the date of issuance of the ReGen AG Convertible Debt.  Upon conversion of the Notes into ReGen AG Convertible Debt, the Notes shall be delivered promptly to Issuer for cancellation.  The ReGen AG Convertible Debt into which the Notes convert shall be subject to and limited by the same terms of and granted the same rights as the ReGen AG Convertible Debt otherwise issued by ReGen AG in the ReGen AG Debt Financing.

  

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3.4             Increase of Authorized Capital Stock.  To the extent conversion of the Notes into Prior Note Equity Securities in accordance with Section 3.1 or the conversion of the Prior Note Equity Securities if such securities are convertible would result in the issuance of more than the amount of shares of capital stock authorized under the Certificate of Incorporation, the Issuer shall, at such time, use its commercially reasonable efforts, subject to the approval of the Issuer’s shareholders, to increase the authorized capital stock of the Issuer such that all of the Prior Note Equity Securities and, if applicable the securities into which the Prior Note Equity Securities are convertible are authorized under the Certificate of Incorporation; provided, however, that, to the extent that the Investor is a shareholder of the Issuer entitled to vote shares of Common Stock at an annual or special meeting of the shareholders of the Company, the Investor shall not unreasonably withhold its votes in favor of any such proposal to increase the authorized capital stock of the Issuer.

 

3.5             Increase in Share Capital of ReGen AG. To the extent conversion of the Notes into ReGen AG Securities in accordance with Section 3.2 or the conversion of the Notes into ReGen AG Convertible Debt in accordance with Section 3.3 would require an increase of the share capital of ReGen AG, the Investor, to the extent it is a beneficial owner of ReGen AG Securities, shall not withhold their votes in favor of any such proposal to increase the share capital of ReGen AG.

 

4.             REPRESENTATIONS AND WARRANTIES OF THE ISSUER.

 

As a material inducement to the Investor entering into this Agreement, subscribing for the Notes, except as set forth in the Disclosure Schedules delivered to the Investor concurrently herewith, the Issuer represents and warrants to the Investor as follows:

 

4.1             Corporate Status.  The Issuer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each of the Issuer and its Subsidiaries has full corporate power and authority to own and hold its properties and to conduct its business as described in the Issuer’s SEC Reports. Each of the Issuer and its Subsidiaries is duly qualified to do business and is in good standing in each jurisdiction in which the nature of its business requires qualification or good standing, except for any failure to be so qualified or be in good standing that would not have a Material Adverse Effect.

  

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4.2             Corporate Power and Authority.  The Issuer has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby.  At or prior to the Closing, the Issuer will have taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby.  No further approval or authorization of any stockholder or the board of directors of the Issuer is required for the issuance and sale of the Notes and Warrants, the conversion or exercise thereof or, except as provided in Section 7.2, the filing of the Registration Statement.

 

4.3             Enforceability.  This Agreement has been duly executed and delivered by the Issuer and (assuming it has been duly authorized, executed and delivered by the Investor) constitutes a legal, valid and binding obligation of the Issuer, enforceable against the Issuer in accordance with its terms, except (a) as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally, and (b) the indemnity provisions of Section 9 of this Agreement, to the extent such provisions may not be enforceable based upon public policy considerations, and general equitable principles, regardless of whether such enforceability is considered in a proceeding at law or in equity.

 

4.4             No Violation.  Except as set forth on Schedule 4.4, the execution and delivery by the Issuer of this Agreement, the consummation of the transactions contemplated hereby, and the compliance by the Issuer with the terms and provisions hereof (including, without limitation, the Issuer’s issuance to the Investor of the Notes as contemplated by and in accordance with this Agreement), will not result in a default under (or give any other party the right, with the giving of notice or the passage of time (or both), to declare a default or accelerate any obligation under) or violate the Certificate of Incorporation or Bylaws of the Issuer or any material Contract to which the Issuer is a party (except to the extent such a default, acceleration, or violation would not, in the case of a Contract, have a Material Adverse Effect on the Issuer), or materially violate any Requirement of Law applicable to the Issuer, or result in the creation or imposition of any material Lien upon any of the capital stock, properties or assets of the Issuer or any of its Subsidiaries (except where such violations of any Requirement of Law or creations or impositions of any Liens would not have a Material Adverse Effect on the Issuer or are specifically contemplated hereby).  Neither the Issuer nor any of its Subsidiaries is (a) in default under or in violation of any material Contract to which it is a party or by which it or any of its properties is bound or (b) to its knowledge, in violation of any order of any Governmental Authority, which, in the case of clauses (a) and (b), could reasonably be expected to have a Material Adverse Effect.

 

4.5             Consents/Approvals.  Except for the filing of a registration statement in accordance with Article 7 hereof and filings with the SEC and the securities commissions of the states in which the Notes are to be issued, no consents, filings, authorizations or other actions of any Governmental Authority are required to be obtained or made by the Issuer for the Issuer’s execution, delivery and performance of this Agreement which have not already been obtained or made.  No consent, approval, waiver or other action by any Person under any Contract to which the Issuer is a party or by which the Issuer or any of its properties or assets are bound is required or necessary for the execution, delivery or performance by the Issuer of this Agreement and the consummation of the transactions contemplated hereby, except where the failure to obtain such consents would not have a Material Adverse Effect on the Issuer.

 

  

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4.6             Valid Issuance.  Upon payment of the applicable purchase price by the Investor with respect to each Note purchased hereunder and delivery to the Investor of such Notes and the accompanying Warrants, such Notes and Warrants will be validly issued, fully paid and nonassessable and will be free and clear of all Liens imposed by the Issuer.  The Conversion Securities, and the shares issuable upon exercise of the Warrants (the “Warrant Shares”), when issued, will be validly issued, fully paid and nonassessable and will be free and clear of all Liens imposed by the Issuer and will not be subject to any preemptive rights or other similar rights of stockholders of the Issuer.

 

4.7             SEC Filings and Other Filings.  Except as set forth on Schedule 4.7, the Issuer has timely made all filings required to be made by it under the Exchange Act since December 31, 2008.  The Issuer has delivered or made accessible to the Investor true, accurate and complete copies of (a) the Issuer’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008; (b) the Issuer’s definitive proxy statement dated April 17, 2009 relating to its 2009 Annual Meeting of Stockholders; (c) the Issuer’s Period Reports on Form 10-Q filed May 11, 2009 for the quarter ended March 31, 2009 and August 11, 2009 for the quarter ended June 30, 2009; and (d) each of the Issuer’s Current Reports on Form 8-K filed since January 1, 2009 (as such documents may have, since the time of their filing, been amended or supplemented, and together with all reports, documents and information filed or after the date first written above through the date of Closing with the SEC, collectively the “SEC Reports”).  The SEC Reports, when filed (unless amended and superseded by a later Issuer filing prior to the date hereof, then on the date of such later filing), complied in all material respects with all applicable requirements of the Exchange Act and the Securities Act, if and to the extent applicable, and the rules and regulations of the SEC thereunder applicable to the SEC Reports.  None of the SEC Reports when filed (unless amended and superseded by a later Issuer filing prior to the date hereof, then on the date of such later filing) contained any misstatement of a material fact or omitted to state a material fact necessary to prevent the statements made therein from being misleading.

 

4.8             Commissions.  Except for those fees set forth on Schedule 4.8, the Issuer has not incurred any other obligation for any finder’s or broker’s or agent’s fees or commissions in connection with the transactions contemplated hereby.

 

4.9             Capitalization.  As of December 31, 2010, the authorized capital stock of the Issuer consists of 165,000,000 shares of Common Stock and 60,000,000 shares of Preferred Stock.  Except as set forth on Schedule 4.9, all issued and outstanding shares of capital stock of the Issuer have been, and as of Closing will be, duly authorized and validly issued and are fully paid and non-assessable, have been issued in compliance with all applicable state and federal securities laws in all material respects and were not issued in violation of, or subject to, any preemptive, subscription or other similar rights of any stockholder of the Issuer imposed by law.  As of December 31, 2010, the Issuer has issued and outstanding 25,788,313 shares of Common Stock, and 3,372,212 shares of Preferred Stock, of which 1,990,331 shares have been designated as Series A Convertible Preferred Stock and of which 1,381,881 shares have been designated as Series C Convertible Preferred Stock, which in the aggregate are convertible into 168,612 shares of Common Stock, not accounting for any fractional shares.  Except for outstanding options to purchase 2,932,062 shares of Common Stock and outstanding warrants to purchase 111,760,838 shares of Common Stock and 28,117,400 shares of Series G Preferred Stock, as of December 31, 2010, there were no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal and similar rights) or agreements, orally or in writing, for the purchase or acquisition from the Issuer of any shares of capital stock, and, except as set forth on Schedule 4.9, the Issuer is not a party to or subject to any agreement or understanding and, to the Issuer’s knowledge, there is no agreement or understanding between any Persons, which affects or relates to the voting or giving of written consents with respect to any security or by a director of the Issuer. The Issuer owns, directly or indirectly, all of the capital stock of its Subsidiaries, free and clear of any Liens or equitable interests other than as reflected in the SEC Reports.  Except as set forth in the SEC Reports or on Schedule 4.9, the Issuer has no obligation, contingent or otherwise, to redeem or repurchase any Equity Security or any security that is a combination of debt and equity.  Since December 31, 2010, except as set forth on Schedule 4.9, there has been no issuance of any capital stock or any issuance or entry into any options, warrants, rights (including conversion or preemptive rights and rights of first refusal and similar rights) or agreements, orally or in writing, for the purchase or acquisition from the Issuer of any shares of capital stock.

 

  

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4.10           Material Changes.  Except as set forth on Schedule 4.10 and in the SEC Reports (excluding any “risk factors” or “forward-looking statements” sections thereof) or as otherwise contemplated herein, since December 31, 2009, there has been no Material Adverse Effect in respect of the Issuer and its Subsidiaries taken as a whole.  Except as set forth in the SEC Reports (excluding any “risk factors” or “forward-looking statements” sections thereof) or as otherwise contemplated herein, since December 31, 2009, there has not been: (i) any direct or indirect redemption, purchase or other acquisition by the Issuer of any shares of the Common Stock; (ii) any declaration, setting aside or payment of any dividend or other distribution by the Issuer with respect to the Common Stock; (iii) any borrowings incurred or any material liabilities (absolute, accrued or contingent) assumed, other than current liabilities incurred in the ordinary course of business, liabilities under Contracts entered into in the ordinary course of business, or liabilities not required to be reflected on the Issuer’s financial statements pursuant to GAAP or required to disclosed in the SEC Reports; (iv) any Lien or adverse claim on any of the Issuer’s material properties or assets, except for Liens for taxes not yet due and payable or otherwise in the ordinary course of business; (v) any sale, assignment or transfer of any of the Issuer’s material assets, tangible or intangible, except in the ordinary course of business; (vi) any extraordinary losses or waiver of any rights of material value; (vii) any material capital expenditures or commitments therefor other than in the ordinary course of business; (viii) any other material transaction other than in the ordinary course of business; (ix) any material change in the nature or operations of the business of the Issuer and its Subsidiaries; (x) any default in the payment of principal or interest in any material amount, or violation of any material covenant, with respect to any outstanding debt obligations that are material to the Issuer and its Subsidiaries as a whole; (xi) any material changes to the Issuer’s critical accounting policies or material deviations from historical accounting and other practices in connection with the maintenance of the Issuer’s books and records; or (xii) any agreement or commitment to do any of the foregoing.

