SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: December 9, 1997
CYTOGEN CORPORATION
(Exact name of registrant as specified in its charter)
Commission File Number: 1-14879
Delaware
22-2322400
(State of Incorporation) (I.R.S. Employer
Identification No.)
600 College Road East, CN 5308, Princeton, NJ 08540-5308
(Address of Principal Executive Offices and Zip Code)
Registrant's Telephone Number: (609) 987-8200
Item 5. Other Events
On December 9, 1997, CYTOGEN Corporation issued the
attached press release.
On December 9, 1997, Cytogen Corporation announced it
had obtained from private investors a financing commitment,
subject to satisfaction of certain conditions, to purchase
shares of its Convertible Preferred Stock for up to $20
million and that it had completed the first tranche of the
financing by issuing shares of its 6% Series B Convertible
Preferred Stock the "Series B Preferred Stock", for $7.5
million.
The Company may at its option issue additional
securities under the commitment in up to two additional
series, subject to certain conditions. The purchasers
are not obligated to purchase additional securities if the
average closing bid price of the Company's common stock is
less than $2.00 per share for a thirty day period, and the
maximum funding for each series is determined by the price
of the stock as follows, between $2.01 - $2.49 per share, $4
million; between $2.50 - $2.99 per share, $5.5 million;
between $3.00 - $3.74 per share, $7 million; between $3.75 -
$4.49 per share, $10 million; $4.50 or greater, $12.5
million. The obligations of the purchasers to purchase
additional securities are subject to additional conditions
related to the effectiveness during certain periods of a
secondary registration statement permitting resale of shares
of common stock issued on conversion of the Series B
Convertible Preferred; and to certain other events. The
shares issued under subsequent tranches could be issuable by
the Company under like terms with the Series B Preferred Stock.
The following summary description of the Series B Preferred
Stock is qualified in its entirety by reference to the
Certificate of Designation (defined below) filed as an exhibit
hereto which defines the rights and preferences of such
security.
Summary Description of The Series B Preferred Stock
The 750 outstanding shares of Series B Preferred Stock were
issued by the Company to the holders of Series B Preferred
Stock (the "Series B Holders") in an offering of Series B
Preferred Stock exempt from the registration requirements of
the Securities Act of 1933 pursuant to Regulation D thereunder
in December 1997. Each share of Series B Preferred Stock has a
par value of $.01 per share and a stated value of $10,000 per
share (the "Stated Value").
Pursuant to the Certificate of Designation relating to
the Series B Preferred Stock (the "Certificate of
Designation") the Series B Holders are entitled to receive,
when, as and if declared by the Board of Directors of the
Company (the "Board of Directors"), out of funds legally
available therefor, cumulative dividends at a rate of 6% of
the Stated Value per share per annum, payable, at the option
of the Company, in cash or shares of Common Stock (subject
to certain limitations). Dividends on the Series B
Preferred Stock shall be deemed to accrue from the date of
original issue of the Series B Preferred Stock, whether or
not earned or declared and whether or not there are profits,
surplus or other funds of the Company legally available for
the payment of dividends. Accrued dividends on the Series B
Preferred Stock shall be paid on the date such Series B
Preferred Stock is converted, but the Company shall have the
option to pay dividends in cash or common stock and more
frequently as and when declared by the Board of Directors. The
Certificate of Designation does not provide for a sinking fund.
The Certificate of Designation prohibits the repurchase
by the Company of, or the payment or declaration of any
dividends with respect to, any securities of the Company
junior to or pari passu with the Series B Preferred Stock
(with certain exceptions).
Except as may be required by law and except with
respect to certain actions which may adversely affect the
Series B Holders, the Series B Holders are not entitled to
vote on any matter submitted to a vote of stockholders of
the Company.
The Series B Preferred Stock ranks senior with respect
to rights on liquidation, winding-up and dissolution of the
Company to the Company's Common Stock. Upon any voluntary
or involuntary liquidation, dissolution or winding-up of the
Company, holders of Series B Preferred Stock will be
entitled to receive $10,000 per share, plus accrued and
unpaid dividends, before any distribution is made on the
common stock or any preferred stock of the Company ranking
junior as to liquidation rights to the Series B Preferred
Stock.
The Series B Holders have the right to convert shares
of Series B Preferred Stock into common stock at a
conversion price (the "Initial Conversion Price") equal to the
lesser of (a) 120% of the average per share market value for
the ten trading days immediately preceding the date of original
issue of the Series B Preferred Stock (the "Original Issue
Date"), or $3.4575 and (b) at a discount up to
85% of the average of four closing bid prices chosen by the
Series B Holders during the twenty-five trading days prior
to notice of conversion, which discount is initially 95% and
shall increase by 5% on the first day of the two months
subsequent to the Original Issue Date of the Series B
Preferred Stock. If, however, the average per share market
value for the five day trading period immediately preceding
the conversion date exceeds the Initial Conversion Price by
180%, then the conversion price otherwise applicable to such
conversion shall be increased by an amount equal to 50% of
the difference between the average per share market value
for the five day trading period immediately preceding the
conversion date and the Initial Conversion Price.
The conversion price may be adjusted under certain
circumstances, including the failure by the company to file
a registration statement with the Securities and Exchange
Commission (the "Commission") for the underlying shares into
which the Series B Preferred Stock is convertible, the
failure of such registration statement to be declared
effective by the Commission within certain time periods,
suspension of trading of the Company's common stock or upon
the occurrence of certain other events. If on the date of
conversion, the conversion price then in effect would result
in the number of shares issuable in connection with such
conversion (including the conversion of shares issued in
respect of payment of dividends) equalling or exceeding 20%
of the number of shares of common stock outstanding, the
Company is, under certain circumstances, required to obtain
the approval of a majority of shareholders to authorize such
conversion. The Series B Holders have agreed that in no
event shall any such Series B Holder be entitled to convert
any shares of Series B Preferred Stock if the issuance of
shares of Common Stock upon a proposed conversion, when the
shares to be so issued are counted together with other
shares of common stock beneficially owned by such Series B
Holder would result in a Series B Holder beneficially owning
more than 4.999% of the outstanding shares of Common Stock.
The Series B Preferred Stock is convertible at the
option of the Company three years from the date of original
issue of the Series B Preferred Stock (the "Original Issue
Date"). All outstanding and unconverted shares of Series B
Preferred Stock are also redeemable at the option of the
Company on the third anniversary of the Original Issue Date
at a price per share equal to the product of (1) the average
per share market value for the five trading days immediately
preceding (i) the third anniversary of the original issue
date or (ii) the date of payment in full by the Company of
the redemption price, whichever is greater, and (2) the
Stated Value plus accrued but unpaid dividends not paid in
common stock divided by the Conversion Price for the Series
B Preferred Stock calculated on the third anniversary of the
Original Issue Date.
Item 7. Exhibits
3.1 Certificate of Designation of 6% Convertible
Preferred Stock, Series B
10.1 Form of Convertible Preferred Stock Purchase
Agreement by and between Cytogen Corporation
and the purchasers of Series B Preferred Stock
10.2 Form of Registration Rights Agreement by and
between Cytogen Corporation and the purchasers
of Series B Preferred Stock
99.1 Press Release issued by CYTOGEN Corporation on
December 9, 1997
SIGNATURE
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.
CYTOGEN CORPORATION
By /s/ Donald F. Crane, Jr.
-------------------------
Name: Donald F. Crane, Jr.
Title: Vice President
General Counsel and Secretary
Date: December 22, 1997
EXHIBIT 3.1
CERTIFICATE OF DESIGNATION OF
6% CONVERTIBLE PREFERRED STOCK, SERIES B
OF CYTOGEN CORPORATION
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
The undersigned, President and Secretary, hereby certify that:
I. They are the duly elected and acting President and
Secretary, respectively, of Cytogen Corporation, a Delaware
corporation (the "Company").
II. The Certificate of Incorporation of the Company
authorizes 5,400,000 shares of preferred stock, par value $.01
per share, of which 1,000 are issued and outstanding.
III. The following is a true and correct copy of
resolutions duly adopted by the Finance Committee of the Board of
Directors of the Company (the "Board of Directors") at a meeting
duly held on December 8, 1997, which constituted all requisite
action on the part of the Company for the adoption of such
resolutions.
RESOLUTIONS
WHEREAS, the Company's Restated Certificate of
Incorporation, as amended (the "Certificate of Incorporation"),
expressly grants to the Board of Directors authority to issue
shares of preferred stock in one or more series, with such voting
powers, full or limited, or no voting powers, and with such
designations, preferences and relative, participating, optional
or other special rights and qualifications, limitations or
restrictions thereof; and
WHEREAS, pursuant to resolutions duly adopted by the
Board of Directors on November 14, 1997 in accordance with
Section 141 of the General Corporation Law of the State of Delaware (the
"DGCL"), the Board of Directors has authorized the issuance of a
new series of preferred stock and has delegated to its Finance
Committee (the "Finance Committee") the authority to fix the
designations and any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution
of assets of the corporation or the conversion into, or the exchange
of such shares for, shares of any other class or classes or any
other series of the same or any other class or classes of stock
of the Company or fix the number of shares of any series of stock or
authorize the increase or decrease of the shares of any series.
NOW, THEREFORE, BE IT RESOLVED, pursuant to the
authority conferred upon the Board of Directors by the Certificate of
Incorporation, and upon the Finance Committee by resolution of
the Board of Directors, that the Finance Committee hereby designates
a new series of preferred stock and the number of shares
constituting such series and fixes the rights, preferences, privileges and
restrictions relating to such series as follows:
Section 1. Designation, Amount and Par Value. The
series of preferred stock shall be designated as Convertible
Preferred Stock, Series B (the "Preferred Stock"), and the number
of shares so designated shall be 750 (which shall not be subject
to increase without the consent of the holders of the Preferred
Stock ("Holder"). Each share of Preferred Stock shall have a par value
of $.01 per share and a stated value of $10,000 per share (the
"Stated Value").
Section 2. Dividends.
(a) Holders of Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors out of
funds legally available therefor, and the Company shall pay,
cumulative dividends at the rate per share (as a percentage of
the Stated Value per share) equal to 6% per annum, payable, in cash
or shares of Common Stock (as defined in Section 7) at (subject to
the terms and conditions set fort herein) the option of the Company.
Dividends on the Preferred Stock shall be calculated on the basis
of a 360-day year, shall accrue daily commencing on the Original
Issue Date (as defined in Section 7), and shall be deemed to
accrue from such date whether or not earned or declared and whether or
not there are profits, surplus or other funds of the Company legally
available for the payment of dividends. Accrued dividends of the
Preferred Stock shall be paid on the date on which such Preferred
Stock is converted, provided, that the Company shall have the
option to pay dividends more frequently as and when declared by
the Board of Directors. The party that holds the Preferred Stock on
an applicable record date for any dividend payment will be entitled
to receive such dividend payment and any other accrued and unpaid
dividends which accrued prior to such dividend payment date,
without regard to any sale or disposition of such Preferred Stock
subsequent to the applicable record date but prior to the
applicable dividend payment date. Except as otherwise provided
herein, if at any time the Company pays less than the total
amount of dividends then accrued on account of the Preferred Stock, such
payment shall be distributed ratably among the holders of the
Preferred Stock based upon the number of shares held by each
holder. Payment of dividends on the Preferred Stock is further
subject to the provisions of Section 5(c)(i). The Company shall
provide the holders quarterly notice of its intention to pay
dividends in cash or shares of Common Stock. Such notice shall
be delivered to all Holders not less than 10 Trading Days prior to
March 31, June 30, September 30 and December 31 of each year for
so long as shares of Preferred Stock are outstanding. If dividends
are paid in shares of Common Stock, the number of shares of Common
Stock payable as such dividend to each Holder shall be equal to
the cash amount of such dividend payable to such Holder on such
dividend payment date divided by the closing bid price of the
Common Stock on such dividend payment date.
(b) Notwithstanding anything to the contrary contained
herein, the Company may not issue shares of Common Stock in
payment of dividends (and must deliver cash in respect thereof) on the
Preferred Stock if:
(i) the number of shares of Common Stock at the
time authorized, unissued and unreserved for all purposes, or
held as treasury stock, is insufficient to pay such dividends in
shares of Common Stock;
(ii) the shares of Common Stock to be issued in
respect of such dividends are not registered for resale pursuant
to an effective registration statement that names the recipient of
such dividend as a selling stockholder thereunder and may not be
sold without volume restrictions pursuant to Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Securities
Act"), as determined by counsel to the Company pursuant to a
written opinion letter, addressed to the Company's transfer agent
in the form and substance acceptable to the Holder;
(iii) the shares of Common Stock to be issued in
respect of such dividends are not listed on the Nasdaq National
Market or any other exchange or quotation system on which the
Common Stock is then listed for trading;
(iv) the issuance of such shares would result in
the recipient thereof beneficially owning, in accordance with
Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended, more than 4.999% of the issued and outstanding shares of
Common Stock; or
(v) the Company has failed to timely satisfy its
obligations pursuant to any Conversion Notice (as defined in
Section 5(a)(ii)).
(c) So long as any Preferred Stock shall remain
outstanding, neither the Company nor any subsidiary thereof shall
redeem, purchase or otherwise acquire directly or indirectly any
Junior Securities (as defined in Section 7), nor shall the
Company directly or indirectly pay or declare any dividend or make any
distribution (other than a dividend or distribution described in
Section 5) upon, nor shall any distribution be made in respect
of, any Junior Securities, nor shall any monies be set aside for or
applied to the purchase or redemption (through a sinking fund or
otherwise) of any Junior Securities or shares pari passu with the
Preferred Stock, except for repurchases effected by the Company
on the open market, pursuant to a direct stock purchase plan.
Section 3. Voting Rights. Except as otherwise
provided herein and as otherwise required by law, the Preferred
Stock shall have no voting rights. However, so long as any
shares of Preferred Stock are outstanding, the Company shall not and
shall cause its subsidiaries not to, without the affirmative vote of
the holders of all of the shares of the Preferred Stock then
outstanding, (a) alter or change adversely the powers, preferences
or rights given to the Preferred Stock, (b) alter or amend this
Certificate of Designation, (c) authorize or create any class of
stock ranking as to dividends or distribution of assets upon a
Liquidation (as defined in Section 4) or otherwise senior to or
pari passu with the Preferred Stock, except for any series of
Preferred Stock issued and sold in accordance with the Purchase
Agreement, (d) amend its certificate of incorporation, bylaws or
other charter documents so as to affect adversely any rights of
any holders, (e) increase the authorized number of shares of
Preferred Stock and (f) enter into any agreement with respect to the
foregoing.
Section 4. Liquidation. Upon any liquidation,
dissolution or winding-up of the Company, whether voluntary or
involuntary (a "Liquidation"), the Holders shall be entitled to
receive out of the assets of the Company, whether such assets are
capital or surplus, for each share of Preferred Stock an amount
equal to the Stated Value plus all accrued but unpaid dividends
per share, whether declared or not, before any distribution or
payment shall be made to the holders of any Junior Securities, and if the
assets of the Company shall be insufficient to pay in full such
amounts, then the entire assets to be distributed to the holders
of Preferred Stock shall be distributed among the holders of
Preferred Stock ratably in accordance with the respective amounts that
would be payable on such shares if all amounts payable thereon were
paid in full. A sale, conveyance or disposition of all or
substantially all of the assets of the Company or the effectuation by the
Company of a transaction or series of related transactions in which more
than 50% of the voting power of the Company is disposed of, or a
consolidation or merger of the Company with or into any other
company or companies shall not be treated as a Liquidation, but
instead shall be subject to the provisions of Section 5. The
Company shall mail written notice of any such Liquidation, not
less than 45 days prior to the payment date stated therein, to each
record holder of Preferred Stock.
Section 5. Conversion.
(a)(i) Each share of Preferred Stock (in minimum
amounts of $10,000 or such lesser amounts as the holders of majority of
Preferred Stock then outstanding shall agree) shall be convertible
into shares of Common Stock (subject to reduction pursuant to
Section 5(a)(iii) and Section 5(a)(v) at the Conversion Ratio (as
defined in Section 7) at the option of the holder in whole or in
part at any time after the Original Issue Date. The Holders
shall effect conversions by surrendering the certificate or
certificates representing the shares of Preferred Stock to be converted to
the Company, together with the form of conversion notice attached
hereto as Exhibit A (the "Holder Conversion Notice"). Each
Holder Conversion Notice shall specify the number of shares of Preferred
Stock to be converted and the date on which such conversion is to
be effected, which date may not be prior to the date the holder
delivers such Holder Conversion Notice by facsimile (the "Holder
Conversion Date"). If no Holder Conversion Date is specified in
a Holder Conversion Notice, the Holder Conversion Date shall be the
date that the Holder Conversion Notice is deemed delivered
pursuant to Section 5(i). Subject to Sections 5(b) and 5(a)(iii) hereof,
each Holder Conversion Notice, once given, shall be irrevocable.
If the holder is converting less than all shares of Preferred
Stock represented by the certificate or certificates tendered by the
holder with the Holder Conversion Notice, or if a conversion
hereunder cannot be effected in full for any reason, the Company
shall promptly deliver to such holder (in the manner and within
the time set forth in Section 5(b)) a certificate for such number of
shares as have not been converted.
(ii) On the third anniversary of the Original
Issue Date, the Company may require the conversion of all of the then
outstanding and unconverted shares of Preferred Stock at the
Conversion Ratio (subject to reduction pursuant to Section
5(a)(iii)) by delivering to the Holder of such shares to be
converted a notice in the form attached hereto as Exhibit B (the
"Company Conversion Notice"), provided, that, no such conversion
is permitted unless at the time of the delivery of the Company
Conversion Notice and on the Company Conversion Date (as defined
below), (a) the Company shall have complied in all material
respects with its obligations under the Registration Rights
Agreement, (b) the shares of Common Stock issuable upon such
conversion are listed for trading on the Nasdaq National Market
or any other exchange or quotation system on which the Common Stock
is then listed for trading and (c) the Company is in compliance with
all of its obligations under this Certificate of Designation, the
Purchase Agreement and the Registration Rights Agreement. Each
Company Conversion Notice shall specify the number of shares of
Preferred Stock to be converted and the date on which such
conversion is to be effected, which date may not be prior to the
day after the Company delivers such Company Conversion Notice by
facsimile (the "Company Conversion Date"). If no Company
Conversion Date is specified in a Company Conversion Notice, the
Company Conversion Date shall be the date that the Company
Conversion Notice is deemed delivered pursuant to Section 5(i).
A Holder Conversion Date and a Company Conversion Date are
sometimes referred to herein as the "Conversion Date" and a Holder
Conversion Notice and a Company Conversion Notice are sometimes referred to
as a "Conversion Notice." Any conversion pursuant to this Section
5(a)(ii) shall be subject to Section 5(b) with respect to
consequences of the Company's failure to deliver shares of Common
Stock in respect of a conversion under this Section. If the
Company is converting less than all shares of Preferred Stock
represented by the certificate or certificates tendered by the
holder in response to a Company Conversion Notice, or if a
conversion hereunder cannot be effected in full for any reason,
the Company shall promptly deliver to such tendering holder (in the
manner and within the time set forth in Section 5(b)) a
certificate for such number of shares as have not been converted.
