<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported) May 9, 1996
----------------
OXIS INTERNATIONAL, INC.
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(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-8092 94-1620407
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(STATE OR OTHER (COMMISSION FILE NUMBER) (IRS EMPLOYER
JURISDICTION OF IDENTIFICATION NUMBER)
INCORPORATION)
6040 N. Cutter Circle, Suite 317, Portland, OR 97217
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code. (508) 283-3911
--------------------------
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
Total number of sequentially
numbered pages: 73
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Exhibit Index at page: 5
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ITEM 5. OTHER EVENTS
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(a) On May 9, 1996, OXIS International, Inc. (the "Company" or "OXIS")
closed the offering of its Series C Preferred Stock. The Company sold a total
of 1,774,080 shares of Series C Preferred for an aggregate purchase price of
$2,306,302. In the offering, approximately $843,000 of principal and interest
relating to promissory notes held by foreign investors was converted into shares
of Series C Preferred. The Series C Preferred Stock is initially convertible
into Common Stock on a one-for-one basis (subject to adjustment under certain
circumstances). The rights of the Series C Preferred Stock are set forth in a
Certificate of Designations, Preferences, and Rights of Series C Preferred Stock
filed with the Delaware Secretary of State. The shares of Series C Preferred
Stock sold (including the underlying Common Stock) were not registered under the
Securities Act of 1933, as amended (the "Securities Act") and may not be re-
offered or re-sold absent registration under the Securities Act or available
exemptions from such registration requirements. The Company has agreed to
register the shares of Common Stock issuable upon conversion of the Series C
Preferred Stock for resale under the Securities Act.
(b) Effective May 15, 1996, the Company raised $2,000,000 by the sale of
2,000 shares of its Series D Preferred Stock and Warrants to purchase 810,126
shares of its Common Stock in a private placement. The Series D Preferred Stock
is convertible into Common Stock at a conversion ratio based on average trading
prices of the Company's Common Stock (subject to other adjustments under certain
circumstances). The rights of the Series D Preferred Stock are set forth in a
Certificate of Designations, Preferences, and Rights of Series D Preferred Stock
filed with the Delaware Secretary of State. The shares of Series D Preferred
Stock and the Warrants sold (including the underlying Common Stock) were not
registered under the Securities Act, and may not be re-offered or re-sold absent
registration under the Securities Act or available exemptions from such
registration requirements. The Company has agreed to register the shares of
Common Stock issuable upon conversion of the Series D Preferred Stock and
exercise of the Warrants for resale under the Securities Act.
A copy of the Press Release with respect to the sale of Series D Preferred
Stock and Warrants to purchase Common Stock is attached as an exhibit to this
report. A copy of each of the Securities Purchase Agreement, the Certificate of
Designations, Preferences and Rights of Series D Preferred Stock of the Company,
the Stock Purchase Warrant, and Registration Rights Agreement relating to the
sale of the Series D Preferred Stock is attached as an exhibit to this report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
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(c) Exhibits
99.1 Press Release, dated May 17, 1996.
99.2 Securities Purchase Agreement dated May 15, 1996.
2
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99.3 Certificate of Designations, Preferences, and Rights of Series D Preferred
Stock of the Company.
99.4 Stock Purchase Warrant issued May 15, 1996.
99.5 Registration Rights Agreement dated May 15, 1996.
3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
OXIS INTERNATIONAL, INC.
(Registrant)
Dated: May 20, 1996 By: /s/Ray R. Rogers
--------------------------
Name: Ray R. Rogers
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Title: Chairman of the Board
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4
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EXHIBIT INDEX
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Page No. in
sequentially numbered
Exhibit No. Description current report
----------- ----------- --------------
99.1 Press Release dated May 17, 1996. 6
99.2 Securities Purchase Agreement dated 7
May 15, 1996
99.3 Certificate of Designations, Preferences,
and Rights of Series D Preferred Stock. 22
99.4 Stock Purchase Warrant issued May 15,
1996 38
99.5 Registration Rights Agreement dated
May 15, 1996 56
5
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EXHIBIT 99.1
For more information:
Claudia Groth Will Anderson
OXIS International, Inc. KVO
(503) 283-3911 (503) 221-1551
OXIS INTERNATIONAL REPORTS PRIVATE PLACEMENT
OF SECURITIES
PORTLAND, ORE. -- MAY 17, 1996 -- OXIS International, Inc. (NASDAQ: OXIS)
announced today it has raised $2,000,000 through a private placement of 2,000
shares of Series D Preferred Stock, together with warrants to purchase an
aggregate of 810,126 shares of Company Common Stock. The Series D Preferred
Stock is convertible into Common Stock at a conversion rate based upon average
trading prices of the Common Stock.
The Series D Preferred Stock, the warrants, and the underlying shares of Common
Stock of the Company are not registered under the Securities Act of 1933, as
amended. These securities may not be offered and sold absent registration under
the Securities Act or an applicable exemption from registration requirements.
The Company has agreed to file a registration statement for the underlying
shares of Common Stock.
OXIS International, Inc. is a drug development and diagnostic company dedicated
to the research and development of technologies and products to combat diseases
associated with free radicals and reactive oxygen species (ROS). The Company is
headquartered in Portland, Oregon, with research facilities outside Paris,
France.
###
<PAGE>
EXHIBIT 99.2
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of May 15, 1996
by and among OXIS INTERNATIONAL, INC., a Delaware corporation, with headquarters
located at 6040 N. Cutter Circle, Suite 317, Portland, Oregon 97217-3935 (the
"COMPANY"), and the purchaser set forth on the signature page hereto (the
"BUYER").
WHEREAS:
A. The Company and the Buyer are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
under Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 ACT");
B. The Buyer wishes to purchase in the amounts and upon the terms and
conditions stated in this Agreement, shares of the Company's Series D
Convertible Preferred Stock, par value $.01 per share (the "PREFERRED STOCK"),
convertible into (i) shares of Common Stock, par value $.50 per share, of the
Company (the "COMMON STOCK") and (ii) warrants (the "WARRANTS"), in the form
attached hereto as EXHIBIT "A", to acquire 810,126 shares of Common Stock
(subject to adjustment as provided in the Warrants), upon the terms and subject
to the limitations and conditions set forth in the Certificate of Designations,
Rights and Preferences attached hereto as Exhibit "B" (the "CERTIFICATE OF
DESIGNATION");
C. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as EXHIBIT "C" (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws;
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
-------------------------------------
a. Purchase of Preferred Shares. On the Closing Date (as defined herein)
----------------------------
subject to the satisfaction (or waiver) of the conditions set forth in Section 6
and Section 7 below, the Company shall issue and sell to Buyer and Buyer shall
purchase from the Company (i) 2,000 shares of Preferred Stock (collectively,
together with any Preferred Stock issued in replacement thereof or as a dividend
thereon or otherwise with respect thereto in accordance with the terms thereof,
the "PREFERRED SHARES") and (ii) Warrants to purchase 810,126 shares of Common
Stock for an aggregate purchase price equal to Two Million Dollars
($2,000,000.00).
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b. Form of Payment. On the Closing Date, (i) Buyer shall pay the purchase
---------------
price for the Preferred Shares and Warrants to be issued and sold at closing
(the "PURCHASE PRICE") by wire transfer to the Company, in accordance with the
Company's written wiring instructions, against delivery of a duly executed
certificate(s) representing the Preferred Shares being purchased by Buyer
hereunder and duly executed Warrants being purchased by Buyer hereunder, and
(ii) the Company shall deliver such certificate(s) and Warrants against delivery
of such Purchase Price.
c. Closing Dates. Subject to the satisfaction (or waiver) of the
-------------
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Preferred Shares and Warrants pursuant to this
Agreement (the "CLOSING DATE") shall be 12:00 noon Eastern Standard Time on May
15, 1996 (subject to a two (2) business day grace period at either party's
option), or such other mutually agreed upon time. The closing shall occur at
the offices of Klehr, Harrison, Harvey, Branzburg & Ellers, 1401 Walnut Street,
Philadelphia, Pennsylvania 19102.
2. BUYER'S REPRESENTATIONS AND WARRANTIES
--------------------------------------
Buyer represents and warrants to the Company that:
a. Investment Purpose. The Buyer is purchasing the Preferred Shares, the
------------------
shares of Common Stock issuable upon conversion thereof (the "CONVERSION
SHARES"), the Warrants and, if applicable, the shares of Common Stock issuable
upon exercise of the Warrants (the "WARRANT SHARES") (collectively, the
"SECURITIES") for its own account for investment only and not with a present
view towards the public sale or distribution thereof, except pursuant to sales
registered under the 1933 Act.
b. Accredited Investor Status. The Buyer is an "accredited investor" as
--------------------------
that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. The Buyer understands that the Preferred
----------------------
Shares and Warrants are being offered and sold to it in reliance upon specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Preferred Shares and Warrants.
d. Information. The Buyer and its advisors, if any, have been furnished
-----------
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Securities which
have been requested by the Buyer or its advisors. The Buyer and its advisors, if
any, have been afforded the opportunity to ask questions of the Company and have
received what the Buyer believes to be satisfactory answers to any such
2
<PAGE>
inquiries. Neither such inquiries nor any other due diligence investigation
conducted by Buyer or any of its advisors or representatives shall modify, amend
or affect Buyer's right to rely on the Company's representations and warranties
contained in Section 3 below. The Buyer understands that its investment in the
Securities involves a high degree of risk.
e. Governmental Review. The Buyer understands that no United States
-------------------
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
f. Transfer or Resale. The Buyer understands that (i) except as provided
------------------
in the Registration Rights Agreement, the Securities have not been and are not
being registered under the 1933 Act or any state securities laws, and may not be
transferred unless (a) subsequently registered thereunder, or (b) the Buyer
shall have delivered to the Company an opinion of counsel (which opinion and
counsel shall be reasonably acceptable to the Company) to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration or (c) sold pursuant to Rule 144 promulgated
under the 1933 Act (or a successor rule); (ii) any sale of such Securities made
in reliance on Rule 144 may be made only in accordance with the terms of said
Rule and further, if said Rule is not applicable, any resale of such Securities
under circumstances in which the seller (or the person through whom the sale is
made) may be deemed to be an underwriter (as that term is defined in the 1933
Act) may require compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC thereunder; and (iii) neither the Company nor
any other person is under any obligation to register such Securities under the
1933 Act or any state securities laws or to comply with the terms and conditions
of any exemption thereunder (in each case, other than pursuant to the
Registration Rights Agreement).
g. Legends. The Buyer understands that the Preferred Shares, Warrants
-------
and, until such time as the Conversion Shares and Warrant Shares have been
registered under the 1933 Act, as contemplated by the Registration Rights
Agreement or otherwise may be sold by Buyer pursuant to Rule 144 under the 1933
Act (or any successor rule thereto) without any restriction as to the number of
securities acquired hereunder that can then be immediately sold, the
certificates for the Conversion Shares and Warrant Shares, may bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Securities):
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be sold, transferred or assigned in the
absence of an effective registration statement for the securities under
said Act, or an opinion of counsel, in form, substance and scope reasonably
acceptable to the Company, that registration is not required under said Act
or unless sold pursuant to Rule 144 under said Act."
3
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The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws, (a) the sale of
such Security is registered under the 1933 Act, or (b) such holder provides the
Company with an opinion of counsel, in form, substance and scope reasonably
acceptable to the Company, to the effect that a public sale or transfer of such
Security may be made without registration under the 1933 Act or (c) such holder
provides the Company with reasonable assurances that such Security can be sold
pursuant to Rule 144 under the 1933 Act (or a successor rule thereto) without
any restriction as to the number of Securities acquired as of a particular date
that can then be immediately sold. The Buyer agrees to sell all Securities,
including those represented by a certificate(s) from which the legend has been
removed, in compliance with applicable securities law. In the event the above
legend is removed from any Security, the Company may, upon reasonable advance
notice to Buyer, require that the above legend be placed on any Security that
cannot then be sold pursuant to an effective registration statement or Rule 144
under the 1933 Act (or any successor rule thereto) without any restriction as to
the number of securities acquired hereunder that can then be immediately sold.
h. Authorization; Enforcement. This Agreement and the Registration Rights
--------------------------
Agreement have been duly and validly authorized, executed and delivered on
behalf of the Buyer and are valid and binding agreements of the Buyer
enforceable in accordance with their terms.
i. Residency. The Buyer is a resident of the Cayman Islands.
---------
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
---------------------------------------------
The Company represents and warrants to Buyer that:
a. Organization and Qualification. The Company and each of its
------------------------------
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company and each of its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. "MATERIAL ADVERSE EFFECT" means any material adverse effect on the
operations, properties, financial condition or prospects of the Company or on
the transactions contemplated hereby.
b. Authorization; Enforcement. (i) The Company has the requisite
--------------------------
corporate power and authority to enter into and perform this Agreement, the
Registration Rights Agreement and the Warrants, and to issue the Securities, in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement, the Registration Rights Agreement and the Warrants by the
Company and the consummation by it of the transactions contemplated hereby and
thereby (including without limitation the issuance of the Preferred Shares and
the Warrants and the issuance and reservation for issuance of the Conversion
Shares and Warrant Shares issuable
4
<PAGE>
upon conversion or exercise thereof) have been duly authorized by the Company's
Board of Directors and no further consent or authorization of the Company, its
Board or Directors, or its stockholders is required, (iii) this Agreement has
been duly executed and delivered by the Company, and (iv) this Agreement and the
Warrants constitute, and upon execution and delivery by the Company of the
Registration Rights Agreement such instrument will constitute, a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms.
c. Capitalization. As of the date hereof, the authorized capital stock
--------------
of the Company consists of (i) 25,000,000 shares of Common Stock of which
12,124,423 shares are issued and outstanding, 1,200,000 shares are reserved for
issuance pursuant to the Company's stock option plans, 7,119,868 shares are
reserved for issuance pursuant to securities (other than the Preferred Shares
and the Warrants) exercisable for, or convertible into or exchangeable for any
shares of Common Stock and 3,266,989 shares are reserved for issuance upon
conversion of the Preferred Shares and exercise of the Warrants (subject to
adjustment pursuant to the Company's covenant set forth in Section 4(h) below);
and (ii) 5,000,000 shares of preferred stock, of which 2,416,635 shares are
issued and outstanding. All of such outstanding shares of capital stock have
been, or upon issuance will be, validly issued, fully paid and nonassessable.
No shares of capital stock of the Company are subject to preemptive rights or
any other similar rights of the stockholders of the Company or any liens or
encumbrances imposed through the actions or failure to act of the Company.