 

4.11           Litigation; Investigations.  Except as set forth on Schedule 4.11 and in the SEC Reports, there is no action, suit, proceeding or investigation pending or, to the Issuer’s knowledge, currently threatened against the Issuer or any of its Subsidiaries that questions the validity of this Agreement or the right of the Issuer to enter into it, or to consummate the transactions contemplated hereby, or that could reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect on the Issuer or any material change in the current equity ownership of the Issuer. The foregoing includes, without limitation, actions pending or, to the Issuer’s knowledge, threatened involving the prior employment of any of the Issuer’s employees or their use in connection with the Issuer’s business of any information or techniques allegedly proprietary to any of their former employers.  Except as set forth on Schedule 4.11 and in the SEC Reports, neither the Issuer nor any of its Subsidiaries is a party to or subject to the provisions of any order, writ, injunction, judgment or decree of any court or Governmental Authority.  Except as set forth in the SEC Reports, there is no action, suit, proceeding or investigation by the Issuer or any of its Subsidiaries currently pending or which the Issuer or any of its Subsidiaries currently intends to initiate, which could reasonably be expected to have a Material Adverse Effect.

 

  

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4.12           Rights of Registration, Voting Rights, and Anti-Dilution.  Except as contemplated in this Agreement and as set forth on Schedule 4.12, the Issuer has not granted or agreed to grant any registration rights, including piggyback rights, to any Person and, to the Issuer’s knowledge, no stockholder of the Issuer has entered into any agreements with respect to the voting of capital shares of the Issuer.  Except as set forth in Schedule 4.12, the issuance of the Notes and Warrants does not constitute an anti-dilution event for any existing security holders of the Issuer, pursuant to which such security holders would be entitled to additional securities or a reduction in the applicable conversion price or exercise price of any securities.

 

4.13           Offerings.  Subject in part to the truth and accuracy of the Investor’s representations and warranties set forth in this Agreement, the offer, sale and issuance of the Notes, Warrants and Conversion Shares (together, the “Securities”) as contemplated by this Agreement are exempt from the registration requirements of the Securities Act and any applicable state securities laws, and neither the Issuer nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemption.

 

4.14           Licenses and Permits.  Except as disclosed in the SEC Reports or on Schedule 4.14, each of the Issuer and its Subsidiaries has all Permits under applicable Requirements of Law from all applicable Governmental Authorities that are necessary to operate its businesses as presently conducted and all such Permits are in full force and effect, except where the failure to have any such Permits in full force and effect would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  Neither the Issuer nor any of its Subsidiaries is in default under, or in violation of or noncompliance with, any of such Permits, except for any such default, violation, or noncompliance which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. To the Issuer’s knowledge, other than as disclosed in the SEC Reports, there is no proposed change in any Requirements of Law which would require the Issuer and its Subsidiaries to obtain any Permits in order to conduct its business as presently conducted that the Issuer and its Subsidiaries do not currently possess and the lack of which could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

4.15           Patents and Trademarks.  Except as set forth in Schedule 4.15, the Issuer and each of its Subsidiaries has, or has rights to use, all intellectual property, including, without limitation, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and know-how (including trade secrets or other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) (collectively, the “Intellectual Property Rights”) that are necessary for use in connection with its business as presently conducted, except where the failure to have such Intellectual Property Rights would not reasonably be expected to have a Material Adverse Effect.  To the Issuer’s knowledge, there is no existing infringement by another person or entity of any of the Intellectual Property Rights that are necessary for use in connection with the Issuer’s business as presently conducted.  The Issuer is not infringing on any intellectual property rights of any other person, nor is there any claim of infringement made or, to the Issuer’s knowledge, threatened by a third party against or involving the Issuer.

 

  

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4.16           Insurance. The Issuer maintains and will continue to maintain insurance with such insurers, and insuring against such losses, in such amounts, and subject to such deductibles and exclusions as are customary in the Issuer’s industry and otherwise reasonably prudent, all of which insurance is in full force and effect.

 

4.17           Material Contracts. All material Contracts to which the Issuer or any Subsidiary is a party and which are required to have been filed by the Issuer on Exhibit 10 to the SEC Reports have been filed by the Issuer with the SEC pursuant to the requirements of the Exchange Act.  Except as disclosed in the SEC Reports, each such material Contract is in full force and effect, except as otherwise required pursuant to its respective terms, and is binding on the Issuer or its Subsidiaries, as the case may be, in each case, in accordance with its respective terms, and neither the Issuer or any of its Subsidiaries nor, to the Issuer’s knowledge, any other party thereto is in breach of, or in default under, any such material Contract, which breach or default would reasonably be expected to have a Material Adverse Effect.  Except as set forth in the SEC Reports, there exists no actual or, to the knowledge of the Issuer, threatened termination, cancellation or limitation of, or any material adverse modification or change in, the business relationship of the Issuer or any of its Subsidiaries, or the business of the Issuer or any of its Subsidiaries, with any customer or supplier or any group of customers or suppliers whose purchases or inventories provided to the business of the Issuer or any of its Subsidiaries would, individually or in the aggregate, have a Material Adverse Effect.

 

4.18           Taxes.  The Issuer has filed all material federal, state and foreign income and franchise tax returns which are due, unless validly extended, and has paid or accrued all taxes shown as due thereon, unless validly extended, and the Issuer has no knowledge of a tax deficiency which has been or might be asserted or threatened against it which is reasonably likely to have a Material Adverse Effect.

 

4.19           Private Placement.  Neither the Issuer nor any of its Subsidiaries or Affiliates, nor any Person acting on its or their behalf, (i) 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 the Securities, (ii) has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under any circumstances that would require registration of the Securities under the Securities Act or (iii) has issued any shares of Common Stock or shares of any series of preferred stock or other securities or instruments (other than the Securities issued under the Old Agreement) convertible into, exchangeable for or otherwise entitling the holder thereof to acquire shares of Common Stock which, to our knowledge, would be integrated with the sale of the Securities hereunder for purposes of the Securities Act or of any applicable stockholder approval provisions, nor will the Issuer or any of its Subsidiaries or Affiliates take any action or steps that would, to our knowledge, require registration of any of the Securities under the Securities Act or cause the offering of the Securities to be integrated with other offerings; provided, however, that if any integration shall have occurred prior to repayment or conversion of the Notes, then the indemnification provisions under Section 9.1 shall apply notwithstanding anything stated therein.  Assuming the accuracy of the representations and warranties of the Investor, the offer and sale of the Securities by the Issuer to the Investor pursuant to this Agreement will be exempt from the registration requirements of the Securities Act.

 

  

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4.20           Reservation of Warrant Shares.  The Issuer has validly reserved sufficient Warrant Shares to provide for conversion of the Warrants issued or issuable pursuant to this Agreement.

 

5.             REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.

 

As a material inducement to the Issuer entering into this Agreement and issuing the Notes and Warrants, and in reliance upon the representations and warranties of the Issuer in Section 4 hereof, the Investor represents, warrants, and covenants to the Issuer as follows:

 

5.1             Power and Authority.  The Investor, if other than a natural person, is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation.  The Investor has the corporate, partnership or other power (or capacity) and authority under applicable law to execute and deliver this Agreement and consummate the transactions contemplated hereby, and has all necessary authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby.  The Investor has taken all necessary action to authorize the execution, delivery and performance of this Agreement and the transactions contemplated hereby.

 

5.2             Enforceability.  This Agreement has been duly executed and delivered by the Investor and (assuming it has been duly authorized, executed and delivered by the Issuer) constitutes a legal, valid and binding obligation of the Investor, enforceable against the Investor in accordance with its terms, except (a) as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditor’s rights generally, and (b) the indemnity provisions of Section 9 of this Agreement, to the extent they may not be enforceable based upon public policy considerations, and general equitable principles, regardless of whether enforceability is considered in a proceeding at law or in equity.

 

5.3             Investment Intent.  The Investor is acquiring the Notes and Warrants hereunder for its own account and with no present intention of distributing or selling any of the Securities and further agrees not to transfer such Securities in violation of the Securities Act or any applicable state securities law, and no one other than the Investor has any beneficial interest in the Notes (except to the extent that the Investor may have delegated voting authority to its investment advisor), the Warrants, and the Conversion Shares and the Warrant Shares.  The Investor agrees that it will not sell or otherwise dispose of any of the Securities unless such sale or other disposition has been registered under the Securities Act or, in the opinion of counsel acceptable to the Issuer, is exempt from registration under the Securities Act and has been registered or qualified or, in the opinion of such counsel acceptable to the Issuer, is exempt from registration or qualification under applicable state securities laws.  The Investor understands that the offer and sale by the Issuer of the Notes and Warrants being acquired by the Investor hereunder has not been registered under the Securities Act by reason of their contemplated issuance in transactions exempt from the registration and prospectus delivery requirements of the Securities Act pursuant to Section 4(2) thereof, and that the reliance of the Issuer on such exemption from registration is predicated in part on these representations and warranties of the Investor.  The Investor acknowledges that pursuant to Section 1.6 of this Agreement a restrictive legend consistent with the foregoing has been or will be placed on the certificates for the Securities.

 

  

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5.4             Accredited Investor.  The Investor is an “accredited investor” as such term is defined in Rule 501(a) of Regulation D under the Securities Act, and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the investment to be made by it hereunder.

 

5.5             Adequate Information.  The Investor has received from the Issuer, and has had the opportunity to review, such information which the Investor considers necessary or appropriate to evaluate the risks and merits of an investment in the Notes and Warrants.  The Investor also acknowledges that the risk factors set forth on Exhibit D and contained in the SEC Reports have been delivered to the Investor and the Investor has had the opportunity to review such risk factors; provided, however, that delivery of such risk factors in no way alters or amends the representations, warranties and covenants made in this Agreement.

 

5.6             Opportunity to Question.  The Investor has had the opportunity to question, and has questioned, to the extent deemed necessary or appropriate, representatives of the Issuer so as to receive answers and verify information obtained in the Investor’s examination of the Issuer, including the information that the Investor has received and reviewed as referenced in Section 5.6 hereof in relation to its investment in the Notes and Warrants.

 

5.7             No Other Representations.  No oral or written material representations have been made to the Investor in connection with the Investor’s acquisition of the Notes and Warrants which were in any way inconsistent with the information reviewed by the Investor.  The Investor acknowledges that in deciding whether to enter into this Agreement and to purchase the Notes and Warrants hereunder, it has not relied on any representations or warranties of any type or description made by the Issuer or any of its representatives with regard to the Issuer, any of its Subsidiaries, any of their respective businesses or properties, or the prospects of the investment contemplated herein, other than the representations and warranties set forth in Section 4 hereof.

 

5.8             Knowledge and Experience.  The Investor has such knowledge and experience in financial, tax and business matters, including substantial experience in evaluating and investing in common stock and other securities (including the common stock and other securities of speculative companies), so as to enable the Investor to utilize the information referred to in Section 5.5 hereof and any other information made available by the Issuer to the Investor in order to evaluate the merits and risks of an investment in the Notes and Warrants and to make an informed investment decision with respect thereto.

 

5.9             Independent Decision.  The Investor is not relying on the Issuer or on any legal or other opinion in the materials reviewed by the Investor with respect to the financial or tax considerations of the Investor relating to its investment in the Notes and Warrants.  The Investor has relied solely on the representations and warranties, covenants and agreements of the Issuer in this Agreement (including the exhibits and schedules hereto) and on its examination and independent investigation in making its decision to acquire the Notes and Warrants.

  

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5.10           Commissions.  The Investor has not incurred any obligation for any finder’s or broker’s or agent’s fees or commissions in connection with the transactions contemplated hereby.