(iii) If on the Conversion Date applicable to any
conversion, (A) the Common Stock is then listed for trading on
the Nasdaq National Market, the American Stock Exchange or the Nasdaq
SmallCap Market, (B) the Conversion Price then in effect is such
that the aggregate number of shares of Common Stock that would
then be issuable upon conversion of all outstanding shares of
Preferred Stock, together with any shares of Common Stock previously issued
upon conversion of Preferred Stock and in respect of payment of
dividends hereunder, would equal or exceed 20% of the number of
shares of Common Stock outstanding on the Original Issue Date
(the "Issuable Maximum"), and (C) the Company has not previously
obtained Shareholder Approval (as defined below), then the
Company shall issue to any Holder so requesting conversion of Preferred
Stock its pro rata portion of the Issuable Maximum in the same
ratio that the number of shares of Preferred Stock held by any
such Holder bears to all shares of Preferred Stock then outstanding
and, with respect to any shares of Common Stock that otherwise would
have been issuable to such Holder in respect of the Conversion
Notice at issue or in respect of payment of dividends hereunder
in excess of the Issuable Maximum, the Holder may require the
Company to, as promptly as possible, but in no event later than 60 days
if the Company has sold Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock for a purchase price of less than
$11,000,000 and no later than 90 days if the Company has sold
Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock for a purchase price equal to or greater than $11,000,000,
after such Conversion Date, convene a meeting of the holders of
the Common Stock and use its best efforts to obtain the Shareholder
Approval. "Shareholder Approval" means the approval by a
majority of the total votes cast on the proposal, in person or by proxy,
at a meeting of the shareholders of the Company held in accordance
with the Company's Certificate of Incorporation and by-laws, of
the issuance by the Company of shares of Common Stock exceeding the
Issuable Maximum as a consequence of the conversion of Preferred
Stock into Common Stock at a price less than the greater of the
book or market value on the Original Issue Date as and to the
extent required pursuant to Rule 4460(i) of the Nasdaq Stock
Market or Rule 713 of the American Stock Exchange (or any successor or
replacement provision thereof), as applicable.
(iv) In no event shall a Holder be permitted to
convert any shares of Preferred Stock in excess of the number of
such shares upon the conversion of which, (x) the number of
shares of Common Stock beneficially owned by such Holder (other than
shares of Common Stock issuable upon conversion of shares of
Preferred Stock) plus (y) the number of shares of Common Stock
issuable upon the conversion of such shares of Preferred Stock,
would be equal to or exceed (z) 4.999% of the number of shares of
Common Stock then issued and outstanding, including shares
issuable on conversion of the Preferred Stock held by such Holder after
application of this Section 5(a)(iv). As used herein, beneficial
ownership shall be determined in accordance with Section 13(d) of
the Exchange Act and the rules thereunder. To the extent that
the limitation contained in this paragraph 5(a)(iv) applies, the
determination of whether shares of Preferred Stock are
convertible (in relation to other securities owned by a Holder) and of which
shares of Preferred Stock are convertible shall be in the sole
discretion of such Holder, and the submission of shares of
Preferred Stock for conversion shall be deemed to be such
Holder's determination of whether such shares of Preferred Stock are
convertible (in relation to other securities owned by a Holder)
and of which shares of Preferred Stock are convertible, in each case
subject to such aggregate percentage limitation, and the Company
shall have no obligation to verify or confirm the accuracy of
such determination. This paragraph may be amended (i) in order to
clarify an ambiguity or otherwise to give effect to such
limitation, by the Board of Directors of the Company and the
Holders of two-thirds (2/3) of the shares of Preferred Stock then
outstanding and (ii) for any other reason, with the further
consent of the Holders of a majority of the shares of Common Stock then
outstanding, to the extent permitted by applicable law and
subject to the rights and preferences of any securities ranking senior
thereto. Nothing contained herein shall be deemed to restrict
the right of a Holder to convert such shares of Preferred Stock at
such time as such conversion will not violate the provisions of this
paragraph. The provisions of this Section 5(a)(iv) may be waived
by a Holder of Preferred Stock as to itself (and solely as to
itself) upon not less than 65 days prior notice to the Company,
and the provisions of this Section 5(a)(iv) shall continue to apply
until such 65th day (or later, if stated in the notice of
waiver). The limitations of this Section 5(a)(iv) shall not apply to any
conversion pursuant to Section 5(a)(ii).
(b) Not later than three Trading Days after any
Conversion Date, the Company will deliver to the holder (i) a
certificate or certificates which shall be free of restrictive
legends and trading restrictions (other than those required by
Section 3.1(b) of the Purchase Agreement) representing the number
of shares of Common Stock being acquired upon the conversion of
shares of Preferred Stock (subject to reduction pursuant to
Section 5(a)(iii) and Section 5(a)(iv), (ii) one or more certificates
representing the number of shares of Preferred Stock not
converted, (iii) a bank check in the amount of accrued and unpaid dividends
(if the Company has elected to pay accrued dividends in cash) and
(iv) if the Company has elected to pay accrued dividends in
shares of Common Stock, certificates, which shall be free of restrictive
legends and trading restrictions (other than those required by
the Purchase Agreement), representing such number of Shares of Common
Stock as equals such dividend divided by the Conversion Price on
the Conversion Date; provided, however, that the Company shall
not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon conversion of any shares of Preferred Stock
until certificates evidencing such shares of Preferred Stock are
either delivered for conversion to the Company or any transfer
agent for the Preferred Stock or Common Stock, or the holder of
such Preferred Stock notifies the Company that such certificates
have been lost, stolen or destroyed and provides a bond (or other
adequate security) reasonably satisfactory to the Company to
indemnify the Company from any loss incurred by it in connection
therewith. The Company shall, upon request of the holder, use
its best efforts to deliver any certificate or certificates required
to be delivered by the Company under this Section electronically
through the Depository Trust Corporation or another established
clearing corporation performing similar functions. If in the
case of any Conversion Notice such certificate or certificates,
including for purposes hereof, any shares of Common Stock to be
issued on the Conversion Date on account of accrued but unpaid
dividends hereunder, are not delivered to or as directed by the
applicable holder by the third Trading Day after the Conversion
Date, the holder shall be entitled by written notice to the
Company at any time on or before its receipt of such certificate or
certificates thereafter, to rescind such conversion, in which
event the Company shall immediately return the certificates
representing the shares of Preferred Stock tendered for conversion. If the
Company fails to deliver to the holder such certificate or
certificates pursuant to this Section, including for purposes
hereof, any shares of Common Stock to be issued on the Conversion
Date on account of accrued but unpaid dividends hereunder, prior
to the fifth Trading Day after the Conversion Date, the Company
shall pay to such holder, in cash, as liquidated damages and not as a
penalty, $5,000 for each day after such fifth Trading Day until
such certificates are delivered. If the Company fails to deliver
to the holder such certificate or certificates pursuant to this
Section prior to the 12th day after the Conversion Date, the
Company shall, at the holder's option (i) redeem, from funds
legally available therefor at the time of such redemption, such
number of shares of Preferred Stock then held by such holder, as
requested by such holder, and (ii) pay all accrued but unpaid
dividends on account of the Preferred Stock for which the Company
shall have failed to issue Common Stock certificates hereunder,
in cash. The redemption price shall be equal to the sum of (A) the
aggregate of all accrued but unpaid dividends, plus (B) the
number of shares of Preferred Stock then held by such holder multiplied
by (1) the average Per Share Market Value for the five (5) Trading
Days immediately preceding (x) the Conversion Date or (y) the
date of payment in full by the Company of such prepayment price,
whichever is greater, multiplied by, (2) the Conversion Ratio
calculated on the Conversion Date. If the holder has requested
that the Company redeem shares of Preferred Stock pursuant to
this Section and the Company fails for any reason to pay the
redemption price under (2) above within seven days after such notice is
deemed delivered pursuant to Section 5(i), the Company will pay interest
on the redemption price at a rate of 15% per annum, in cash to
such holder, accruing from such seventh day until the redemption price
and any accrued interest thereon is paid in full. Nothing herein
shall limit a holer's right to pursue actual damages for the
Company's failure to deliver certificates representing shares of
Common upon conversion within the period specified herein
(including, without limitation, damages relating to any purchase
of shares of Common Stock by such holder to make delivery on a sale
effected in anticipation of receiving certificates representing
shares of Common Stock upon conversion, such damages to be in an
amount equal to (A) the aggregate amount paid by such holder for
the shares of Common Stock so purchased minus (B) the aggregate
amount of net proceeds, if any, received by such holder from the
sale of the shares of Common Stock issued by the Company pursuant
to such conversion), and such holder shall have the right to
pursue all remedies available to it at law or in equity (including,
without limitation, a decree of specific performance and/or
injunctive relief).
(c) (i) The conversion price for each share of
Preferred Stock (the "Conversion Price") in effect on any
Conversion Date shall be the lesser of (a) 120% of the average
Per Share Market Value for the ten (10) Trading Days immediately
preceding the Original Issue Date (the "Initial Conversion
Price") and (b) up to 85% of the average of four (4) closing bid prices
of the Common Stock on the Nasdaq National Market or other market or
exchange on which the Common Stock is then listed or traded,
during the twenty-five (25) Trading Days prior to the date of the
applicable Conversion Notice, which four closing bid prices shall
be chosen by the Holder converting such shares of Preferred Stock
and which discount shall initially be 95% and shall increase by
5% on the first day of each month subsequent to the Original Issue
Date until such discount is equal to 85%; provided, however,
that, the Conversion Price in effect for the 10 Trading Day period
immediately following the last day of any postponement or
suspension of the effectiveness of any registration statement
pursuant to Section 3(p) of the Registration Rights Agreement
shall, at the option of each Holder, be either the Conversion
Price in effect on such date or the lowest Conversion Price on any day
during the period commencing with the last Trading Day
immediately prior to such postponement or suspension through the last day of
such postponement or suspension; provided, further, that, if on
any Conversion Date the average Per Share Market Value for the five
Trading Days immediately preceding such Conversion Date exceeds
the Initial Conversion Price by more than 180%, then the Conversion
Price otherwise applicable to such conversion shall be increased
by an amount equal to 50% of the difference between an amount equal
to (A) the average Per Share Market Value for the five Trading Days
immediately preceding such Conversion Date less (B) the Initial
Conversion Price; and provided, further, that, (a) if the
Underlying Shares Registration Statement is not filed on or prior
to the 30th day after the Original Issue Date, or (b) the Company
fails to file with the Commission a request for acceleration in
accordance with Rule 12d1-2 promulgated under the Securities
Exchange Act of 1934, as amended, within five (5) days of the
date that the Company is notified (orally or in writing, whichever is
earlier) by the Commission that an Underlying Shares Registration
Statement will not be "reviewed," or not subject to further
review or (c) if the Underlying Shares Registration Statement is not
declared effective by the Commission on or prior to the 90th day
after the Original Issue Date, or (d) if such Underlying Shares
Registration Statement is filed with and declared effective by
the Commission but thereafter ceases to be effective as to all
Registrable Securities (as such term is defined in the
Registration Rights Agreement) at any time prior to the expiration of the
"Effectiveness Period" (as such term as defined in the
Registration Rights Agreement), without being succeeded within 10 Trading Days
by a subsequent Underlying Shares Registration Statement filed
with and declared effective by the Commission, or (e) if trading in
the Common Stock shall be suspended or if the Common Stock is
delisted for any reason for more than three (3) Trading Days in the
aggregate, or (f) if the conversion rights of the Holders are
suspended for any reason, or (g) if the Company breaches in a
material respect any covenant or other material term or condition
to this Agreement, the Purchase Agreement (other than a
representation or warranty contained therein), the Registration
Rights Agreement or any other agreement, document, certificate or
other instrument delivered in connection with the transactions
contemplated thereby, and such breach continues for a period of
thirty (30) days after written notice thereof to the Company, or
(h) if the Company is required to convene a shareholders meeting
pursuant to Section 5(a)(iii) and fails to convene a meeting of
shareholders within the time periods specified in Section
5(a)(iii) or does so convene a meeting of shareholders within such time
period but fails to obtain Shareholder Approval at such meeting,
or (i) if the Company has breached Section 3(p) of the Registration
Rights Agreement (any such failure or breach being referred to as
an "Event," and for purposes of clauses (a), (c) and (f) the date
on which such Event occurs, or for purposes of clause (b) the
date on which such five (5) day period is exceeded, or for purposes of
clause (d) the date which such 10 Trading Day-period is exceeded,
or for purposes of clause (e) the date on which such three
Trading Day period is exceeded, or for clause (g) the date on which such
thirty (30) day period is exceeded, being referred to as "Event
Date"), the Conversion Price shall be decreased by 2.5% each
month (i.e., the Conversion Price would decrease by 2.5% as of the
Event Date and an additional 2.5% as of each monthly anniversary of the
Event Date) until the earlier to occur of the second month
anniversary after the Event Date and such time as the applicable
Event is cured. Commencing the second month anniversary after
the Event Date, the Company shall pay to the Holders $50,000 (each
holder being entitled to receive such portion of such amount as
equals its pro rata portion of the Preferred Stock then
outstanding) in cash as liquidated damages, and not as a penalty
on the first day of each monthly anniversary of the Event Date until
such time as the applicable Event, is cured. Any decrease in the
Conversion Price pursuant to this Section shall continue
notwithstanding the fact that the Event causing such decrease has
been subsequently cured. Additionally, if the Company has failed
to file a registration statement as required by the Registration
Rights Agreement within 120 days after the date it was required
to file such registration statement pursuant to the Registration
Rights Agreement or if any registration statement required to be
filed by the Company pursuant to the Registration Rights
Agreement has not been declared effective by the Commission within 240 days
of the date it was required to file such registration statement
pursuant to the Registration Rights Agreement or if the Company
has let any registration statement required to be filed pursuant to
the Registration Rights Agreement lapse for a period of 60
consecutive days, then each Holder shall have the option to require the
Company to redeem the balance of such Holder's Preferred Stock, together
with all accrued but unpaid dividends, in cash at a redemption
price equal to the sum of (A) the aggregate of all accrued but
unpaid dividends, plus (B) the number of shares of Preferred
Stock then held by such holder multiplied by (1) the average Per Share
Market Value for the five (5) Trading Days immediately preceding
(x) the date of the redemption request notice or (y) the date of
payment in full by the Company of such prepayment price,
whichever is greater, multiplied by, (2) the Conversion Ratio calculated on
the redemption date. If the Holder has requested that the
Company redeem shares of Preferred Stock pursuant to this Section and the
Company fails for any reason to pay the redemption price as
calculated above within seven days after such notice is deemed
delivered, the Company will pay interest on the redemption price
at a rate of 15% per annum, in cash to such holder, accruing from
such seventh day until the redemption price and any accrued interest
thereon is paid in full. The provisions of this Section are not
exclusive and shall in no way limit the Company's obligations
under the Registration Rights Agreement.
(ii) If the Company, at any time while any shares
of Preferred Stock are outstanding, (a) shall pay a stock dividend
or otherwise make a distribution or distributions on shares of its
Junior Securities or pari passu securities (other than with
respect to the Series C Preferred Stock, Series D Preferred Stock or any
stock dividend issued in whole or part in shares of Common Stock
to pay the standard coupon on any pari passu securities where Union
Bank of Switzerland was the placement agent or underwriter for
such securities) payable in shares of Common Stock, (b) subdivide
outstanding shares of Common Stock into a larger number of
shares, (c) combine outstanding shares of Common Stock into a smaller
number of shares, or (d) issue by reclassification of shares of
Common Stock any shares of capital stock of the Company, the
Initial Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding before such event
and of which the denominator shall be the number of shares of
Common Stock outstanding after such event. Any adjustment made
pursuant to this Section 5(c)(ii) shall become effective
immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in
the case of a subdivision, combination or re-classification.
(iii) If the Company, at any time while any
shares of Preferred Stock are outstanding, shall issue rights or
warrants to all holders of Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than
the Per Share Market Value of Common Stock at the record date
mentioned below, the Initial Conversion Price shall be multiplied by a
fraction, of which the denominator shall be the number of shares
of Common Stock (excluding treasury shares, if any) outstanding on
the date of issuance of such rights or warrants plus the number of
additional shares of Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding
on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of
shares so offered would purchase at such Per Share Market Value.
Such adjustment shall be made whenever such rights or warrants
are issued, and shall become effective immediately after the record
date for the determination of stockholders entitled to receive
such rights or warrants. However, upon the expiration of any right or
warrant to purchase Common Stock the issuance of which resulted
in an adjustment in the Initial Conversion Price pursuant to this
Section 5(c)(iii), if any such right or warrant shall expire and
shall not have been exercised, the Initial Conversion Price shall
immediately upon such expiration be recomputed and effective
immediately upon such expiration be increased to the price which
it would have been (but reflecting any other adjustments in the
Initial Conversion Price made pursuant to the provisions of this
Section 5 after the issuance of such rights or warrants) had the
adjustment of the Initial Conversion Price made upon the issuance
of such rights or warrants been made on the basis of offering for
subscription or purchase only that number of shares of Common
Stock actually purchased upon the exercise of such rights or warrants
actually exercised.
(iv) If the Company, at any time while shares of
Preferred Stock are outstanding, shall distribute to all holders
of Common Stock (and not to holders of Preferred Stock) evidences of
its indebtedness or assets or rights or warrants to subscribe for
or purchase any security (excluding those referred to in Sections
5(c)(ii) and (iii) above), then in each such case the Initial
Conversion Price at which each share of Preferred Stock shall
thereafter be convertible shall be determined by multiplying the
Conversion Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the
Per Share Market Value of Common Stock determined as of the
record date mentioned above, and of which the numerator shall be such
Per Share Market Value of the Common Stock on such record date less
the then fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable to
one outstanding share of Common Stock as determined by the Board of
Directors in good faith; provided, however, that in the event of
a distribution exceeding ten percent (10%) of the net assets of the
Company, such fair market value shall be determined by a
nationally recognized or major regional investment banking firm or firm of
independent certified public accountants of recognized standing
(which may be the firm that regularly examines the financial
statements of the Company) (an "Appraiser") selected in good
faith by the holders of a majority in interest of the shares of
Preferred Stock then outstanding; and provided, further, that the Company,
after receipt of the determination by such Appraiser shall have
the right to select an additional Appraiser, in good faith, in which
case the fair market value shall be equal to the average of the
determinations by each such Appraiser. In either case the
adjustments shall be described in a statement provided to the
holders of Preferred Stock of the portion of assets or evidences
of indebtedness so distributed or such subscription rights
applicable to one share of Common Stock. Such adjustment shall be made
whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(v) All calculations under this Section 5 shall
be made to the nearest cent or the nearest 1/100th of a share, as
the case may be.