Except as disclosed in SCHEDULE 3(C), as of the effective date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for any shares of capital
stock of the Company or any of its subsidiaries, or arrangements by which the
Company or any of its subsidiaries is or may become bound to issue additional
shares of capital stock of the Company or any of its subsidiaries, and (ii)
there are no agreements or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of its or their securities
under the 1933 Act (except the Registration Rights Agreement). The Company has
furnished to the Buyer true and correct copies of the Company's Restated
Certificate of Incorporation as in effect on the date hereof ("CERTIFICATE OF
INCORPORATION") and the Company's By-laws, as in effect on the date hereof (the
"BY-LAWS"). The Company shall provide the Buyer with a written update of this
representation signed by the Company's Chief Executive or Chief Financial
Officer on behalf of the Company as of each Closing Date.
d. Issuance of Shares. The Preferred Shares, Conversion Shares and
------------------
Warrant Shares are duly authorized and, upon issuance in accordance with the
terms of this Agreement, upon conversion of the Preferred Shares and upon proper
exercise of the Warrants, as applicable, the Securities shall be validly issued,
fully paid and non-assessable, and free from all taxes, liens (imposed through
the actions or failure to act of the Company) and charges with respect to the
issue thereof and shall not be subject to preemptive rights or other similar
rights of stockholders of the Company. The term Conversion Shares includes the
shares of Common Stock issuable upon conversion of the Preferred Shares,
including without limitation, such additional shares, if any, as are issuable as
a result of the events described in Section 2(c) of the Registration Rights
5
<PAGE>
Agreement and Article VI. E of the Certificate of Designation. The Company has
been advised by the NASD that the Warrant Shares shall not be included with the
Preferred Shares when determining whether the twenty percent (20%) threshold set
forth in Section 6(i)(1)(d) of Part III to Schedule D of the NASD By-Laws has
been met by the transactions contemplated hereby.
e. No Conflicts. The execution, delivery and performance of this
------------
Agreement, the Registration Rights Agreement and the Warrants by the Company and
the consummation by the Company of the transactions contemplated hereby and
thereby (including without limitation, the issuance and reservation for issuance
of the Preferred Shares, Conversion Shares and Warrant Shares) will not
(i) result in a violation of the Certificate of Incorporation or By-laws or
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its subsidiaries is bound or
affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). Neither the Company nor any of its
subsidiaries is in violation of its Certificate of Incorporation, By-laws or
other organizational documents and neither the Company nor any of its
subsidiaries is in default (and no event has occurred which with notice or lapse
of time or both would put the Company or any of its subsidiaries in default)
under, and neither the Company nor any of its subsidiaries has taken any action
or failed to take any action that would give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its subsidiaries is a
party, except for possible defaults as would not, individually or in the
aggregate, have a Material Adverse Effect. The businesses of the Company and its
subsidiaries are not being conducted, and shall not be conducted so long as a
Buyer owns any of the Securities, in violation of any law, ordinance or
regulation of any governmental entity, except for possible violations which
either singly or in the aggregate do not have a Material Adverse Effect. Except
as specifically contemplated by this Agreement and as required under the 1933
Act and any applicable state securities laws, the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or self
regulatory agency in order for it to execute, deliver or perform any of its
obligations under this Agreement, the Registration Rights Agreement or the
Warrants in accordance with the terms hereof or thereof.
f. SEC Documents, Financial Statements. Since December 31, 1994, the
-----------------------------------
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Exchange Act of 1934, as amended (the "1934 ACT") (all of the foregoing
filed prior to the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents (other than exhibits)
incorporated by reference therein, being hereinafter referred to herein as the
"SEC DOCUMENTS").
6
<PAGE>
The Company has delivered to Buyer true and complete copies of the SEC
Documents, except for such exhibits, schedules and incorporated documents. As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance
with generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may include footnotes or may be condensed or
summary statements) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC documents, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred in
the ordinary course of business subsequent to December 31, 1995 and
(ii) obligations under contracts and commitments incurred in the ordinary course
of business and not required under generally accepted accounting principles to
be reflected in such financial statements, which, individually or in the
aggregate, are not material to the financial condition or operating results of
the Company.
g. Absence of Certain Changes. Since December 31, 1995, there has been
--------------------------
no material adverse change and no material adverse development in the business,
properties, operations, financial condition, results of operations or prospects
of the Company, except as disclosed in Schedule 2(g) or in the SEC Documents.
h. Absence of Litigation. There is no action, suit, proceeding, inquiry
---------------------
or investigation before or by any court, public board, government agency, self-
regulatory organization or body pending or, to the knowledge of the Company or
any of its subsidiaries, threatened against or affecting the Company or any of
its subsidiaries.
i. Disclosure. All information relating to or concerning the Company set
----------
forth in this Agreement and provided to the Buyer pursuant to Section 2(d)
hereof and otherwise in connection with the transactions contemplated hereby is
true and correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading.
7
<PAGE>
j. Acknowledgment Regarding Buyer's Purchase of Preferred Shares. The
-------------------------------------------------------------
Company acknowledges and agrees that the Buyer is acting solely in the capacity
of arm's length purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that Buyer is not acting
as a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement and the transactions contemplated hereby and any
advice given by the Buyer or any of its representatives or agents in connection
with this Agreement and the transactions contemplated hereby is merely
incidental to the Buyer's purchase of the Preferred Shares and Warrants. The
Company further represents to Buyer that the Company's decision to enter into
this Agreement has been based solely on the independent evaluation of the
Company and its representatives.
4. COVENANTS.
---------
a. Best Efforts. The parties shall use their best efforts timely to
------------
satisfy each of the conditions described in Section 6 and 7 of this Agreement.
b. Form D; Blue Sky Laws. The Company agrees to file a Form D with
---------------------
respect to the Securities as required under Regulation D and to provide a copy
thereof to the Buyer promptly after such filing. The Company shall, on or
before each Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for, or obtain exemption for
the Securities for, sale to the Buyer at the applicable closing pursuant to this
Agreement under applicable securities or "blue sky" laws of the states of the
United States, and shall provide evidence of any such action so taken to the
Buyer on or prior to such Closing Date.
c. Reporting Status. So long as the Buyer beneficially owns any of the
----------------
Securities, the Company shall timely file all reports required to be filed with
the SEC pursuant to the 1934 Act, and the Company shall not terminate its status
as an issuer required to file reports under the 1934 Act even if the 1934 Act or
the rules and regulations thereunder would permit such termination.
d. Use of Proceeds. The Company shall use the proceeds from the sale of
---------------
the Preferred Shares and Warrants in the manner set forth in Schedule 4(d)
attached hereto and made a part hereof and shall not, directly or indirectly,
use such proceeds for any loan to or investment in any other corporation,
partnership, enterprise or other person (except in connection with its direct or
indirect subsidiaries).
e. Additional Equity Capital; Right of First Refusal. The Company agrees
-------------------------------------------------
that during the period beginning on the date hereof and ending one hundred
twenty (120) days following the Closing Date (the "LOCK-UP PERIOD"), the Company
will not, without the prior written consent of the Buyer (which consent shall
not be unreasonably withheld), negotiate or contract with any party to obtain
additional equity financing (including debt financing with an equity component)
in any form ("FUTURE OFFERINGS") and shall not for a period of sixty (60) days
following the Lock-Up Period, without the prior written consent of the Buyer,
negotiate or
8
<PAGE>
contract with any party to conduct any Future Offering pursuant to Regulation S
under the 1933 Act. In addition, the Company will not conduct any Future
Offering during the period beginning on the date hereof and ending one (1) year
after the Closing Date unless it shall have first delivered to the Buyer, at
least five (5) business days prior to the closing of such Future Offering,
written notice describing the proposed Future Offering, including the terms and
conditions thereof, and providing the Buyer an option during the five (5)
business day period following delivery of such notice to purchase all or any
portion of the securities being offered in the Future Offering on the same terms
as contemplated by such Future Offering (the limitations referred to in this and
the immediately preceding sentence are collectively referred to as the "CAPITAL
RAISING LIMITATION"). The Capital Raising Limitation shall not apply to any
transaction involving the Company's commercial banking arrangements or issuances
of securities in connection with a merger, consolidation or sale of assets, or
in connection with any strategic partnership or joint venture (the primary
purpose of which is not to raise equity capital), or in connection with the
disposition or acquisition of a business, product or license by the Company or
exercise of options by employees, consultants or directors. The Capital Raising
Limitation also shall not apply to the issuance of securities pursuant to an
underwritten public offering or a public offering conducted exclusively in
France or upon exercise or conversion of the Company's options, warrants or
other convertible securities outstanding as of the date hereof or to the grant
of additional options or warrants, or the issuance of additional securities,
under any Company stock option or restricted stock plan.
f. Expenses. The Company shall pay all expenses incurred by the Buyer in
--------
connection with the negotiation, preparation, execution, delivery and
performance of this Agreement and the other agreements to be executed in
connection herewith, including, without limitation, the Buyer's attorneys' fees
and expenses. The Company's obligations to pay the Buyer's expenses under this
Section 4(f) shall be limited to Fifty Thousand Dollars ($50,000.00).
g. Financial Information. The Company agrees to send the following
---------------------
reports to the Buyer until the Buyer transfers, assigns, or sells all of the
Securities: (i) within ten (10) days after the filing with the SEC, a copy of
its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and any
Current Reports on Form 8-K; and (ii) within one (1) day after release, copies
of all press releases issued by the Company or any of its subsidiaries.
h. Reservation of Shares. The Company shall at all times have
---------------------
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the full conversion of the outstanding
Preferred Shares and issuance of the Conversion Shares in connection therewith
and the full exercise of the Warrants and the issuance of the Warrant Shares in
connection therewith (based on the Conversion Price of the Preferred Shares and
the exercise price of the Warrants in effect from time to time). The Company
shall not reduce the number of shares of Common Stock reserved for issuance upon
conversion of the Preferred Shares and the full exercise of the Warrants without
the consent of the Buyer, which consent will not be unreasonably withheld.
9
<PAGE>
i. Listing. The Company shall promptly secure the listing of the
-------
Conversion Shares and Warrant Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all
Conversion Shares from time to time issuable upon conversion of the Preferred
Shares and Warrant Shares issuable upon exercise of the Warrants.
j. Corporate Existence. So long as the Buyer beneficially owns any
-------------------
Preferred Shares or Warrants, the Company shall maintain its corporate
existence, except in the event of a merger, consolidation or sale of all or
substantially all of the Company's assets, as long as the surviving or successor
entity in such transaction (i) assumes the Company's obligations hereunder and
under the agreements and instruments entered into in connection herewith and
(ii) is a publicly traded corporation whose Common Stock is listed for trading
on the American Stock Exchange the New York Stock Exchange or the NASDAQ
National Market System ("NASDAQ").
k. Restrictions on Transfer of Preferred Shares and Warrants. Buyer
---------------------------------------------------------
agrees that it shall not, without the Company's prior written consent, transfer
any Preferred Shares or Warrants to any competitor of the Company.
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
The Company shall instruct its transfer agent to issue certificates,
registered in the name of the Buyer or its nominee, for the Conversion Shares
and Warrant Shares in such amounts as specified from time to time by the Buyer
to the Company upon conversion of the Preferred Shares or exercise of the
Warrants. Prior to registration of the Conversion Shares and Warrant Shares
under the 1933 Act, all such certificates shall bear the restrictive legend
specified in Section 2(g) of this Agreement. The Company warrants that no
instruction other than such instructions referred to in this Section 5, and stop
transfer instructions to give effect to Section 2(f) hereof, in the case of the
Conversion Shares and Warrant Shares, prior to registration of the Conversion
Shares and Warrant Shares under the 1933 Act, will be given by the Company to
its transfer agent and that the Securities shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement. Nothing in
this Section shall affect in any way the Buyer's obligations and agreement set
forth in Section 2(g) hereof to comply with all applicable securities laws upon
resale of the Securities. If the Buyer provides the Company with an opinion of
counsel, reasonably satisfactory to the Company in form, substance and scope,
that registration of a resale by such Buyer of any of the Securities is not
required under the 1933 Act, the Company shall permit the transfer, and, in the
case of the Conversion Shares and Warrant Shares promptly instruct its transfer
agent to issue one or more certificates in such name and in such denominations
as specified by the Buyer.
10
<PAGE>
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company hereunder to issue and sell the Preferred
Shares and Warrants to the Buyer at the closing is subject to the satisfaction,
at or before the Closing Date of each of the following conditions thereto,
provided that these conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.
(i) The Buyer shall have executed this Agreement and the Registration
Rights Agreement, and delivered the same to the Company.
(ii) The Buyer shall have delivered the Purchase Price in accordance
with Section 1(b) above.
(iii) The Certificate of Designation shall have been accepted for
filing with the Secretary of State of the State of Delaware.
(iv) The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date), and the Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Buyer at or prior to the Closing Date.
7. CONDITIONS TO BUYER'S OBLIGATION TO PURCHASE.
--------------------------------------------
The obligation of the Buyer hereunder to purchase the Preferred Shares and
Warrants at the closing is subject to the satisfaction, at or before the Closing
Date of each of the following conditions, provided that these conditions are for
the Buyer's sole benefit and may be waived by the Buyer at any time in its sole
discretion:
(i) The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Buyer.
(ii) The Certificate of Designation shall have been accepted for
filing with the Secretary of State of the State of Delaware, and a copy thereof
certified by such Secretary of State shall have been delivered to the Buyer.
(iii) The Company shall have delivered to the Buyer (A) duly
executed certificates (in such denominations as the Buyer shall request)
representing the Preferred Shares being so purchased and (B) duly executed
Warrants (in such denominations as the Buyer shall request) representing the
Warrants being so purchased, in accordance with Section 1(b) above.
11
<PAGE>
(iv) The Common Stock shall be authorized for quotation on NASDAQ, and
trading in the Common Stock (or on NASDAQ generally) shall not have been
suspended by the SEC or NASDAQ.
(v) The Company shall have delivered evidence reasonably satisfactory
to Buyer's counsel that no approval of the Company's stockholder's for the
issuance of the Preferred Shares and Warrants, or the Conversion Shares or
Warrant Shares issuable upon conversion or exercise thereof, is required under
the rules of NASDAQ.
(vi) The representations and warranties of the Company shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer
shall have received a certificate, executed by the chief executive officer of
the Company, dated as of the Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by the Buyer.
(vii) The Buyer shall have received an opinion of the Company's
counsel, dated as of the date of the First Closing, in form, scope and substance
reasonably satisfactory to the Buyer and in substantially the same form as
EXHIBIT "D-1" attached hereto.