 

6.             COVENANTS.

 

6.1             Public Announcements.  The Issuer shall file within four (4) business days after the Closing a Current Report on Form 8-K with the SEC in respect of the transactions contemplated by this Agreement.  Prior to the earlier of the filing of such Current Report on Form 8-K or the fifth business day after the Closing, the Investor agrees not to make any public announcement or issue any press release or otherwise publicly disseminate any information about the subject matter of this Agreement.  Except as provided herein, the Issuer shall have the right to make such public announcements and shall control, in its sole and absolute discretion, the timing, form and content of all press releases or other public communications of any sort relating to the subject matter of this Agreement, and the method of their release, or publication thereof.  The Issuer may issue press releases relating to the transactions contemplated by this Agreement, but shall not identify any Investor in any such press release without the consent of such Investor, except as may be required by any Requirement of Law or rule of any exchange on which the Issuer’s securities are listed.  Notwithstanding the foregoing, the Investor may make such filings with and public disclosures to any Governmental Authority as are required, including but not limited to filings on Form 4 and Schedule 13D/G with the SEC.

 

6.2             Further Assurances.  Each party shall execute and deliver such additional instruments and other documents and shall take such further actions as may be reasonably necessary or appropriate to effectuate, carry out and comply with all of the terms of this Agreement and the transactions contemplated hereby.  Each of the Investor and the Issuer shall make on a prompt and timely basis all governmental or regulatory notifications and filings required to be made by it with or to any Governmental Authority in connection with the consummation of the transactions contemplated hereby.  The Issuer and the Investor each agree to cooperate with the other in the preparation and filing of all forms, notifications, reports and information, if any, required or reasonably deemed advisable pursuant to any Requirement of Law in connection with the transactions contemplated by this Agreement and to use their respective commercially reasonable efforts to agree jointly on a method to overcome any objections by any Governmental Authority to any such transactions.  Except as may be specifically required hereunder, neither of the parties hereto nor their respective Affiliates shall be required to agree to take any action that in the reasonable opinion of such party would result in or produce a Material Adverse Effect on such party.

 

6.3             Notification of Certain Matters.  Prior to the Closing, each party hereto shall give prompt notice to the other party of the occurrence, or non-occurrence, of any event which would be likely to cause any representation and warranty herein to be untrue or inaccurate, or any covenant, condition or agreement herein not to be complied with or satisfied.

 

  

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6.4             Approval of Operating Budgets; Use of Proceeds.

 

 (a)           So long as the Notes are outstanding, the Company shall provide the Investor with biweekly operating budgets of the Company (each, an “Interim Budget Report”) not less than one week before such two-week period begins.  The first Interim Budget Report, for the two week period commencing at the Closing, shall be delivered at the Closing and shall be consistent with the drafts delivered to the Investor prior to the Closing.  Each Interim Budget Report shall be subject to the Investor’s approval, and may be amended once by the Company within one (1) business day following rejection by the Investor.  In the event that the Investor does not approve an Interim Budget Report, the Investor shall have no obligation to purchase additional Notes pursuant to Section 1.3 unless and until the Company submits an Interim Budget Report that is approved by the Investor.

 

 (b)          The Company covenants that all proceeds resulting from the Offering shall be used solely to fund the activities identified in the corresponding Interim Budget Report and not for any other purpose without the consent of the Investor.

 

6.5             Confidential Information.  Except as contemplated by Sections 6.1 and 6.2 above, each of the Investor agrees that no portion of the Confidential Information (as defined below) shall be disclosed to third parties, except as may be required by law, without the prior express written consent of the Issuer; provided, that an Investor may share such information with such of its officers and professional advisors as may need to know such information to assist such Investor in its evaluation thereof on the condition that such parties agree to be bound by the terms hereof.  “Confidential Information” means the existence and terms of this Agreement, the transactions contemplated hereby, and the disclosures and other information contained herein, excluding any disclosures or other information that is or becomes publicly available without breach by the Investor of this Section 6.5.  Each of the Investor further agrees that it will not transfer the Notes acquired through this Offering or any Common Stock owned by such Investor until the earlier of the time the Issuer has publicly announced the completion of the Offering or the fifth business day after the Closing.

 

6.6             Disposition or Encumbrance of Collateral.  The Issuer will not without the prior written consent of the Investor (A) surrender or lose possession of (other than to the Investor), sell, lease, rent or otherwise dispose of or transfer (collectively, a “Transfer”) any of its property including without limitation its intellectual property or any right or interest therein, other than: (i) Transfers of inventory in the ordinary course of business, (ii) Transfers of non-exclusive licenses and similar arrangements for the use of the property of Issuer in the ordinary course of business, or (iii) Transfers of worn-out or obsolete equipment; (B) create, incur, assume or allow any Lien with respect to any of the Collateral, outside the ordinary course of business; or (C) remove any material portion of the Collateral from its present location within the State of California.

 

6.7             Covenants Regarding Intellectual Property.

 

  (a)         The Issuer shall register or cause to be registered on an expedited basis (to the extent not already registered) with the United States Patent and Trademark Office or the United States Copyright Office, as the case may be, those registrable Intellectual Property Rights now owned or hereafter developed or acquired by the Issuer, to the extent that the Issuer, in its reasonable business judgment, deems it appropriate to so protect such Intellectual Property Rights.

  

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 (b)           The Issuer shall promptly give Investor written notice of any applications or registrations of Intellectual Property Rights filed with the United States Patent and Trademark Office, including the date of such filing and the registration or application numbers, if any.

 

 (c)           The Issuer shall (i) give Investor not less than 30 days prior written notice of the filing of any applications or registrations with the United States Copyright Office, including the title of such Intellectual Property Rights to be registered, as such title will appear on such applications or registrations, and the date such applications or registrations will be filed; (ii) prior to the filing of any such applications or registrations, execute such documents as Investor may reasonably request for Investor to maintain its perfection in such Intellectual Property Rights to be registered by Issuer; (iii) upon the request of Investor, either deliver to Investor or file such documents simultaneously with the filing of any such applications or registrations; or (iv) upon filing any such applications or registrations, promptly provide Investor with a copy of such applications or registrations together with any exhibits, evidence of the filing of any documents requested by Investor to be filed for Investor to maintain the perfection and priority of its security interest in such Intellectual Property Rights, and the date of such filing.

 

 (d)           The Issuer shall execute and deliver such additional instruments and documents from time to time as Investor shall reasonably request to perfect and maintain the perfection and priority of Investor’s security interest in Issuer’s Intellectual Property.

 

 (e)           The Issuer (i) shall provide the Investor with not less than 15 days prior written notice of any contemplated direct or indirect grant of any license or other interest in the Intellectual Property Rights to ReGen AG and (ii) shall not enter into any such license or interest without written confirmation that the terms thereof are reasonably acceptable to the Investor.

 

 (f)           The Issuer shall (i) protect, defend and maintain the validity and enforceability of the Intellectual Property including all trade secrets, trademarks, patents and copyrights, (ii) use commercially reasonable efforts to detect infringements of the Intellectual Property and promptly advise Investor in writing of material infringements detected and (iii) not allow any material Intellectual Property to be abandoned, forfeited or dedicated to the public without the written consent of Investor, which shall not be unreasonably withheld.

 

6.8            Amendments of Notes.  So long as the Notes are outstanding, the Issuer shall be allowed to alter or change the terms of the Notes or the Warrants (including any applicable provisions of this Agreement notwithstanding anything to the contrary provided in Section 11.6) upon first obtaining the Required Consent, unless such alteration or change shall be deemed by the Issuer in good faith to adversely affect the Notes or the Warrants or the rights of any Holder, in which case the Issuer must first obtain consent of the Investor. The execution of this Agreement by each of the Investor party to the Old Agreement shall constitute such Investor’s further consent to this Agreement and the changes made to the notes and warrants issued under the Old Agreement.

 

6.9             Further Issuances.  So long as the Notes are outstanding, the Issuer shall not issue any capital stock or issue or enter into any options, warrants, rights (including conversion or preemptive rights and rights of first refusal and similar rights) or agreements, orally or in writing, for the purchase or acquisition from the Issuer of any shares of capital stock, without the prior written consent of the Investor.

  

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7.           REGISTRATION RIGHTS.

 

The Investor shall have the following registration rights with respect to the Registrable Securities owned by it:

 

7.1             Transfer of Registration Rights.  The Investor may assign the registration rights with respect to the Registrable Securities to any party or parties to which it may from time to time transfer all of the Notes and Warrants in accordance with Section 5.3 hereof; provided, that the transferee agrees in writing with the Issuer to be bound by the applicable provisions of this Agreement regarding such registration rights and indemnification relating thereto.  Upon assignment of any registration rights pursuant to this Section 7.1, the Investor shall deliver to the Issuer a notice of such assignment which includes the identity and address of any assignee and such other information reasonably requested by the Issuer in connection with effecting any such registration (collectively, the Investor and each such subsequent holder is referred to as a “Holder”).  The Issuer shall maintain at one of its offices a register for the recordation of the names and addresses of the Holders and principal amount of the Notes owing to each Holder pursuant to the terms hereof from time to time (for the purposes of this Section 7.1 only, the “Register”).  The Issuer and Holders may treat each person whose name is recorded in the Register pursuant to the terms hereof as a Holder hereunder for all purposes of this Agreement.

 

7.2             Required Registration.  Following the Due Date, upon request of the Holders of a majority of the Registrable Securities, either issued or issuable upon conversion of the Prior Note Equity Securities, if applicable, and the Warrant Shares the Issuer will file a registration statement on Form S-1 (or S-3 if conditions change to allow the Issuer to use S-3) (the “Registration Statement”) for the resale of the Registrable Securities. The Issuer shall subsequently use commercially reasonable efforts to cause the SEC to declare the Registration Statement effective as soon as possible.  The Issuer shall thereafter maintain the effectiveness of the Registration Statement until the earlier of (a) the date on which all the Registrable Securities have been sold pursuant to the Registration Statement or Rule 144 promulgated under the Securities Act (“Rule 144”), (b) such time as the Issuer reasonably determines, based on an opinion of counsel, that all of the Holders will be eligible to sell under Rule 144 all of the Securities then owned by the Holders within the volume limitations imposed by paragraph (e) of Rule 144 in the three month period immediately following the termination of the effectiveness of the Registration Statement, and (c) the first anniversary of the date the Registration Statement was declared effective by the SEC.  The Registration Statement filed pursuant to this Section 7.2 may include other securities of the Issuer that are held by Persons who, by virtue of agreements with the Issuer, are entitled to similar registration rights.

 

7.3             Registration Procedures.

 

(a)           In case of the Registration Statement effected by the Issuer subject to this Section 7, the Issuer shall keep the Investor, on behalf of Holder, advised in writing as to the initiation of such registration, and as to the completion thereof.  In addition, subject to Section 7.2 above, the Issuer shall, to the extent applicable to the Registration Statement:

  

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(i)         prepare and file with the SEC such amendments and supplements to the Registration Statement as may be necessary to keep such registration continuously effective and free from any material misstatement or omission necessary to make the statements therein, in light of the circumstances, not misleading, and comply with provisions of the Securities Act with respect to the disposition of all securities covered thereby during the period referred to in Section 7.2;

 

(ii)        update, correct, amend and supplement the Registration Statement as necessary;

 

(iii)       notify the Holders promptly when the Registration Statement is declared effective by the SEC, and furnish such number of prospectuses, including preliminary prospectuses, and other documents incident thereto as any Holder may reasonably request from time to time;

 

(iv)       use its commercially reasonable efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions of the United States where an exemption is not available and as any Holder may reasonably request to enable it to consummate the disposition in such jurisdiction of the Registrable Securities (provided that the Issuer will not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this provision, or (B) consent to general service of process in any such jurisdiction, or (C) subject itself to taxation in any jurisdiction where it is not already subject to taxation);

 

(v)        notify each Holder at any time when a prospectus relating to the Registrable Securities is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in the Registration Statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading and, subject to Section 7.6, the Issuer will prepare a supplement or amendment to such prospectus, so that, as thereafter delivered to purchasers of such shares, such prospectus will not contain any untrue statements of a material fact or omit to state any fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;

 

(vi)       cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Issuer are then listed and obtain all necessary approvals for trading thereon;

 

(vii)      provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of the Registration Statement;

 

(viii)     upon the sale of any Registrable Securities pursuant to the Registration Statement, direct the transfer agent to remove all restrictive legends from all certificates or other instruments evidencing the Registrable Securities;

 

(ix)       with a view to making available to the Holders the benefits of certain rules and regulations of the SEC that at any time permit the sale of the Registrable Securities to the public without registration, so long as any Registrable Securities are outstanding, the Issuer shall use its commercially reasonable efforts for a period of two years following the date of Closing:

  

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(1)           to make and keep public information available, as those terms are understood and defined in Rule 144(c) under the Securities Act;

 

(2)           to file with the SEC in a timely manner all reports and other documents required of the Issuer under the Exchange Act; and

 

(3)           to furnish to the Holders upon any reasonable request a written statement by the Issuer as to its compliance with the public information requirements of Rule 144(c) under the Securities Act; and

 

(x)        to advise the Holder promptly after it has received notice or obtained knowledge of the existence of any stop order by the SEC delaying or suspending the effectiveness of the Registration Statement or of the initiation or threat of any proceeding for that purpose, and to make every commercially reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement at the earliest possible time.