(vi) Whenever the Conversion Price is adjusted
pursuant to Section 5(c)(ii),(iii) or (iv), the Company shall
promptly mail to each holder of Preferred Stock, a notice setting
forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
(vii) In case of any reclassification of the
Common Stock, any consolidation or merger of the Company with or
into another person pursuant to which (i) a majority of the
Company's Board of Directors will not constitute a majority of
the board of directors of the surviving entity or (ii) less than 65%
of the outstanding shares of the capital stock of the surviving
entity will be held by the same shareholders of the Company prior to
such reclassification, consolidation or merger, the sale or transfer
of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property, the holders of
the Preferred Stock then outstanding shall have the right
thereafter to convert such shares only into the shares of stock
and other securities, cash and property receivable upon or deemed to
be held by holders of Common Stock following such reclassification,
consolidation, merger, sale, transfer or share exchange, and the
holders of the Preferred Stock shall be entitled upon such event
to receive such amount of securities, cash or property as the shares
of the Common Stock of the Company into which such shares of
Preferred Stock could have been converted immediately prior to
such reclassification, consolidation, merger, sale, transfer or share
exchange would have been entitled; provided, however, that if
such reclassification, consolidation or merger is approved by the
Company's Board of Directors, each Holder shall have the option
to require the Company to redeem, from funds legally available
therefor at the time of such redemption, its shares of Preferred
Stock at a price per share equal to the product of (i) the
average Per Share Market Value for the five (5) Trading Days immediately
preceding (1) the effective date, the date of the closing or the
date of the announcement, as the case may be, of the
reclassification, consolidation, merger, sale, transfer or share
exchange the triggering such redemption right or (2) the date of
payment in full by the Company of the redemption price hereunder,
whichever is greater, and (ii) the Conversion Ratio calculated on
the date of the closing or the effective date, as the case may
be, of the reclassification, consolidation, merger, sale, transfer or
share exchange triggering such redemption right, as the case may
be. The entire redemption price shall be paid in cash, and the
terms of payment of such redemption price shall be subject to the
provisions set forth in Section 6(b). The terms of any such
consolidation, merger, sale, transfer or share exchange shall
include such terms so as to continue to give to the holder of
Preferred Stock the right to receive the securities, cash or
property set forth in this Section 5(c)(vii) upon any conversion
or redemption following such consolidation, merger, sale, transfer
or share exchange. This provision shall similarly apply to
successive reclassifications, consolidations, mergers, sales, transfers or
share exchanges.
(viii) If:
A. the Company shall declare a dividend (or
any other distribution) on its Common
Stock; or
B. the Company shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or
C. the Company shall authorize the granting
to all holders of the Common Stock rights
or warrants to subscribe for or purchase
any shares of capital stock of any class
or of any rights; or
D. the approval of any stockholders of the
Company shall be required in connection
with any reclassification of the Common
Stock of the Company, any consolidation
or merger to which the Company is a party,
any sale or transfer of all or
substantially all of the assets of the
Company, of any compulsory share of
exchange whereby the Common Stock is
converted into other securities, cash or
property; or
E. the Company shall authorize the voluntary
or involuntary dissolution, liquidation
or winding up of the affairs of the Company;
then the Company shall cause to be filed at each office or agency
maintained for the purpose of conversion of Preferred Stock, and
shall cause to be mailed to the holders of Preferred Stock at
their last addresses as they shall appear upon the stock books of the
Company, at least 30 calendar days prior to the applicable record
or effective date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a
record is not to be taken, the date as of which the holders of
Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided, however, that the
failure to mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice. Holders are entitled to
convert shares of Preferred Stock during the 30-day period
commencing the date of such notice to the effective date of the
event triggering such notice.
(ix) If the Company (i) makes a public
announcement that it intends to enter into a Change of Control Transaction (as
defined below) or (ii) any person, group or entity (including the
Company, but excluding a Holder or any affiliate of a Holder)
publicly announces a bona fide tender offer, exchange offer or
other transaction to purchase 50% or more of the Common Stock
(such announcement being referred to herein as a "Major Announcement"
and the date on which a Major Announcement is made, the "Announcement
Date"), then, in the event that a Holder seeks to convert shares
of Preferred Stock on or following the Announcement Date, the
Conversion Price shall, effective upon the Announcement Date and
continuing through the earlier to occur of the consummation of
the proposed transaction or tender offer, exchange offer or other
transaction and the Abandonment Date (as defined below), be equal
to the lower of (x) the average Per Share Market Value on the
five Trading Days immediately preceding (but not including) the
Announcement Date and (y) the Conversion Price in effect on the
Conversion Date for such Preferred Stock. "Abandonment Date"
means with respect to any proposed transaction or tender offer,
exchange offer or other transaction for which a public announcement as
contemplated by this paragraph has been made, the date upon which
the Company (in the case of clause (i) above) or the person,
group or entity (in the case of clause (ii) above) publicly announces
the termination or abandonment of the proposed transaction or tender
offer, exchange offer or another transaction which caused this
paragraph to become operative.
(d) If at any time conditions shall arise by reason of
action taken by the Company which in the opinion of the Board of
Directors are not adequately covered by the other provisions
hereof and which might materially and adversely affect the rights of the
holders of Preferred Stock (different than or distinguished from
the effect generally on rights of holders of any class of the
Company's capital stock) or if at any time any such conditions
are expected to arise by reason of any action contemplated by the
Company, the Company shall mail a written notice briefly
describing the action contemplated and the material adverse effects of such
action on the rights of the holders of Preferred Stock at least
30 calendar days prior to the effective date of such action, and an
Appraiser selected by the holders of majority in interest of the
Preferred Stock shall give its opinion as to the adjustment, if
any (not inconsistent with the standards established in this Section
5), of the Conversion Price (including, if necessary, any
adjustment as to the securities into which shares of Preferred
Stock may thereafter be convertible) and any distribution which
is or would be required to preserve without diluting the rights of
the holders of shares of Preferred Stock; provided, however, that the
Company, after receipt of the determination by such Appraiser,
shall have the right to select an additional Appraiser, in good
faith, in which case the adjustment shall be equal to the average
of the adjustments recommended by each such Appraiser. The Board
of Directors shall make the adjustment recommended forthwith upon
the receipt of such opinion or opinions or the taking of any such
action contemplated, as the case may be; provided, however, that
no such adjustment of the Conversion Price shall be made which in
the opinion of the Appraiser(s) giving the aforesaid opinion or
opinions would result in an increase of the Conversion Price to
more than the Conversion Price then in effect.
(e) The Company covenants that it will at all times
reserve and keep available out of its authorized and unissued
Common Stock solely for the purpose of issuance upon conversion
of Preferred Stock and payment of dividends on Preferred Stock, each
as herein provided, free from preemptive rights or any other
actual contingent purchase rights of persons other than the holders of
Preferred Stock, not less than such number of shares of Common
Stock as shall (subject to any additional requirements of the
Company as to reservation of such shares set forth in the
Purchase Agreement) be issuable (taking into account the adjustments and
restrictions of Section 5(c)) upon the conversion of all
outstanding shares of Preferred Stock and payment of dividends
hereunder. The Company covenants that all shares of Common Stock
that shall be so issuable shall, upon issue, be duly and validly
authorized, issued and fully paid, nonassessable and freely
tradeable.
(f) Upon a conversion hereunder the Company shall not
be required to issue stock certificates representing fractions of
shares of Common Stock, but may if otherwise permitted, make a
cash payment in respect of any final fraction of a share based on the
Per Share Market Value at such time. If the Company elects not,
or is unable, to make such a cash payment, the holder of a share of
Preferred Stock shall be entitled to receive, in lieu of the
final fraction of a share, one whole share of Common Stock.
(g) The issuance of certificates for shares of Common
Stock on conversion of Preferred Stock shall be made without
charge to the holders thereof for any documentary stamp or similar taxes
that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to
pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate upon conversion
in a name other than that of the holder of such shares of
Preferred Stock so converted and the Company shall not be required to issue
or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
(h) Shares of Preferred Stock converted into Common
Stock shall be canceled and shall have the status of authorized
but unissued shares of undesignated stock.
(i) Any and all notices or other communications or
deliveries to be provided by the holders of the Preferred Stock
hereunder, including, without limitation, any Conversion Notice,
shall be in writing and delivered personally, by facsimile or
sent by a nationally recognized overnight courier service, addressed
to the attention of the Chief Executive Officer of the Company at
the facsimile telephone number or address of the principal place of
business of the Company as set forth in the Purchase Agreement.
Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and
delivered personally, by facsimile or sent by a nationally recognized
overnight courier service, addressed to each holder of Preferred
Stock at the facsimile telephone number or address of such holder
appearing on the books of the Company, or if no such facsimile
telephone number or address appears, at the principal place of
business of the holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 7:00 p.m. (Eastern
Time), (ii) the date after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 7:00 p.m. (New York
Time) on any date and earlier than 11:59 p.m. (Eastern Time) on
such date, (iii) upon receipt, if sent by a nationally recognized
overnight courier service, or (iv) upon actual receipt by the
party to whom such notice is required to be given.
Section 6. Redemptions.
(a) All outstanding and unconverted shares of
Preferred Stock on the third anniversary of the Original Issue Date shall
be converted pursuant to Section 5(a)(ii) or redeemed by the Company
pursuant to this Section 6(a), from funds legally available
therefor at a price per share equal to the product of (i) the
average Per Share Market Value for the five (5) Trading Days
immediately preceding (1) the third anniversary of the Original
Issue Date or (2) the date of payment in full by the Company of
the redemption price hereunder, whichever is greater, and (ii) the
Conversion Ratio calculated on the third anniversary of the
Original Issue Date. Thereafter, all shares of Preferred Stock
shall cease to be outstanding and shall have the status of
authorized but undesignated stock. The entire redemption price
shall be paid in cash.
(b) If any portion of the applicable redemption price
under Section 6(a) shall not be paid by the Company within seven
(7) calendar days after the date due, interest shall accrue
thereon at the rate of 15% per annum until the redemption price plus all
such interest is paid in full (which amount shall be paid as
liquidated damages and not as a penalty). In addition, if any
portion of such redemption price remains unpaid for more than 7
calendar days after the date due, the holder of the Preferred
Stock subject to such redemption may elect, by written notice to the
Company given within 30 days after the date due, to either (i)
demand conversion in accordance with the formula and the time
frame therefor set forth in Section 5 of all of the shares of Preferred
Stock for which such redemption price, plus accrued liquidated
damages thereof, has not been paid in full (the "Unpaid
Redemption Shares"), in which event the Per Share Market Price for such
shares shall be the lower of the Per Share Market Price calculated on
the date such redemption price was originally due and the Per Share
Market Price as of the holder's written demand for conversion, or
(ii) invalidate ab initio such redemption, notwithstanding
anything herein contained to the contrary. If the holder elects option
(i) above, the Company shall within three (3) Trading Days of its
receipt of such election deliver to the holder the shares of
Common Stock issuable upon conversion of the Unpaid Redemption Shares
subject to such holder conversion demand and otherwise perform
its obligations hereunder with respect thereto; or, if the Holder
elects option (ii) above, the Company shall promptly, and in any
event not later than three (3) Trading Days from receipt of
holder's notice of such election, return to the holder all of the
Unpaid Redemption Shares.
Section 7. Definitions. For the purposes hereof,
the following terms shall have the following meanings:
"Common Stock" means the Company's common stock, $.01
par value per share, of the Company and stock of any other class into
which such shares may hereafter have been reclassified or
changed.
"Conversion Ratio" means, at any time, a fraction, of
which the numerator is Stated Value plus accrued but unpaid
dividends (including any accrued but unpaid interest thereon) but
only to the extent not paid in shares of Common Stock in
accordance with the terms hereof, and of which the denominator is the
Conversion Price at such time.
"Junior Securities" means the Common Stock and all
other equity securities of the Company which are junior in rights and
liquidation preference to the Preferred Stock.
"Original Issue Date" shall mean the date of the first
issuance of any shares of the Preferred Stock regardless of the
number of transfers of any particular shares of Preferred Stock
and regardless of the number of certificates which may be issued to
evidence such Preferred Stock.
"Per Share Market Value" means on any particular date
(a) the closing bid price per share of the Common Stock on such date
on the Nasdaq National Market or other stock exchange or quotation
system on which the Common Stock is then listed or if there is no
such price on such date, then the closing bid price on such
exchange or quotation system on the date nearest preceding such
date, or (b) if the Common Stock is not listed then on the Nasdaq
National Market or any stock exchange or quotation system, the
closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the Nasdaq Stock Market
or in the National Quotation Bureau Incorporated or similar
organization or agency succeeding to its functions of reporting
prices) at the close of business on such date, or (c) if the
Common Stock is not then reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its
functions of reporting prices), then the average of the "Pink
Sheet" quotes for the relevant conversion period, as determined
in good faith by the holder, or (d) if the Common Stock is not then
publicly traded the fair market value of a share of Common Stock
as determined by an Appraiser selected in good faith by the holders
of a majority in interest of the shares of the Preferred Stock;
provided, however, that the Company, after receipt of the
determination by such Appraiser, shall have the right to select
an additional Appraiser, in which case, the fair market value shall
be equal to the average of the determinations by each such
Appraiser; and provided, further that all determinations of the Per Share
Market Value shall be appropriately adjusted for any stock
dividends, stock splits or other similar transactions during such
period.
"Person" means a corporation, an association, a
partnership, organization, a business, an individual, a
government or political subdivision thereof or a governmental agency.
"Purchase Agreement" means the Convertible Preferred
Stock Purchase Agreement, dated as of the Original Issue Date,
among the Company and the original holders of the Preferred
Stock.
"Registration Rights Agreement" means the Registration
Rights Agreement, dated as of the Original Issue Date, by and
among the Company and the original Holders.
"Trading Day" means (a) a day on which the Common Stock
is traded on the Nasdaq National Market or other stock exchange
or market on which the Common Stock has been listed, or (b) if the
Common Stock is not listed on the Nasdaq National Market or any
stock exchange or market, a day on which the Common Stock is
traded in the over-the-counter market, as reported by the OTC Bulletin
Board, or (c) if the Common Stock is not quoted on the OTC
Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided, however,
that in the event that the Common Stock is not listed or quoted
as set forth in (a), (b) and (c) hereof, then Trading Day shall mean
any day except Saturday, Sunday and any day which shall be a
legal holiday or a day on which banking institutions in the State of
New York are authorized or required by law or other government action
to close.
"Underlying Shares" means the number of shares of
Common Stock into which the Shares are convertible and the shares or
Common Stock issuable upon payment of dividends thereon, in
accordance with the terms hereof and the Purchase Agreement .
RESOLVED FURTHER, that the President and Secretary of
the Company be, and they hereby are, authorized and directed to
prepare, execute, verify, and file with the Secretary of State of
Delaware, a Certificate of Designation in accordance with these
resolutions and as required by law.
IN WITNESS WHEREOF, Cytogen Corporation has caused its
corporate seal to be hereunto affixed and this certificate to be
signed by Dr. Thomas J. McKearn, its President, and attested by
Donald F. Crane, Jr., its Secretary, this 8th day of December,
1997.
CYTOGEN CORPORATION
By:/s/ Thomas J. McKearn
----------------------
Name: Thomas J. McKearn
Title: Chairman, President &
Chief Executive Officer
Attest:
By:/s/ Donald F. Crane, Jr.
------------------------
Name: Donald F. Crane, Jr.
Title: Vice President
General Counsel and Secretary
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby elects to convert the number of shares of
Series B Convertible Preferred Stock indicated below, into shares
of Common Stock, par value $.01 per share (the "Common Stock"),
of Cytogen Corporation (the "Company") according to the conditions
hereof, as of the date written below. If shares are to be issued
in the name of a person other than undersigned, the undersigned
will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be
charged to the holder for any conversion, except for such
transfer taxes, if any.
Conversion calculations: -----------------------------------
Date to Effect Conversion
-----------------------------------
Number of shares of Preferred Stock
to be Converted
-----------------------------------
Number of shares of Common Stock
to be Issued
----------------------------------
Applicable Conversion Price
----------------------------------
Signature
----------------------------------
Name
----------------------------------
Address
EXHIBIT B
NOTICE OF CONVERSION AT
THE ELECTION OF THE COMPANY
The undersigned in the name and on behalf of Cytogen Corporation
(the "Company") hereby notifies the addressee hereof that the
Company hereby elects to exercise its right to convert [ ]
shares of its 6% Series B Convertible Preferred Stock (the "Preferred
Stock") held by the Holder into shares of Common Stock, par value
$.01 per share (the "Common Stock") of the Company according to
the terms hereof, as of the date written below. No fee will be
charged to the Holder for any conversion hereunder, except for such
transfer taxes, if any which may be incurred by the Company if
shares are to be issued in the name of a person other than the
person to whom this notice is addressed.
Conversion calculations: ----------------------------------
Date to effect Conversion
----------------------------------
Number of shares of Preferred Stock
to be Converted
----------------------------------
Number of shares of Common Stock
to be Issued
----------------------------------
Applicable Conversion Price
----------------------------------
Name of Holder
----------------------------------
Address of Holder
EXHIBIT 10.1
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Between
CYTOGEN CORPORATION,
SOUTHBROOK INTERNATIONAL INVESTMENTS,
LTD.,
WESTOVER INVESTMENTS, L.P.,
MONTROSE INVESTMENTS, L.P.,
HERACLES FUND,
THEMIS PARTNERS, L.P.
BROWN SIMPSON STRATEGIC GROWTH FUND, L.P.
and
BROWN SIMPSON STRATEGIC GROWTH FUND, LTD.
Dated as of December 9, 1997
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this
"Agreement"), dated as of December 9, 1997, between Cytogen
Corporation, a Delaware corporation (the "Company") and
Southbrook International Investments, Ltd., a corporation
organized and existing under the laws of the British Virgin
Islands ("Southbrook"), Westover Investments L.P., a Delaware
limited partnership ("Westover"), Montrose Investments L.P., a
Cayman Islands exempt limited partnership ("Montrose"), Heracles
Fund, a Cayman Islands exempt company ("Heracles"), Themis
Partners, L.P., a Delaware limited partnership ("Themis"), Brown
Simpson Strategic Growth Fund, L.P., a New York limited
partnership ("Brown Simpson LP") and Brown Simpson Strategic
Growth Fund, Ltd., a Cayman Islands exempt company ("Brown
Simpson Limited"). Southbrook, Westover, Montrose, Heracles,
Themis and Brown Simpson LP and Brown Simpson Limited are each
referred to herein as a "Purchaser" and are collectively referred
to herein as the "Purchasers."
WHEREAS, subject to the terms and conditions set forth in
this Agreement, the Company desires to issue and sell to the
Purchasers, and the Purchasers desire to acquire from the
Company, shares of the Company's 6% Series B Convertible
Preferred Stock, par value $.01 per share (the "Series B
Preferred"), the Company's 6% Series C Convertible Preferred
Stock, par value $.01 per share (the "Series C Preferred") and
the Company's 6% Series D Convertible Preferred Stock, par value
$.01 per share (the "Series D Preferred" and together with the
Series B Preferred and the Series C Preferred, the "Preferred
Stock").
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Company and each Purchaser agree as follows:
ARTICLE I
PURCHASE AND SALE OF PREFERRED SHARES
1.1 Purchase and Sale. (a) Subject to the terms and
conditions set forth herein, the Company shall issue and sell to
the Purchasers, and the Purchasers, severally and not jointly,
shall purchase from the Company: (i) 750 shares of Series B
Preferred (the "Series B Shares"); (ii) up to 1,250 shares of
Series C Preferred (the "Series C Shares"); and (iii) up to 1,250
shares of Series D Preferred (the "Series D Shares" and together
with the Series B Shares and the Series C Shares, the "Shares").