(viii) The Buyer shall have received the officer's certificate
described in Section 3(c) above, dated as of the Closing Date.
(ix) The Buyer shall have received a copy of correspondence from the
NASD to the Company, in form and substance reasonably satisfactory to the Buyer,
evidencing the advice referred to in the last sentence of Section 3(d) hereof.
8. GOVERNING LAW; MISCELLANEOUS.
----------------------------
a. Governing Law. This Agreement shall be governed by and interpreted in
-------------
accordance with the laws of the Delaware without regard to the principles of
conflict of laws. The parties hereto hereby submit to the exclusive jurisdiction
of the United States Federal Courts located in Philadelphia, Pennsylvania with
respect to any dispute arising under this Agreement, the agreements entered into
in connection herewith or the transactions contemplated hereby or thereby.
b. Counterparts. This Agreement may be executed in two or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party.
12
<PAGE>
c. Headings. The headings of this Agreement are for convenience of
--------
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid or
------------
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the instruments
----------------------------
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
f. Notices. Any notices required or permitted to be given under the
-------
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier and shall be effective
five days after being placed in the mail, if mailed, or upon receipt or refusal
of receipt, if delivered personally or by courier, in each case addressed to a
party. The addresses for such communications shall be:
If to the Company:
OXIS International, Inc.
6040 N. Cutter Circle
Suite 317
Portland, Oregon 97217-3935
Attention: Chief Executive Officer
Telecopy: (503) 283-4058
With copy to:
Richard Scudellari, Esquire
Jackson Tufts Cole & Black, LLP
60 South Market Street
San Jose, California 95113-2336
Telecopy: (408) 998-4889
13
<PAGE>
If to the Buyer:
Capital Ventures International
c/o Bala International, Inc.
1900 Market Street
Philadelphia, PA 19102
Telecopy: (215) 963-3379
Attention: Steve B. Katznelson
With copy to:
Gary S. Kaminsky, Esq.
c/o Bala International, Inc.
1900 Market Street
Philadelphia, PA 19102
Telecopy: (215) 656-8758
And:
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
Telecopy: (215) 568-6603
Attention: Wayne D. Bloch, Esq.
Each party shall provide notice to the other party of any change in
address.
g. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties and their successors and assigns. Neither
the Company nor the Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any
of its "affiliates," as that term is defined under the 1934 Act, without the
consent of the Company.
h. Third Party Beneficiaries. This Agreement is intended for the benefit
-------------------------
of the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.
i. Survival. The representations and warranties of the Company and the
--------
agreements and covenants set forth in Sections 3, 4, 5 and 8 shall survive the
closing hereunder for a period of two (2) years notwithstanding any due
diligence investigation conducted by or on behalf of the Buyer. The Company
agrees to indemnify and hold harmless the Buyer for loss or damage arising as a
result of or related to any breach or alleged breach by the Company of any of
its
14
<PAGE>
representations set forth in Section 3 hereof, including advancement of expenses
as they are incurred.
j. Publicity. The Company and the Buyer shall have the right to approve
---------
before issuance any press releases, SEC, NASDAQ or NASD filings, or any other
public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
- -------- -------
approval of the Buyer, to make any press release or SEC, NASDAQ or NASD filings
with respect to such transactions as is required by applicable law and
regulations (although the Buyer shall be consulted by the Company in connection
with any such press release prior to its release and shall be provided with a
copy thereof).
k. Further Assurances. Each party shall do and perform, or cause to be
------------------
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Closing shall not have occurred on
-----------
or before fifteen (15) business days from the date hereof, unless the parties
agree otherwise, this Agreement shall terminate at the close of business on such
date.
IN WITNESS WHEREOF, the Buyer and the Company have caused this Agreement to
be duly executed as of the date first above written.
OXIS INTERNATIONAL, INC.
By: /s/ RAY R. ROGERS
---------------------------------------------------
Name: Ray R. Rogers
--------------------------------------------------
Its: Chairman
---------------------------------------------------
BUYER:
CAPITAL VENTURES INTERNATIONAL
By: Bala International, Inc., as authorized agent
By: /s/ STEVE KATZNELSON
---------------------------------------------------
Name: Steve Katznelson
-------------------------------------------------
Its: Vice President of Bala International for
the account of Capital Ventures International
--------------------------------------------------
15
<PAGE>
EXHIBIT 99.3
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
OF
SERIES D CONVERTIBLE PREFERRED STOCK
OF
OXIS INTERNATIONAL, INC.
Pursuant to Section 151 of the
Delaware General Corporation Law
OXIS International, Inc. a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), hereby
certifies that the following resolutions were adopted by the Board of Directors
of the Corporation pursuant to authority of the Board of Directors as required
by Section 151 of the Delaware General Corporation Law:
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Corporation (the "Board of Directors" or the "Board") in
accordance with the provisions of its Restated Certificate of Incorporation, the
Board of Directors hereby authorizes a series of the Corporation's previously
authorized Preferred Stock, par value $.01 per share (the "Preferred Stock"),
and hereby states the designation and number of shares, and fixes the relative
rights, preferences, privileges, powers and restrictions thereof as follows:
Series D Convertible Preferred Stock:
I. Designation and Amount
----------------------
The designation of this series, which consists of 2,000 shares of Preferred
Stock, is Series D Convertible Preferred Stock (the "Series D Preferred Stock")
and the stated value shall be One Thousand Dollars ($1,000) per share (the
"Stated Value").
-1-
<PAGE>
II. Rank With Respect to Liquidation Event
--------------------------------------
In the event of any distribution of assets upon liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the holders
of Series D Preferred Stock shall participate on an equal basis with (i) the
holders of the Corporation's Common Stock, par value $.50 per share (the "Common
Stock"), as if the Series D Preferred Stock had converted into Common Stock;
(ii) the holders of the Corporation's Series C Preferred Stock, par value $.01
per share (the "Series C Preferred Stock"); and (iii) the holders of any class
or series of capital stock of the Corporation hereafter created (with the
consent of the holders of Series D Preferred Stock obtained in accordance with
Article IX hereof) which specifically, by its terms, ranks pari passu with the
---- -----
Series D Preferred Stock (collectively, with the Common Stock and the Series C
Preferred Stock, "Pari Passu Securities").
---- -----
III. No Dividends
------------
The Series D Preferred Stock will bear no dividends, and the holders
of the Series D Preferred Stock shall not be entitled to receive dividends on
the Series D Preferred Stock.
IV. [Intentionally Omitted]
V. Cash Redemption of Premium by Corporation; Redemption of
--------------------------------------------------------
Series D Preferred Stock.
------------------------
A. (a) The Corporation shall have the right, in its sole discretion,
upon receipt of a Notice of Conversion pursuant to Article VI.D. or in the event
of a Mandatory Conversion effected in accordance with Article VII hereof, to
redeem all or any portion of the Premium (as defined in Article VI. A. below)
subject to such conversion for a sum of cash equal to the amount of the Premium
being so redeemed. All cash redemption payments hereunder shall be paid in
lawful money of the United States of America at such address for the holder as
appears on the record books of the Corporation (or at such other address as such
holder shall hereafter give to the Corporation by written notice). In the event
the Corporation elects, pursuant to this Article V.A., to redeem all or any
portion of the Premium in cash and fails to pay such holder the applicable
redemption amount to which such holder is entitled by depositing a check in the
U.S. Mail to such holder within seven (7) business days of receipt by the
Corporation of a Conversion Notice (in the case of a redemption in connection
with an Optional Conversion) or May 15, 2001 (in the case of a redemption in
connection with a Mandatory Conversion), the Corporation shall thereafter
forfeit its right to redeem such Premium in cash and such Premium shall
thereafter be converted into shares of Common Stock in accordance with Article
VI hereof.
-2-
<PAGE>
(b) Each holder of Series D Preferred Stock shall have the right to
require the Corporation to provide advance notice to such holder stating whether
the Corporation will elect to redeem all or any portion of the Premium in cash
pursuant to the Corporation's redemption rights discussed in subparagraph (a) of
this Article V.A as set forth herein. A holder may exercise such right from
time to time by sending notice (an "Election Notice") to the Corporation, by
facsimile, requesting that the Corporation disclose to such holder whether the
Corporation would elect to redeem any portion of the Premium for cash in lieu of
issuing Common Stock in accordance with Article VI hereof if such holder were to
exercise his, her or its right of conversion pursuant to Article VI. The
Corporation shall, no later than the fifth (5th) business day following receipt
of an Election Notice, disclose to such holder, whether the Corporation would
elect to redeem any portion of a Premium in connection with a conversion
pursuant to a Conversion Notice delivered over the subsequent ten (10) business
day period. If the Corporation does not respond to such holder within such five
(5) business day period via facsimile, the Corporation shall, with respect to
any conversion pursuant to a Conversion Notice delivered within the subsequent
ten (10) business day period, forfeit its right to redeem such Premium in
accordance with subparagraph (a) of this Article V.A. and shall be required to
convert such Premium into shares of Common Stock in accordance with Article VI
hereof.
B. Except as provided in Article V.C and D hereof, the Series D
Preferred Stock is not subject to redemption.
C. (a) Commencing May 15, 1998, at any time that the average of
the closing bid prices for the Common Stock on NASDAQ, or on the principal
securities exchange or other securities market on which the Common Stock is
being traded, for the twenty (20) consecutive Trading Days ending one Trading
Day prior to the date the Corporation provides the holders a Redemption Notice
(as defined herein) under this Article V.C. is equal to or greater than 200% of
the closing bid price for the Common Stock on NASDAQ (or on the principal
securities exchange or other securities market on which the Common Stock is
being traded) on the Closing Date (as defined herein) (the "Optional Redemption
Threshold Price"), the Corporation shall have the right, in its sole
discretion, to redeem ("Redemption at Corporation's Election") any or all of the
Series D Preferred Stock at the Redemption Price (as defined herein), in
accordance with the redemption procedures set forth below; provided, however,
that if the average closing bid price of the Common Stock for any ten (10)
consecutive Trading Days after a Redemption Notice is less than 75% of the
Optional Redemption Threshold Price, the Corporation's Redemption Notice shall
thereafter be rendered null and void and the Corporation shall not have the
right to redeem the Series D Preferred Stock pursuant to the terms of this
Article V.C. unless and until it delivers another Redemption Notice to the
holders of the Series D Preferred Stock in accordance with the provisions of
this Article V. "Trading Day" shall mean any day on which the Common Stock is
traded for any period on NASDAQ, or on the principal securities exchange or
other securities market on which the Common Stock is then being traded. If the
Corporation elects to redeem some, but not all, of the Series D Preferred Stock,
the Corporation shall redeem a pro-rata amount from each holder of Series D
Preferred Stock. Holders of Series D Preferred Stock may convert all or any
part of their shares of
-3-
<PAGE>
Series D Preferred Stock into Common Stock by delivering a Notice of Conversion
(as defined herein) to the Corporation at any time prior to the Effective Date
of Redemption (as defined herein).
(b) The "Redemption Price" with respect to each share of Series D
Preferred Stock shall mean the amount equal to the sum of (i) the Stated Value
thereof plus (ii) the amount equal to eight (8%) percent per annum of such
Stated Value for the period beginning on the issuance of such share and ending
on the Effective Date of Redemption hereunder.
(c) The Corporation shall effect each redemption under this Article
V.C. by giving at least ninety (90) days (subject to extension as set forth
below) prior written notice (the "Redemption Notice") to (i) the holders of
Series D Preferred Stock selected for redemption at the address and facsimile
number of such holder appearing in the Corporation's register for the Series D
Preferred Stock and (ii) the Transfer Agent, which Redemption Notice shall be
deemed to have been delivered three (3) business days after the Corporation's
mailing (by overnight courier, with a copy by facsimile) of such notice. Such
Redemption Notice shall indicate the number of shares of the holder's Series D
Preferred Stock that have been selected for redemption, the date which such
redemption is to become effective (the "Effective Date of Redemption") and the
Redemption Price. The Corporation shall not be entitled to send any Redemption
Notice and begin the redemption procedure unless it has (i) the full amount of
the Redemption Price, in cash, available in a demand or other immediately
available account in a bank or similar financial institution or (ii) immediately
available credit facilities, in the full amount of the Redemption Price, with a
bank or similar financial institution on the date the Redemption Notice is
delivered to the applicable holder. Notwithstanding the foregoing, the ninety
(90) day notice period referred to herein shall be extended with respect to any
holder of Series D Preferred Stock by such number of days after the date of the
Redemption Notice as such holder is not permitted to sell all of its Series D
Preferred Stock pursuant to an effective registration statement filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(or a successor statute) (the "1933 Act") or pursuant to Rule 144(k) under the
1933 Act.
The Redemption Price, shall be paid to the holder of the Series D
Preferred Stock being redeemed within 10 business days of the Effective Date of
Redemption; provided, however, that the Corporation shall not be obligated to
deliver any portion of the Redemption Price until either the certificates
evidencing the Series D Preferred Stock being redeemed are delivered to the
office of the Corporation or the Transfer Agent, or the holder notifies the
Corporation or the Transfer Agent that such certificates have been lost, stolen
or destroyed and delivers the documentation in accordance with Article VI.D.
hereof. Notwithstanding anything herein to the contrary, in the event that the
certificates evidencing the Series D Preferred Stock redeemed are not delivered
to the Corporation or the Transfer Agent prior to the 10th business day
following the Effective Date of Redemption, the redemption of the Series D
Preferred Stock pursuant to this Article V.C. shall still be deemed effective as
of the Effective Date of Redemption and the Redemption Price shall be paid to
the holder of Series D Preferred Stock redeemed within 5 business days of the
date the certificates evidencing the Series D Preferred Stock redeemed are
actually delivered to the Corporation or the Transfer Agent.