 

 (b)           Notwithstanding anything stated or implied to the contrary in Section 7.3(a) above, the Issuer shall not be required to consent to any underwritten offering of the Registrable Securities or to any specific underwriter participating in any underwritten public offering of the Registrable Securities.

 

 (c)           Each Holder agrees that upon receipt of any notice from the Issuer of the happening of any event of the kind described in Section 7.3(a)(v), and subject to Section 7.5, such Holder will forthwith discontinue such Holder’s disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 7.3(a)(v) and, if so directed by the Issuer, will deliver to the Issuer at the Issuer’s expense all copies, other than permanent file copies, then in such Holder’s possession, of the prospectus relating to such Registrable Securities current at the time of receipt of such notice.

 

 (d)           Except as required by law, all expenses incurred by the Issuer in complying with this Section 7, including but not limited to, all registration, qualification and filing fees, printing expenses, fees and disbursements of counsel and accountants for the Issuer, blue sky fees and expenses (including fees and disbursements of counsel related to all blue sky matters) incurred in connection with any registration, qualification or compliance pursuant to this Section 7 shall be borne by the Issuer.  All underwriting discounts and selling commissions applicable to a sale incurred in connection with any registration of Registrable Securities and the legal fees and other expenses of a Holder shall be borne by such Holder.

 

7.4            Further Information.  If Registrable Securities owned by a Holder are included in any registration, such Holder shall furnish the Issuer such information regarding itself as the Issuer may reasonably request and as shall be required in connection with any registration (or amendment or supplement thereto), referred to in this Agreement, and Holder shall indemnify the Issuer with respect thereto in accordance with Section 9 hereof.  The Investor hereby represents and warrants to the Issuer that, upon request and in connection with the filing of a Registration Statement, it will accurately and completely provide any requested information, including answers the questions listed in Exhibit E of this Agreement, and the Investor agrees and acknowledges that the Issuer may rely on such information as being true and correct for purposes of preparing and filing the Registration Statement at the time of filing thereof and at the time it is declared effective, unless the Investor has notified the Issuer in writing to the contrary prior to such time.

  

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7.5              Right of Suspension.

 

  (a)          Notwithstanding any other provision of this Agreement or any related agreement to the contrary, the Issuer shall have the right, at any time, to suspend the effectiveness of the Registration Statement and offers and sales of the Registrable Securities pursuant thereto whenever, in the good faith judgment of the Issuer, (i) there exists a material development or a potential material development with respect to or involving the Issuer that the Issuer would be obligated to disclose in the prospectus used in connection with the Registration Statement, which disclosure, in the good faith judgment of the Issuer, after considering the advice of counsel, would be premature or otherwise inadvisable at such time or (ii) the Registration Statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances, not misleading, including without limitation that period annually during which any Registration Statement would require suspension pending the Issuer’s new fiscal year financial statements (each, a “Suspension Event”).  In the event that the Issuer shall determine to so suspend the effectiveness of the Registration Statement and offers and sales of the Registrable Securities pursuant thereto, the Issuer shall, in addition to performing those acts required to be performed under the Securities Act and/or the Exchange Act or deemed advisable by the Issuer, deliver to each Holder written notice thereof, signed by the Chief Financial Officer or Chief Executive Officer of the Issuer.  Upon receipt of such notice, the Holders shall discontinue disposition of the Registrable Securities pursuant to the Registration Statement and prospectus until such Holders (x) are advised in writing by the Issuer that the use of the Registration Statement and prospectus (and offers and sales thereunder) may be resumed, (y) have received copies of a supplemental or amended prospectus, if applicable, and (z) have received copies of any additional or supplemental filings which are incorporated or deemed to be incorporated by reference into such prospectus.  The Issuer will exercise commercially reasonable efforts to ensure that the use of the Registration Statement and prospectus may be resumed as quickly as practicable.

 

 (b)          The Issuer’s right to suspend the effectiveness of the Registration Statement and the offers and sales of the Registrable Securities pursuant thereto, as described above in Section 7.5(a), shall be for a period of time (the “Suspension Period”) beginning on the date of the occurrence of the Suspension Event and expiring on the earlier to occur of (i) the date on which the Suspension Event ceases, or (ii) ninety (90) days after the occurrence of the Suspension Event; provided, however, that there shall not be more than two Suspension Periods in any 12-month period.  Notwithstanding the foregoing, the Issuer shall be able to suspend the effectiveness of the Registration Statement and offers and sales of the Registrable Securities for any time period as may reasonably be required in order to update the Registration Statement to replace financial information which is no longer current, as required by applicable securities law.

 

  

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 (c)           In addition, in connection with any underwritten public offering of securities of the Issuer, if requested by the Issuer or its managing underwriter, each Holder will enter into a lock-up agreement pursuant to which such Holder will not, during the seven (7) days prior to, and for a period no longer than one hundred eighty (180) days following, the date of the prospectus (or if the offering is pursuant to a shelf registration statement, the date of the pricing prospectus supplement) relating to the offering, offer, sell or otherwise dispose of any securities of the Issuer without the prior consent of the Issuer and the managing underwriter, provided that the executive officers and directors of the Issuer enter into lock-up agreements for a period at least as long and on the same terms.

 

7.6             Transfer of Securities.  An Investor may transfer all or any part of its Securities to any Person under common management with the Investor and may distribute all or any part of the Conversion Shares to its equity holders or partners; provided, that any such transfer shall be effected in full compliance with all applicable federal and state securities laws, including, but not limited to, the Securities Act and the rules of the SEC promulgated thereunder.  The Issuer will effect such transfer of restricted certificates and will promptly amend or supplement the Prospectus forming a part of the Registration Statement to add the transferee to the selling stockholders in the Registration Statement; provided that the transferor and transferee shall be required to provide the Issuer with the information requested of the Investor in this Agreement, information reasonably necessary for the Issuer to determine that the transfer was effected in accordance with all applicable federal and state securities laws, including, but not limited to, the Securities Act and the rules of the SEC promulgated thereunder, and all other information reasonably requested by the Issuer from time to time in connection with any transfer, registration, qualification or compliance referred to in Section 7.4.

 

7.7             SEC Comments. Notwithstanding anything to the contrary contained in this Section 7, if the Issuer receives comments from the SEC, and following discussions with and responses to the SEC in which the Issuer uses its commercially reasonable efforts to cause as many Registrable Securities for as many Holders as possible to be included in the Registration Statement filed pursuant to Section 7.2 without characterizing any Holder as an underwriter (and in such regard uses its commercially reasonable efforts to cause the SEC to permit the affected Holders), the Issuer is unable to cause the inclusion of all Registrable Securities, then the Issuer may, upon written notice to the Holders, (i) remove from the Registration Statement such Registrable Securities and/or (ii) agree to such restrictions and limitations on the registration and resale of the Registrable Securities, in each case as the SEC may require in order for the SEC to allow such Registration Statement to become effective.  In furtherance of the foregoing, unless the SEC Restrictions otherwise require, any cut-back imposed pursuant to this Section 7.7 shall be allocated among the Registrable Securities of the Holders on a pro rata basis.

 

8.            SECURITY.

 

8.1             Collateral.  To secure repayment and performance of each and all of the obligations of the Issuer hereunder and under the Notes, the Issuer hereby pledges, grants, assigns and transfers to Investor a continuing first-priority security interest in the Collateral, senior in priority to the security interest held by the Collateral Agent on behalf of the holders of the Prior Bridge Notes under the Prior Subscription Agreement and the holders of the notes issued pursuant to the Old Agreement (the “Prior Collateral Agent”) as provided in the Intercreditor Agreement.  The Issuer’s grant of such security interest to the Investor shall secure the payment and performance of any and all indebtedness, obligations and liabilities arising from, or in any way related to, this Agreement and/or the Notes.

 

  

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8.2             Perfection.  At any time and from time to time Issuer shall execute and deliver such further instruments and take such further action as may reasonably be requested by Investor to effect the purposes of this Agreement.  The Issuer hereby agrees that the Investor shall have all the rights and remedies of a secured party under the UCC and that at any time, and from time to time, the Issuer shall execute and deliver (or cause to be executed and delivered) any and all such further instruments and/or documents, including without limitation, a UCC-1 financing statement and intellectual property security filings with the United States Patent and Trademark Office and the Copyright Office, as Investor may consider reasonably necessary or desirable in order to effectuate, complete, perfect or preserve and maintain the Liens created hereby including without limitation to cause any financial institution or other entity with which Issuer maintains or invests any of its property to enter into an account control agreement with Investor in form and substance satisfactory to Investor.

 

8.3             Events of Default.  Any one or more of the following events shall constitute an Event of Default by Issuer under this Agreement: (i) if the Issuer fails to pay, when due, any amount owing in connection with this Agreement or the Notes; (ii) if the Issuer fails to perform any material obligation under this Agreement or the Notes; (iii) if an Insolvency Proceeding is commenced by or against Issuer; or an Event of Default shall occur under the Prior Subscription Agreement or the Old Agreement.

 

8.4             Remedies.  Upon the occurrence of any one or more Events of Default, (i) the Investor’s obligation to permit the Notes and the amounts due under the Notes to remain outstanding shall automatically expire, and (ii) the Investor may accelerate and demand payment of all or any part of the Issuer’s obligations under the Notes or this Agreement and declare such amounts and obligations to be immediately due and payable (provided, that upon the occurrence of an Event of Default of the type described in Section 8.3(iii), the Notes and all obligations under the Notes and this Agreement shall automatically be accelerated and made due and payable without any further notice or act).  Subject to Section 8.10, Investor may exercise all rights and remedies with respect to the Collateral available under the UCC and other applicable law, including without limitation the right to release, hold, sell, assign, lease, liquidate, collect, realize upon, or otherwise dispose of all or any part of the Collateral and the right to occupy, utilize, process and commingle the Collateral and further including, without limitation, to: (a) foreclose the Liens and security interests created under this Section 8 relating to the Collateral by any valid judicial process, (b) enter any premises where any of the Collateral may be located for the purpose of taking possession or removing the same, and (c) sell, assign, lease or otherwise dispose of the Collateral or any part thereof, either at public or private sale or at any broker’s board, in lots or in bulk, for cash, on credit or otherwise, upon such terms as shall be deemed acceptable to Investor, and to the extent permitted by law, Investor may bid or become a purchaser at any such sale.  All of the Investor’s rights and remedies shall be cumulative and not exclusive.

 

  

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8.5             Delegation.

 

 (a)           Investor may execute any of its duties hereunder by or through agents or employees and shall be entitled to request and act in reliance upon the advise of counsel concerning all matters pertaining to its duties hereunder and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance therewith.