Notwithstanding anything to the contrary set forth in this
Agreement, the aggregate number of Shares to be sold hereunder
shall not exceed 2,000 (the "Maximum Share Amount").
(b) The Series B Preferred shall have the respective
rights, preferences and privileges set forth in Exhibit A
attached hereto (the "Series B Terms"), which shall be
incorporated into a Certificate of Designation to be approved by
the Purchasers and filed on or prior to the Series B Closing (as
defined below) by the Company with the Secretary of State of
Delaware (the "Series B Designation"). The Series C Preferred
and Series D Preferred shall have respective rights, preferences
and privileges identical to the Series B Terms, mutatis mutandis,
and shall rank pari passu with the Series B Preferred with regard
to dividends, liquidation, voting rights and any other
preferential rights designated therein, except that the
Conversion Price (as defined below) for conversion
of the Series C Shares and Series D Shares shall be determined as
of the Original Issue Date (as defined below) for such Series C
and Series D Shares.
The Series C Preferred and Series D Preferred shall be
authorized pursuant to certificates of designation prepared by
the Company, subject to the approval of the Purchasers, and filed
at or prior to the Series C Closing Date (as defined below) and
Series D Closing Date (as defined below), as applicable, by the
Company with the Secretary of State of Delaware (such
certificates of designation, together with the Series B
Designation, are referred to as the "Certificates of
Designation").
For purposes of this Agreement, "Conversion Price,"
"Original Issue Date," "Conversion Date" "Trading Day" and "Per
Share Market Value" shall have the meanings set forth in Exhibit
A; and "Market Price" as at any date shall mean the average Per
Share Market Value for the five (5) Trading Days immediately
preceding such date.
1.2 Purchase Price. The purchase price per Share shall be
$10,000.
1.3 The Closings.
(a) The Series B Closing. (i) The closing of the
purchase and sale of the Series B Shares (the "Series B Closing")
shall take place at the offices of Robinson Silverman Pearce
Aronsohn & Berman LLP ("Robinson Silverman"), 1290 Avenue of the
Americas, New York, New York 10104, immediately following the
execution hereof or such later date as the parties shall agree,
but not prior to the date that the conditions set forth in
Section 4.1 have been satisfied or waived by the appropriate
party. The date of the Series B Closing is hereinafter referred
to as the "Series B Closing Date." At the Series B Closing, the
Company shall sell and issue to the Purchasers, and the
Purchasers shall, severally and not jointly, purchase from the
Company, 750 Series B Shares for an aggregate purchase price of
$7,500,000 (the "Series B Purchase Price").
(ii) At the Series B Closing, (a) the Company
shall deliver to each Purchaser one or more stock certificates
representing the Series B Shares purchased by such Purchaser as
set forth next to such Purchaser's name on Schedule 1 attached
hereto, each registered in the name of such Purchaser, and all
other documents, instruments and writings required to have been
delivered at or prior to the Series B Closing by the Company
pursuant to this Agreement and the Registration Rights Agreement,
dated the date hereof, by and between the Company and the
Purchasers, in the form of Exhibit B (the "Registration Rights
Agreement"), and (b) each Purchaser shall deliver to the Company
the portion of the Series B Purchase Price set forth next to its
name on Schedule 1, in United States dollars in immediately
available funds by wire transfer to an account designated in
writing by the Company for such purpose prior to the Series B
Closing Date, and all documents, instruments and writings
required to have been delivered at or prior to the
Series B Closing by such Purchaser pursuant to this Agreement and
the Registration Rights Agreement.
(b) The Series C Closing. (i) Subject to the terms
and conditions set forth in this Agreement, the Company shall, if
the average Per Share Market Value for the thirty Trading Days
prior to the date of the Series C Subsequent Financing Notice is
greater than $2.00, have the right to deliver a written notice to
the Purchasers (a "Series C Subsequent Financing Notice")
requiring the Purchasers to purchase Series C Shares. The
Company may deliver a Series C Subsequent Financing Notice no
earlier than 90 days after the effective date of the Underlying
Shares Registration Statement relating to the securities issued
at the Series B Closing Date and no later than 270 days after the
effective date of such Registration Statement (such 270th day,
the "Series C Closing Expiration Date") and such Series C
Subsequent Financing Notice shall set forth the dollar amount of
Series C Shares that the Company intends to sell to the
Purchasers, provided, however, that the minimum amount of such
sale and purchase shall be $1,500,000 and the maximum amount of
such sale and purchase shall be based upon the average Per Share
Market Value for the thirty Trading Days prior to the date of the
Series C Closing as follows: if such average price is greater
than $2.00 but less than $2.50 then the maximum funding shall be
$4,000,000; if such average price is equal to or greater than
$2.50 but less than $3.00 then the maximum funding shall be
$5,500,000; if such average price is equal to or
greater than $3.00 but less than $3.75 then the maximum funding
shall be $7,000,000; if such average price is equal to or greater
than $3.75 but less than $4.50 then the maximum funding shall be
$10,000,000; and if such average price is equal to or greater
than $4.50 then the maximum funding shall be $12,500,000;
provided, further, that the Purchasers shall not be required to
purchase any Series C Shares if the average Per Share Market
Value for the thirty Trading Days prior to the date of the Series
C Closing is less than $2.00. At the Series C Closing each
Purchaser shall be obligated (subject to the terms and conditions
herein) to purchase such portion of such Series C Shares as
equals such Purchaser's pro rata portion of the purchase price
for the Series B Shares issued and sold at the Series B Closing.
The closing of the purchase and sale of the Series C Shares (the
"Series C Closing") shall take place at the offices of Robinson
Silverman on such date indicated in the Series C Subsequent
Financing Notice (which may not be prior to the 15th Trading Day
or subsequent to the 30th Trading Day after receipt by the
Purchasers of the Subsequent Financing Notice, or as
otherwise agreed to by the parties); provided that in no case
shall the Series C Closing take place unless and until the
conditions listed in Section 4.2 have been satisfied or waived by
the appropriate party. The date of the Series C Closing is
hereinafter referred to as the "Series C Closing Date" and the
purchase price paid for the Series C Shares is hereinafter
referred to as the "Series C Purchase Price.")
(ii) At the Series C Closing, (a) the Company
shall deliver (A) to each Purchaser (1) a pro rata portion of the
Series C Shares (determined by reference to the amount of Series
B Shares issued and sold at the Series B Closing) to be issued
and sold thereat (or such other amount upon which the parties may
agree), registered in the name of the appropriate Purchaser, (2)
the legal opinion referenced in Section 4.2(xii), substantially
in the form attached hereto as Exhibit C, and (3) all other
documents, instruments and writings required to have been
delivered at or prior to the Series C Closing by the Company to
the Purchasers pursuant to this Agreement; and (b) each Purchaser
shall deliver to the Company (1) the purchase price for the
Series C Shares being purchased by it at the Series C Closing in
United States dollars in immediately available funds by wire
transfer to an account designated in writing by the Company for
such purpose on or prior to the Series C Closing Date and (2) all
documents, instruments and writings required to have been
delivered at or prior to the Series C Closing by such Purchaser
pursuant to this Agreement.
(c) The Series D Closing. (i) Subject to the terms
and conditions set forth in this Agreement, the Company shall, if
the average Per Share Market Value for the thirty Trading Days
prior to the date of the Series D Subsequent Financing Notice is
greater than $2.00 and if the sum of the Series B Purchase Price
and the Series C Purchase Price is less than $20,000,000, have
the right to deliver a written notice to the Purchasers (a
"Series D Subsequent Financing Notice") requiring the Purchasers
to purchase Series D Shares. The Company may deliver a Series D
Subsequent Financing Notice no earlier than 90 days after the
effective date of the Underlying Shares Registration Statement
relating to the securities issued at the Series C Closing Date
and no later than 270 days after the effective date of such
Registration Statement (such 270th day,, the "Series D Closing
Expiration Date") and such Subsequent Financing Notice shall set
forth the dollar amount of Series D Shares that the Company
intends to sell to the Purchasers, provided, however, that the
minimum amount of such sale and purchase shall be $1,500,000 and
the maximum amount of such sale and purchase shall be based upon
the average Per Share Market Value for the thirty Trading Days
prior to the date of the Series D Closing as follows: if such
average price is greater than $2.00 but less than $2.50 then the
maximum funding shall be $4,000,000; if such average price is
equal to or greater than $2.50 but less than $3.00 then the
maximum funding shall be $5,500,000; if such average
price is equal to or greater than $3.00 but less than $3.75 then
the maximum funding shall be $7,000,000; if such average price is
equal to or greater than $3.75 but less than $4.50 then the
maximum funding shall be $10,000,000; and if such average price
is equal to or greater than $4.50 then the maximum funding shall
be $12,500,000; provided, further, that the Purchasers shall not
be required to purchase any Series D Shares if the average Per
Share Market Value for the thirty Trading Days prior to the date
of the Series D Closing is less than $2.00, and provided,
further, that in no event shall the aggregate purchase price of
Shares sold and purchased pursuant to this Agreement exceed
$20,000,000 and if the amount of Series D Shares to be sold and
purchased at the Series D Closing would cause the aggregate
purchase price of Shares sold pursuant to this Agreement to
exceed $20,000,000 (including such Series D Shares to be sold and
purchased) then the amount of Series D Shares to be sold at the
Series D Closing shall be reduced to an amount so that the
aggregate purchase price of Shares sold pursuant to this
Agreement does not exceed $20,000,000. At the Series D
Closing each Purchaser shall be obligated (subject to the terms
and conditions herein) to purchase such portion of such Series D
Shares as equals such Purchaser's pro rata portion of the
purchase price for the Series B Shares issued and sold at the
Series B Closing. The closing of the purchase and sale of the
Series D Shares (the "Series D Closing") shall take place at the
offices of Robinson Silverman on such date indicated in the
Series D Subsequent Financing Notice (which may not be prior to
the 15th Trading Day or subsequent to the 30th Trading Day after
receipt by the Purchasers of the Subsequent Financing Notice, or
as otherwise agreed to by the parties); provided that in no case
shall the Series D Closing take place unless and until the
conditions listed in Section 4.2 have been satisfied or waived by
the appropriate party. The date of the Series D Closing is
hereinafter referred to as the "Series D Closing Date."
(ii) At the Series D Closing, (a) the Company
shall deliver (A) to each Purchaser (1) a pro rata portion of the
Series D Shares (determined by reference to the amount of Series
B Shares issued and sold at the Series B Closing) to be issued
and sold thereat (or such other amount upon which the parties may
agree), registered in the name of the appropriate Purchaser, (2)
the legal opinion referenced in Section 4.1(xii), substantially
in the form attached hereto as Exhibit C, and (3) all other
documents, instruments and writings required to have been
delivered at or prior to the Series D Closing by the Company to
the Purchasers pursuant to this Agreement; and (b) each Purchaser
shall deliver to the Company (1) the purchase price for the
Series D Shares being purchased by it at the Series D Closing in
United States dollars in immediately available funds by wire
transfer to an account designated in writing by the Company for
such purpose on or prior to the Series D Closing Date and (2) all
documents, instruments and writings required to have been
delivered at or prior to the Series D Closing by such Purchaser
pursuant to this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the
Company. The Company hereby makes the following representations
and warranties to the Purchasers:
(a) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, with the
requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries other than as set
forth in Schedule 2.1(a) (collectively the "Subsidiaries"). Each
of the Subsidiaries is a corporation, duly incorporated, validly
existing and in good standing under the laws of the jurisdiction
of its incorporation or organization (as applicable), with the
full corporate power and authority to own and use its properties
and assets and to carry on its business as currently conducted.
Each of the Company and the Subsidiaries is duly qualified to do
business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the
case may be, would not, individually or in the aggregate, (x)
adversely affect the legality, validity or enforceability of the
Preferred Stock or any of the Transaction Documents (as defined
below) in any material respect, (y) have or result in a material
adverse effect on the results of operations, assets, prospects,
or financial condition of the Company and the Subsidiaries, taken
as a whole or (z) adversely impair the Company's ability to
perform fully on a timely basis its obligations under any
Transaction Document (any of (x), (y) or (z), being a "Material
Adverse Effect").
(b) Authorization; Enforcement. The Company has the
requisite corporate power and authority to enter into and to
consummate the transactions contemplated by this Agreement and
the other Transaction Documents, and otherwise to carry out its
obligations hereunder and thereunder. This Agreement, the
Certificates of Designation and the Registration Rights Agreement
are collectively referred to as the "Transaction Documents". The
execution and delivery of each of the Transaction Documents by
the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action
is required by the Company. Each of the Transaction Documents
has been duly executed by the Company and when delivered in
accordance with the terms hereof will constitute the valid and
binding obligation of the Company enforceable against the Company
in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or
by other equitable principles of general application. Neither
the Company nor any Subsidiary is in violation of any of the
provisions of its respective certificate of incorporation,
articles, by-laws or other charter documents.
Prior to each of the closing dates the respective Certificate of
Designation has been filed with the Secretary of State of the
State of Delaware and will be in full force and effect,
enforceable against the Company in accordance with the terms
thereof.
(c) Capitalization. The authorized, issued and
outstanding capital stock of the Company is set forth in Schedule
2.1(c). No shares of Common Stock are entitled to preemptive or
similar rights, nor is any holder of the Common Stock entitled to
preemptive or similar rights arising out of any agreement or
understanding with the Company by virtue of any of the
Transaction Documents. Except as disclosed in Schedule 2.1(c),
there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever
relating to, or, except as a result of the purchase and sale of
the Shares, securities, rights or obligations convertible into or
exchangeable for, or giving any person any right to subscribe for
or acquire any shares of Common Stock, or contracts, commitments,
understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or exchangeable
into shares of Common Stock. To the knowledge of the Company,
except as specifically disclosed in the SEC Documents (as defined
below) or Schedule 2.1(c), no Person or group of related Persons
beneficially owns (as determined pursuant to Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) or has the right to acquire by agreement
with or by obligation binding upon the Company beneficial
ownership of in excess of 5% of the Common Stock. A "Person"
means an individual or corporation, partnership, trust,
incorporated or unincorporated association,
joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity
of any kind.
(d) Issuance of Shares. The Shares are duly
authorized, and when issued and paid for in accordance with the
terms hereof, shall be validly issued, fully paid and
nonassessable, free and clear of all liens, encumbrances and
rights of first refusal of any kind (collectively, "Liens"). The
Company, as at the Series B Closing Date, the Series C Closing
Date and the Series D Closing Date (each a "Closing Date"), as
the case may be, will have and at all times while the Shares are
outstanding will maintain an adequate reserve of duly authorized
shares of Common Stock to enable it to perform its obligations
under this Agreement and the Certificates of Designation with
respect to the number of Shares issued and outstanding at such
Closing Date and in no circumstances shall such reserved and
available shares of Common Stock be less than the sum of (i) 175%
times the maximum number of shares of Common Stock which would be
issuable upon conversion of the Shares issued pursuant to the
terms hereof with respect to the number of Shares issued and
outstanding at such Closing Date were such conversion effected on
the Original Issue Date for such Shares and (ii) the number of
shares Common Stock which would be issuable upon
payment of dividends on the Shares, assuming each Share is
outstanding for two years. The shares of Common Stock issuable
upon conversion of the Shares and which may be issued as payment
of dividends on the Shares are collectively referred to herein as
the "Underlying Shares." When issued in accordance with the
Certificates of Designation, the Underlying Shares will be duly
authorized, validly issued, fully paid and nonassessable, free
and clear of all Liens.
(e) No Conflicts. The execution, delivery and
performance of this Agreement and the other Transaction Documents
by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not
(i) conflict with or violate any provision of its certificate of
incorporation, bylaws or other charter documents (each as amended
through the date hereof) or (ii) subject to obtaining the
consents referred to in Section 2.1(f), 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 (evidencing a Company
debt or otherwise) to which the Company is a party or by which
any property or asset of the Company is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company is subject (including
Federal and state securities laws and regulations), or by which
any material property or asset of the Company is bound or
affected, except in the case of each of clauses (ii) and (iii),
such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not,
individually or in the aggregate, have or result in a Material
Adverse Effect. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any
governmental authority, except for violations which, individually
or in the aggregate, would not have a Material Adverse Effect.
(f) Consents and Approvals. Except as specifically
set forth in Schedule 2.1(f), neither the Company nor any
Subsidiary is required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing
or registration with, any court or other federal, state, local or
other governmental authority or other person in connection with
the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filings of the
Certificates of Designation with respect to the Preferred Stock
with the Secretary of State of Delaware, which filings with
respect to each of the Series B Shares, the Series C Shares and
the Series D Shares shall be effected prior to the Series B
Closing Date, the Series C Closing Date and the Series D Closing
Date, as appropriate, (ii) the filing of Underlying Shares
Registration Statements with the Securities and Exchange
Commission (the "Commission"), which shall
be filed in accordance with and in the time periods set forth in
the Registration Rights Agreement, (iii) the application(s) or
any letter(s) acceptable to the Nasdaq National Market for the
listing of the Underlying Shares with the Nasdaq National Market
(and with any other national securities exchange or market on
which the Common Stock is then listed), (iv) any filings, notices
or registrations under applicable state securities laws, and (v)
other than, in all other cases, where the failure to obtain such
consent, waiver, authorization or order, or to give such notice
or make such filing or registration would not have or result in,
individually or in the aggregate, a Material Adverse Effect
(together with the consents, waivers, authorizations, orders,
notices and filings referred to in Schedule 2.1(f), the "Required
Approvals").
(g) Litigation; Proceedings. Except as specifically
disclosed in the Disclosure Materials (as hereinafter defined)
there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties before or by
any court, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) which (i)
adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Preferred Stock or (ii) could reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect.
(h) No Default or Violation. Neither the Company nor
any Subsidiary (i) is in default under or in violation of any
indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its
properties is bound, (ii) is in violation of any order of any
court, arbitrator or governmental body applicable to it, or (iii)
is in violation of any statute, rule or regulation of any
governmental authority to which it is subject, except as could
not reasonably be expected to, in any such case (individually or
in the aggregate) have or result in a Material Adverse Effect.
(i) Schedules. The Schedules to this Agreement
furnished by or on behalf of the Company do not contain any
untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not
misleading.
(j) Private Offering. Neither the Company nor any
Person acting on its behalf has taken or will take any action
which might subject the offering, issuance or sale of the
Securities to the registration requirements of the Securities Act
of 1933, as amended (the "Securities Act").
(k) SEC Documents; Financial Statements; No Adverse
Change. The Company has filed all reports required to be filed
by it under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including pursuant to Section 13(a) or 15(d)
thereof, for the three years preceding the date hereof (or such
shorter period as the Company was required by law to file such
material) (the foregoing materials being collectively referred to
herein as the "SEC Documents" and, together with the Schedules to
this Agreement, the "Disclosure Materials") on a timely basis or
has received a valid extension of such time of filing and has
filed any such SEC Documents prior to the expiration of any such
extension. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations
of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, 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. All material agreements to which the
Company is a party or to which the property or assets of the
Company are subject have been filed as exhibits to the SEC
Documents as required; neither the Company nor any of its
subsidiaries is in breach of any agreement where such breach
would have or result in a Material Adverse Effect. The financial
statements of the Company included in the SEC Documents comply in
all material respects with applicable accounting requirements and
the rules and regulations of the Commission with respect thereto
as in effect at the time of filing. Such financial statements
have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the
periods involved, except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in
all material respects the financial position of the Company as of
and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of
unaudited statements, to normal year-end audit adjustments.