-4-
<PAGE>
D. If of any of the following events (each, a "Mandatory Redemption
Event") shall occur:
(i) Conversion and the Shares. The Corporation fails to issue shares
-------------------------
of Common Stock (subject to the limitations set forth in Article VI.G.) to the
holders of Series D Preferred Stock upon exercise by the holders of their
conversion rights in accordance with the terms of this Certificate of
Designation (for a period of at least sixty (60) days if such failure is solely
as a result of the circumstances governed by Article VI.E. below and the
Corporation is using all commercially reasonable efforts to authorize a
sufficient number of shares of Common Stock as soon as practicable), fails to
transfer any certificate for shares of Common Stock issued to the holders upon
conversion of the Series D Preferred Stock and when required by this Certificate
of Designation or the Registration Rights Agreement, dated as of May 15, 1996,
by and among the Corporation and the other signatories thereto (the
"Registration Rights Agreement") (or shares of Common Stock issuable upon
exercise of the warrants (the "Warrants") issued pursuant to the Securities
Purchase Agreement, dated as of May 15, 1996, by and between the Corporation and
the other signatory thereto (the "Purchase Agreement") in accordance with the
Warrants), or fails to remove any restrictive legend on any certificate or any
shares of Common Stock issued to the holders of Series D Preferred Stock upon
conversion of the Series D Preferred Stock as and when required by this
Certificate of Designation, the Purchase Agreement or the Registration Rights
Agreement (or shares of Common Stock issuable upon exercise of the Warrants in
accordance with the Warrants) and any such failure shall continue uncured for
twenty (20) business days after the Corporation shall have been notified thereof
in writing by the holder;
(ii) Failure to Register. The Corporation fails to obtain
-------------------
effectiveness with the Securities and Exchange Commission (the "SEC") of the
Registration Statement (as defined in the Registration Rights Agreement) prior
to November 15, 1996 (other than because of issues raised by the SEC arising
from the transactions contemplated by the Purchase Agreement or because of a
change in the policy, procedures, interpretations, positions, practice or rules
of the SEC made public after the date hereof so long as, in either case, the
Corporation is using all commercially reasonable efforts to achieve the
effectiveness of such Registration Statement) or lapses in effect (or sales
otherwise cannot be made thereunder) for more than thirty (30) consecutive days
or sixty (60) days in any twelve (12) month period after such Registration
Statement becomes effective;
(iii) Receiver or Trustee. The Corporation or any subsidiary of
-------------------
the Corporation shall make an assignment for the benefit of creditors, or apply
for or consent to the appointment of a receiver or trustee for it or for all or
substantially all of its property or business; or such a receiver or trustee
shall otherwise be appointed;
(iv) Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
-----------
proceedings or other proceedings for relief under any bankruptcy law or any law
for
-5-
<PAGE>
the relief of debtors shall be instituted by or against the Corporation or any
subsidiary of the Corporation.
Then, upon the occurrence and during the continuation of any Mandatory
Redemption Event specified in subparagraphs (i) or (ii), at the option of the
holders of at least 50% of the then outstanding shares of Series D Preferred
Stock by written notice (the "Mandatory Redemption Notice") to the Corporation
of such Mandatory Redemption Event, the Corporation shall, and upon the
occurrence of any Mandatory Redemption Event specified in subparagraphs (iii) or
(iv), purchase the holder's shares of Series D Preferred Stock for an amount per
share equal to 125% multiplied by the Redemption Price in effect at the time of
the redemption hereunder.
Subject to the limitations contained in Article VI.G, if the
Corporation fails to pay the Mandatory Redemption Amount for each share within
five (5) business days of written notice that such amount is due and payable,
then each holder of Series D Preferred Stock shall have the right at any time,
so long as the Mandatory Redemption Event continues to require the Corporation,
upon written notice, to immediately issue (in accordance with the terms of
Article VI below), in lieu of the Mandatory Redemption Amount, with respect to
each outstanding share of Series D Preferred Stock held by such holder, the
number of shares of Common Stock of the Corporation equal to the Mandatory
Redemption Amount divided by the Conversion Price then in effect.
VI. Conversion at the Option of the Holder
--------------------------------------
A. Each holder of shares of Series D Preferred Stock may, at its
option at any time and from time to time (whether or not the Corporation has
sent an Optional Conversion Notice to the holders of Series D Preferred Stock
pursuant to Article V.C.), upon surrender of the certificates therefor, convert
any or all of its shares of Series D Preferred Stock into Common Stock as
follows (an "Optional Conversion"). Each share of Series D Preferred Stock
shall be convertible into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing (x) the sum of (I) the Stated Value
thereof, plus (II) unless the Corporation has timely redeemed such Premium in
cash in accordance with Article V.A, an amount equal to eight percent (8%) per
annum of such Stated Value for the period beginning on the date of issuance of
such share and ending on the Conversion Date (the "Premium"), by (y) the then
effective Conversion Price (as defined below); provided, however, that in no
event shall holders of shares of Series D Preferred Stock be entitled to convert
any such shares in excess of that number of shares upon conversion of which the
sum of (x) the number of shares of Common Stock beneficially owned by the holder
and its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
shares of Series D Preferred Stock and the unexercised portion of the Warrants)
and (y) the number of shares of Common Stock issuable upon the conversion of the
shares of Series D Preferred Stock with respect to which the determination of
this proviso is being made would result
-6-
<PAGE>
in beneficial ownership by the holder and its affiliates of more than 4.9% of
the outstanding shares of Common Stock. For purposes of the second proviso to
the immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13 D-G thereunder, except as otherwise provided in
clause (x) of such proviso.
B. The "Conversion Price" shall be the lesser of (i) the Applicable
Percentage (as hereinafter defined) of the average of the closing bid prices for
the Common Stock on the NASDAQ National Market ("NASDAQ"), or on the principal
securities exchange or other securities market on which the Common Stock is then
being traded, for the five (5) consecutive Trading Days (as defined below)
ending one Trading Day prior to the date (the "Conversion Date") the Conversion
Notice is sent by a holder to the Corporation via facsimile (the "Variable
Conversion Price"), and (ii) the average of the closing bid prices for the
Common Stock on NASDAQ for the five (5) consecutive Trading Days ending on the
Closing Date under the Purchase Agreement (the "Closing Date") (the "Fixed
Conversion Price") (subject to equitable adjustments from time to time pursuant
to the antidilution provisions of Article VI.C. below). Applicable Percentage
means (i) 100%, if the Conversion Date is within forty (40) days after the
Closing Date, and (ii) 90%, if the Conversion Date is within eighty (80) days,
but more than forty (40) days, after the Closing Date, and (iii) 75%, if the
Conversion Date is more than eighty (80) days after the Closing Date.
C. The Conversion Price shall be subject to adjustment from time to
time as follows:
(a) Adjustment to Fixed Conversion Price Due to Stock Split, Stock
--------------------------------------------------------------
Dividend, Etc. If at any time when the Series D Preferred Stock is issued and
- --------------
outstanding, the number of outstanding shares of Common Stock is increased by a
stock split, stock dividend, or other similar event, the Fixed Conversion Price
shall be proportionately reduced, or if the number of outstanding shares of
Common Stock is decreased by a reverse stock split, combination or
reclassification of shares, or other similar event, the Fixed Conversion Price
shall be proportionately increased. In such event the Corporation shall notify
the Transfer Agent of such change on or before the effective date thereof.
(b) Adjustment to Variable Conversion Price. If at any time when
----------------------------------------
Series D Preferred Stock is issued and outstanding, the number of outstanding
shares of Common Stock is increased or decreased by a stock split, stock
dividend, combination, reclassification or other similar event, which event
shall have taken place during the reference period for determination of the
Conversion Price for any Optional Conversion or Mandatory Conversion of the
Series D Preferred Stock, then the Variable Conversion Price shall be calculated
giving appropriate effect to the stock split, stock dividend, combination,
reclassification or other similar event for all five (5) Trading Days
immediately preceding the Conversion Date.
-7-
<PAGE>
(c) Adjustment Due to Merger, Consolidation, Etc. If, at any time
---------------------------------------------
when Series D Preferred Stock is issued and outstanding and prior to the
conversion of all Series D Preferred Stock, there shall be (i) any
reclassification or change of the outstanding shares of Common Stock (other than
a change in par value, or from par value to no par value, or from no par value
to par value, or as a result of a subdivision or combination), (ii) any
consolidation or merger of the Corporation with any other corporation (other
than a merger in which the Corporation is the surviving or continuing
corporation and its capital stock is unchanged), (iii) any sale or transfer of
all or substantially all of the assets of the Corporation or (iv) any share
exchange pursuant to which all of the outstanding shares of Common Stock are
converted into other securities or property, then the holders of Series D
Preferred Stock shall, upon being given at least thirty (30) days prior written
notice of such transaction, thereafter have the right to purchase and receive
upon conversion of Series D Preferred Stock, upon the basis and upon the terms
and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such shares of stock and/or
securities or other property as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
purchasable and receivable upon the conversion of Series D Preferred Stock held
by such holders had such merger, consolidation, exchange of shares,
recapitalization, reorganization or other similar event not taken place and in
any such case appropriate provisions shall be made with respect to the rights
and interests of the holders of the Series D Preferred Stock to the end that the
provisions hereof (including, without limitation, provisions for adjustment of
the Conversion Price and of the number of shares issuable upon conversion of the
Series D Preferred Stock) shall thereafter be applicable, as nearly as may be
practicable in relation to any shares of stock or securities thereafter
deliverable upon the conversion thereof. The Corporation shall not effect any
transaction described in this subsection (c) unless (i) each holder of Series D
Preferred Stock has received written notice of such transaction at least thirty
(30) days prior thereto and in no event later than ten (10) days prior to the
record date for the determination of shareholders entitled to vote with respect
thereto, and (ii) the provisions of this paragraph have been complied with. The
above provisions shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
(d) No Fractional Shares. If any adjustment under this Article VI.C.
---------------------
would create a fractional share of Common Stock or a right to acquire a
fractional share of Common Stock, such fractional share shall be disregarded and
the number of shares of Common Stock issuable upon conversion shall be the next
higher number of shares.
D. In order to convert Series D Preferred Stock into full shares of
Common Stock, a holder shall: (i) fax a copy of the fully executed notice of
conversion in the form attached hereto ("Notice of Conversion") to the
Corporation at the office of the Corporation for the Series D Preferred Stock
that the holder elects to convert the same, which notice shall specify the
number of shares of Series D Preferred Stock to be converted, the applicable
Conversion Price and a calculation of the number of shares of Common Stock
issuable upon such conversion (together with a copy of the first page of each
certificate to be converted) prior to Midnight, New York City time (the
"Conversion Notice Deadline") on the date of conversion specified on the
-8-
<PAGE>
Notice of Conversion; and (ii) surrender the original certificates representing
the Series D Preferred Stock being converted (the "Preferred Stock
Certificates"), duly endorsed, along with a copy of the Notice of Conversion as
soon as practicable thereafter to the office of the Corporation for the Series D
Preferred Stock; provided, however, that the Corporation shall not be obligated
to issue certificates evidencing the shares of Common Stock issuable upon such
conversion unless either the Preferred Stock Certificates are delivered to the
Corporation as provided above, or the holder notifies the Corporation that such
certificates have been lost, stolen or destroyed (subject to the requirements of
subparagraph (a) below). In the case of a dispute as to the calculation of the
Conversion Price, the Corporation shall promptly issue such number of shares of
Common Stock that are not disputed in accordance with subparagraph (b) below.
The Corporation shall submit the disputed calculations to its outside accountant
via facsimile within three (3) business days of receipt of the Notice of
Conversion. The accountant shall audit the calculations and notify the
Corporation and the holder of the results no later than 48 hours from the time
it receives the disputed calculations. The accountant's calculation shall be
deemed conclusive absent manifest error.
(a) Lost or Stolen Certificates. Upon receipt by the Corporation of
----------------------------
evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificates representing shares of Series D Preferred Stock, and (in the case
of loss, theft or destruction) of indemnity or security reasonably satisfactory
to the Corporation, and upon surrender and cancellation of the Preferred Stock
Certificate(s), if mutilated, the Corporation shall execute and deliver new
Preferred Stock Certificate(s) of like tenor and date. However, the Corporation
shall not be obligated to reissue such lost or stolen Preferred Stock
Certificate(s) if the holder contemporaneously requests the Corporation to
convert such Series D Preferred Stock.
(b) Delivery of Common Stock Upon Conversion. Upon the surrender of
-----------------------------------------
certificates as described above from a holder of Series D Preferred Stock
accompanied by a Notice of Conversion, the Corporation shall issue and, within
two (2) business days (the "Delivery Period") after such surrender (or, in the
case of lost, stolen or destroyed certificates, after provision of agreement and
indemnification pursuant to subparagraph (a) above), deliver to or upon the
order of the holder (i) that number of shares of Common Stock for the portion of
the shares of Series D Preferred Stock converted as shall be determined in
accordance herewith and (ii) a certificate representing the balance of the
shares of Series D Preferred Stock not converted, if any. In addition to any
other remedies available to the holder, including actual damages and/or
equitable relief, the Corporation shall pay to a holder $250 in cash for the
first day beyond such Delivery Period that the Corporation fails to deliver
Common Stock issuable upon surrender of shares of Series D Preferred Stock with
a Notice of Conversion and $500 per day in cash for each day thereafter until
such time as the earlier of the date that the Corporation has delivered all such
Common Stock and the tenth day beyond such Delivery Period. Such cash amount
shall be paid to such holder by the fifth day of the month following the month
in which it has accrued. In the event the Corporation fails to deliver such
Common Stock prior to the expiration of the ten (10) business day period after
the Delivery Period for any reason (whether due to a requirement of law or a
stock exchange or otherwise), such holder shall be entitled to (in addition to
any other
-9-
<PAGE>
remedies available to the holder) Conversion Default Payments in accordance with
Article VI.E. hereof beginning on the expiration of such ten (10) business day
period.
(c) No Fractional Shares. If any conversion of Series D Preferred
---------------------
Stock would result in a fractional share of Common Stock or the right to acquire
a fractional share of Common Stock, such fractional share shall be disregarded
and the number of shares of Common Stock issuable upon conversion of the Series
D Preferred Stock shall be the next higher number of shares.
(d) Conversion Date. The "Conversion Date" shall be the date
----------------
specified in the Notice of Conversion, provided (i) that the advance copy of the
Notice of Conversion is faxed to the Corporation before Midnight, New York City
time, on the Conversion Date, and (ii) that the original Preferred Stock
Certificate(s), duly endorsed, are surrendered along with a copy of the Notice
of Conversion as soon as practicable thereafter to the office of the Corporation
or the Transfer Agent for the Series D Preferred Stock. The person or persons
entitled to receive the shares of Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such securities as
of the Conversion Date and all rights with respect to the shares of Series D
Preferred Stock surrendered shall forthwith terminate except the right to
receive the shares of Common Stock or other securities or property issuable on
such conversion.