 

 (b)           Neither the Investor nor any of its directors, officers or employees shall be liable or responsible to the Issuer for any action taken or omitted to be taken by Investor or any other such person hereunder or under any related agreement, instrument or document, except in the case of bad faith, gross negligence or willful misconduct on the part of the Investor, nor shall the Investor or any of its directors, officers or employees be liable or responsible for (i) the validity, effectiveness, sufficiency, enforceability or enforcement of the Notes, this Agreement or any instrument or document delivered hereunder or relating hereto; (ii) the title of Issuer to any of the Collateral or the freedom of any of the Collateral from any prior or other Liens or security interests; (iii) the determination, verification or enforcement of Issuer’s compliance with any of the terms and conditions of this Agreement; (iv) the failure by Issuer to deliver any instrument  or document required to be delivered pursuant to the terms hereof; or (v) the receipt, disbursement, waiver, extension or other handling of payments or proceeds made or received with respect to the Collateral, the servicing of the Collateral or the enforcement or the collection of any amounts owing with respect to the Collateral.

 

8.6             Application of Collateral Proceeds.  Subject to Section 8.10, the proceeds and/or avails of the Collateral, or any part thereof, and the proceeds and the avails of any remedy hereunder (as well as any other amounts of any kind held by Investor at the time of, or received by Investor after, the occurrence of an Event of Default) shall be paid to and applied as follows:

 

 (a)           First, to the payment of reasonable costs and expenses, including all amounts expended to preserve the value of the Collateral, of foreclosure or suit, if any, and of such sale and the exercise of any other rights or remedies, and of all proper fees, expenses, liability and advances, including reasonable legal expenses and attorneys’ fees, incurred or made hereunder by Investor;

 

 (b)          Second, to the payment to the Investor of the amount then payable to the Investor under this Agreement, the Note or any related agreement;

 

 (c)          Third, to the payment to the Prior Collateral Agent of the amount then payable to the Prior Collateral Agent in accordance with the terms of the Intercreditor Agreement;

 

 (d)          Fourth, to the payment of the surplus, if any, to Issuer, its successors and assigns, or to whomsoever may be lawfully entitled to receive the same.

 

8.7             Termination.  At Issuer’s request, upon the indefeasible payment or conversion in full of all amounts owing by Issuer under the Notes in accordance with the terms of this Agreement and the Notes and the cancellation or termination of any commitment to extend credit or make loans, the security interest granted herein shall terminate and the Investor shall execute and deliver (or cause to be executed and delivered) any and all such instruments and/or documents reasonably requested by Issuer to effectuate such termination of the Liens and security interest granted hereunder.

 

  

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8.8             Authorized Action by Investor.  The Issuer hereby irrevocably appoints Investor as its attorney-in-fact (which appointment is coupled with an interest) and agrees that Investor may perform (but Investor shall not be obligated to and shall incur no liability to the Issuer or any third party for failure so to do) any act which the Issuer is obligated by this Agreement to perform, and to exercise such rights and powers as the Issuer might exercise with respect to the Collateral, including the right to (a) collect by legal proceedings or otherwise and endorse, receive and receipt for all dividends, interest, payments, proceeds and other sums and property now or hereafter payable on or on account of the Collateral; (b) enter into any extension, reorganization, deposit, merger, consolidation or other agreement pertaining to, or deposit, surrender, accept, hold or apply other property in exchange for the Collateral; (c) make any compromise or settlement, and take any action it deems advisable, with respect to the Collateral; (d) insure, process and preserve the Collateral; (e) pay any indebtedness of Issuer relating to the Collateral; and (f) file UCC financing statements and execute other documents, instruments and agreements required hereunder; provided, however, that Investor shall not exercise any such powers granted pursuant to subsections (a) through (e) prior to the occurrence of an Event of Default and shall only exercise such powers during the continuance of an Event of Default.  The Issuer agrees to reimburse Investor upon demand for any reasonable costs and expenses, including attorneys’ fees, Investor may incur while acting as the Issuer’s attorney-in-fact hereunder in perfecting and maintaining the Liens hereunder, all of which costs and expenses are obligations hereunder.  It is further agreed and understood between the parties hereto that such care as Investor gives to the safekeeping of its own property of like kind shall constitute reasonable care of the Collateral when in Investor’s possession; provided, however, that Investor shall not be required to make any presentment, demand or protest, or give any notice and need not take any action to preserve any rights against any prior party or any other person in connection with the Obligations or with respect to the Collateral.

 

8.9             Litigation and Other Proceedings

 

  (a)          The Issuer shall have the right and reasonable obligation to commence and diligently prosecute such suits, proceedings or other actions for infringement or other damage, or reexamination or reissue proceedings, or opposition or cancellation proceedings as are reasonable to protect any of the patents, trademarks, copyrights, mask works or trade secrets.  No such suit, proceeding or other actions shall be settled or voluntarily dismissed, nor shall any party be released or excused of any claims of or liability for infringement, without the prior written consent of Investor, which consent shall not be unreasonably withheld.

 

  (b)          Upon the occurrence and during the continuation of an Event of Default, Investor shall have the right but not the obligation to bring suit or institute proceedings in the name of the Issuer or Investor to enforce any rights in the Collateral, including any license thereunder, in which event the Issuer shall at the request of Investor do any and all lawful acts and execute any and all documents reasonably required by Investor in aid of such enforcement.  If Investor elects not to bring suit to enforce any right under the Collateral, including any license thereunder, the Issuer agrees to use all reasonable measures, whether by suit, proceeding or other action, to cause to cease any infringement of any right under the Collateral by any entity and for that purpose agrees to diligently maintain any action, suit or proceeding against any entity so infringing necessary to prevent such infringement.

 

  

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8.10           Intercreditor Agreement.  This entire Section 8 shall be subject to the terms of the Intercreditor Agreement so long as such agreement is effective.  To the extent the terms set forth in this Section 8 conflict with the terms set forth in the Intercreditor Agreement, the Intercreditor Agreement terms shall control.

 

9.             INDEMNIFICATION.

 

9.1             Indemnification by the Issuer.  The Issuer will indemnify and hold harmless each Holder of Registrable Securities which are included in a registration statement pursuant to the provisions of Section 7 hereof and any underwriter (as defined in the Securities Act) for such Holder, and any person who controls such Holder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act or such underwriter within the meaning of the Securities Act, and any officer, director, investment adviser, employee, agent, partner, member or affiliate of such Holder (each, a “Holder Indemnified Party”), from and against, and will reimburse each such Holder Indemnified Party with respect to, any and all claims, actions, demands, losses, damages, liabilities, costs and reasonably incurred expenses to which such Holder or any such Holder Indemnified Party may become subject under the Securities Act or otherwise, insofar as such claims, actions, demands, losses, damages, liabilities, costs or reasonably incurred expenses arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) any materially inaccurate representation or breach of any material warranty, agreement or covenant of the Issuer contained herein; provided, however, that the Issuer will not be liable in any such case to the extent that any such claim, action, demand, loss, damage, liability, cost or expense is caused by an untrue statement or alleged untrue statement or omission or alleged omission (1) made in conformity with information furnished by such Holder in writing specifically for use in the preparation thereof, or (2) which was cured in an amendment or supplement to the prospectus (or any amendment or supplement thereto) delivered to the Holder on a timely basis to permit proper delivery thereof prior to the date on which any Registrable Securities were transferred or sold.

 

9.2             Indemnification by the Holder.  Each Holder of Registrable Securities which are included in a registration statement pursuant to the provisions of Section 7 hereof will indemnify and hold harmless the Issuer, and any Person who controls the Issuer within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, and any officer, director, employee, agent, partner, member or affiliate of the Issuer (each, an “Issuer Indemnified Party”) from and against, and will reimburse the Issuer Indemnified Parties with respect to, any and all losses, damages, liabilities, costs or reasonably incurred expenses to which such Issuer Indemnified Parties may become subject under the Securities Act or otherwise, insofar as such losses, damages, liabilities, costs or reasonably incurred expenses are caused by any untrue or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, or are caused by the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was so made solely in reliance upon and in conformity with written information furnished by such Holder specifically for use in the preparation thereof; provided, however, that the liability of any Holder pursuant to this Section 9.2 shall be limited to an amount not to exceed the net proceeds received by such Holder from the sale of Registrable Securities pursuant to the registration statement which gives rise to such obligation to indemnify.

 

  

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9.3             Procedures.  Promptly after receipt by a party indemnified pursuant to the provisions of Section 9.1 or Section 9.2 of notice of the commencement of any action involving the subject matter of the foregoing indemnity provisions, such indemnified party will, if a claim thereof is to be made against the indemnifying party pursuant to the provisions of Section 9.1 or Section 9.2, notify the indemnifying party of the commencement thereof; but the omission to so notify the indemnifying party will not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 9 and shall not relieve the indemnifying party from liability under this Section 9, except to the extent that such indemnifying party is materially prejudiced by such omission.  In case such action is brought against any indemnified party and such indemnified party notifies the indemnifying party of the commencement thereof, the indemnifying party shall have the right to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election to assume the defense thereof, the indemnifying party will not be liable to such indemnified party pursuant to the provisions of Section 9.1 or Section 9.2 for any legal or other expense subsequently incurred by such indemnified party in connection with the defense thereof.  No indemnifying party shall be liable to an indemnified party for any settlement of any action or claim without the consent of the indemnifying party.  No indemnifying party will consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

 

10.           CONDITIONS TO CLOSING.

 

10.1            Conditions to the Obligations of the Investor.  The obligation of the Investor to proceed with the Closing and with each subsequent purchase of Notes thereafter is subject to the following conditions, any and all of which may be waived by such Investor, in whole or in part, to the extent permitted by applicable law:

 

  (a)          Representations and Warranties.  Each of the representations and warranties of the Issuer contained in this Agreement shall be true and correct in all material respects as of such date as though made on and as of such date, except (i) for changes specifically permitted by this Agreement, (ii) that those representations and warranties which address matters only as of a particular date shall remain true and correct as of such date, and (iii) such failures to be true and correct which would not, individually or in the aggregate, have a Material Adverse Effect on the Issuer.  Unless the Investor receives written notice to the contrary on such date, such Investor shall be entitled to assume that the preceding is accurate in all respects at such date.

  

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 (b)           Agreement and Covenants.  The Issuer shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to such date.  Unless the Investor receives written notice to the contrary on such date, such Investor shall be entitled to assume that the preceding is accurate in all respects at such date.

 

 (c)           No Order.  No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction, or other order (whether temporary, preliminary or permanent) which is in effect and which materially restricts, prevents or prohibits consummation of the Closing or any transaction contemplated by this Agreement.

 

 (d)           Closing Certificate. The Investor shall have received a certificate executed by the Chief Executive Officer or Chief Financial Officer of the Issuer, dated as of such date, to the effect that the conditions set forth in Sections 10.1(a) and (b) have been fulfilled, and providing representations to certain matters regarding security interest filings by or on behalf of the Issuer.

 

10.2           Conditions to the Obligations of the Issuer.  The obligation of the Issuer to proceed with the Closing and each issuance of the Notes is subject to the following conditions, any and all of which may be waived by the Issuer, in whole or in part and with respect to the Investor, to the extent permitted by applicable law:

 

 (a)           Representations and Warranties.  Each of the representations and warranties of the Investor contained in this Agreement shall be true and correct as of such date as though made on and as of such date, except (i) for changes specifically permitted by this Agreement, and (ii) that those representations and warranties which address matters only as of a particular date shall remain true and correct as of such date.  Unless the Issuer receives written notification to the contrary on such date, the Issuer shall be entitled to assume that the preceding is accurate in all respects at such date.

 

 (b)           Agreement and Covenants.  The Investor shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to such date.  Unless the Issuer receives written notification to the contrary on such date, the Issuer shall be entitled to assume that the preceding is accurate in all respects at such date.