Since the date of the financial statements included in the
Company's last filed Quarterly Report on Form 10-Q
for the period ended September 30, 1997, there has been no event,
occurrence or development that has had a Material Adverse Effect
which has not been specifically disclosed to the Purchasers by
the Company. The Company last filed audited financial statements
with the Commission on March 24, 1997, and has not received any
comments from the Commission in respect thereof.
(l) Seniority. No class of equity securities of the
Company is senior to the Preferred Stock in right of payment,
whether upon liquidation, dissolution or otherwise.
(m) Investment Company. The Company is not, and is
not controlled by or under common control with an affiliate (an
"Affiliate") of, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
(n) Certain Fees. Except for Fees payable to Brown
Simpson Asset Management, LLC pursuant to Section 3 of the letter
agreement (the "Engagement Letter") dated December 1, 1997
between the Company and Brown Simpson Asset Management, no fees
or commissions will be payable by the Company to any broker,
financial advisor, finder, investment banker, or bank with
respect to the transactions contemplated by this Agreement. The
Purchasers shall have no obligation with respect to any fees or
with respect to any claims made by or on behalf of other Persons
for fees of a type contemplated in this Section that may be due
in connection with the transactions contemplated by this
Agreement. The Company shall indemnify and hold harmless each of
the Purchasers, its employees, officers, directors, agents, and
partners, and their respective Affiliates (as such term is
defined under Rule 405 promulgated under the Securities Act),
from and against all claims, losses, damages, costs (including
the costs of preparation and attorney's fees) and expenses
suffered in respect of any such claimed or existing fees.
(o) Solicitation Materials. The Company has not (i)
distributed any offering materials in connection with the
offering and sale of the Shares or the Underlying Shares other
than the Disclosure Materials and any amendments and supplements
thereto or (ii) solicited any offer to buy or sell the Shares or
the Underlying Shares by means of any form of general
solicitation or advertising. None of the Disclosure Materials or
any other information provided to the Purchasers by or on behalf
of the Company contain any untrue statement of material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(p) Form S-3 Eligibility. The Company is, and at each
Closing Date will be, eligible to register securities for resale
with the Commission under Form S-3 promulgated under the
Securities Act.
(q) Exclusivity. The Company shall not issue and sell
the Preferred Stock to any Person other than the Purchasers
pursuant to this Agreement other than with the specific prior
written consent of each of the Purchasers.
(r) Listing and Maintenance Requirements Compliance.
The Company has not in the two years preceding the date hereof
received notice (written or oral) from any stock exchange, market
or trading facility on which the Common Stock is or has been
listed (or on which it has been quoted) to the effect that the
Company is not in compliance with the listing or maintenance
requirements of such exchange or market. After giving effect to
the transactions contemplated in this Agreement, the Company
believes that it is in compliance with all such maintenance
requirements.
(s) Patents and Trademarks. The Company has, or has
rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights,
licenses and rights (collectively, the "Intellectual Property
Rights") which are necessary for use in connection with its
business, as currently conducted and as described in the SEC
Documents, and which the failure to so have would have a Material
Adverse Effect. Except as disclosed in Schedule 2.1(s), to the
best knowledge of the Company, there is no existing infringement
by another Person of any of the Intellectual Property Rights
which are necessary for use in connection with the Company's
business.
(t) Acknowledgement of Dilution. The Company
acknowledges that the issuance of the Underlying Shares upon
conversion of the Shares and payment of dividends thereon in
accordance with the Certificates of Designation may result in
dilution of the outstanding shares of Common Stock, which
dilution may be substantial under certain market conditions. The
Company further acknowledges that its obligation to issue
Underlying Shares upon conversion of the Shares and payment of
dividends thereon in accordance with the Certificates of
Designation is unconditional and absolute regardless of the
effect of any such dilution.
(u) Registration Rights; Rights of Participation.
Except as described on Schedule 2.1(u) hereto, (A) the Company
has not granted or agreed to grant to any Person any rights
(including "piggy-back" registration rights) to have any
securities of the Company registered with the Commission or any
other governmental authority which has not been satisfied and (B)
no Person, including, but not limited to, current or former
shareholders of the Company, underwriters, brokers or agents, has
any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the
transactions contemplated by this Agreement or any other
Transaction Document.
(v) Title. Except as disclosed in Schedule 2.1(v),
the Company and the Subsidiaries have good and marketable title
in fee simple to all real property and personal property owned by
them which is material to the business of the Company and its
Subsidiaries, in each case free and clear of all Liens, except
for liens, claims or encumbrances as do not materially affect the
value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its
Subsidiaries. Any real property and facilities held under lease
by the Company and its Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to
be made of such property and buildings by the Company and its
Subsidiaries.
(w) Regulatory Permits. The Company and its
Subsidiaries possess all certificates, authorizations and permits
issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses as
described in the SEC Documents except where the failure to
possess such permits would not, individually or in the aggregate,
have a Material Adverse Effect ("Material Permits"), and neither
the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any
Material Permit.
2.2 Representations and Warranties of the Purchasers. Each
of the Purchasers, severally and not jointly, hereby represents
and warrants to the Company as follows:
(a) Organization; Authority. Such Purchaser is a
corporation duly incorporated or a limited partnership duly
formed, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or formation with the
requisite power and authority, corporate or otherwise, to enter
into and to consummate the transactions contemplated hereby and
by the Registration Rights Agreement and otherwise to carry out
its obligations hereunder and thereunder. The purchase by such
Purchaser of the Shares hereunder has been duly authorized by all
necessary action on the part of such Purchaser. Each of this
Agreement and the Registration Rights Agreement has been duly
executed and delivered by such Purchaser and constitutes the
valid and legally binding obligation of such Purchaser,
enforceable against such Purchaser, in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights
generally and to general principles of equity.
(b) Investment Intent. Such Purchaser is acquiring
the Shares and the Underlying Shares for its own account for
investment purposes only and not with a view to or for
distributing or reselling such Shares or Underlying Shares or any
part thereof or interest therein, without prejudice, however, to
such Purchaser's right, subject to the provisions of this
Agreement and the Registration Rights Agreement, at all times to
sell or otherwise dispose of all or any part of such Shares or
Underlying Shares pursuant to an effective registration statement
under the Securities Act and in compliance with applicable State
securities laws or under an exemption from such registration.
(c) Purchaser Status. At the time such Purchaser was
offered the Shares, it was, and at the date hereof, it is, and at
each Closing Date, it will be, an "accredited investor" as
defined in Rule 501(a)(1), (a)(2), (a)(3) or (a)(4) under the
Securities Act.
(d) Experience of Purchaser. Such Purchaser either
alone or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters
so as to be capable of evaluating the merits and risks of the
prospective investment in the Shares and the Underlying Shares,
and has so evaluated the merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment.
Such Purchaser is able to bear the economic risk of an investment
in the Shares and the Underlying Shares and, at the present time,
is able to afford a complete loss of such investment.
(f) Access to Information. Each Purchaser
acknowledges receipt of the Disclosure Materials and further
acknowledges that it has been afforded (i) the opportunity to ask
such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms
and conditions of the offering of the Shares and the Underlying
Securities and the merits and risks of investing in the Shares
and the Underlying Securities; (ii) access to information about
the Company and the Company's financial condition, results of
operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the
Company possesses or can acquire without unreasonable effort or
expense that is necessary to make an informed investment decision
with respect to the investment and to verify the accuracy and
completeness of the information contained in the Disclosure
Materials.
(g) Reliance. Each Purchaser understands and
acknowledges that (i) the Shares are being offered and sold to
the Purchaser without registration under the Securities Act in a
private placement that is exempt from the registration provisions
of the Securities Act under Section 4(2) of the Securities Act or
Regulation D promulgated thereunder and (ii) the availability of
such exemption, depends in part on, and the Company will rely
upon the accuracy and truthfulness of, the foregoing
representations and such Purchaser hereby consents to such
reliance.
The Company acknowledges and agrees that the Purchasers
make no representations or warranties with respect to the
transactions contemplated hereby other than those specifically
set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) If any Purchaser should
decide to dispose of Shares (and upon conversion thereof any of
the Underlying Shares) held by it, each Purchaser understands and
agrees that it may do so only pursuant to an effective
registration statement under the Securities Act, to the Company
or pursuant to an available exemption from the registration
requirements of the Securities Act. In connection with any
transfer of any Shares or any Underlying Shares other than
pursuant to an effective registration statement or to the
Company, the Company may require the transferor thereof to
provide to the Company a written opinion of counsel experienced
in the area of United States securities laws selected by the
transferor, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that
such transfer does not require registration of such transferred
securities under the Securities Act. Notwithstanding the
foregoing, the Company hereby consents to and agrees to register
(i) any transfer of Shares by one Purchaser to another Purchaser,
and agrees that no documentation other than executed transfer
documents shall be required for any such transfer, and (ii) any
transfer by any Purchaser to an Affiliate of such Purchaser or to
an Affiliate of another Purchaser, or any transfer among any such
Affiliates, provided that transferee certifies to the Company
that it is an "accredited investor" as defined in Rule 501(a)
under the Securities Act. Any such transferee shall be bound by
the terms of this Agreement and shall have the rights of a
Purchaser under this Agreement and the Registration Rights
Agreement.
(b) Each Purchaser agrees to the imprinting, so long
as is required by this Section 3.1(b), of the following legend on
the Shares and the Underlying Shares:
[NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH
THESE SECURITIES ARE CONVERTIBLE HAVE] [THE SECURITIES
REPRESENTED HEREBY HAVE NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
[FOR SHARES ONLY] THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER
AND CONVERSION SET FORTH IN A CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT, DATED AS OF DECEMBER 9, 1997, EXECUTED
BY THE ORIGINAL HOLDER HEREOF. A COPY OF THAT AGREEMENT IS
ON FILE AT THE PRINCIPAL OFFICE OF CYTOGEN CORPORATION.
The Underlying Shares issuable upon conversion of
Shares or as payment of dividends thereon shall not contain the
legend set forth above if the conversion of such Shares or the
payment of such dividends occurs at any time while the Underlying
Shares Registration Statement is effective under the Securities
Act or in the event there is not an effective Underlying Shares
Registration Statement at such time, if in the written opinion of
counsel to the Company experienced in the area of United States
securities laws such legend is not required under applicable
requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission). The Company agrees that it will provide each
Purchaser, upon request, with a certificate or certificates
representing Underlying Shares, free from such legend at such
time as such legend is no longer required hereunder.
3.2 Stop Transfer Instruction. The Company may not make
any notation on its records or give instructions to any transfer
agent of the Company which enlarge the restrictions of transfer
set forth in Section 3.1.
3.3 Furnishing of Information. As long as any Purchaser
owns Shares or Underlying Shares, the Company covenants to timely
file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to Section 13(a) or 15(d)
of the Exchange Act and to promptly furnish the Purchasers with
true and complete copies of all such filings. As long as any
Purchaser owns Shares or Underlying Shares, if the Company is not
required to file reports pursuant to Section 13(a) or 15(d) of
the Exchange Act, it will prepare and furnish to the Purchasers
and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act annual and quarterly
financial statements, together with a discussion and analysis of
such financial statements in form and substance substantially
similar to those that would otherwise be required to be included
in reports required by Section 13(a) or 15(d) of the Exchange
Act, as well as any other information required thereby, in the
time period that such filings would have been required to have
been made under the Exchange Act. The Company further covenants
that it will take such further action as any holder of Shares may
reasonably request, all to the extent required from time to time
to enable such Person to sell Underlying Shares without
registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated
under the Securities Act, including the legal opinion referenced
above in this Section. Upon the request of any such Person, the
Company shall deliver to such Person a written certification of a
duly authorized officer as to whether it has complied with such
requirements.
3.4 Blue Sky Laws. In accordance with the Registration
Rights Agreement, the Company shall qualify the Underlying Shares
under the securities or Blue Sky laws of such jurisdictions as
the Purchasers may request and shall continue such qualification
at all times through the third anniversary of the last Closing
Date; provided, however, that neither the Company nor its
Subsidiaries shall be required in connection therewith to qualify
as a foreign corporation where they are not now so qualified or
to take any action that would subject the Company to general
service of process in any such jurisdiction where it is not then
so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
3.5 Integration. The Company shall not sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect
of any security (as defined in Section 2 of the Securities Act)
that would be integrated with the offer or sale of the Shares or
the Underlying Shares in a manner that would require the
registration under the Securities Act of the sale of the Shares
or the Underlying Shares to any Purchaser.
3.6 Certain Agreements. As long as any Purchaser owns
Shares, the Company shall not and shall cause the Subsidiaries
not to, without the consent of the holders of all of the Shares
then outstanding, (i) amend its certificate of incorporation,
bylaws or other charter documents so as to adversely affect any
rights of any Purchaser; (ii) declare, authorize, set aside or
pay any dividend or other distribution with respect to the Common
Stock except as permitted under the Certificates of Designation
and as would not adversely affect the rights of any Purchaser
hereunder or under the Certificates of Designation; (iii) repay,
repurchase or offer to repay, repurchase or otherwise acquire
shares of its Common Stock in any manner; or (iv) enter into any
agreement with respect to any of the foregoing.
3.7 Listing and Reservation of Underlying Shares. (a) The
Company shall (i) not later than the fifth Business Day following
the applicable Closing Date prepare and file with the Nasdaq
National Market (as well as any other national securities
exchange or market on which the Common Stock is then listed) an
additional shares listing application or a letter acceptable to
the Nasdaq National Market covering and listing a number of
shares of Common Stock which is at least equal to 175% of the
maximum number of Underlying Shares then issuable assuming the
payment of all future dividends on the Shares then outstanding
were made in shares of Common Stock, (ii) take all steps
necessary to cause the Underlying Shares to be approved for
listing in the Nasdaq National Market (as well as on any other
national securities exchange or market on which the Common Stock
is then listed) as soon as possible thereafter, and (iii) provide
to the Purchasers evidence of such listing, and the Company shall
maintain the listing of its Common Stock on such exchange.
(b) The Company shall reserve for issuance upon
conversion of the Shares and for payment of dividends thereupon
in shares of Common Stock pursuant to the terms of the
Certificates of Designation the number of shares to be listed on
the Nasdaq National Market (and such other national securities
exchange or market on which the Common Stock is then listed or
traded) as set forth in Section 3.7(a). Shares of Common Stock
reserved for issuance upon the conversion of the Shares as set
forth in Section 3.7(a) shall be allocated pro rata to each of
the Purchasers in accordance with the amount of Shares issued and
delivered to such Purchaser at each Closing, as applicable.
3.8 No Violation of Applicable Law. Notwithstanding any
provision of this Agreement to the contrary, if the redemption of
Shares or Underlying Shares otherwise required under this
Agreement or the Registration Rights Agreement would be
prohibited by the relevant provisions of the Delaware General
Corporation Law, such redemption shall be effected as soon as it
is permitted under such law; provided, however, that from the 5th
day after such redemption notice until such redemption price is
paid in full, interest on any such unpaid amount shall accrue at
the rate of 15% per annum.
3.9 Notice of Breaches. (a) Each of the Company and each
Purchaser shall give prompt written notice to the other of any
breach of any representation, warranty or other agreement
contained in this Agreement or in the Registration Rights
Agreement, as well as any events or occurrences arising after the
date hereof and prior to, with respect to the Series C Closing,
the Series C Closing Date and with respect to the Series D
Closing, the Series D Closing Date, which would reasonably be
likely to cause any representation or warranty or other agreement
of such party, as the case may be, contained herein to be
incorrect or breached as of such Closing Date. However, no
disclosure by either party pursuant to this Section 3.9 shall be
deemed to cure any breach of any representation, warranty or
other agreement contained herein or in the Registration Rights
Agreement.
(b) Notwithstanding the generality of Section 3.9(a)
the Company shall promptly notify each Purchaser of any notice or
claim (written or oral) that it receives from any lender of the
Company to the effect that the consummation of the transactions
contemplated hereby and by the Registration Rights Agreement
violates or would violate any written agreement or understanding
between such lender and the Company, and the Company shall
promptly furnish by facsimile to the holders of the Shares a copy
of any written statement in support of or relating to such claim
or notice.
(c) The default by any Purchaser of any of its
obligations, representations or warranties under any Transaction
Document shall not be imputed to, and shall have no effect upon,
any other Purchaser or affect the Company's obligations under the
Transaction Documents to any non-defaulting Purchaser.
3.10 Conversion Obligations of the Company. The Company
covenants to convert Shares and to deliver Underlying Shares in
accordance with the terms and conditions and time period set
forth in the respective Certificates of Designation.
3.11 Subsequent Registrations. Other than Underlying Shares
and other "Registrable Securities" (as defined in the
Registration Rights Agreement) to be registered in accordance
with the Registration Rights Agreement, the Company shall not,
for a period of not less than 90 Trading Days after the date that
the Underlying Shares Registration Statement relating to the
securities issued at the Series B Closing Date, the Series C
Closing Date and the Series D Closing Date is declared effective
by the Commission, without the prior written consent of the
Purchasers, (i) issue or sell any of its or any of its
Affiliates' equity or equity-equivalent securities pursuant to
Regulation S promulgated under the Securities Act, or (ii)
register for resale any securities of the Company. Any days that
any Purchaser is unable to sell Underlying Shares under an
Underlying Shares Registration Statement shall be
added to such 90 Trading Day period for the purposes of (i) and
(ii) above.
3.12 Press Release. The Company shall issue a press release
within two Business Days of the Series B Closing Date, the Series
C Closing Date and the Series D Closing Expiration Date, as
applicable, relating to the issue and sale of the Shares to the
Purchasers which press releases shall be approved by each party
to this Agreement.
3.13 Use of Proceeds. The Company shall use all of the
proceeds from the sale of the Shares for working capital and
general corporate purposes and not for the satisfaction of any
portion of Company borrowings or to redeem Company equity or
equity-equivalent securities. Pending application of the
proceeds of this placement in the manner permitted hereby, the
Company will invest such proceeds in interest bearing accounts
and/or short-term, investment grade interest bearing securities.
3.14 Reimbursement. In the event that any Purchaser, other
than by reason of its gross negligence or willful misconduct,
becomes involved in any capacity in any action, proceeding or
investigation brought by or against any person, including
stockholders of the Company, in connection with or as a result of
the consummation of the transactions contemplated pursuant to the
Transaction Documents, the Company will reimburse such Purchaser
for its legal and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith.
In addition, with respect to each Purchaser, other than with
respect to any matter in which such Purchaser is a named party,
the Company will pay such Purchaser the charges, as reasonably
determined by such Purchaser, for the time of any officers or
employees of such Purchaser devoted to appearing and preparing to
appear as witnesses, assisting in preparation for hearings,
trials or pretrial matters, or otherwise with respect to
inquiries, hearings, trials, and other proceedings relating to
the subject matter of this Agreement. The reimbursement
obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have,
shall extend upon the same terms and conditions to any affiliate
of each Purchaser and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of each
Purchaser and any such affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and
personal representatives of the Company, each Purchaser and any
such affiliate and any such person. The Company also agrees that
no Purchaser or any such affiliates, partners, directors, agents,
employees or controlling persons shall have any liability to the
Company or any person asserting claims on behalf of or in right
of the Company in connection with or as a result of the
consummation of the Transaction Documents except to
the extent that any losses, claims, damages, liabilities or
expenses incurred by the Company result from the gross negligence
or willful misconduct of such Purchaser or entity in connection
with the transactions contemplated by this Agreement.