E. A number of shares of the authorized but unissued Common Stock
sufficient to provide for the conversion of the Series D Preferred Stock
outstanding at the then current Conversion Price shall at all times be reserved
by the Corporation, free from preemptive rights, for such conversion or
exercise. If the Corporation shall issue any securities or make any change in
its capital structure which would change the number of shares of Common Stock
into which each share of the Series D Preferred Stock shall be convertible at
the then current Conversion Price, the Corporation shall at the same time also
make proper provision so that thereafter there shall be a sufficient number of
shares of Common Stock authorized and reserved, free from preemptive rights, for
conversion of the outstanding Series D Preferred Stock on the new basis. If, at
any time a holder of shares of Series D Preferred Stock submits a Conversion
Notice, the Corporation does not have sufficient authorized but unissued shares
of Common Stock available to effect such conversion in accordance with the
provisions of this Article VI (a "Conversion Default"), the Corporation shall
issue to the holder all of the shares of Common Stock which are available to
effect such conversion (including, with the Holder's written consent, any shares
underlying outstanding Warrants ("Borrowed Shares")). The number of shares of
Series D Preferred Stock included in the Notice of Conversion which exceeds the
amount which is then convertible into available shares of Common Stock
(including Borrowed Shares, if any) (the "Excess Amount") shall, notwithstanding
anything to the contrary contained herein, not be convertible into Common Stock
in accordance with the terms hereof until (and at the holder's option at any
time after) the date additional shares of Common Stock are authorized by the
Corporation to permit such conversion, at which time the Conversion Price in
respect thereof shall be the lesser of (i) the Conversion Price on the
Conversion Date Default (as defined below) and
-10-
<PAGE>
(ii) the Conversion Price on the Conversion Date elected by the holder in
respect thereof. The Corporation shall pay to the holder payments ("Conversion
Default Payments") for a Conversion Default in the amount of (N/365), multiplied
by the sum of the Stated Value with respect to each share of Series D Preferred
Stock, multiplied by the Default Amount (as defined below) on the first day of
the Conversion Default (the "Conversion Default Date"), multiplied by .25, where
(i) N = the number of days from the Conversion Default Date to the earlier of
(A) the date (the "Authorization Date") that the Corporation authorizes a
sufficient number of shares of Common Stock to effect conversion of the full
number of shares of Series D Preferred Stock and (B) the date such share of
Series D Preferred Stock is redeemed in accordance with Article VI.D. and (ii)
"Default Amount" means the Excess Amount plus the number of shares of Series D
Preferred Stock that would not be convertible as a result of this Article VI.E
but for the Borrowed Shares. The Corporation shall send notice to the holder of
the authorization of additional shares of Common Stock, the Authorization Date
and the amount of holder's accrued Conversion Default Payments. The accrued
Conversion Default Payments for each calendar month shall be paid in cash or,
subject to the limitations contained in Article VI.G, shall be convertible into
Common Stock at the Conversion Price, at the holder's option, as follows:
(a) In the event holder elects to take such payment in cash, cash
payment shall be made to holder by the fifth day of the month following the
month in which it has accrued; and
(b) In the event holder elects to take such payment in Common Stock,
the holder may convert such payment amount into Common Stock at the Conversion
Price (as in effect at the time of Conversion) at any time after the fifth day
of the month following the month in which it has accrued in accordance with the
terms of this Article VI.
Nothing herein shall limit the holder's right to pursue actual damages for the
Corporation's failure to maintain a sufficient number of authorized shares of
Common Stock, and each holder shall have the right to pursue all remedies
available at law or in equity (including a decree of specific performance and/or
injunctive relief).
F. Upon the occurrence of each adjustment or readjustment of the
Conversion Price pursuant to this Article VI, the Corporation, at its expense,
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of Series D Preferred Stock
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of Series
D Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustment or readjustment, (ii) the
Conversion Price at the time in effect and (iii) the number of shares of Common
Stock and the amount, if any, of other securities or property which at the time
would be received upon conversion of a share of Series D Preferred Stock.
-11-
<PAGE>
G. Notwithstanding anything contained herein to the contrary, in no event
shall the aggregate number of shares of Common Stock issuable upon conversion or
redemption of, or otherwise issuable with respect to, all of the Series D
Preferred Stock issued by the Corporation pursuant to the Purchase Agreement
(including, without limitation, all shares of Common Stock issued with respect
to such Series D Preferred Stock pursuant to Article V.D and Article VI.E
hereof, but without taking into account any shares of Common Stock issuable upon
exercise of Warrants) plus all shares of Common Stock issuable pursuant to
Section 2(c) of the Registration Rights Agreement exceed 2,424,884 (subject to
equitable adjustments from time to time pursuant to the antidilution provisions
of Article VI.C. above). In the event the Corporation is prohibited from
issuing shares of Common Stock as a result of the operation of this Article
VI.G., the provisions of Article V.D., subparagraph (b) of Article VI.D. and
Article VI.E. shall apply to the extent applicable.
VII. Mandatory Conversion
--------------------
Each share of Series D Preferred Stock issued and outstanding on May 15,
2001, automatically shall be converted into shares of Common Stock on such date
at the then effective Conversion Price in accordance with the provisions of
Article VI hereof (the "Mandatory Conversion").
VIII. Voting Rights
-------------
The holders of the Series D Preferred Stock have no voting power
whatsoever, except as otherwise provided by the Delaware General Corporation Law
("DGCL"), and in this Article VIII, and in Article IX below.
Notwithstanding the above, the Corporation shall provide each holder of
Series D Preferred Stock with prior notification of any meeting of the
shareholders (and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Corporation of a record of its
shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed sale, lease or conveyance
of all or substantially all of the assets of the Corporation, or any proposed
liquidation, dissolution or winding up of the Corporation, the Corporation shall
mail a notice to each holder, at least ten (10) days prior to the record date
specified therein (or 30 days prior to the consummation of the transaction or
event, whichever is earlier), of the date on which any such record is to be
taken for the purpose of such dividend, distribution, right or other event, and
a brief statement regarding the amount and character of such dividend,
distribution, right or other event to the extent known at such time.
-12-
<PAGE>
To the extent that under the DGCL the vote of the holders of the Series D
Preferred Stock, voting separately as a class or series as applicable, is
required to authorize a given action of the Corporation, the affirmative vote or
consent of the holders of at least a majority of the shares of the Series D
Preferred Stock represented at a duly held meeting at which a quorum is present
or by written consent of a majority of the shares of Series D Preferred Stock
(except as otherwise may be required under the DGCL) shall constitute the
approval of such action by the class. To the extent that under the DGCL holders
of the Series D Preferred Stock are entitled to vote on a matter with holders of
Common Stock, voting together as one class, each share of Series D Preferred
Stock shall be entitled to a number of votes equal to the number of shares of
Common Stock into which it is then convertible using the record date for the
taking of such vote of shareholders as the date as of which the Conversion
Price is calculated. Holders of the Series D Preferred Stock shall be entitled
to notice of (and copies of proxy materials and other information sent to
shareholders) all shareholder meetings or written consents with respect to which
they would be entitled to vote, which notice would be provided pursuant to the
Corporation's by-laws and the DGCL.
IX. Protection Provision
--------------------
So long as shares of Series D Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval (by vote or written
consent, as provided by the DGCL) of the holders of at least a majority of the
then outstanding shares of Series D Preferred Stock:
(a) alter or change the rights, preferences or privileges of the
Series D Preferred Stock or any other class or series of capital stock of the
Corporation so as to affect adversely the Series D Preferred Stock;
(b) create any new class or series of capital stock having a
preference over the Series D Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation ("Senior Securities");
(c) create any new class or series of capital stock ranking pari passu
---- -----
with the Series D Preferred Stock as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation (as previously defined in Article
II hereof, "Pari Passu Securities");
---- -----
(d) increase the authorized number of shares of Series D Preferred
Stock.
(e) do any act or thing not authorized or contemplated by this
Certificate of Designation which would result in taxation of the holders of
shares of the Series D Preferred Stock under Section 305 of the Internal Revenue
Code of 1986, as amended (or any comparable provision of the Internal Revenue
Code as hereafter from time to time amended); or
-13-
<PAGE>
(f) issue after the Closing Date any Senior Securities or Pari
----
Passu Securities (other than Common Stock).
- -----
In the event holders of at least a majority of the then outstanding shares
of Series D Preferred Stock agree to allow the Corporation to alter or change
the rights, preferences or privileges of the shares of Series D Preferred Stock,
pursuant to subsection (a) above, so as to affect the Series D Preferred Stock,
then the Corporation will deliver notice of such approved change to the holders
of the Series D Preferred Stock that did not agree to such alteration or change
(the "Dissenting Holders") and Dissenting Holders shall have the right for a
period of twenty (20) days to convert pursuant to the terms of this Certificate
of Designation as they exist prior to such alteration or change or continue to
hold their shares of Series D Preferred Stock.
X. Notices
-------
Each holders of Series D Preferred Stock shall send a copy of all notices
to be given to the Corporation under this Certificate of Designation to such one
(1) counsel as the Corporation may designate in writing at least five (5)
business days prior to such holder sending such notice. For purposes of this
Article X, the initial counsel designated by the Corporation for receiving
copies of notices under this Certificate of Designation shall be Jackson, Tufts,
Cole & Black LLP, 60 South Market Street, San Jose, California 95113, Attention:
Richard Scudellari, Telecopier (408) 998-4889.
IN WITNESS WHEREOF, this Certificate of Designations, Right and Preferences
is executed on behalf of the Corporation this 14th day of May, 1996.
OXIS INTERNATIONAL, INC.
By: /s/ RAY R. ROGERS
-------------------------------------
Chairman
-14-
<PAGE>
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series D Preferred Stock)
The undersigned hereby irrevocably elects to convert shares of Series D
Preferred Stock, represented by stock certificate No(s). (the "Preferred Stock
Certificates") into shares of common stock ("Common Stock") of Oxis
International, Inc. (the "Corporation") according to the conditions of the
Certificate of Designation of Series D Preferred Stock, as of the date written
below. If securities are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates. No fee will be charged to
the Holder for any conversion, except for transfer taxes, if any. A copy of
each Preferred Stock Certificate is attached hereto (or evidence of loss, theft
or destruction thereof).
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable to the undersigned upon conversion of the
Series D Preferred Stock shall be made pursuant to registration of the
securities under the Securities Act of 1933, as amended (the "Act"), or pursuant
to an exemption from registration under the Act.
Date of Conversion:____________________________
Applicable Conversion Price:___________________
Number of Shares of
Common Stock to be Issued:_____________________
Signature:_____________________________________
Name:__________________________________________
Address:_______________________________________
*The Corporation is not required to issue shares of Common Stock until the
original Series D Preferred Stock Certificate(s) (or evidence of loss, theft or
destruction thereof) to be converted are received by the Corporation or its
Transfer Agent. The Corporation shall issue and deliver shares of Common Stock
to an overnight courier not later than two (2) business days following receipt
of the original Preferred Stock Certificate(s) to be converted, and shall make
payments
<PAGE>
pursuant to the Certificate of Designation for the number of business days such
issuance and delivery is late.
-16-
<PAGE>
EXHIBIT 99.4
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN A SECURITIES
PURCHASE AGREEMENT DATED AS OF MAY 15, 1996, NEITHER THIS WARRANT NOR
ANY OF SUCH SHARES MAY BE SOLD, OFFERED FOR SALE, ASSIGNED,
TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION
UNDER SUCH ACT OR AN OPINION OF COUNSEL THAT REGISTRATION IS NOT
REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
SUCH ACT. ANY SUCH SALE, ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH
APPLICABLE STATE SECURITIES LAWS.
Right to
Warrant Purchase
No. ___ _______
Shares of
Common Stock,
par value $.50
per share
OXIS INTERNATIONAL, INC.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Capital Ventures International or
its registered assigns, is entitled to purchase from OXIS International, Inc., a
Delaware corporation (the "Company"), at any time or from time to time during
the period specified in Paragraph 2 hereof, ____________________ (_______) fully
paid and nonassessable shares of the Company's Common Stock par value $.50 per
share (the "Common Stock"), at a price per share equal to $3.0859375 (the
"Exercise Price"). The term "Warrant Shares", as used herein, refers to the
shares of Common Stock purchasable hereunder. The Warrant Shares and the
Exercise Price are subject to adjustment as provided in Paragraph 4 hereof. The
term Warrants means this Warrant and the other warrants of the Company issued
pursuant to that certain Securities Purchase Agreement dated as of May 15, 1996,
by and between the Company and the Buyer listed on the execution page thereof
(the "Securities Purchase Agreement").
This Warrant is subject to the following terms, provisions, and conditions:
<PAGE>
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
----------------------------------------------------------------
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) if the resale of the Warrant
Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), delivery to the Company of a written notice of an election to
effect a "Cashless Exercise" (as defined in Section 11(c) below) for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Exercise Agreement
shall have been deliv ered, and payment shall have been made for such shares as
set forth above. Certificates for the Warrant Shares so purchased, representing
the aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding two (2)
business days, after this Warrant shall have been so exercised. The
certificates so delivered shall be in such denominations as may be requested by
the holder hereof and shall be registered in the name of such holder or such
other name as shall be designated by such holder. If this Warrant shall have
been exercised only in part, then, unless this Warrant has expired, the Company
shall, at its expense, at the time of delivery of such certificates, deliver to
the holder a new Warrant representing the number of shares with respect to which
this Warrant shall not then have been exercised.
Notwithstanding anything in this Warrant to the contrary, in no event
shall the Holder of this Warrant be entitled to exercise a number of Warrants
(or portions thereof) in excess of the number of Warrants (or portions thereof)
upon exercise of which the sum of (i) the number of shares of Common Stock
beneficially owned by the Holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the ownership of the
unexercised Warrants and the unconverted portion of the Company's Series D
Convertible Preferred Stock (the "Preferred Stock")) and (ii) the number of
shares of Common Stock issuable upon exercise of the Warrants (or portions
thereof) with respect to which the determination described herein is being made,
would result in beneficial ownership by the Holder and its affiliates of more
than 4.9% of the outstanding shares of Common Stock. For purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D-G thereunder (collectively, "Section 13(d)"), except
as otherwise provided in clause (i) thereof.
-2-
<PAGE>
2. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from
------------------
time to time on or after the date on which this Warrant is issued and before
5:00 p.m., New York City time on the fifth (5th) anniversary of the date of
issuance (the "Exercise Period").
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
---------------------------------
agrees as follows:
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon issuance
-----------------------
in accordance with the terms of this Warrant, be validly issued, fully
paid, and nonassessable and free from all taxes, liens, and charges with
respect to the issue thereof.
(b) RESERVATION OF SHARES. During the Exercise Period, the Company
---------------------
shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of
Common Stock to provide for the exercise of this Warrant.