 

 (c)           No Order.  No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction, or other order (whether temporary, preliminary or permanent) which is in effect and which materially restricts, prevents or prohibits consummation of the Closing or any transaction contemplated by this Agreement.

 

11.           MISCELLANEOUS.

 

11.1           Defined Terms.  As used herein the following terms shall have the following meanings:

  

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 (a)           “Affiliate” has the meaning ascribed to it in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date hereof.

 

 (b)           “Aggregate Purchase Price” has the meaning specified in Section 1.1 of this Agreement.

 

 (c)           “Asset Transaction” means any transaction or related series of transactions whereby the Issuer transfers certain of its assets to ReGen AG through a sale, capital contribution or otherwise.

 

 (d)           “Bylaws” means the Bylaws of the Issuer, as the same may be supplemented, amended, or restated from time to time.

 

 (e)           “Certificate of Incorporation” means the Issuer’s Certificate of Incorporation, as the same may be supplemented, amended or restated from time to time.

 

 (f)           “CHF” means Swiss franc.

 

 (g)           “Closing” has the meaning specified in Section 2.1 of this Agreement.

 

 (h)           “Collateral” means the property described on Appendix A attached to this Agreement.

 

 (i)           “Commitment Amount” has the meaning specified in Section 1.1 of this Agreement.

 

 (j)           “Common Stock” has the meaning specified in the Recitals of this Agreement.

 

 (k)           “Confidential Information” has the meaning specified in Section 6.5 of this Agreement.

 

 (l)           “Consent Agreement” means that certain consent agreement, dated as of the date hereof, by certain investors, the Issuer, Sanderling Management Company, LLC as collateral agent for the investors, and Newco.

 

 (m)           “Contract” means any indenture, lease, sublease, loan agreement, mortgage, note, restriction, commitment, obligation or other contract, agreement or instrument.

 

 (n)           “Conversion Securities” means the Prior Note Equity Securities, ReGen AG Securities and ReGen AG Convertible Debt, as applicable.

 

 (o)           “Due Date” means August 31, 2011, which date shall be automatically extended for three months if, on or prior to August 31, 2011, the Issuer has obtained adequate commitments (i.e., commitments in the aggregate of at least $5,000,000) for, but has not yet closed, the ReGen AG Equity Financing.

  

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 (p)           “Equity Security” means the Issuer’s Common Stock or preferred stock that is convertible into Common Stock which shall not be redeemable at the option of the holder of such preferred stock.

 

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

 

 (r)           “Exchange Rate” means the rate at which U.S. Dollars can be converted into CHF as provided by The Wall Street Journal or any other nationally or internationally recognized provider of exchange rates selected by the Issuer.

 

 (s)           “Fundamental Transaction” means that the Issuer shall, directly or indirectly, in one or more related transactions, (a) consolidate or merge with or into (whether or not the Issuer is the surviving corporation or entity) another person or entity where either (i) the Issuer’s stockholders immediately prior to such transaction own 50% or less of the outstanding voting securities of the surviving entity or (ii) the person or entity with which the Issuer is merging is not a subsidiary of the Issuer, (b) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Issuer and its subsidiaries, taken as a whole, to another person or entity (other than to a subsidiary of the Issuer), (c) consummate a stock purchase agreement or other business combination with another person or entity or group of persons whereby such other person or entity or group of persons acquires 50% or more of the outstanding voting securities of the Issuer on a fully diluted basis or (d) otherwise dissolve or liquidate all or substantially all of the properties or assets of the Issuer and its subsidiaries, taken as a whole; provided, however, under no circumstances shall the consummation of the transactions contemplated by this Agreement, the Prior Subscription Agreement or by a ReGen AG Equity Financing, ReGen AG Debt Financing, Future Private Placement (as defined in the Prior Subscription Agreement), Asset Transaction or Newco Asset Sale (as defined in the Consent Agreement) constitute a Fundamental Transaction.

 

 (t)           “Fundamental Transaction Premium” has the meaning specified in Section 1.5 of this Agreement.

 

 (u)           “GAAP” means generally accepted accounting principles in effect in the United States of America.

 

 (v)           “Governmental Authority” means any nation or government, any state or other political subdivision thereof, and any entity or official exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

 

 (w)          “Holder” has the meaning specified in Section 7.1 of this Agreement.

 

 (x)           “Holder Indemnified Party” has the meaning specified in Section 9.1 of this Agreement.

 

 (y)           “Insolvency Proceeding” means any proceeding commenced by or against any entity under any provision of the United States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law, including assignments for the benefit of creditors, formal or informal moratoria, compositions, extension generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.

 

  

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 (z)           “Intellectual Property” means all property over which the Issuer has valid and legally binding Intellectual Property Rights.

 

 (aa)         “Intellectual Property Rights” has the meaning specified in Section 4.15 of this Agreement.

 

 (bb)         “Intercreditor Agreement” means that certain Second Amended and Restated Intercreditor Agreement and Collateral Agency Agreement dated as of March 11, 2011.

 

 (cc)         “Interest” has the meaning specified in Section 1.2 of this Agreement.

 

 (dd)         “Interim Budget Report” has the meaning specified in Section 6.4 of this Agreement.

 

 (ee)         “Investor” has the meaning specified in the Preamble to this Agreement.

 

 (ff)           “Issuer” has the meaning specified in the Preamble to this Agreement.

 

 (gg)         “Issuer Indemnified Party” has the meaning specified in Section 9.2 of this Agreement.

 

 (hh)         “Lien” means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the UCC or comparable law of any jurisdiction in connection with such mortgage, pledge, security interest, encumbrance, lien or charge).

 

 (ii)           “Material Adverse Effect” means a material and adverse change in, or effect on, the financial condition, properties, assets, liabilities, rights, obligations, operations or business, of a Person and its Subsidiaries taken as a whole.

 

 (jj)           “Newco” means Sports Medicine Holding Company LLC.

 

 (kk)          “Notes” has the meaning specified in the Recitals to this Agreement.

 

 (ll)           “Offering” has the meaning specified in Section 1.1 of this Agreement.

 

 (mm)       “Old Agreement” has the meaning specified in the Recitals hereto.

 

 (nn)         “Options” means any rights, options or warrants, other than the Warrants, to subscribe for, purchase or otherwise acquire Common Stock or Conversion Shares.

 

 (oo)         “Permit” means any permit, certificate, consent, approval, authorization, order, license, variance, franchise or other similar indicia of authority issued or granted by any Governmental Authority.

 

  

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 (pp)        “Person” means an individual, partnership, corporation, business trust, joint stock company, estate, trust, unincorporated association, joint venture, Governmental Authority or other entity, of whatever nature.

 

 (qq)         “Prior Bridge Notes” means the secured convertible notes issued pursuant to the Prior Subscription Agreement.

 

  (rr)         “Prior Collateral Agent” has the meaning specified in Section 8.1 of this Agreement.

 

 (ss)         “Prior Note Equity Securities” has the meaning specified in Section 1.4 of this Agreement.

 

 (tt)          “Prior Subscription Agreement” means that certain Amended and Restated Subscription and Security Agreement, dated as June 15, 2010, by and between the Issuer and the investors named therein, as the same may be amended and/or restated from time to time.

 

 (uu)         “Preferred Stock” means the Series A Convertible Preferred Stock, the Series C Convertible Preferred Stock, the Series D Convertible Preferred Stock, the Series E Convertible Preferred Stock and the Series F Convertible Preferred Stock.

 

 (vv)         “Pro Rata Share” has the meaning specified in Section 8.6(b) of this Agreement.

 

 (ww)        “ReGen AG” means ReGen AG, a wholly-owned subsidiary of the Issuer formed under the laws of Switzerland.

 

 (xx)          “ReGen AG Convertible Debt” has the meaning specified in Section 3.3 of this Agreement.

 

 (yy)         “ReGen AG Debt Financing” means a financing by ReGen AG whereby it issues ReGen AG Convertible Debt.

 

 (zz)          “ReGen AG Equity Financing” means the consummation of a financing by ReGen AG whereby it issues ReGen AG Securities for an aggregate purchase price of at least $5,000,000; provided, however, that such aggregate purchase price shall not include any principal amount or interest outstanding under any previously issued debt or outstanding obligation of the Issuer or ReGen AG that may convert in connection with a ReGen AG Equity Financing into ReGen AG Securities pursuant to their respective terms or otherwise.

 

 (aaa)       “ReGen AG Securities” means shares of the capital stock of ReGen AG.

 

 (bbb)      “Register”, “registered” and “registration” refer to a registration of the offering and sale or resale of Common Stock effected by preparing and filing a registration statement in compliance with the Securities Act and the declaration or ordering of the effectiveness of such registration statement.

 

  

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 (ccc)       “Registrable Securities” means (i) (A) if the Prior Note Equity Securities are shares of Common Stock, the Prior Note Equity Securities issued upon conversion of this Note pursuant to Section 3.1 or (B) if the Prior Note Equity Securities are a security convertible into shares of Common Stock, the shares of Common Stock issuable upon conversion of the Prior Note Equity Securities issued upon conversion of this Note pursuant to Section 3.1, (ii) the shares of Common Stock issuable upon the conversion of the Warrant Shares and (iii) and any other shares of Common Stock or other securities issued in respect of the Notes by way of a stock dividend or stock split or in connection with a combination or subdivision of the Common Stock or by way of a recapitalization, merger or consolidation or reorganization of the Issuer; provided, however, that as to any particular securities, such securities will cease to be Registrable Securities upon the earlier of (i) the sale of such securities pursuant to registration or in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof, (ii) the date that such securities are permitted to be disposed pursuant to Rule 144 under the Securities Act, regardless of whether current public information regarding the Issuer is available, as such term is understood under Rule 144 of the Securities Act, or (iii) the date on which all such securities cease to be outstanding; and, as a result of the event or circumstance described in either of the foregoing clauses (i) or (ii), all transfer restrictions and restrictive legends with respect thereto are removed or removable in accordance with this Agreement or such legends, as the case may be.

 

 (ddd)      “Registration Statement” has the meaning specified in Section 7.2 of this Agreement.

 

 (eee)       “Required Consent” means the written consent of the Investor.

 

 (fff)         “Requirements of Law” means as to any Person, the certificate of incorporation, bylaws or other organizational or governing documents of such Person, and any domestic or foreign and federal, state or local law, rule, regulation, statute or ordinance or determination of any arbitrator or a court or other Governmental Authority, in each case applicable to, or binding upon, such Person or any of its properties or to which such Person or any of its property is subject.

 

 (ggg)      “Rule 144” has the meaning specified in Section 7.2 of this Agreement.

 

 (hhh)      “SEC” means the Securities and Exchange Commission.

 

 (iii)          “SEC Reports” has the meaning specified in Section 4.7 of this Agreement.

 

(jjj)           “Securities” has the meaning specified in Section 4.13 of this Agreement. For the avoidance of doubt, the Securities shall include the securities issued, or issuable, pursuant to the Old Agreement, and such securities shall be subject to the amended and restated terms contained in this Agreement.

 

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

 

 (lll)          “Series G Preferred Stock” means the Issuer’s Series G Convertible Preferred Stock, par value $0.01 per share.

 

  

31

  

 

 (mmm)    “Subsidiary” means as to any Person, a corporation or limited partnership of which more than 50% of the outstanding capital stock or partnership interests having full voting power is at the time directly or indirectly owned or controlled by such Person.

 

 (nnn)      “Suspension Event” has the meaning specified in Section 7.5(a) of this Agreement.

 

 (ooo)      “Suspension Period” has the meaning specified in Section 7.5(b) of this Agreement.

 

 (ppp)      “UCC” has the meaning specified in the recitals to this Agreement.

 

 (qqq)      “Warrants” has the meaning specified in the Recitals to this Agreement.