ARTICLE IV
CONDITIONS
4.1 (a) Conditions Precedent to the Obligation of the
Company to Sell the Series B Shares. The obligation of the
Company to sell the Series B Shares hereunder is subject to the
satisfaction or waiver by the Company, at or before the Series B
Closing, of each of the following conditions:
(i) Accuracy of the Purchasers' Representations
and Warranties. The representations and warranties of each
Purchaser shall be true and correct in all material respects as
of the date when made and as of the Series B Closing Date, as
though made on and as of such date;
(ii) Performance by the Purchasers. Each
Purchaser shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by such Purchaser at or prior to the Series B Closing; and
(iii) No Injunction. No statute, rule,
regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court
or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights
Agreement.
(b) Conditions Precedent to the Obligation of the
Purchasers to Purchase the Series B Shares. The obligation of
each Purchaser hereunder to acquire and pay for the Series B
Shares is subject to the satisfaction or waiver by such
Purchaser, at or before the Series B Closing, of each of the
following conditions:
(i) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company
set forth in this Agreement and in the Registration Rights
Agreement shall be true and correct in all material respects as
of the date when made and as of the Series B Closing Date as
though made on and as of such date;
(ii) Performance by the Company. The Company
shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by
the Company at or prior to the Series B Closing;
(iii) No Injunction. No statute, rule,
regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court
or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights
Agreement;
(iv) Adverse Changes. Since the date of the
financial statements included in the Company's Quarterly Report
on Form 10-Q or Annual Report on Form 10-K, whichever is more
recent, last filed prior to the date of this Agreement, no event
which had a Material Adverse Effect and no material adverse
change in the financial condition or prospects of the Company
shall have occurred which is not disclosed in the Disclosure
Materials (for purposes hereof changes in the market price of the
Common Stock may be considered in determining whether there has
occurred an event which has had a Material Adverse Effect or
whether a material adverse change has occurred);
(v) No Suspensions of Trading in Common Stock.
The trading in the Common Stock shall not have been suspended by
the Commission or on the Nasdaq National Market which suspension
shall remain in effect.
(vi) Listing of Common Stock. The Company shall
have filed a listing application to list the Underlying Shares
for trading on the Nasdaq National Market;
(vii) Legal Opinion. The Company shall have
delivered to the Purchasers the opinions of Donald F. Crane, Jr.,
the Company's general counsel, and Dewey Ballantine LLP, outside
counsel to the Company, in substantially the form attached hereto
as Exhibit C-1 and Exhibit C-2, respectively;
(viii) Required Approvals. All Required
Approvals shall have been obtained other than those relating
solely to the Series C Shares and the Series D Shares;
(ix) Shares of Common Stock. On or prior to the
Series B Closing Date, the Company shall have duly reserved the
number of Underlying Shares required by the Transaction Documents
to be reserved for issuance upon conversion of Series B Shares
and payment of dividends thereon;
(x) Delivery of Stock Certificates. The Company
shall have delivered to each Purchaser or such Purchaser's
designee the stock certificate(s) representing the Series B
Shares, registered in the name of such Purchaser, each in form
satisfactory to the Purchaser;
(xi) Registration Rights Agreement. The Company
shall have executed and delivered the Registration Rights
Agreement;
(xii) Certificates of Designation. The Series
B Designation shall have been duly filed with the Secretary of
State of Delaware, and the Company shall have delivered a copy
thereof to the Purchaser certified as filed by the office of the
Secretary of State of Delaware;
(xiii) Change of Control. No Change of Control
(as hereafter defined) shall have occurred between the date
hereof and the Series B Closing Date; and
(xiv) Transfer Agent Instructions. The
Irrevocable Transfer Agent Instructions, in the form of Exhibit D
attached hereto, shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
4.2 Conditions Precedent to the Obligation of the
Purchasers to Purchase the Series C Shares and the Series D
Shares. The obligation of each Purchaser hereunder to acquire
and pay for the Series C Shares and the Series D Shares is
subject to the satisfaction or waiver by each Purchaser, at or
before the Series C Closing or the Series D Closing, as
applicable, of each of the following conditions:
(i) Series B Closing. The Series B Closing shall
have occurred;
(ii) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company
contained herein and in the Registration Rights Agreement shall
be true and correct in all material respects as of the date when
made and as of the Series C Closing Date and the Series D Closing
Date, as applicable, as though made on and as of such date;
(iii) Performance by the Company. The Company
shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required
by this Agreement and the Registration Rights Agreement to be
performed, satisfied or complied with by the Company at or prior
to the Series C Closing Date and the Series D Closing Date, as
applicable;
(iv) Underlying Shares Registration Statements.
With respect to the Series C Closing, the Underlying Shares
Registration Statement with respect to the Underlying Shares
issuable on conversion of all outstanding Series B Shares and as
payment of dividends thereon shall have been declared effective
under the Securities Act by the Commission; and with respect to
the Series D Closing, the Underlying Shares Registration
Statement with respect to the Underlying Shares issuable on
conversion of all outstanding Series C Shares and as payment of
dividends thereon shall have been declared effective under the
Securities Act by the Commission; and on each such Closing Date
such Underlying Shares Registration Statement shall be effective,
not subject to any stop order and not be subject to any
suspension pursuant to Section 3(p) of the Registration Rights
Agreement, and shall have been effective and shall not have been
subject to any stop order for the ninety (90) days prior to such
Closing Date and no stop order shall be pending or threatened as
at such Closing Date;
(v) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court of
governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this
Agreement or the Registration Rights Agreement relating to the
issuance or conversion of any of the Shares;
(vi) Adverse Changes. During the period which is
10 Trading Days prior to the date of the delivery of either a
Series C Subsequent Financing Notice or a Series D Subsequent
Financing Notice and the date of the Series C Closing and the
Series D Closing, respectively, the closing bid price on the
Common Stock shall not have decreased by more than 50% from the
highest closing bid price during such period; provided, however,
that if the closing bid price shall have so decreased by more
than 50%, but shall have subsequently increased so that on the
applicable Closing Date it is no more than 25% below the highest
closing bid price during such period then this condition shall be
satisfied;
(vii) Litigation. No material litigation
shall have been instituted or threatened against the Company;
(viii) Management. In the reasonable judgment
of each Purchaser, there have been no substantial changes in the
senior management of the Company, other than the hiring of a new
Chief Executive Officer or new Chief Financial Officer in
connection with the Company's search, in effect on the date of
this Agreement, to fill such positions;
(ix) No Suspensions of Trading in Common Stock.
The trading in the Common Stock shall not have been suspended by
the Commission or on the Nasdaq National Market (except for any
suspension of trading of limited duration solely to permit
dissemination of material information regarding the Company and
except if, at the time there is any suspension on the Nasdaq
National Market, the Common Stock is then listed and approved for
trading on the Nasdaq SmallCap Market within one (1) trading day
thereof);
(x) Listing of Common Stock. The Common Stock
shall have been at all times since the Series B Closing Date, and
on the Series C Closing Date and the Series D Closing Date be
listed for trading on the Nasdaq National Market or Nasdaq
SmallCap
Market;
(xi) Change of Control. No Change of Control in
the Company shall have occurred. "Change of Control" means the
occurrence of any of (i) an acquisition after the date hereof by
an individual or legal entity or "group" (as described in Rule
13d-5(b)(1) promulgated under the Exchange Act) of in excess of
50% of the voting securities of the Company, (ii) a replacement
of more than one-half of the members of the Company's board of
directors which is not approved by those individuals who are
members of the board of directors on the date hereof in one or a
series of related transactions, (iii) the merger of the Company
with or into another entity, consolidation or sale of all or
substantially all of the assets of the Company in one or a series
of related transactions or (iv) the execution by the Company of
an agreement to which the Company is a party or by which it is
bound, providing for any of the events set forth above in (i),
(ii) or (iii);
(xii) Legal Opinion. The Company shall have
delivered to the Purchasers the opinions of the Company's general
counsel and outside counsel, in substantially the form attached
hereto as Exhibit C-1 and Exhibit C-2, respectively, each dated
the applicable Closing Date;
(xiii) Required Approvals. All Required
Approvals shall have been obtained;
(xiv) Shares of Common Stock. On each of the
Series C Closing Date and the Series D Closing Date the Company
shall have duly reserved the number of Underlying Shares required
by this Agreement to be reserved for issuance upon conversion of
Series C Shares and Series D Shares, respectively, and payment of
dividends thereon;
(xv) Delivery of Stock Certificates. The Company
shall have delivered to each Purchaser or such Purchaser's
designee the stock certificate(s) representing the Shares, being
purchased at such Closing, registered in the name of such
Purchaser, each in form satisfactory to such Purchaser;
(xvi) Performance of Conversion/Exercise
Obligations. The Company shall have delivered Underlying Shares
upon conversion of Shares and otherwise performed its obligations
in accordance with the terms, conditions and timing requirements
of each Certificate of Designation;
(xvii) Closing Thresholds. (a) (i) The Company
shall have sold and the Purchasers shall have purchased, pursuant
to this Agreement, including amounts sold and purchased on the
applicable Closing Date, Preferred Stock with a purchase price of
at least $11,000,000, or (ii) with respect to the transactions
contemplated by the Transaction Documents, the Company shall have
received the approval of its stockholders necessary to satisfy
the shareholder approval provisions of the Nasdaq Stock Market,
or any other exchange or market on which the Common Stock is then
listed or traded, with respect to the issuance of 20% or more of
a company's capital stock, or any similar stockholder approval
requirements, or (b) on each of the 30 Trading Days prior to the
applicable Closing Date, the Per Share Market Value of the Common
Stock shall have been at least $4.50 per share; and
(xviii) Transfer Agent Instructions. The
Irrevocable Transfer Agent Instructions, in the form of Exhibit D
attached hereto, shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
(xix) Officer's Certificate. On each Closing
Date the Company shall deliver to the Purchaser's an Officer's
Certificate dated the Closing Date and signed by an executive
officer of the Company confirming the accuracy of the Company's
representations, warranties and covenants as of such Closing Date
and confirming the compliance by the Company with the conditions
precedent set forth in this Section 4.2 as of such Closing Date.
ARTICLE V
MISCELLANEOUS
5.1 Fees and Expenses. Each party shall pay the fees
and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and
performance of this Agreement, except as set forth in the
Registration Rights Agreement. The Company shall pay all stamp
and other taxes and duties levied in connection with the issuance
of the Shares pursuant hereto.
5.2 Entire Agreement; Amendments. This Agreement,
together with the Exhibits and Schedules hereto, the Registration
Rights Agreement and each Certificate of Designation (each when
filed) contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to
such matters, except that the provisions of Section 3 and Section
5 of the Engagement Letter shall survive.
5.3 Notices. Any notice or other communication
required or permitted to be given hereunder shall be in writing
and shall be deemed to have been received (a) upon hand delivery
(receipt acknowledged) or delivery by telex (with correct answer
back received), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below
(if delivered on a business day during normal business hours
where such notice is to be received), or the first business day
following such delivery (if delivered on a business day after
during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall
first occur. The addresses for such communications shall as set
forth below each parties name on Schedule 1, and if to the
Company with copies to Dewey Ballantine LLP, 1301 Avenue of the
Americas, New York, NY 10019, Attn: Frederick Kanner, Esq., fax:
(212) 259-7302, and if to any Purchaser with copies to Robinson
Silverman Pearce Aronsohn & Berman LLP, 1290 Avenue of the
Americas, New York, NY 10104, Attn: Kenneth L. Henderson, Esq.,
fax: (212) 541-4630, or such other address as may be designated
in writing hereafter, in the same manner, by such person.
5.4 Amendments; Waivers. No provision of this
Agreement may be waived or amended except in a written instrument
signed, in the case of an amendment, by both the Company and the
Purchasers; or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either
party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter.
Notwithstanding the foregoing, no such amendment shall be
effective to the extent that it applies to less than all of the
holders of the Shares outstanding. The Company shall not offer
or pay any consideration to a Purchaser for consenting to such an
amendment or waiver unless the same consideration is offered to
each Purchaser and the same consideration is paid to each
Purchaser which consents to such amendment or waiver.
5.5 Headings. The headings herein are for convenience
only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof.
5.6 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their
successors and permitted assigns. The Company may not assign
this Agreement or any rights or obligations hereunder without the
prior written consent of each of the Purchasers. No Purchaser
may assign this Agreement (other than to an Affiliate of such
Purchaser) or any rights or obligations hereunder without the
prior written consent of the Company, except that any Purchaser
may assign its rights hereunder and under the Transaction
Documents without the consent of the Company as long as such
assignee demonstrates to the reasonable satisfaction of the
Company its satisfaction of the representations and warranties
set forth in Section 2.2. This provision shall not limit a
Purchaser's right to transfer securities or transfer or assign
rights hereunder or under the Registration Rights Agreement.
5.7 No Third-Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their
respective permitted successors and assigns and is not for the
benefit of, nor may any provision hereof be enforced by, any
other person.
5.8 Governing Law. This Agreement shall be governed
by and construed and enforced in accordance with the internal
laws of the State of New York without regard to the principles of
conflicts of law thereof. Each party hereby irrevocably submits
to the non-exclusive jurisdiction of the state and federal courts
sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein,
and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit,
action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by
law.
5.9 Survival. The agreements and covenants contained
in Article III and this Article V shall survive the delivery and
conversion of the Shares pursuant to this Agreement and the
representations and warranties of the Company and the Purchasers
contained in Article II shall survive each Closing hereunder and
any conversion of Shares.
5.10 Execution. This Agreement may be executed in two
or more counterparts, all of which when taken together shall be
considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to
the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create
a valid and binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same
force and effect as if such facsimile signature page were an
original thereof.
5.11 Publicity. The Company and each Purchaser shall
consult with each other in issuing any press releases or
otherwise making public statements with respect to the
transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public
statement without the prior written consent of the other, which
consent shall not be unreasonably withheld or delayed, except
that no prior consent shall be required if such disclosure is
required by law, in which such case the disclosing party shall
provide the other party with prior notice of such public
statement. The Company shall not publicly or otherwise disclose
the names of any of the Purchasers without each such Purchaser's
prior written consent.
5.12 Severability. In case any one or more of the
provisions of this Agreement shall be invalid or unenforceable in
any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be
affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a
reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Agreement.
5.13 Remedies. In addition to being entitled to
exercise all rights provided herein or granted by law, including
recovery of damages, the Purchasers will be entitled to specific
performance of the obligations of the Company under the
Transaction Documents. Each of the Company and the Purchasers
(severally and not jointly) agree that monetary damages would not
be adequate compensation for any loss incurred by reason of any
breach of its obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be
adequate.
5.14 Independent Nature of Purchasers' Obligations and
Rights. The obligations of each Purchaser hereunder is several
and not joint with the obligations of the other Purchasers
hereunder, and no Purchaser shall be responsible in any way for
the performance of the obligations of any other Purchaser
hereunder. Nothing contained herein or in any other agreement or
document delivered at any Closing, and no action taken by any
Purchaser pursuant hereto or thereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert
with respect to such obligations or the transactions contemplated
by this Agreement. Each Purchaser shall be entitled to protect
and enforce its rights, including without limitation the rights
arising out of this Agreement or out of the other Transaction
Documents, and it shall not be necessary for any other Purchaser
to be joined as an additional party in any proceeding for such
purpose.
5.15 No Reliance. Each party acknowledges that (i) it
has such knowledge in business and financial matters as to be
fully capable of evaluating this Agreement, the other Transaction
Documents and the transactions contemplated hereby and thereby,
(ii) it is not relying on any advice or representation of the
other party in connection with entering into this Agreement, the
other Transaction Documents or such transactions (other than the
representations made in this Agreement or the other Transaction
Documents), (iii) it has not received from such party any
assurance or guarantee as to the merits (whether legal,
regulatory, tax, financial or otherwise) of entering into this
Agreement or the other Transaction Documents or the performance
of its obligations hereunder and thereunder, and (iv) it has
consulted with its own legal, regulatory, tax, business,
investment, financial and accounting advisors to the extent that
it has deemed necessary, and has entered into this Agreement and
the other Transaction Documents based on its own independent
judgment and on the advice of its advisors as it has deemed
necessary, and not on any view (whether written or oral)
expressed by such party.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF,
the parties hereto have caused this Convertible Preferred Stock Purchase
Agreement to be duly executed by their respective authorized persons as of
the date first indicated above.
CYTOGEN CORPORATION SOUTHBROOK INTERNATIONAL INVESTMENTS,
LTD.
By: /s/ Thomas J. McKearn By: /s/ Kenneth L. Henderson
--------------------- -----------------------------
Name: Thomas J. McKearn Name: Kenneth L. Henderson
Title:Chairman, President Title: Attornedy In Fact
& Chief Executive Officer
WESTOVER INVESTMENTS L.P.
By: /s/ William E. Rose
----------------------------
Name: William E. Rose
Title: Authorized Signatory
MONTROSE INVESTMENTS L.P.
By: /s/ William E. Rose
----------------------------
Name: William E. Rose
Title: Authorized Signatory
HERACLES FUND
By Promethean Investment Group
L.L.C., its investment advisor
By: /s/ James F. O'Brien, Jr.
-----------------------------
Name: James F. O'Brien, Jr.
Title: Managing Member
THEMIS PARTNERS, L.P.
By Promethean Investment Group
L.L.C., its general partner
By: /s/ James F. O'Brien, Jr.
-------------------------------
Name: James F. O'Brien, Jr.
Title: Managing Member
BROWN SIMPSON STRATEGIC GROWTH
FUND, L.P.
By: /s/ Mitchell D. Kay
-------------------------------
Name: Mitchell D. Kay
Title: Principal
BROWN SIMPSON STRATEGIC GROWTH
FUND, LTD.
By: /s/ Mitchell D. Kay
-------------------------------
Name: Mitchell D. Kay
Title: Principal
Exhibit A Filed as Exhibit 3.1
Exhibit B Filed as Exhibit 10.2
EXHIBIT C-1
December 9, 1997
Southbrook International
Investments, Ltd. Heracles Fund
C/o Trippoak Advisors Bank of Bermuda (Cayman)
Inc. P.O. Box 513
630 Fifth Avenue, Suite 2000 3rd Floor British
New York, NY 10111 American Center
Dr. Roy's Drive
Westover Investments, L.P. Georgetown, Grand Cayman
c/o HBK Investments, L.P. Cayman Island, BWI
777 Main Street, Suite 2750
Fort Worth, Texas 76102 Themis Partners, L.P.
c/o Promethean Investment
Montrose Investments, L.P. Group, L.L.C.
c/o HBK Investments, L.P. 40 West 57th Street
777 Main Street, Suite 2750 Suite 1520
Fort Worth, Texas 76102 New York, NY 10019
Brown Simpson Strategic Growth Brown Simpson Strategic
Fund, L.P. Growth Fund, Ltd.