(c) LISTING. The Company shall promptly secure the listing of the
-------
shares of Common Stock issuable upon exercise of the Warrant upon each
national securities exchange or automated quotation system, if any, upon
which shares of Common Stock are then listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all shares
of Common Stock from time to time issuable upon the exercise of this
Warrant; and the Company shall so list on each national securities exchange
or automated quotation system, as the case may be, and shall maintain such
listing of, any other shares of capital stock of the Company issuable upon
the exercise of this Warrant if and so long as any shares of the same class
shall be listed on such national securities exchange or automated quotation
system.
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment
--------------------------
of its charter or through any reorganization, transfer of assets,
consolidation, mer ger, dissolution, issue or sale of securities, or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed by it
hereunder, but will at all times in good faith assist in the carrying out
of all the provisions of this Warrant and in the taking of all such action
as may reasonably be requested by the holder of this Warrant in order to
protect the exercise privilege of the holder of this Warrant consistent
with the tenor and purpose of this Warrant. Without limiting the
generality of the foregoing, the Company (i) will not increase the par
value of any shares of Common Stock receivable upon the exercise of this
Warrant above the Exercise Price then in
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<PAGE>
effect, and (ii) will take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of Common Stock upon the exercise of this
Warrant.
(e) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any
----------------------
entity succeeding to the Company by merger, consolidation, or acquisition
of all or sub stantially all the Company's assets.
4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise
-----------------------
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Paragraph 4.
In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up to the
nearest cent.
(a) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON ISSUANCE OF
------------------------------------------------------------------
COMMON STOCK. Except as otherwise provided in Paragraphs 4(c) and 4(e)
------------
hereof, if and whenever on or after the date of issuance of this Warrant,
the Company issues or sells, or in accordance with Paragraph 4(b) hereof is
deemed to have issued or sold, any shares of Common Stock for no
consideration or for a consideration per share (before deduction of
reasonable expenses or commissions or underwriting discounts or allowances
in connection therewith) less than the Market Price (as hereinafter
defined) on the date of issuance (a "Dilutive Issuance"), then effective
immediately upon the Dilutive Issuance, the Exercise Price will be reduced
to a price determined by multiplying the Exercise Price in effect
immediately prior to the Dilutive Issuance by a fraction, (i) the numerator
of which is an amount equal to the sum of (x) the aggregate number of
shares of Common Stock actually outstanding (as hereinafter defined)
immediately prior to the Dilutive Issuance, plus (y) the aggregate
consideration, calculated as set forth in Section 4(b) hereof, received by
the Company upon such Dilutive Issuance, divided by the Market Price in
effect immediately prior to the Dilutive Issuance, and (ii) the denominator
of which is the aggregate number of shares of Common Stock Deemed
Outstanding immediately after the Dilutive Issuance.
(b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
------------------------------------------
determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner
-----------------------------
issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or
-4-
<PAGE>
other securities convertible into or exchangeable for Common Stock
("Convertible Securities") (such warrants, rights and options to purchase
Common Stock or Convertible Securities are hereinafter referred to as
"Options") and the price per share for which Common Stock is issuable upon
the exercise of such Options is less than the Market Price on the date of
issuance, then the maximum total number of shares of Common Stock issuable
upon the exercise of all such Options will, as of the date of the issuance
or grant of such Options, be deemed to be outstanding and to have been
issued and sold by the Company for such price per share. For purposes of
the preceding sentence, the "price per share for which Common Stock is
issuable upon the exercise of such Options" is determined by dividing (i)
the total amount, if any, received or receivable by the Company as
consideration for the issuance or granting of all such Options, plus the
minimum aggregate amount of additional consideration, if any, payable to
the Company upon the exercise of all such Options, plus, in the case of
Convertible Securities issuable upon the exercise of such Options, the
minimum aggregate amount of additional consideration payable upon the
conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total number
of shares of Common Stock issuable upon the exercise of all such Options
(assuming full conversion of Convertible Securities, if applicable). No
further adjustment to the Exercise Price will be made upon the actual
issuance of such Common Stock upon the exercise of such Options or upon the
conversion or exchange of Convertible Securities issuable upon exercise of
such Options.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
----------------------------------
manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon the
exercise of Options) and the price per share for which Common Stock is
issuable upon such conversion or exchange is less than the Market Price on
the date of issuance, then the maximum total number of shares of Common
Stock issuable upon the conversion or exchange of all such Convertible
Securities will, as of the date of the issuance of such Convertible
Securities, be deemed to be outstanding and to have been issued and sold by
the Company for such price per share. For the purposes of the preceding
sentence, the "price per share for which Common Stock is issuable upon such
conversion or exchange" is determined by dividing (i) the total amount, if
any, received or receivable by the Company as consideration for the
issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the
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<PAGE>
Company upon the conversion or exchange thereof at the time such
Convertible Securities first become convertible or exchangeable, by
(ii) the maximum total number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities. No further
adjustment to the Exercise Price will be made upon the actual issuance of
such Common Stock upon conversion or exchange of such Convertible
Securities.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
-----------------------------------------
change at any time in (i) the amount of additional consideration payable to
the Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion or
exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common
Stock (other than under or by reason of provisions designed to protect
against dilution), the Exercise Price in effect at the time of such change
will be readjusted to the Exercise Price which would have been in effect at
such time had such Options or Convertible Securities still outstanding
provided for such changed additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or sold.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
--------------------------------------------------------
SECURITIES. If, in any case, the total number of shares of Common Stock
----------
issuable upon exercise of any Option or upon conversion or exchange of any
Convertible Securities is not, in fact, issued and the rights to exercise
such Option or to convert or exchange such Convertible Securities shall
have expired or terminated, the Exercise Price then in effect will be
readjusted to the Exercise Price which would have been in effect at the
time of such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such expiration
or termination (other than in respect of the actual number of shares of
Common Stock issued upon exercise or conversion thereof), never been
issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
-------------------------------------
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the
amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable
expenses paid or incurred by the Company in connection with
-6-
<PAGE>
such issuance, grant or sale. In case any Common Stock, Options or
Convertible Securities are issued or sold for a consideration part or all
of which shall be other than cash, the amount of the consideration other
than cash received by the Company will be the fair value of such
consideration, except where such consideration consists of securities, in
which case the amount of consideration received by the Company will be the
Market Price thereof as of the date of receipt. In case any Common Stock,
Options or Convertible Securities are issued in connection with any merger
or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair value of
such portion of the net assets and business of the non-surviving
corporation as is attributable to such Common Stock, Options or Convertible
Securities, as the case may be. The fair value of any consideration other
than cash or securities will be determined in good faith by the Board of
Directors of the Company.
(vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment
------------------------------------------
to the Exercise Price will be made (i) upon the exercise of any warrants,
options or convertible securities issued and outstanding on May 14, 1996;
(ii) upon the grant or exercise of any stock or options which may hereafter
be granted or exercised under any employee benefit plan of the Company now
existing or to be implemented in the future, so long as the issuance of
such stock or options is approved by a majority of the non-employee members
of the Board of Directors of the Company or a majority of the members of a
committee of non-employee directors established for such purpose;
(iii) upon the exercise of the Warrants or issuance or conversion of the
Preferred Stock; or (iv) that will result in the Exercise Price declining
below $2.46875 (subject to equitable adjustments from time to time pursuant
to the antidilution provisions of Section 4(c) hereof).
(c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at any
------------------------------------------
time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date
of record for effecting such subdivision, the Exercise Price in effect
immediately prior to such subdivision will be proportionately reduced. If
the Company at any time combines (by reverse stock split, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a smaller number of shares, then, after the date
of record for effecting such combination, the Exercise Price in effect
immediately prior to such combination will be proportionately increased.
-7-
<PAGE>
(d) [Intentionally Omitted.]
(e) CONSOLIDATION, MERGER OR SALE. In case of any consolidation of
-----------------------------
the Company with, or merger of the Company into any other corporation, or
in case of any sale or conveyance of all or substantially all of the assets
of the Company other than in connection with a plan of complete liquidation
of the Company, then as a condition of such consolidation, merger or sale
or conveyance, adequate provision will be made whereby the holder of this
Warrant will have the right to acquire and receive upon exercise of this
Warrant in lieu of the shares of Common Stock immediately theretofore
acquirable upon the exercise of this Warrant, such shares of stock,
securities or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of this Warrant had such
consolidation, merger or sale or conveyance not taken place. In any such
case, the Company will make appropriate provision to insure that the
provisions of this Paragraph 4 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities
thereafter deliverable upon the exercise of this Warrant. The Company will
not effect any consolidation, merger or sale or conveyance unless prior to
the consummation thereof, the successor corporation (if other than the
Company) assumes by written instrument the obligations under this Paragraph
4 and the obligations to deliver to the holder of this Warrant such shares
of stock, securities or assets as, in accordance with the foregoing
provisions, the holder may be entitled to acquire.
(f) DISTRIBUTION OF ASSETS. In case the Company shall declare or make
----------------------
any distribution of its assets to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise, then, after
the date of record for determining stockholders entitled to such
distribution, but prior to the date of distribution, the holder of this
Warrant shall be entitled upon exercise of this Warrant for the purchase of
any or all of the shares of Common Stock subject hereto, to receive the
amount of such assets which would have been payable to the holder had such
holder been the holder of such shares of Common Stock on the record date
for the determination of stockholders entitled to such distribution.
(g) NOTICE OF ADJUSTMENT. Upon the occurrence of any event which
--------------------
requires any adjustment of the Exercise Price, then, and in each such case,
the Company shall give notice thereof to the holder of this Warrant, which
notice shall state the Exercise Price resulting from such adjustment,
setting forth in reasonable detail the method of calculation and the facts
upon which such calculation is based. Such calculation shall be certified
by the chief financial officer of the Company.
-8-
<PAGE>
(h) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
------------------------------------
Exercise Price shall be made in an amount of less than 1% of the Exercise
Price in effect at the time such adjustment is otherwise required to be
made, but any such lesser adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment which,
together with any adjustments so carried forward, shall amount to not less
than 1% of such Exercise Price.
(i) NO FRACTIONAL SHARES. No fractional shares of Common Stock are to
--------------------
be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price of a
share of Common Stock on the date of such exercise.
(j) OTHER NOTICES. In case at any time:
-------------
(i) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of retained
earnings) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class
or other rights;
(iii) there shall be any capital reorganization of the Company,
or reclassification of the Common Stock, or consolidation or merger of the
Company with or into, or sale of all or substantially all its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the
date on which the holders of Common Stock shall be entitled to receive such
dividend,
-9-
<PAGE>
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least fifteen
(15) days prior to the record date or the date on which the Company's books are
closed in respect thereto. Failure to give any such notice or any defect
therein shall not affect the validity of the proceedings referred to in clauses
(i), (ii), (iii) and (iv) above.
(k) INTENTIONALLY OMITTED
(l) CERTAIN DEFINITIONS.
-------------------
(i) "Common Stock Deemed Outstanding" shall mean the number of
-------------------------------
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) in the case of
Paragraph 4(b)(i) hereof, the maximum total number of shares of Common
Stock issuable upon the exercise of the Options issued in the transaction
for which the adjustment is required under this Section 4, calculated as of
the date of such issuance or grant of such Options, if any, and (y) in the
case of Paragraph 4(b)(ii) hereof, the maximum total number of shares of
Common Stock issuable upon conversion or exchange of the Convertible
Securities issued in the transaction for which the adjustment is required
under this Section 4, calculated, as of the date of issuance of such
Convertible Securities, if any.
(ii) "Market Price," as of any date, (i) means the average of
-------------
the last reported sale prices for the shares of Common Stock as reported by
the NASDAQ National Market ("NASDAQ") for the ten (10) trading days
immediately preceding such date, or (ii) if NASDAQ is not the principal
trading market for the shares of Common Stock, the average of the last
reported sale prices on the principal trading market for the Common Stock
during the same period, or (iii) if market value cannot be calculated as of
such date on any of the foregoing bases, the Market Price shall be the
average fair market value as reasonably determined in good faith by the
Board of Directors of the Company. The manner of determining the Market
Price of the Common Stock set forth in the foregoing definition shall apply
with respect to any other security in respect of which a determination as
to market value must be made hereunder.
(iii) "Common Stock," for purposes of this Paragraph 4,
------------
includes the Common Stock, par value $.50 per share, and any additional
class of stock of the Company having no preference as to dividends or
distributions
-10-
<PAGE>
on liquidation, provided that the shares purchasable pursuant to this
Warrant shall include only shares of Common Stock, par value $.50 per
share, in respect of which this Warrant is exercisable, or shares resulting
from any subdivision or combination of such Common Stock, or in the case of
any reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Paragraph 4(e) hereof, the stock or other
securities or property provided for in such Paragraph.
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
---------
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
-----------------------------------------
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT.
----------------------------------------------
(a) RESTRICTION ON TRANSFER. This Warrant and the rights granted to
-----------------------
the holder hereof are transferable, in whole or in part, upon surrender of
this Warrant, together with a properly executed assignment in the form
attached hereto, at the office or agency of the Company referred to in
Paragraph 7(e) below, provided, however, that any transfer or assignment
shall be subject to the conditions set forth in Paragraph 7(f) hereof and
to the applicable provisions of the Securities Purchase Agreement. Until
due presentment for registration of transfer on the books of the Company,
the Company may treat the registered holder hereof as the owner and holder
hereof for all purposes, and the Company shall not be affected by any
notice to the contrary. Notwithstanding anything to the contrary contained
herein, the registration rights described in Paragraph 8 are assignable
only in accordance with the provisions of that certain Registration Rights
Agreement, dated as of May 14, 1996, by and among the Company and the other
signatories thereto (the "Registration Rights Agreement").
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant
------------------------------------------------
is exchangeable, upon the surrender hereof by the holder hereof at the
office or agency of the Company referred to in Paragraph 7(e) below, for
new Warrants of
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<PAGE>
like tenor of different denominations representing in the aggregate the
right to purchase the number of shares of Common Stock which may be
purchased hereunder, each of such new Warrants to represent the right to
purchase such number of shares as shall be designated by the holder hereof
at the time of such surrender.
(c) REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
----------------------
satisfactory to the Company of the loss, theft, destruction, or mutilation
of this Warrant and, in the case of any such loss, theft, or destruction,
upon delivery of an affidavit of loss and indemnity agreement reasonably
satisfactory in form and amount to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of this Warrant, the Company,
at its expense, will execute and deliver, in lieu thereof, a new Warrant of
like tenor.