 

 (rrr)         “Warrant Shares” has the meaning specified in Section 4.6 of this Agreement.

 

11.2          Other Definitional Provisions.

 

 (a)           All terms defined in this Agreement shall have the defined meanings when used in any certificates, reports or other documents made or delivered pursuant hereto or thereto, unless the context otherwise requires.

 

 (b)           Terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa.

 

 (c)           All accounting terms shall have a meaning determined in accordance with GAAP.

 

 (d)           The words “hereof,” “herein” and “hereunder,” and words of similar import, when used in this Agreement shall refer to this Agreement as a whole (including any exhibits and schedules hereto) and not to any particular provision of this Agreement.

 

11.3           Notices.  All notices, requests, demands, claims, and other communications hereunder shall be in writing and shall be delivered by certified or registered mail (first class postage pre-paid), guaranteed overnight delivery, or facsimile transmission if such transmission is confirmed by delivery by certified or registered mail (first class postage pre-paid) or guaranteed overnight delivery, to the following addresses and telecopy numbers (or to such other addresses or telecopy numbers which such party shall subsequently designate in writing to the other party):

 

 (a)           if to the Issuer to:

 

ReGen Biologics, Inc.

411 Hackensack Avenue

Hackensack, NJ  07601

Attention: Gerald E. Bisbee, Jr., Ph.D.

Telecopy: 201.651.5141

 

  

32

  

 

with a copy to:

 

Pillsbury Winthrop Shaw Pittman LLP

1650 Tysons Boulevard

McLean, VA 22102

Attention: David C. Main, Esq.

 

Telecopy: 703.770.7901

 

 (b)           if to the Investor, to the address or telecopy number set forth next to its name on the signature page hereto.

 

Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered by hand, by messenger or by courier, or if sent by facsimile, upon confirmation of receipt.

 

11.4           Entire Agreement.  This Agreement (including the exhibits and schedules attached hereto) and other documents delivered at the Closing pursuant hereto, contain the entire understanding of the parties in respect of its subject matter and supersede all prior agreements and understandings between the parties with respect to such subject matter.

 

11.5           Expenses; Taxes.  The parties shall pay their own fees and expenses, including their own counsel fees, incurred in connection with this Agreement or any transaction contemplated hereby; provided, however, that the Issuer shall pay all Perfection Expenses incurred in connection with this Agreement, the Notes and the transactions contemplated herein and therein as and when such expenses are incurred or become due.  As used herein “Perfection Expenses” shall include all reasonable costs incurred in connection with the filing, perfecting and maintaining the security interests and liens granted in this Agreement including without limitation the filing of any financing statements, intellectual property security agreements or control agreements.  Any sales tax, stamp duty, deed transfer or other tax (except taxes based on the income of an Investor) arising out of the issuance of the Securities (but not with respect to subsequent transfers) by the Issuer to an Investor and consummation of the transactions contemplated by this Agreement shall be paid by the Issuer.

 

11.6           Amendment; Waiver.  Subject to Section 6.8 of this Agreement, this Agreement may not be modified, amended, supplemented, canceled or discharged, except by written instrument executed by the Issuer and Prior Collateral Agent.  No failure to exercise, and no delay in exercising, any right, power or privilege under this Agreement shall operate as a waiver, nor shall any single or partial exercise of any right, power or privilege hereunder preclude the exercise of any other right, power or privilege.  No waiver of any breach of any provision by Prior Collateral Agent shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision, nor shall any waiver be implied from any course of dealing between the parties.  No extension of time for performance of any obligations or other acts hereunder or under any other agreement shall be deemed to be an extension of the time for performance of any other obligations or any other acts.  The rights and remedies of the parties under this Agreement are in addition to all other rights and remedies, at law or equity, that they may have against each other.

 

  

33

  

 

11.7           Binding Effect; Assignment.  This Agreement shall bind and inure to the benefit of each of the parties hereto and the respective successors and permitted assigns of each of the parties and shall bind all persons who become bound as a debtor to this Agreement; provided, however, that neither this Agreement nor any rights hereunder may be assigned by Issuer without the Required Consent.

 

11.8           Counterparts; Facsimile Signature.  This Agreement may be executed by facsimile signature and in any number of counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument.

 

11.9           Headings.  The headings contained in this Agreement are for convenience of reference only and are not to be given any legal effect and shall not affect the meaning or interpretation of this Agreement.

 

11.10         Governing Law; Jury Trial Waiver.  This Agreement shall be construed in accordance with and governed for all purposes by the laws of the State of New York, without regard to principles of conflicts of law.  Jurisdiction shall lie in the State of New York.  THE UNDERSIGNED ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES.  TO THE EXTENT PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS, HIS OR HER CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER DOCUMENT, INSTRUMENT OR AGREEMENT BETWEEN THE UNDERSIGNED PARTIES.

 

11.11         Severability.  The parties stipulate that the terms and provisions of this Agreement are fair and reasonable as of the date of this Agreement.  However, if any provision of this Agreement shall be determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.  If, moreover, any of those provisions shall for any reason be determined by a court of competent jurisdiction to be unenforceable because excessively broad or vague as to duration, activity or subject, it shall be construed by limiting, reducing or defining it, so as to be enforceable.

 

[Signature Pages Follow]

  

34

  

IN WITNESS WHEREOF, the parties hereto have caused this Subscription Agreement to be duly executed and delivered as of the date set forth below.

 

	
NAME OF INVESTOR:

	  	
ADDRESS FOR NOTICES (Please Print):

	  
	  	  	  	  
	
Sports Medicine Holding Company LLC

	  	
One Paragon Drive, Suite 125

	  
	  	  	
Montvale, NJ  07645

	  
	  	  	
 

	  
	
SIGNATURE:

	  	
 

	  
	  	  	
Attention: 

	Robert W. Pangia
	
By:  /s/ Robert W. Pangia

	  	
Telecopy:   

	201 573-8403
	
     Name:  Robert W. Pangia

	  	
Phone:   

	201 573-8400
	
     Title:  Manager

	  	
Email Address:

	  
	  	  	
Tax Identification #:

	  
	  	  	  	  
	
Exact Name to appear on Note:

	  	
Sports Medicine Holding Company LLC

	  	  	  	  
	
Commitment Amount (in US dollars): 

	  	  	  

 

  

  

  

 

ACKNOWLEDGED AND ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN BY:

 

REGEN BIOLOGICS, INC.

 

	
By:

	
/s/ Gerald E. Bisbee, Jr., Ph.D.

	 
	
Name:

	
Gerald E. Bisbee, Jr., Ph.D.

	 
	
Title:

	
President and

Chief Executive Officer

	 

  

  

  

APPENDIX A

COLLATERAL DESCRIPTION

 

DEBTOR:  ReGen Biologics, Inc., a Delaware corporation

 

Subject to the proviso set forth below, all personal property of Issuer (herein referred to as “Debtor”, “Issuer”, “Borrower”), whether presently existing or hereafter created or acquired, and wherever located, including, but not limited to:

 

(a)           all accounts (including health-care-insurance receivables), chattel paper (including tangible and electronic chattel paper), deposit accounts, documents (including negotiable documents), equipment (including all accessions and additions thereto), general intangibles (including all intellectual property, licenses, payment intangibles and software), goods (including fixtures), instruments (including promissory notes), inventory (including all goods held for sale or lease or to be furnished under a contract of service, and including returns and repossessions), investment property (including securities and securities entitlements), letter of credit rights, money, and all of Debtor's books and records with respect to any of the foregoing, and the computers and equipment containing said books and records;

 

(b)           all common law and statutory copyrights and copyright registrations, applications for registration, now existing or hereafter arising, in the United States of America or in any foreign jurisdiction, obtained or to be obtained on or in connection with any of the forgoing, or any parts thereof or any underlying or component elements of any of the forgoing, together with the right to copyright and all rights to renew or extend such copyrights and the right (but not the obligation) of Secured Party to sue in its own name and/or in the name of the Debtor for past, present and future infringements of copyright;

 

(c)           all trademarks, service marks, trade names and service names and the goodwill associated therewith, together with the right to trademark and all rights to renew or extend such trademarks and the right (but not the obligation) of Secured Party to sue in its own name and/or in the name of the Debtor for past, present and future infringements of trademark;

 

(d)           all (i) patents and patent applications filed in the United States Patent and Trademark Office or any similar office of any foreign jurisdiction, and interests under patent license agreements, including, without limitation, the inventions and improvements described and claimed therein, (ii) licenses pertaining to any patent whether Debtor is licensor or  licensee, (iii) income, royalties, damages, payments, accounts and accounts receivable now or hereafter due and/or payable under and with respect thereto, including, without limitation, damages and payments for past, present or future infringements thereof, (iv) right (but not the obligation) to sue in the name of Debtor and/or in the name of Secured Party for past, present and future infringements thereof, (v) rights corresponding thereto throughout the world in all jurisdictions in which such patents have been issued or applied for, and (vi) reissues, divisions, continuations, renewals, extensions and continuations-in-part with respect to any of the foregoing; and

 

(e)           any and all cash proceeds and/or noncash proceeds of any of the foregoing, including, without limitation, insurance proceeds, and all supporting obligations and the security therefor or for any right to payment.  All terms above have the meanings given to them in the New York Uniform Commercial Code, as amended or supplemented from time to time;

  

  

  

provided, however, that the foregoing collateral description and the collateral pledged pursuant to this Agreement shall not include the following (the “Zimmer Collateral”):

 

The intellectual property of Borrower, rights in which shall constitute Collateral (as defined in that certain Intellectual Property Security Agreement, dated March 14, 2000, as amended or supplemented (the “Zimmer Security Agreement”), and shall consist of all of Borrower’s right and title to, and interest in, any copyrights, patents and trademarks (including without limitation those listed on Schedules A, B and C of the Zimmer Security Agreement), designs, mechanisms, processes, methods and instrumentation, which constitute, or directly relate to, the combination of Borrower’s collagen meniscus implant product and the NeOsteo growth hormone, commonly known as “CMI-2”.

 

The Zimmer Collateral shall not include (i) patent rights to the meniscus implant product without the NeOsteo growth hormone, commonly known as “CMI-1” or (ii) designs, mechanisms, processes, methods and instrumentation that constitute, or directly relate to, CMI-1.

  

  

  

EXHIBIT A

 

FORM OF NOTE

 

See attached.

  

  

  

EXHIBIT B

 

FORM OF WARRANT

 

See attached.

  

  

  

EXHIBIT D

 

RISK FACTORS RELATED TO THE SALE

 

THE ISSUER IS DEPENDENT ON THIRD PARTY FINANCING TO CONTINUE ITS OPERATIONS AND MAY NOT BE ABLE TO SATISFY ITS OBLIGATIONS, INCLUDING ITS OBLIGATIONS UNDER THE NOTES, WHICH MAY LEAD THE ISSUER TO SEEK PROTECTION UNDER THE UNITED STATES BANKRUPTCY CODE.

 

The Issuer depends on third party financing, such as that contemplated by the Agreement, in order to fund and continue its operations.  The Issuer will require additional third party financing in order to satisfy its obligations under the Notes.  There can be no assurance that the Issuer will be able to obtain the necessary funds from third parties on acceptable terms, if at all, or that the Issuer will be able to satisfy the obligations under the Notes.  If the Issuer is unable to obtain additional third party financing, it may need to cease all operations and seek bankruptcy protection under the United States Bankruptcy Code.

 

THE COLLATERAL SECURING THE NOTES MAY NOT BE SUFFICIENT TO REPAY THE NOTES.