152 West 57th Street, 40th Floor 152 West 57th Street, 40th Floor
New York, New York, 10019 New York, New York 10019
Re: Cytogen Corporation
The undersigned is Vice President and General Counsel of
Cytogen Corporation, a Delaware corporation (the "Company"),
and provides this opinion in connection with the execution
and delivery of the Convertible Preferred Stock Purchase
Agreement, dated as of December 8, 1997 (the "Purchase
Agreement"), by and among the Company and Southbrook
International Investments, Ltd., Westover Investments, L.P.,
Montrose Investments, L.P., Heracles Fund, Themis Partners,
L.P., Brown Simpson Strategic Growth Fund, L.P., and Brown
Simpson Strategic Growth Fund, Ltd. (collectively, the
"Purchasers"), pursuant to which the Company is issuing to
the Purchasers shares of its Series B Convertible Preferred
Stock, par value $.01 per share (the "Series B Preferred").
Capitalized terms used and not otherwise defined herein
shall have the respective meanings set forth in the Purchase
Agreement.
This opinion is delivered to you pursuant to Section 1.3 of
the Purchase Agreement.
In connection with this opinion, I have examined:
(a) An executed copy of the Purchase Agreement;
(b) The Series B Designation of the Company;
(c) The Registration Rights Agreement;
(d) The Certificate of Incorporation and By-laws of the
Company and of each Subsidiary, each as amended to the
date hereof; and
(e) Records of proceedings and actions of the Board of
Directors of the Company and of the Finance Committee
thereof relating to the transactions contemplated by
the Purchase Agreement and the Registration Rights
Agreement.
The documents reference is (a) through (d) above are
referred to herein as the "Operative Documents").
I have also examined such additional corporate records of
the Company and such other documents and public records as I
have deemed necessary or appropriate to render the opinions
contained herein.
I have assumed the genuineness of all signatures (except
those of officers of the Company), the authenticity of all
documents submitted to me as originals and the conformity to
original documents of documents submitted to us as
certified, conformed or photostatic copies. I have also
assumed, without verification, the legal capacity of each
individual who has executed documents or instruments in
connection with the transaction contemplated hereby. With
respect to certain factual matters, I have relied, without
independent investigation on the facts stated in the
representations and warranties contained in the Purchase
Agreement and the Schedules thereto and the SEC Documents
(other than in each case facts constituting conclusions of
law).
I have also assumed, without verification (i) that the
parties to the Purchase Agreement and the other agreements,
instruments and documents executed in connection therewith,
other than the Company, have the power (including, without
limitation, corporate power where applicable) and authority
to enter into and perform the Purchase Agreement and
such other agreements, instruments and documents, (ii) the
due authorization, execution and delivery by such other
parties of the Purchase Agreement and such other agreements,
instruments and documents, and (iii) that the Purchase
Agreement and such other agreements, instruments and
documents constitute legal, valid and binding obligations of
each such other party, enforceable against such other party
in accordance with their respective terms.
Based upon and subject to the foregoing, I am of the opinion
that:
1. Each of the Company and its Subsidiaries is a
corporation, duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its
incorporation, with the requisite corporate power and
authority to own and use its properties and assets and to
carry on its business as currently conducted. The Company
has no subsidiaries other than the Subsidiaries. Each of the
Company and the Subsidiaries is duly qualified to do
business and is in good standing as a foreign corporation in
each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification
necessary.
2. The execution, delivery and performance of the
Operative Documents by the Company and the consummation by
the Company of the transactions contemplated by such
agreements do not and will not (i) conflict with or violate
any provision of its Certificate of Incorporation or Bylaws,
(ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company is a party, or
(iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company is
subject (including Federal and state securities laws and
regulations), or by which any property or asset of the
Company is bound or affected. To our knowledge, the
business of the Company is not being conducted in violation
of any law, ordinance or regulation of any governmental
authority.
3. Other than as may be set forth in Schedule 2.1(f) to
the Purchase Agreement, neither the Company nor any
Subsidiary is required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal,
state, local or other governmental authority or other person
in connection with the execution, delivery and performance
by the Company of the Transaction Documents.
4. To my knowledge, the Company has filed all reports
required to be filed by it under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), including pursuant
to Section 13(a) or 15(d) thereof, for the three years
preceding the date hereof (or such shorter period as the
Company was required by law to file such material
collectively, the "SEC Documents") on a timely basis. As of
their respective dates, the SEC Documents complied in all
material respects as to form with the requirements of the
Securities Act and the Exchange Act and the rules and
regulations of the Securities and Exchange Commission
promulgated thereunder.
I do not undertake to advise you or anyone else of any
changes in the opinions expressed herein resulting from
changes in laws, changes in facts or any other matters that
hereafter might occur or be brought to my attention that did
not exist on the date hereof and of which I had no
knowledge.
Very truly yours,
By: /s/ Donald F. Crane
-----------------------------
Name: Donald F. Crane
Title: Vice President General Counsel
and Secretary
EXHIBIT C-2
December 9, 1997
Southbrook International Investments, Ltd.
Westover Investments L.P.
Montrose Investments L.P.
Heracles Fund
Themis Partners, L.P.
Brown Simpson Strategic Growth Fund, L.P.
Brown Simpson Strategic Growth Fund, Ltd.
c/o Brown Simpson Strategic Growth Fund, L.P.
152 West 57th Street
40th Floor
New York, NY 10019
Ladies and Gentlemen:
We have acted as counsel to Cytogen Corporation, a
Delaware corporation (the "Company"), in connection with the
execution and delivery of the Convertible Preferred Stock
Purchase Agreement, dated as of December 9, 1997 (the
"Purchase Agreement"), by and among the Company and Southbrook
International Investments, Ltd., Westover Investments L.P.,
Montrose Investments L.P., Heracles Fund, Themis Partners
L.P., Brown Simpson Strategic Growth Fund, L.P. and Brown
Simpson Strategic Growth Fund, Ltd. (collectively, the
"Purchasers"), pursuant to which the Company is issuing to the
Purchasers shares of its 6% Convertible Preferred Stock,
Series B, par value $0.01 per share (the "Series B
Preferred"). This opinion is being delivered to you pursuant
to Section 4.2 (xii) of the Purchase Agreement. Capitalized
terms used herein without definition shall have the respective
meanings ascribed to them in the Purchase Agreement.
In connection with this opinion, we have examined
and are familiar with originals or copies, certified or
otherwise identified to our satisfaction, of the following:
(a) a copy of the Restated Certificate of
Incorporation of the Company, including all amendments
thereto, as in effect on the date hereof (the
"Certificate of Incorporation");
(b) a copy of the By-laws of the Company, as
amended to date;
(c) a record of corporate proceedings of the
Company relating to the authorization of the issuance,
sale and delivery of the Shares being sold by the
Company to the Purchasers, including the execution and
delivery of the Purchase Agreement and Registration
Rights Agreement;
(d) an executed copy of the Purchase Agreement;
(e) the Registration Rights Agreement; and
(f) the Certificate of Designation of the Company's
6% Convertible Preferred Stock, Series B (the
"Certificate of Designation").
The documents referred to in (a) through (f) above
are referred to herein as the "Operative Documents."
For the purpose of this opinion, we have assumed
that the certificates representing the Shares being sold by
the Company to the Purchasers will conform as to form to the
specimen certificate thereof examined by us, which assumption
we have not independently verified.
In addition, we have had conferences with officers
of the Company and with counsel for the Company and have
ascertained or verified facts which we have deemed necessary
or relevant.
We have also investigated such questions of law,
including, without limitation, Regulation D ("Regulation D")
promulgated under the Securities Act of 1933, as amended (the
"Securities Act") and examined such additional corporate
records of the Company and other documents and public records
as we have deemed necessary or appropriate to render the
opinions contained herein.
We have assumed the genuineness of all signatures
(except those of officers of the Company), the authenticity of
all documents submitted to us as originals and the conformity
to original documents of documents submitted to us as
certified, conformed or photostatic copies. We have also
assumed, without verification, the legal capacity of each
individual who has executed documents or instruments in
connection with the transaction contemplated hereby. With
respect to certain factual matters, we have relied, without
independent investigation, on the facts stated in the
representations and warranties contained in the Purchase
Agreement and the Schedules thereto and the SEC Documents
(other than in each case facts constituting conclusions of
law).
We have also assumed, without verification (i) that
the parties to the Purchase Agreement and the other
agreements, instruments and documents executed in connection
therewith, other than the Company, have the power (including,
without limitation, corporate power where applicable) and
authority to enter into and perform the Purchase Agreement and
such other agreements, instruments and documents, (ii) the due
authorization, execution and delivery by such other parties of
the Purchase Agreement and such other agreements, instruments
and documents, and (iii) that the Purchase Agreement and such
other agreements, instruments and documents constitute legal,
valid and binding obligations of each such other party,
enforceable against each such other party in accordance with
their respective terms.
Based upon and subject to the foregoing, we are of
the opinion that:
1. The Company has the requisite corporate power
and authority to enter into and consummate the transactions
contemplated by each of the Operative Documents and otherwise
to carry out its obligations thereunder. The execution and
delivery of each of the Operative Documents by the Company and
the consummation by it of the transactions contemplated
thereby have been duly authorized by all necessary action on
the part of the Company. Each of the Operative Documents has
been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies
or by other equitable principles of general application.
2. No shares of the Company's common stock, $0.01
par value per share, are entitled to preemptive rights under
the Delaware General Corporation Law or the Company's Restated
Certificate of Incorporation.
3. The Series B Preferred has been duly authorized
and, when paid for and issued in accordance with the terms of
the Purchase Agreement, shall have been validly issued, fully
paid and nonassessable.
4. The Company has duly authorized and reserved
for issuance such number of shares of Common Stock as are
issuable upon conversion of the Series B Preferred and
dividends thereon (collectively, the "Underlying Shares") in
accordance with the terms of the Purchase Agreement and the
Certificate of Designation. When issued by the Company in
accordance with the terms of the Purchase Agreement and the
Certificate of Designation, such Underlying Shares will be
validly issued, fully paid and nonassessable.
5. Assuming the accuracy of the representations
and warranties of the Company set forth in Section 2.1 of the
Purchase Agreement and of the Purchasers set forth in Section
2.2 of the Purchase Agreement, the offer, issuance and sale of
the Series B Preferred and the offer of the Underlying Shares
to the Purchasers pursuant to the Purchase Agreement and the
Certificate of Designation are exempt from the registration
requirements of the Securities Act.
We express no opinion as to the laws of any
jurisdiction other than the laws of the State of New York, the
general corporate laws of the State of Delaware and the
federal law of the United States of America. The foregoing
opinion is rendered as of the date hereof, and we assume no
obligation to update such opinion to reflect any facts or
circumstances which may hereafter come to our attention or any
changes in the law which may hereafter occur.
This letter is furnished solely for your information
in connection with the private placement and sale of the
Shares and may not be relied upon by any other person.
Very truly yours,
DEWEY BALLANTINE LLP
EXHIBIT D
December 8, 1997
Chase Mellon Shareholder Services
85 Challenger Road
Overpeck Center
Ridgefield Park, New Jersey 07660
Re: TRANSFER AGENT INSTRUCTIONS
Ladies and Gentlemen:
Reference is made to that certain Securities Purchase Agreement
to be entered into by and among Cytogen Corporation, a Delaware
corporation (the "Company"), and the buyers named therein
(collectively, the "Holders") pursuant to which the Company is
issuing to the Holders shares of its Series B Convertible
Preferred Stock, par value $0.01 per share (the "Preferred
Shares"), which shall be convertible into shares of the Company's
Common Stock, par value $0.01 per share (the "Common Stock").
This letter shall serve as our irrevocable authorization and
direction to you (provided that you are the transfer agent of the
Company at such time) to issue shares of Common Stock upon
conversion of the Preferred Shares (the "Conversion Shares") to
or upon the order of a Holder from time to time upon (i)
surrender to you of a properly completed and duly executed
Conversion Notice, in the form attached hereto as Exhibit I,
which has been acknowledged by the Company as indicated by the
signature of a duly authorized officer of the Company thereon,
and (ii) certificates representing Preferred Shares being
converted (or an indemnification undertaking with respect to such
share certificates in the case of their loss, theft or
destruction). So long as you have previously received (x)
written confirmation from counsel to the Company that a
registration statement covering resales of the Conversion Shares
has been declared effective by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as
amended (the "1933 Act"), and (y) a copy of such registration
statement, certificates representing the Conversion Shares shall
not bear any legend restricting transfer of the Conversion Shares
thereby and should not be subject to any stop-transfer
restriction. Provided, however, that if you have not previously
received (i) written confirmation from counsel to the Company
that a registration statement covering resales of the Conversion
Shares has been declared effective by the SEC under the 1933 Act,
and (ii) a copy of such registration statement, then the
certificates for the Conversion Shares shall bear the following
legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS.
and, provided further, that the Company may from time to time
notify you to place stop-transfer restrictions on the
certificates for the Conversion Shares in the event a
registration statement covering the Conversion Shares is subject
to amendment for events then current.
A form of written confirmation from counsel to the Company that a
registration statement covering resales of the Conversion Shares
has been declared effective by the SEC under the 1933 Act is
attached hereto as Exhibit II.
Please be advised that the Holders are relying upon this letter
as an inducement to enter into the Securities Purchase Agreement
and, accordingly, each Holder is a third party beneficiary to
these instructions.
Please execute this letter in the space indicated to acknowledge
your agreement to act in accordance with these instructions.
Should you have any questions concerning this matter, please
contact me at (609) 520-3062.
Very truly yours,
By: /s/ Donald F. Crane
-------------------------------
Name: Donald F. Crane
Title: Vice President General Counsel
and Secretary
ACKNOWLEDGED AND AGREED:
By: /s/ Gary R. Dalessandro
-----------------------------
Name: Gary R. Dalessandro
Title: Assistant Vice President
Date: December 8, 1997
EXHIBIT I
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby elects to convert the number of shares of
Series B Convertible Preferred Stock indicated below, into shares
of Common Stock, par value $.01 per share (the "Common Stock"),
of Cytogen Corporation (the "Company") according to the
conditions hereof, as of the date written below. If shares are
to be issued in the name of a person other than undersigned, the
undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions
as reasonably requested by the Company in accordance therewith.
No fee will be charged to the holder for any conversion, except
for such transfer taxes, if any.
Conversion calculations: -------------------------------
Date to Effect Conversion
-------------------------------
Number of shares of Preferred
-------------------------------
Stock to be Converted
-------------------------------
Number of shares of Common
Stock to be Issued
-------------------------------
Applicable Conversion Price
-------------------------------
Signature
-------------------------------
Name
-------------------------------
Address
EXHIBIT II
[Dewey Ballantine LLP Letterhead]
[Addressee]
[Address]
To Whom It May Concern:
The Registration Statement on Form S-3 (File No.
333-______________) of Cytogen Corporation was declared effective
at
___:____ __.M. Eastern Time on _____________, 199___.
Very truly yours,
EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement")
is made and entered into as of December 9, 1997, among Cytogen
Corporation, a Delaware corporation (the "Company"), Southbrook
International Investments, Ltd., a corporation existing under the
laws of the British Virgin Islands ("Southbrook"), Westover
Investments L.P., a Delaware limited partnership ("Westover"),
Montrose Investments L.P., a Cayman Islands exempt limited
partnership ("Montrose"), Heracles Fund, a Cayman Islands exempt
company ("Heracles"), Themis Partners, L.P., a Delaware limited
partnership ("Themis"), Brown Simpson Strategic Growth Fund,
L.P., a New York limited partnership ("Brown Simpson LP") and
Brown Simpson Strategic Growth Fund, Ltd., a Cayman Islands
exempt company ("Brown Simpson Limited"). Southbrook, Westover,
Montrose, Heracles, Themis and Brown Simpson LP and Brown Simpson
Limited are each referred to herein as a "Purchaser" and are
collectively referred to herein as the "Purchasers."
This Agreement is made pursuant to the Convertible
Preferred Stock Purchase Agreement, dated as of the date hereof
among the Company and the Purchasers (the "Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein
shall have the meanings given such terms in the Purchase
Agreement. As used in this Agreement, the following terms shall
have the following meanings:
"Advice" shall have meaning set forth in Section 3(o).
"Affiliate" means, with respect to any Person, any
other Person that directly or indirectly controls or is
controlled by or under common control with such Person. For the
purposes of this definition, "control," when used with respect to
any Person, means the possession, direct or indirect, of the
power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting
securities, by contract or otherwise; and the terms of
"affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday
and any day which shall be a legal holiday or a day on which
banking institutions in the state of New York generally are
authorized or required by law or other government actions to
close.
"Closing Date" shall have the meaning set forth in the
Purchase Agreement.
"Commission" means the Securities and Exchange
Commission.
"Common Stock" means the Company's Common Stock, par
value $.01 per share.
"Effectiveness Date" means (i) with respect to the
Registration Statement to be filed with respect to the Series B
Shares, the 90th day following the Series B Closing Date, (ii)
with respect to the Registration Statement to be filed with
respect to the Series C Shares, the 90th day following the Series
C Closing Date and (iii) with respect to the Registration
Statement to be filed with respect to the Series D Shares, the
90th day following the Series D Closing Date.
"Effectiveness Period" shall have the meaning set forth
in Section 2(a).
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Filing Date" means (i) with respect to the shares of
Common Stock issuable upon conversion of the Series B Shares, the
30th day following the Series B Closing Date, (ii) with respect
to the shares of Common Stock issuable upon conversion of the
Series C Shares, the 30th day following the Series C Closing Date
and (iii) with respect to the shares of Common Stock issuable
upon conversion of the Series D Shares, the 30th day following
the Series D Closing Date.
"Holder" or "Holders" means the holder or holders, as
the case may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in
Section 5(c).
"Indemnifying Party" shall have the meaning set forth
in Section 5(c).
"Losses" shall have the meaning set forth in Section
5(a).
"Person" means an individual or a corporation,
partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company,
government (or an agency or political subdivision thereof) or
other entity of any kind.
"Preferred Stock" means the shares of 6% Series B,
Series C and Series D Preferred Stock, par value $.01 per share,
of the Company issued to the Purchasers pursuant to the Purchase
Agreement.
"Proceeding" means an action, claim, suit,
investigation or proceeding (including, without limitation, an
investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
"Prospectus" means the prospectus included in the
Registration Statement (including, without limitation, a
prospectus that includes any information previously omitted from
a prospectus filed as part of an effective registration statement
in reliance upon Rule 430A promulgated under the Securities Act),
as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the
Registrable Securities covered by the Registration Statement, and
all other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by
reference in such Prospectus.