(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this
---------------------------------
Warrant in connection with any transfer, exchange, or replacement as
provided in this Paragraph 7, this Warrant shall be promptly canceled by
the Company. The Company shall pay all taxes (other than securities
transfer taxes) and all other expenses (other than legal expenses, if any,
incurred by the Holder or transferees) and charges payable in connection
with the preparation, execution, and delivery of Warrants pursuant to this
Paragraph 7.
(e) REGISTER. The Company shall maintain, at its principal executive
--------
offices (or such other office or agency of the Company as it may designate
by notice to the holder hereof), a register for this Warrant, in which the
Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee
and each prior owner of this Warrant.
(f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time of
-----------------------------------------
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise,
the Warrant Shares issuable hereunder), shall not be registered under the
Securities Act and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such exercise, transfer, or
exchange, (i) that the holder or transferee of this Warrant, as the case
may be, furnish to the Company a written opinion of counsel, which opinion
and counsel are reasonably acceptable to the Company, to the effect that
such exercise, transfer, or exchange may be made without registration under
said Act and under applicable state securities or blue sky laws, (ii) that
the holder or transferee execute and deliver to the Company an investment
letter in form and substance acceptable to the Company and (iii) that the
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<PAGE>
transferee be an "accredited investor" as defined in Rule 501(a)
promulgated under the Securities Act; provided that no such opinion, letter
or status as an "accredited investor" shall be required in connection with
a transfer pursuant to Rule 144 under the Securities Act; provided further,
however, that no "Subject Holder" (as defined below) may sell or otherwise
transfer the Warrants, except (i) to the Company or to a stockholder or a
group of stockholders who immediately prior to the sale control a majority
of the Company's voting shares (a "Controlling Stockholder" or "Controlling
Group", as applicable); (ii) to an affiliate of such Holder; (iii) in
connection with any merger, consolidation, reorganization or sale of more
than 50% of the outstanding Common Stock of the Company (a
"Reorganization"); (iv) in a registered public offering or a public sale
pursuant to Rule 144 or other applicable exemption from the registration
requirements of the Securities Act (or any successor rule or regulation);
or (v) in a private sale (otherwise than to the Company, to a Controlling
Stockholder or a Controlling Group, to an affiliate of such Holder, or in a
Reorganization), provided that the Holder shall not sell or otherwise
transfer during any ninety (90) day period a portion(s) of the Warrants
which, if converted into Common Stock, would represent, at the time of the
transfer, in the aggregate (together with any other shares of Common Stock
the beneficial ownership of which is transferred), beneficial ownership by
the transferee(s) of more than 4.9% percent of the Common Stock then
outstanding. Subject Holder means any Holder who, but for the provisions
contained in the last paragraph of Section 1, would beneficially own 5% or
more of the outstanding Common Stock of the Borrower. The first holder of
this Warrant, by taking and holding the same, represents to the Company
that such holder is acquiring this Warrant for investment and not with a
view to the distribution thereof. For the purposes of this paragraph,
beneficial ownership shall be determined in accordance with Section 13(d).
8. REGISTRATION RIGHTS.
-------------------
The initial holder of this Warrant (and certain assignees thereof) is
entitled to the benefit of such registration rights in respect of the Warrant
Shares as are set forth in Section 2 of the Registration Rights Agreement
(including, without limitation, Section 2(c) thereof).
9. NOTICES. All notices, requests, and other communications required or
-------
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be
-13-
<PAGE>
personally delivered, or shall be sent by certified or registered mail or by
recognized overnight mail courier, postage prepaid and addressed, to the office
of the Company at 6040 N. Cutter Circle, Suite 317, Portland, Oregon 97217-3935,
Attention: Chief Executive Officer, or at such other address as shall have been
furnished to the holder of this Warrant by notice from the Company. Any such
notice, request, or other communication may be sent by facsimile, but shall in
such case be subsequently confirmed by a writing personally delivered or sent by
certified or registered mail or by recognized overnight mail courier as provided
above. All notices, requests, and other communications shall be deemed to have
been given either at the time of the receipt thereof by the person entitled to
receive such notice (or upon such person's refusal to accept such notice) at the
address of such person for purposes of this Paragraph 9, or, if mailed by
registered or certified mail or with a recognized overnight mail courier upon
deposit with the United States Post Office or such overnight mail courier, if
postage is prepaid and the mailing is properly addressed, as the case may be.
10. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
-------------
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT
REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW. THE PARTIES HERETO
HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS
LOCATED IN PHILADELPHIA, PENNSYLVANIA WITH RESPECT TO ANY DISPUTE ARISING UNDER
THIS WARRANT.
-14-
<PAGE>
11. MISCELLANEOUS.
-------------
(a) AMENDMENTS. This Warrant and any provision hereof may only be
----------
amended by an instrument in writing signed by the Company and the holder
hereof.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the several
--------------------
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions
hereof.
(c) CASHLESS EXERCISE. Notwithstanding anything to the contrary
-----------------
contained in this Warrant, if the resale of the Warrant Shares by the
holder is not then registered pursuant to an effective registration
statement under the Securities Act, this Warrant may be exercised at any
time after August 15, 1996 by presentation and surrender of this Warrant to
the Company at its principal executive offices with a written notice of the
holder's intention to effect a cashless exercise, including a calculation
of the number of shares of Common Stock to be issued upon such exercise in
accordance with the terms hereof (a "Cashless Exercise"). In the event of
a Cashless Exercise, in lieu of paying the Exercise Price in cash, the
holder shall surrender this Warrant for that number of shares of Common
Stock determined by multiplying the number of Warrant Shares to which it
would otherwise be entitled by a fraction, the numerator of which shall be
the difference between the then current Market Price per share of the
Common Stock and the Exercise Price, and the denominator of which shall be
the then current Market Price per share of Common Stock.
-15-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
OXIS INTERNATIONAL, INC.
Warrant By:
No. ___ --------------------------------------
Name:
---------------------------------
Title:
---------------------------------
Agreed to and Accepted
Capital Ventures International
By: Bala International, Inc., as authorized agent
By:
-----------------------------------------------
Name:
--------------------------------------
Its:
--------------------------------------
Dated as of May 15, 1996
-16-
<PAGE>
FORM OF EXERCISE AGREEMENT
Dated: ________, ____.
To:_____________________________
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended, by surrender of securities issued by the
Company (including a portion of the Warrant) having a market value (in the case
of a portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $_________. Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:
Name:____________________________________________
Signature:_______________________________________
Address:_________________________________________
Note: The above signature should correspond
exactly with the name on the face of
the within Warrant.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth hereinbelow, to:
Name of Assignee Address No of Shares
- ---------------- ------- ------------
, and hereby irrevocably constitutes and appoints ______________________________
________________________ as agent and attorney-in-fact to transfer said Warrant
on the books of the within-named corporation, with full power of substitution in
the premises.
Dated: _____________________, ____,
In the presence of
__________________
Name: ____________________________________________
Signature: _________________________________
Title of Signing Officer or Agent (if any):
__________________________________
Address: ___________________________________
___________________________________
Note: The above signature should
correspond exactly with the name
on the face of the within Warrant.
<PAGE>
EXHIBIT 99.5
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of May ___, 1996
by and among OXIS INTERNATIONAL, INC., a Delaware corporation, with headquarters
located at 6040 N. Cutter Circle, Suite 317, Portland, Oregon 97217-3935 (the
"COMPANY"), and the undersigned (together with affiliates, the "INITIAL
INVESTOR").
WHEREAS:
A. In connection with the Securities Purchase Agreement of even date
herewith by and between the Company and the Initial Investor (the "SECURITIES
PURCHASE AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Initial Investor shares
of its Series D Convertible Preferred Stock (the "PREFERRED STOCK") that is
convertible into (i) shares (the "CONVERSION SHARES") of the Company's common
stock (the "COMMON STOCK") and (ii) warrants (the "WARRANTS") to acquire shares
of Common Stock (the "WARRANT SHARES"), upon the terms and subject to the
limitations and conditions set forth in the Certificate of Designations, Rights
and Preferences with respect to such Preferred Stock (the "CERTIFICATE OF
DESIGNATION"); and
B. To induce the Initial Investor to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investor hereby agree as follows:
1. DEFINITIONS.
-----------
a. As used in this Agreement, the following terms shall have the following
meanings:
(i) "INVESTORS" means the Initial Investor and any transferees or
assignees who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
<PAGE>
(ii) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("RULE 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC") .
(iii) "REGISTRABLE SECURITIES" means the Conversion Shares and the
Warrant Shares issued or issuable and any shares of capital stock issued or
issuable as a dividend on or in exchange for or otherwise with respect to any of
the foregoing.
(iv) "REGISTRATION STATEMENT" means a registration statement of the
Company under the 1933 Act.
b. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
------------
a. Mandatory Registration. The Company shall prepare, and, on or prior to
----------------------
the date which is fifteen (15) days after the date of the Closing Date under the
Securities Purchase Agreement (the "CLOSING DATE"), file with the SEC a
Registration Statement on Form S-3 (or, if Form S-3 is not then available, on
such form of Registration Statement as is then available to effect a
registration of the Registrable Securities, subject to the consent of the
Initial Investor (as determined pursuant to Section 11(j) hereof), which consent
will not be unreasonably withheld) covering the resale of the Registrable
Securities (including the Registrable Securities underlying the Warrants), which
Registration Statement, to the extent allowable under the 1933 Act and the Rules
promulgated thereunder (including Rule 416), shall state that such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of the Preferred Stock and exercise
of the Warrants (i) to prevent dilution resulting from stock splits, stock
dividends or similar transactions or (ii) by reason of changes in the Conversion
Price of the Preferred Stock or the Exercise Price of the Warrants in accordance
with the terms thereof. The Registration Statement (and each amendment or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided to (and subject to the approval of) the Initial Investor and
its counsel prior to its filing or other submission.
b. INTENTIONALLY OMITTED
c. Payments by the Company. The Company shall use its best efforts to
-----------------------
obtain effectiveness of the Registration Statement as soon as practicable. If
(i) the Registration Statement(s) covering the Registrable Securities required
to be filed by the Company pursuant to Section 2(a) hereof is not declared
effective by the SEC within ninety (90) days after the Closing Date (other than
by reason of any act or failure to act in a timely manner by the Investors or
Investors counsel, or if the delay relates to issues raised by the SEC arising
from the transaction contemplated
2
<PAGE>
by the Securities Purchase Agreement or is due to a change in the policy,
procedures, interpretations, positions, practice or rules of the SEC made public
after the date hereof so long as the Company is using all commercially
reasonable efforts to achieve the effectiveness of such Registration Statement)
or if, after the Registration Statement has been declared effective by the SEC,
sales cannot be made pursuant to the Registration Statement (by reason of stop
order, or the Company's failure to update the Registration Statement), or (ii)
the Common Stock is not listed or included for quotation on the NASDAQ National
Market System (the "NASDAQ-NMS"), NASDAQ Small Cap, the New York Stock Exchange
(the "NYSE") or the American Stock Exchange (the "AMEX"), then the Company will
make payments to the Investors in such amounts and at such times as shall be
determined pursuant to this Section 2(c) as partial relief for the damages to
the Investors by reason of any such delay in or reduction of their ability to
sell the Registrable Securities (which remedy shall not be exclusive of any
other remedies available at law or in equity). The Company shall pay to each
holder of Registerable Securities an amount equal to the aggregate "Purchase
Price" (as defined below) of the Preferred Stock held by such Investors
(including, without limitation, Preferred Stock that has been converted into
Conversion Shares then held by such Investors) (the "AGGREGATE SHARE PRICE")
multiplied by two and one-half hundredths (.025) times the sum of: (i) the
number of months (prorated for partial months) after the end of such 90-day
period and prior to the date the Registration Statement is declared effective by
the SEC, provided, however, that there shall be excluded from such period any
delays which are solely attributable to changes required by the Investors in the
Registration Statement with respect to information relating to the Investors,
including, without limitation, changes to the plan of distribution, or to the
failure of the Investors to conduct their review of the registration statement
pursuant to Section 2(a) above in a reasonably prompt manner; (ii) the number of
months (prorated for partial months) that sales cannot be made pursuant to the
Registration Statement after the Registration Statement has been declared
effective; and (iii) the number of months (prorated for partial months) that the
Common Stock is not listed or included for quotation on the NASDAQ-NMS, NASDAQ
Small Cap, NYSE or AMEX after the Registration Statement has been declared
effective. (For example, if the Registration Statement becomes effective one (1)
month after the end of such 90-day period, the Company would pay $25,000 for
each $1,000,000 of Aggregate Share Price and would continue to pay $25,000 for
each 1,000,000 of Aggregate Share Price until the Registration Statement becomes
effective.) Such amounts shall be paid in cash or, at each Investor's option
(but subject to the limitations contained in Article VI.G. of the Certificate of
Designation), may be convertible into Common Stock at the "CONVERSION PRICE" (as
defined in the Certificate of Designation). Any shares of Common Stock issued
upon conversion of such amounts shall be Registrable Securities. If the Investor
desires to convert the amounts due hereunder into Registrable Securities it
shall so notify the Company in writing within two (2) business days of the date
on which such amounts are first payable in cash and such amounts shall be so
convertible (pursuant to the mechanics set forth under Article VI of the
Certificate of Designation), beginning on the last day upon which the cash
amount would otherwise be due in accordance with the following sentence.
Payments of cash pursuant hereto shall be made within ten (10) days after the
end of each period that gives rise to such obligation, provided that, if any
such period extends for more than thirty (30) days, interim payments shall be
made for each such thirty (30) day period. The term "PURCHASE PRICE" means the
purchase price paid by the Investors for the Preferred Stock.