 

The Collateral securing the Notes may not be sufficient to repay the Notes.  Further, the Collateral is subject to prior Liens, and to the extent the Collateral shall be used to satisfy the debt obligations of the Issuer, the proceeds received upon realization of the Collateral will be applied first to amounts due to the holder(s) of the prior Liens.  Certain of the Issuer’s Intellectual Property, which comprise part of the Collateral, has been effectively assigned by court order to one of the Issuer’s former vendors.  The Issuer believes such assignment was inappropriate and plans to take actions to cause such Intellectual Property to be assigned back to it.

 

THERE CAN BE NO ASSURANCE THAT THE ISSUER OR REGEN AG WILL BE ABLE TO CONSUMMATE A FUTURE EQUITY OR DEBT FINANCING.

 

Each of the Issuer’s and ReGen AG’s ability to consummate a future equity or debt financing is subject to many factors, including, but not limited to, the status of certain investigations, reviews and/or proceedings by the FDA and the Congress, or any committee or subcommittee thereof, as disclosed to the Investor, and there can be no assurance that these investigations, reviews and/or proceedings will end soon or in a manner favorable to the Issuer or that the Issuer or ReGen AG will be able to consummate a future debt or equity financing.

 

SALES OR THE PERCEPTION OF FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE. BECAUSE THE MARKET PRICES FOR BIOTECHNOLOGY AND MEDICAL DEVICE STOCKS ARE LIKELY TO REMAIN VOLATILE, OUR STOCK PRICE MAY BE MORE ADVERSELY AFFECTED THAN OTHER COMPANIES BY SUCH FUTURE SALES.

 

Sales of substantial numbers of shares of our Common Stock in the public market, or the perception that significant sales are likely, could adversely affect the market price of our Common Stock.  Compliance with the registration rights provisions of the Subscription Agreement could create the perception that all the shares of Common Stock that may be issuable upon conversion of the Notes will soon be available for sale, and this number of shares is greater than the average trading volume for our shares.  No prediction can be made as to the effect, if any, that market sales of such shares will have on the market price of our Common Stock.  Sales of substantial amounts of such shares in the public market could adversely affect the market price of our Common Stock.

  

  

  

 

THE CONVERSION RATE OF THE NOTES FOR SHARES OF COMMON STOCK OR OTHER EQUITY SECURITIES MAY NOT BEAR ANY RELATIONSHIP TO OUR ASSETS, BOOK VALUE, EARNINGS HISTORY, OR OTHER ESTABLISHED CRITERIA.  AS A RESULT, YOU MAY EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.

 

The conversion rate of the Notes for shares of Common Stock, other Equity Securities or ReGen AG Securities was established based on such factors as our capital requirements, financial conditions and prospects, percentage of ownership to be held by investors following this sale, and the general condition of securities markets at the time of the sale.  The conversion rate does not necessarily bear any relationship to our assets, book value, earnings history or other established criteria of value.  As a result, you may experience immediate and substantial dilution.

 

THE ISSUER IS NOT CURRENT IN ITS SEC FILINGS.

 

The Issuer has not filed its annual report on Form 10-K for the year ended December 31, 2009 or its quarterly reports on Form 10-Q for the quarters ended September 30, 2009, March 31, 2010, June 30, 2010 or September 30, 2010 and is otherwise not current in its SEC filings. Unless the Issuer becomes current, the SEC will not declare the registration statement registering the Common Stock underlying the Notes effective. Further, the SEC may sanction the issuer for being delinquent in its filings or decide to terminate the registration of the Issuer’s Common Stock, which could have a material adverse effect on the Issuer and the price of its securities.

 

WE ARE UNABLE TO DETERMINE WITH CERTAINTY WHEN THE REGISTRATION STATEMENT, WHICH MAY BE FILED WITH THE SEC, WILL BE DECLARED EFFECTIVE.  CONSEQUENTLY, YOU MAY NOT BE ABLE TO SELL YOUR SHARES OF COMMON STOCK FOR A SUBSTANTIAL PERIOD OF TIME.

 

Although we have undertaken to register the shares of Common Stock upon conversion of the Notes into Common Stock upon request for resale by you, you should be aware that we are unable to determine with certainty when the registration statement to be filed with the SEC will become effective.  The SEC may seek to review our registration statement, in which case, the period necessary to achieve effectiveness of the registration statement with the SEC will be affected by our ability to provide the SEC with sufficient disclosures satisfactory to the SEC.  The length of the SEC review process is uncertain and may extend to a number of months.  As you are aware, the shares of Common Stock that may issued upon conversion of the Notes that are being sold in this sale are restricted in nature and may not be publicly resold absent the effectiveness of the registration statement or pursuant to an applicable exemption from registration. Consequently, you may not be able to sell your shares of Common Stock for a substantial period of time.

  

  

  

EXHIBIT C

EXPLANATION OF “BENEFICIAL OWNERSHIP

 

Securities that are subject to a power to vote or dispose are deemed beneficially owned by the person who holds such power, directly or indirectly.  This means that the same securities may be deemed beneficially owned by more than one person, if such power is shared.  In addition, the beneficial ownership rules provide that shares which may be acquired upon exercise of an option or warrant, or which may be acquired upon the termination of a trust, discretionary account or similar arrangement, which can be effected within a period of sixty (60) days from the date of determination, are deemed to be “beneficially” owned.  Furthermore, shares that are subject to rights or powers even though such rights or powers to acquire are not exercisable within the 60-day period may also be deemed to be beneficially owned if the rights or powers were acquired “with the purpose or effect of changing or influencing the control of the issuer or in connection with or as a participant in any transaction having such purpose or effect.”

 

In determining whether securities are “beneficially owned,” benefits which are substantially equivalent to those of ownership by virtue of any contract, understanding, relationship, agreement or other arrangement should cause the securities to be listed as “beneficially owned.”

 

Thus, for example, securities held for a person’s benefit in the name of others or in the name of any estate or trust in which such person may be interested should also be listed.  Securities held by a person’s spouse, children or other members of such person’s family who are such person’s dependents or who live in such person’s household should be listed as “beneficially owned” unless such person does not enjoy benefits equivalent to those of ownership with respect to such securities.

 

If a person has a proprietary or beneficial interest in a controlled corporation, partnership, personal holding company, trust or estate which owns of record or beneficially any securities, such person should state the amount of such securities owned by such controlled corporation, partnership, personal holding company, trust or estate in lieu of allocating such person’s proprietary interest, and by note or otherwise, please indicate that.  In any case, the name of the controlled corporation, partnership, personal holding company, or estate must be stated.

 

In all cases the nature of the beneficial ownership should be stated.

 

  

  

  

EXHIBIT E

 

ADDITIONAL INFORMATION

 

The Investor hereby provides the following additional information:

 

(a)           Excluding the Notes (and any Conversion Shares into which such Notes may be converted) subscribed for above, set forth below is the number of shares of preferred stock of the Issuer (“Preferred Stock”) or Common Stock and options, rights or warrants of the Issuer (“Options” and together with the Preferred Stock and Common Stock, “Owned Securities”) which the Investor beneficially owns or of which the Investor is the record owner on the date hereof.  Please refer to the definition of beneficial ownership on Exhibit C attached hereto.  If none, please so state.

 

Number of shares of Preferred Stock and Common Stock:_______________________ (excluding the Notes, and any Conversion Shares into which such Notes may be converted, subscribed for above)

 

Number of Options:  __________________

 

Please indicate by an asterisk (*) above if the Investor disclaims “beneficial ownership” of any of the above listed Owned Securities, and indicate in response to question (b) below who has beneficial ownership.

 

(b)           If the Investor disclaims “beneficial ownership” in question (a),  please furnish the following information with respect to the person(s) other than the Investor who is the beneficial owner(s) of the Owned Securities in question.  If not applicable, please check box:   ̈

 

Name of Beneficial Owner:__________________________________________

Relationship to the Investor:________________________________________

Number of Owned Securities Beneficially Owned: ________________________

 

                I               As to the Owned Securities indicated as being “beneficially owned” in answers to question (a) and (b) does any person other than the person identified as the “beneficial owner” have:

 

(i)            the sole or shared power to vote or to direct the vote of any such Owned Securities?

 

Yes o            No o

 

or                             (ii)           the sole or shared power to dispose or to direct the disposition of any such Owned Securities (referred to as “dispositive power”)?

 

 Yes o           No o

  

  

  

 

If the answer is “Yes” to either of the forgoing questions, the Investor should set forth below the name and address of each person who has either such power or with whom the indicated “beneficial owner” shares such power, together with such number of shares to which such rights relates.

 

IF THE INVESTOR IS AN ENTITY OR A TRUST:

 

The Investor must list the name of each natural person associated with the Investor entity or trust who has or shares voting or dispositive power with respect to the shares indicated as being “beneficially owned” in answers to questions (a) or (c).  For an investment or holding company, the investment manager(s) would normally be the person(s) who hold(s) or share(s) voting and dispositive power.  For a trust, the natural person(s) holding or sharing voting or dispositive power would normally be the trustee(s).  For other types of entities, the natural person(s) holding or sharing voting or dispositive power would normally be the officer(s) empowered by the board of directors to make such decisions, or if there is no such officer, each of the directors.  Disclosure is required for each natural person who in practice has voting or dispositive power, regardless of that person’s formal title or position within the organization.

  

  

  

NAME OF INVESTOR:______________________

 

	
Name of Natural Person

	
Type of Power: Voting/Dispositive/

Both

	
Address

	
Position or Title

	  	  	  	  
	  	  	  	  
	  	  	  	  

(d)       In any pending legal proceeding, is the Investor or any of its affiliates a party, or does the Investor or any such affiliate have an interest, adverse to the Issuer or any affiliate of the Issuer?

 

Yes o             No o

 

If the answer is “Yes,” please describe, and state the nature and amount of, such interest.

 

(e)        Is there any family relationship (including relationships by blood, marriage, and adoption, except those more remote than first cousin) between the Investor or any of its affiliates and any director or officer of the Issuer, any affiliate of the Issuer or any person who has been chosen to become a director or officer of the Issuer?

 

Yes o          No o

 

If the answer is “Yes,” please describe the relationship.

  

  

  

(f)            Are any of the Owned Securities listed in response to question (a) the subject of a voting agreement, contract or other arrangement whereby others have voting control over, or any other interest in, any of the Investor’s Owned Securities?

 ̈  Yes                                                       ̈  No

 

If the answer is “Yes”, please give details:____________________________________________.

 

(g)            Please describe each position, office or other material relationship which the Investor has had with the Issuer or any of its affiliates, including any Subsidiary of the Issuer, within the past three years.  Please include a description of any loans or other indebtedness, and any contracts or other arrangements or transactions involving a material amount, payable by the Investor to the Issuer or any of its affiliates, including its Subsidiaries, or by the Issuer or any of its affiliates, including its Subsidiaries, to the Investor.  “Affiliates” of the Issuer include its directors and executive officers, and any other person controlling or controlled by the Issuer.  If none, please so state.

 

Answer:

 

(h)            Please provide the name and address of other person(s), if any, to whom any proxy statements, registration statements (including notice of effectiveness thereof), prospectuses or similar documents and information should be delivered by the Issuer on behalf of the Investor in the future, with respect to the Investor’s shares:

 

____________________________  _____________________________

____________________________  _____________________________

____________________________  _____________________________

____________________________  _____________________________

 

(i)            Please advise if a Financial Industry Regulatory Authority (FINRA) member has placed with you the Notes or Conversion Shares being purchased hereunder: 

 (Name of Member): ________________________________

 

(j)            Please disclose if the Investor is a broker-dealer:  ̈  Yes      ̈  No

 

(k)            Please disclose if the Investor is affiliated with a broker-dealer:   ̈  Yes   ̈  No

 

If the answer is “Yes,” please answer the following: the shares being registered for resale were purchased in the ordinary course of business, and at the time of the purchase, the selling stockholder had no agreements or understandings, directly or indirectly, with any person to distribute the securities:   ̈  Yes  ̈  No

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