3
<PAGE>
d. Piggy-Back Registrations. If at any time prior to the expiration of
------------------------
the Registration Period (as hereinafter defined) the Company shall file with the
SEC a Registration Statement relating to (i) a firm underwritten offering for
its own account or the account of others under the 1933 Act of any of its equity
securities or (ii) any other offering for its own account or the account of
others under the 1933 Act of any of its equity securities (other than on Form
S-4 or Form S-8 or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans) at a time when the Registration Statement contemplated by Section
1(a) hereof is not effective, the Company shall send to each Investor who is
entitled to registration rights under this Section 2(d) written notice of such
determination and, if within fifteen (15) days after the effective date of such
notice, such Investor shall so request in writing, the Company shall include in
such Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Investor has
requested inclusion hereunder as the underwriter shall permit. Any exclusion of
Registrable Securities shall be made pro rata among the Investors seeking to
include Registrable Securities, in proportion to the number of Registrable
Securities sought to be included by such Investors; provided, however, that the
-------- -------
Company shall not exclude any Registrable Securities unless the Company has
first excluded all outstanding securities, the holders of which are not entitled
to inclusion of such securities in such Registration Statement or are not
entitled to pro rata inclusion with the Registrable Securities; and provided,
--------
further, however, that, after giving effect to the immediately preceding
- ------- -------
proviso, any exclusion of Registrable Securities shall be made pro rata with
holders of other securities having the right to include such securities in the
Registration Statement other than holders of securities entitled to inclusion of
their securities in such Registration Statement by reason of demand registration
rights. No right to registration of Registrable Securities under this Section
2(d) shall be construed to limit any registration required under Section 2(a)
hereof. If an offering in connection with which an Investor is entitled to
registration under this Section 2(d) is an underwritten offering, then each
Investor whose Registrable Securities are included in such Registration
Statement shall, unless otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such underwritten
offering.
e. Eligibility for Form S-3. The Company represents and warrants that it
------------------------
meets the requirements for the use of Form S-3 for registration of the sale by
the Initial Investor and any other Investor of the Registrable Securities and
the Company shall file all reports required to be filed by the Company with the
SEC in a timely manner so as to maintain such eligibility for the use of Form S-
3.
4
<PAGE>
3. OBLIGATIONS OF THE COMPANY.
--------------------------
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly, and file with the SEC not later
than fifteen (15) days after the Closing Date, a Registration Statement with
respect to the number of Registrable Securities provided in Section 2(a), and
thereafter use its best efforts to cause such Registration Statement relating to
Registrable Securities to become effective as soon as possible after such
filing, and keep the Registration Statement effective pursuant to Rule 415 at
all times until such date as is the earlier of (i) the date on which all of the
Registrable Securities have been sold and (ii) the date on which the Registrable
Securities (in the opinion of counsel to the Initial Investor) may be
immediately sold without registration (the "REGISTRATION PERIOD"), which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein and all documents incorporated by reference
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during such period, comply with the
provisions of the 1933 Act with respect to the disposition of all Registrable
Securities of the Company covered by the Registration Statement until such time
as all of such Registrable Securities have been disposed of in accordance with
the intended methods of disposition by the seller or sellers thereof as set
forth in the Registration Statement. In the event the number of shares
available under a Registration Statement filed pursuant to this Agreement is
insufficient to cover all of the Registrable Securities issued or issuable upon
conversion of the Preferred Stock and exercise of the Warrants, the Company
shall amend the Registration Statement, or file a new Registration Statement (on
the short form available therefore, if applicable), or both, so as to cover all
of the Registrable Securities, in each case, as soon as practicable, but in any
event within fifteen (15) days after the necessity therefor arises (based on the
market price of the Common Stock and other relevant factors on which the Company
reasonably elects to rely). The Company shall use its best efforts to cause
such amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof. The provisions of Section 2(c) above
shall be applicable with respect to such obligation, with the one hundred twenty
(120) days running from the day after the date on which the Company reasonably
first determines (or reasonably should have determined) the need therefor.
c. The Company shall furnish to each Investor whose Registrable Securities
are included in the Registration Statement and its legal counsel (i) promptly
after the same is prepared and publicly distributed, filed with the SEC, or
received by the Company, one copy of the Registration Statement and any
amendment thereto each preliminary prospectus and prospectus and
5
<PAGE>
each amendment or supplement thereto, and, in the case of the Registration
Statement referred to in Section 2(a), each letter written by or on behalf of
the Company to the SEC or the staff of the SEC, and each item of correspondence
from the SEC or the staff of the SEC, in each case relating to such Registration
Statement (other than any portion of any thereof which contains information for
which the Company has sought confidential treatment), and (ii) such number of
copies of a prospectus, including a preliminary prospectus, and all amendments
and supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor.
d. The Company shall use reasonable efforts to (i) register and qualify
the Registrable Securities covered by the Registration Statement under such
other securities or "blue sky" laws of such jurisdictions in the United States
as the Investors who hold a majority in interest of the Registrable Securities
being offered reasonably request, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
-------- -------
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) make any change in its charter or bylaws, which in each case
the Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders.
e. INTENTIONALLY OMITTED
f. As promptly as practicable after becoming aware of such event, the
Company shall notify each Investor of the happening of any event, of which the
Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request.
g. The Company shall use its best efforts to prevent the issuance of any
stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof.
6
<PAGE>
h. The Company shall permit a single firm of counsel designated by the
Initial Investor to review the Registration Statement and all amendments and
supplements thereto a reasonable period of time prior to their filing with the
SEC, and not file any document in a form to which such counsel reasonably
objects.
i. The Company shall make generally available to its security holders as
soon as practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the 1933 Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
j. At the request of any Investor, the Company shall furnish, on the date
of effectiveness of the Registration Statement (i) an opinion, dated as of such
date, from counsel representing the Company addressed to the Investors and
substantially in the form attached hereto as Exhibit 3 and (ii) in the case of
an underwriting, a letter, dated such date, from the Company's independent
certified public accountants in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and the Investors.
k. The Company shall make available for inspection by (i) any Investor,
(ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Initial Investor, (iv) one firm of attorneys and
one firm of accountants or other agents retained by all other Investors, and (v)
one firm of attorneys retained by all such underwriters (collectively, the
"INSPECTORS") all pertinent financial and other records, and pertinent corporate
documents and properties of the Company (collectively, the "RECORDS"), as shall
be reasonably deemed necessary by each Inspector to enable each Inspector to
exercise its due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence; provided, however, that
-------- -------
each Inspector shall hold in confidence and shall not make any disclosure
(except to an Investor) of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (b) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction, or (c)
the information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(k). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein
7
<PAGE>
shall be deemed to limit the Investor's ability to sell Registrable Securities
in a manner which is otherwise consistent with applicable laws and regulations.
l. The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction, or (iv) such information has
been made generally available to the public other than by disclosure in
violation of this or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to such Investor prior to making such disclosure, and
allow the Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
m. The Company shall use its best efforts either to (i) cause all the
Registrable Securities covered by the Registration Statement to be listed on the
NYSE or the AMEX or another national securities exchange and on each additional
national securities exchange on which securities of the same class or series
issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure the designation and quotation, of all the Registrable Securities
covered by the Registration Statement on the NASDAQ-NMS or, if not eligible for
the NASDAQ-NMS on the NASDAQ Small Cap and, without limiting the generality of
the foregoing, to arrange for or maintain at least two market makers to register
with the National Association of Securities Dealers, Inc. ("NASD") as such with
respect to such Registrable Securities.
n. The Company shall provide a transfer agent and registrar, which may be
a single entity, for the Registrable Securities not later than the effective
date of the Registration Statement.
o. The Company shall cooperate with the Investors who hold Registrable
Securities being offered and the managing underwriter or underwriters, if any,
to facilitate the timely preparation and delivery of certificates (not bearing
any restrictive legends) representing Registrable Securities to be offered
pursuant to the Registration Statement and enable such certificates to be in
such denominations or amounts, as the case may be, as the managing underwriter
or underwriters, if any, or the Investors may reasonably request and registered
in such names as the managing underwriter or underwriters, if any, or the
Investors may request, and, within three (3) business days after a Registration
Statement which includes Registrable Securities is ordered effective by the SEC,
the Company shall deliver, and shall cause legal counsel selected by the Company
to deliver, to the transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) an instruction in the form attached hereto as EXHIBIT 1 and an
opinion of such counsel in the form attached hereto as EXHIBIT 2.
8
<PAGE>
4. OBLIGATIONS OF THE INVESTORS.
----------------------------
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable Securities
held by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least three (3) business
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor if such Investor elects to have any of such Investor's
Registrable Securities included in the Registration Statement.
b. Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
c. INTENTIONALLY OMITTED
d. Each Investor agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(f) or 3(g),
such Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(f) or 3(g) and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
e. No Investor may participate in any underwritten registration hereunder
unless such Investor (i) agrees to sell such Investor's Registrable Securities
on the basis provided in any underwriting arrangements in usual and customary
form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to Section 5 below.
9
<PAGE>
5. EXPENSES OF REGISTRATION.
------------------------
All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, the fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements (not to
exceed $15,000) of one counsel selected by the Initial Investor pursuant to
Section 2(b) hereof shall be borne by the Company.
6. INDEMNIFICATION.
---------------
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) each Investor who holds such Registrable Securities, and
(ii) the directors, officers, partners, employees, agents and each person who
control any Investor within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 ACT"), if any, (each, an
"INDEMNIFIED PERSON"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "CLAIMS") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities (the matters in the foregoing clauses (i) through (iii)
being, collectively, "VIOLATIONS"). Subject to the restrictions set forth in
Section 6(c) with respect to the number of legal counsel, the Company shall
reimburse the Investors and each such underwriter or controlling person,
promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by any Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto; (ii) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without
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the prior written consent of the Company, which consent shall not be
unreasonably withheld; and (iii) with respect to any preliminary prospectus,
shall not inure to the benefit of any Indemnified Person if the untrue statement
or omission of material fact contained in the preliminary prospectus was
corrected on a timely basis in the prospectus, as then amended or supplemented,
if such corrected prospectus was timely made available by the Company pursuant
to Section 3(c) hereof, and the Indemnified Person was promptly advised in
writing not to use the incorrect prospectus prior to the use giving rise to a
Violation and such Indemnified Person, notwithstanding such advice, used it.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
b. In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees severally and not jointly to indemnify,
hold harmless and defend, to the same extent and in the same manner set forth in
Section 6(a), the Company, each of its directors, each of its officers who signs
the Registration Statement, each person, if any, who controls the Company within
the meaning of the 1933 Act or the 1934 Act, and any other stockholder selling
securities pursuant to the Registration Statement or any of its directors or
officers or any person who controls such stockholder or underwriter within the
meaning of the 1933 Act or the 1934 Act (collectively and together with an
Indemnified Person, an "INDEMNIFIED PARTY"), against any Claim to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim arises out of or is based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and subject to
Section 6(c) such Investor will reimburse any legal or other expenses (promptly
as such expenses are incurred and are due and payable) reasonably incurred by
them in connection with investigating or defending any such Claim; provided,
---------
however, that the indemnity agreement contained in this Section 6(b) shall not
- -------
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
----------------- -------
liable under this Agreement (including this Section 6(b) and Section 7) for only
that amount as does not exceed the net proceeds to such Investor as a result of
the sale of Registrable Securities pursuant to such Registration Statement.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.
c. Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of
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<PAGE>
the commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
---------
however, that an Indemnified Person or Indemnified Party shall have the right to
- -------
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The indemnifying party shall pay for only one separate legal
counsel for the Indemnified Persons or the Indemnified Parties, as applicable,
and such legal counsel shall be selected by Investors holding a majority-in-
interest of the Registrable Securities included in the Registration Statement to
which the Claim relates (with the approval of the Initial Investor if it holds
Registrable Securities included in such Registration Statement), if the
Investors are entitled to indemnification hereunder, or the Company, if the
Company is entitled to indemnification hereunder, as applicable. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is actually prejudiced in its
ability to defend such action. The indemnification required by this Section 6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that (i) no
-------- -------
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution (together
with any indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Investors to sell securities of the Company
to the public without registration ("RULE 144"), the Company agrees to:
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<PAGE>
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements (it being understood that nothing
herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the Investors to
sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights to have the Company register Registrable Securities pursuant to
this Agreement shall be automatically assignable by the Investors to any
transferee of all or any portion of Registrable Securities if: (i) the Investor
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the securities with respect to
which such registration rights are being transferred or assigned, (iii)
following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, and (vi) such transferee shall be an "ACCREDITED INVESTOR" as that
term defined in Rule 501 of Regulation D promulgated under the 1933 Act.
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with written consent of the Company, the Initial
Investor (to the extent the Initial Investor still owns Registrable Securities)
and Investors who hold a majority interest of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
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<PAGE>
11. MISCELLANEOUS.
-------------
a. A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
b. Notices required or permitted to be given hereunder shall be in writing
and shall be deemed to be sufficiently given when personally delivered (by hand,
by courier, by telephone line facsimile transmission or other means) or sent by
certified mail, return receipt requested, properly addressed and with proper
postage pre-paid,
if to the Company:
OXIS International, Inc.
6040 N. Cutter Circle
Suite 317
Portland, Oregon 97217-3935
Attention: Chief Executive Officer
Telecopy: (503) 283-4058
with copy to:
Richard Scudellari, Esquire
Jackson Tufts Cole & Black LLP
60 South Market Street
San Jose, California 95113-2336
Telecopy (408) 998-4889
if to the Initial Investor,
Capital Ventures International
c/o Bala International, Inc.
1900 Market Street
Philadelphia, PA 19102
Telecopy: (215) 963-3379
Attention: Steve Katznelson
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<PAGE>
with copy to:
Gary Kaminsky, Esq.
c/o Bala International, Inc.
1900 Market Street
Philadelphia, PA 19102
Telecopy: (215) 656-8758
and:
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
Telecopy: (215) 568-6603
Attention: Wayne D. Bloch, Esq.
and if to any other Investor, at such address as such Investor shall have
provided in writing to the Company, or at such other address as each such party
furnishes by notice given in accordance with this Section 11(b), and shall be
effective, when personally delivered, upon receipt and, when so sent by
certified mail, four days after deposit with the United States Postal Service.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State. In the event that any provision
of this Agreement is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision hereof. The parties hereto hereby submit to the exclusive
jurisdiction of the United States Federal Courts located in Philadelphia,
Pennsylvania with respect to any dispute arising under this Agreement or the
transactions contemplated hereby.
e. This Agreement and the Securities Purchase Agreement (including all
schedules and exhibits thereto) constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement and the Securities
Purchase Agreement supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof and thereof.
15
<PAGE>
f. Subject to the requirements of Section 9 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
g. The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
j. All consents and other determinations to be made by the Investors
pursuant to this Agreement shall be made by the Investors holding a majority of
the Registrable Securities (determined as if all shares of Preferred Stock and
Warrants then outstanding had been converted into or exercised for Registrable
Securities).
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
OXIS INTERNATIONAL, INC.
By: /s/ RAY R. ROGERS
----------------------------------------------
Name: Ray R. Rogers
--------------------------------------------
Its: Chairman
---------------------------------------------
INITIAL INVESTOR:
CAPITAL VENTURES INTERNATIONAL
By: Bala International, Inc., as authorized agent
By: /s/ STEVE KATZNELSON
----------------------------------------------------
Name: Steve Katznelson
--------------------------------------------------
Its: Vice President of Bala International
for the account of Capital Ventures International
---------------------------------------------------
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