"Registrable Securities" means (a) with respect to the
Registration Statement to be filed after the Series B Closing,
the shares of Common Stock issuable upon (i) conversion of the
Series B Shares and (ii) payment of dividends in respect of the
Series B Shares, (b) with respect to the Registration Statement
to be filed after the Series C Closing, the shares of Common
Stock issuable upon (i) conversion of the Series C Shares and
(ii) payment of dividends in respect of the Series C Shares and
(c) with respect to the Registration Statement to be filed after
the Series D Closing Date, the shares of Common Stock issuable
upon (i) conversion of the Series D Shares and (ii) payment of
dividends with respect to the Series D Shares; provided, however
that in order to account for the fact that the number of shares
of Common Stock that are issuable upon conversion of shares of
Preferred Stock is determined in part upon the market price of
the Common Stock at the time of conversion, in the case of each
of (a), (b) and (c), Registrable Securities shall include (but
not be limited to) a number of shares of Common Stock equal to no
less than the sum of (1) 175% times the maximum number of shares
of Common Stock into which the applicable series of Preferred
Stock are convertible, assuming such conversion occurred on the
particular Closing Date for such series of Preferred Stock and
(2) the number of shares of Common Stock issuable on payment of
dividends on such Preferred Shares during the two-year period
after the applicable Closing Date assuming all such dividends
were paid in shares of Common Stock. Such registered shares of
Common Stock shall be allocated among the Holders pro rata based
on the total number of Registrable Securities issued or issuable
as of each date that a Registration Statement, as amended,
relating to the resale of the Registrable Securities is declared
effective by the SEC. Notwithstanding anything herein contained
to the contrary, if the actual number of shares of Common Stock
into which the shares of Preferred Stock are convertible exceeds
twice the number of shares of Common Stock into which the
particular series of Preferred Stock are convertible based upon a
computation as at a particular Closing Date, the term
"Registrable Securities" shall be deemed to include such
additional shares of Common Stock.
"Registration Statement" means the registration
statements and any additional registration statements
contemplated by Section 2(a), including (in each case) the
Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated
by reference in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted
by the Commission having substantially the same effect as such
Rule.
"Rule 158" means Rule 158 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted
by the Commission having substantially the same effect as such
Rule.
"Rule 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted
by the Commission having substantially the same effect as such
Rule.
"Securities Act" means the Securities Act of 1933, as
amended.
"Special Counsel" means any special counsel to the
Holders, for which the Holders will be reimbursed by the Company
pursuant to Section 4.
"Underwritten Registration or Underwritten Offering"
means a registration in connection with which securities of the
Company are sold to an underwriter for reoffering to the public
pursuant to an effective registration statement.
2. Shelf Registration
(A) On or prior to each applicable Filing Date the
Company shall prepare and file with the Commission a "Shelf"
Registration Statement covering all Registrable Securities for an
offering to be made on a continuous basis pursuant to Rule 415.
The Registration Statement shall be on Form S-3 (except if
otherwise directed by the Holders of a majority in interest of
the applicable Registrable Securities in accordance herewith or
if the Company is not then eligible to register for resale the
Registrable Securities on Form S-3, in which case such
registration shall be on another appropriate form in accordance
herewith). The Company shall (i) not permit any securities
other than the Registrable Securities and those securities listed
in Schedule 2.1(u) of the Purchase Agreement to be included in
the Registration Statement and (ii) use its commercially
reasonable efforts to cause the Registration Statement to be
declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event prior to the
Effectiveness Date, and to keep such Registration Statement
continuously effective under the Securities Act until the date
which is two years after the date that such Registration
Statement is declared effective by the Commission or such earlier
date when all Registrable Securities covered by such Registration
Statement have been sold or may be sold without volume
restrictions pursuant to Rule 144 as determined by the counsel to
the Company pursuant to a written opinion letter, addressed to
the Company's transfer agent to such effect (the "Effectiveness
Period"). If an additional Registration Statement is required to
be filed because the actual number of shares of Common Stock into
which the Preferred Stock is convertible plus shares issuable
upon payment of dividends exceeds the number of shares of Common
Stock initially registered in respect of any particular series of
Preferred Stock based upon the computation on a particular
Closing Date, the Company shall have 15 Business Days to file
such additional Registration Statement, and the Company shall use
its best efforts to cause such additional Registration Statement
to be declared effective by the Commission as soon as possible.
(B) If the Holders of a majority of the Registrable
Securities so elect, an offering of Registrable Securities
pursuant to the Registration Statement may be effected on no more
than two occasions in the form of an Underwritten Offering. In
such event, and if the managing underwriters advise the Company
and such Holders in writing that in their opinion the amount of
Registrable Securities proposed to be sold in such Underwritten
Offering exceeds the amount of Registrable Securities which can
be sold in such Underwritten Offering, there shall be included in
such Underwritten Offering the amount of such Registrable
Securities which in the opinion of such managing underwriters can
be sold, and such amount shall be allocated pro rata among the
Holders proposing to sell Registrable Securities in such
Underwritten Offering. The Holders hereby agree that in
exercising any rights under this Section 2(b) they will cooperate
with the Company so as not to interfere with any underwritten
public offering where the lead underwriter is Union Bank of
Switzerland.
(C) If any of the Registrable Securities are to be
sold in an Underwritten Offering, the investment banker in
interest that will administer the offering will be selected by
the Holders of a majority of the Registrable Securities included
in such offering provided that the Company shall consent to the
inclusion of such investment banker, which consent shall not be
unreasonably withheld. No Holder may participate in any
Underwritten Offering hereunder unless such Holder (i) agrees to
sell its Registrable Securities on the basis provided in any
underwriting agreements approved by the Persons entitled
hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the
terms of such arrangements.
3. Registration Procedures
In connection with the Company's registration
obligations hereunder, the Company shall:
(A) Prepare and file with the Commission on or prior
to each applicable Filing Date, a Registration Statement on Form
S-3 (or if the Company is not then eligible to register for
resale the Registrable Securities on Form S-3 such registration
shall be on another appropriate form in accordance herewith, or,
in connection with an Underwritten Offering hereunder, such other
form agreed to by the Company and by a majority-in-interest of
Holders of Registrable Securities) in accordance with the method
or methods of distribution thereof as specified by the Holders
(except if otherwise directed by the Holders), and cause the
Registration Statement to become effective and remain effective
as provided herein; provided, however, that not less than five
(5) Business Days prior to the filing of the Registration
Statement or any related Prospectus or any amendment or
supplement thereto (including any document that would be
incorporated therein by reference), the Company shall, if
reasonably practicable (i) furnish to the Holders, their Special
Counsel and any managing underwriters, copies of all such
documents proposed to be filed, which documents (other than those
incorporated by reference) will be subject to the review of such
Holders, their Special Counsel and such managing underwriters,
and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such
inquiries as shall be necessary, in the reasonable opinion of
respective counsel to such Holders and such underwriters, to
conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file the Registration
Statement or any such Prospectus or any amendments or supplements
thereto to which the Holders of a majority of the Registrable
Securities, their Special Counsel, or any managing underwriters,
shall reasonably object in writing within three (3) Business Days
of their receipt thereof.
(B) (i) Prepare and file with the Commission such
amendments, including post-effective amendments, to the
Registration Statement as may be necessary to keep the
Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period
and prepare and file with the Commission such additional
Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the
related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be
filed pursuant to Rule 424 (or any similar provisions then in
force) promulgated under the Securities Act; (iii) respond as
promptly as possible to any comments received from the Commission
with respect to the Registration Statement or any amendment
thereto and as promptly as possible provide the Holders true and
complete copies of all correspondence from and to the Commission
relating to the Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and
the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended
methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so
supplemented.
(C) Notify the Holders of Registrable Securities to be
sold, their Special Counsel and any managing underwriters as
promptly as possible (and, in the case of (i)(A) below, not less
than five (5) days prior to such filing) and (if requested by any
such Person) confirm such notice in writing no later than one (1)
Business Day following the day (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed; (B) when the
Commission notifies the Company whether there will be a "review"
of such Registration Statement and whenever the Commission
comments in writing on such Registration Statement and (C) with
respect to the Registration Statement or any post-effective
amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state
governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional
information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement
covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) if at any
time any of the representations and warranties of the Company
contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material
respects; (v) of the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale
in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (vi) of the occurrence of any
event that makes any statement made in the Registration Statement
or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect
or that requires any revisions to the Registration Statement,
Prospectus or other documents so that, in the case of the
Registration Statement or the Prospectus, as the case may be, it
will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(D) Use its best efforts to avoid the issuance of, or,
if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of the Registration Statement or (ii) any
suspension of the qualification (or exemption from qualification)
of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(E) If requested by any managing underwriter or the
Holders of a majority in interest of the Registrable Securities
to be sold in connection with an Underwritten Offering, (i)
promptly incorporate in a Prospectus supplement or post-effective
amendment to the Registration Statement such information as the
Company reasonably agrees should be included therein and (ii)
make all required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after the Company
has received notification of the matters to be incorporated in
such Prospectus supplement or post-effective amendment; provided,
however, that the Company shall not be required to take any
action pursuant to this Section 3(e) that would, in the opinion
of counsel for the Company, violate applicable law or be
materially detrimental to the business prospects of the Company.
(F) Furnish to each Holder, their Special Counsel and
any managing underwriters, without charge, at least one conformed
copy of each Registration Statement and each amendment thereto,
including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference,
and all exhibits to the extent requested by such Person
(including those previously furnished or incorporated by
reference) promptly after the filing of such documents with the
Commission.
(G) Promptly deliver to each Holder, their Special
Counsel, and any underwriters, without charge, as many copies of
the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such
Persons may reasonably request; and the Company hereby consents
to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders and any underwriters in
connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or
supplement thereto.
(H) Prior to any public offering of Registrable
Securities, use its best efforts to register or qualify or
cooperate with the selling Holders, any underwriters and their
Special Counsel in connection with the registration or
qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions
within the United States as any Holder or underwriter requests in
writing, to keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things necessary or advisable
to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement;
provided, however, that the Company shall not be required to
qualify generally to do business in any jurisdiction where it is
not then so qualified or to take any action that would subject it
to general service of process in any such jurisdiction where it
is not then so subject or subject the Company to any material tax
in any such jurisdiction where it is not then so subject.
(I) Cooperate with the Holders and any managing
underwriters to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold
pursuant to a Registration Statement, which certificates shall be
free, to the extent permitted by applicable law, of all
restrictive legends, and to enable such Registrable Securities to
be in such denominations and registered in such names as any such
managing underwriters or Holders may request at least two
Business Days prior to any sale of Registrable Securities.
(J) Upon the occurrence of any event contemplated by
Section 3(c)(vi), as promptly as possible, prepare a supplement
or amendment, including a post-effective amendment, to the
Registration Statement or a supplement to the related Prospectus
or any document incorporated or deemed to be incorporated therein
by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(K) Use its best efforts to cause all Registrable
Securities relating to such Registration Statement to be listed
on The Nasdaq National Market and any other securities exchange,
quotation system, market or over-the-counter bulletin board, if
any, on which similar securities issued by the Company are then
listed as and when required pursuant to the Purchase Agreement.
(L) Enter into such agreements (including an
underwriting agreement in form, scope and substance as is
customary in Underwritten Offerings) and take all such other
actions in connection therewith (including those reasonably
requested by any managing underwriters and the Holders of a
majority of the Registrable Securities being sold) in order to
expedite or facilitate the disposition of such Registrable
Securities, and whether or not an underwriting agreement is
entered into, (i) make such representations and warranties to
such Holders and such underwriters as are customarily made by
issuers to underwriters in underwritten public offerings, and
confirm the same if and when requested; (ii) in the case of an
Underwritten Offering obtain and deliver copies thereof to the
managing underwriters, if any, of opinions of counsel to the
Company and updates thereof addressed to each such underwriter,
in form, scope and substance reasonably satisfactory to any such
managing underwriters and Special Counsel to the selling Holders
covering the matters customarily covered in opinions requested in
Underwritten Offerings and such other matters as may be
reasonably requested by such Special Counsel and underwriters;
(iii) immediately prior to the effectiveness of the Registration
Statement, and, in the case of an Underwritten Offering, at the
time of delivery of any Registrable Securities sold pursuant
thereto, obtain and deliver copies to the Holders and the
managing underwriters, if any, of "cold comfort" letters and
updates thereof from the independent certified public accountants
of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or
of any business acquired by the Company for which financial
statements and financial data is, or is required to be, included
in the Registration Statement), addressed to each selling Holder
and each of the underwriters, if any, in form and substance as
are customary in connection with Underwritten Offerings; (iv) if
an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable to
the selling Holders and the underwriters, if any, than those set
forth in Section 6 (or such other provisions and procedures
acceptable to the managing underwriters, if any, and holders of a
majority of Registrable Securities participating in such
Underwritten Offering; and (v) deliver such documents and
certificates as may be reasonably requested by the Holders of a
majority of the Registrable Securities being sold, their Special
Counsel and any managing underwriters to evidence the continued
validity of the representations and warranties made pursuant to
clause 3(l)(i) above and to evidence compliance with any
customary conditions contained in the underwriting agreement or
other agreement entered into by the Company.
(M) Make available for inspection by the selling
Holders, any representative of such Holders, any underwriter
participating in any disposition of Registrable Securities, and
any attorney or accountant retained by such selling Holders or
underwriters, at the offices where normally kept, during
reasonable business hours, all financial and other records,
pertinent corporate documents and properties of the Company and
its subsidiaries, and cause the officers, directors, agents and
employees of the Company and its subsidiaries to supply all
information in each case reasonably requested by any such Holder,
representative, underwriter, attorney or accountant in connection
with the Registration Statement; provided, however, that any
information that is determined in good faith by the Company in
writing to be of a confidential nature at the time of delivery of
such information shall be kept confidential by such Persons,
unless (i) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of
regulatory authorities; (ii) disclosure of such information, in
the opinion of counsel to such Person, is required by law; (iii)
such information becomes generally available to the public other
than as a result of a disclosure or failure to safeguard by such
Person; or (iv) such information becomes available to such Person
from a source other than the Company and such source is not known
by such Person to be bound by a confidentiality agreement with
the Company.
(N) Comply in all material respects with all
applicable rules and regulations of the Commission and make
generally available to its security holders earning statements
satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158 not later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such
period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Securities are sold to underwriters
in a firm commitment or best efforts Underwritten Offering and
(ii) if not sold to underwriters in such an offering, commencing
on the first day of the first fiscal quarter of the Company after
the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.
(O) The Company may require each selling Holder to
furnish to the Company information regarding such Holder and the
distribution of such Registrable Securities as is required by law
to be disclosed in the Registration Statement, and the Company
may exclude from such registration the Registrable Securities of
any such Holder who unreasonably fails to furnish such
information within a reasonable time after receiving such
request.
If the Registration Statement refers to any Holder by
name or otherwise as the holder of any securities of the Company,
then such Holder shall have the right to require (if such
reference to such Holder by name or otherwise is not required by
the Securities Act or any similar Federal statute then in force)
the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared
subsequent to the time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not
sell any Registrable Securities under the Registration Statement
until it has received copies of the Prospectus as then amended or
supplemented as contemplated in Section 3(g) and notice from the
Company that such Registration Statement and any post-effective
amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or
Affiliates, if any, will comply with the prospectus delivery
requirements of the Securities Act as applicable to them in
connection with sales of Registrable Securities pursuant to the
Registration Statement.
Each Holder agrees by its acquisition of such
Registrable Securities that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in
Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi), such
Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or
amended Registration Statement contemplated by Section 3(j), or
until it is advised in writing (the "Advice") by the Company that
the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration
Statement.
(P) If (a) there is material non-public information
regarding the Company which the Company's Board of Directors
reasonably determines not to be in the Company's best interest to
disclose and which the Company is not otherwise required to
disclose, or (b) there is a significant business opportunity
(including but not limited to the acquisition or disposition of
assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction)
available to the Company which the Company's Board of Directors
reasonably determines not to be in the Company's best interest to
disclose, then the Company may postpone or suspend filing or
effectiveness of a registration statement for a period not to
exceed 20 consecutive days, provided that the Company may not
postpone or suspend its obligation under this Section 3(p) for
more than 60 days in the aggregate during any 12 month period;
provided, however, that no such postponement or suspension shall
be permitted for consecutive 20 day periods, arising out of the
same set of facts, circumstances or transactions.
4. Registration Expenses
(A) All fees and expenses incident to the performance
of or compliance with this Agreement by the Company, except as
and to the extent specified in Section 4(b), shall be borne by
the Company whether or not pursuant to an Underwritten Offering
and whether or not the Registration Statement is filed or becomes
effective and whether or not any Registrable Securities are sold
pursuant to the Registration Statement. The fees and expenses
referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings
required to be made with The Nasdaq National Market and each
other securities exchange or market on which Registrable
Securities are required hereunder to be listed and (B) in
compliance with state securities or Blue Sky laws (including,
without limitation, fees and disbursements of counsel for the
Holders in connection with Blue Sky qualifications of the
Registrable Securities and determination of the eligibility of
the Registrable Securities for investment under the laws of such
jurisdictions as the managing underwriters, if any, or the
Holders of a majority of Registrable Securities may designate)),
(ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of
printing prospectuses if the printing of prospectuses is
requested by the managing underwriters, if any, or by the holders
of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Company
and Special Counsel for the Holders, in the case of the Special
Counsel, to a maximum amount of $10,000, (v) Securities Act
liability insurance, if the Company so desires such insurance,
and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall
be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated
by this Agreement (including, without limitation, all salaries
and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and
expenses incurred in connection with the listing of the
Registrable Securities on any securities exchange as required
hereunder.
(B) If the Holders require an Underwritten Offering
pursuant to the terms hereof, the Company shall be responsible
for all costs, fees and expenses in connection therewith, except
for the fees and disbursements of the Underwriters (including any
underwriting commissions and discounts) and their legal counsel
and accountants (which shall be borne by the Holders).
Therefore, in such circumstances the Holder shall bear the
expenses of the fees and disbursements of any legal counsel or
accounting firm retained by the underwriters in connection with
such Underwritten Offering and the costs of any determination
(but not filing) by the underwriters of the eligibility of the
Registrable Securities for investment under the applicable state
securities laws. By way of illustration which is not intended to
diminish from the provisions of Section 4(a), the Holders shall
not be responsible for, and the Company shall be required to pay
the fees or disbursements incurred by the Company (including by
its legal counsel and accountants) in connection with, the
preparation and filing of a Registration Statement and related
Prospectus for such offering, the maintenance of such
Registration Statement in accordance with the terms hereof, the
listing of the Registrable Securities in accordance with the
requirements hereof, and printing expenses incurred to comply
with the requirements hereof.
5. Indemnification
(A) Indemnification by the Company. The Company
shall, notwithstanding any termination of this Agreement,
indemnify and hold harmless each Holder, the officers, directors,
agents (including any underwriters retained by such Holder in
connection with the offer and sale of Registrable Securities),
brokers (including brokers who offer and sell Registrable
Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such
Holder (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) and the officers, directors,
agents and employees of each such controlling Person, to the
fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including,
without limitation, costs of preparation and attorneys' fees) and
expenses (collectively, "Losses"), as incurred, arising out of or
relating to any untrue or alleged untrue statement of a material
fact contained in the Registration Statement, any Prospectus or
any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating
to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein
(in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which
they were made) not misleading (in the case of any Prospectus or
form of Prospectus or supplement thereto, in light of the
circumstances under which they were made), except to the extent,
but only to the extent, that such untrue statements or omissions
are based solely upon information regarding such Holder furnished
in writing to the Company by such Holder expressly for use
therein, which information was reasonably relied on by the
Company for use therein or to the extent that such information
relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto. The
Company shall notify the Holders promptly of the institution,
threat or assertion of any Proceeding of which the Company is
aware in connection with the transactions contemplated by this
Agreement.
(B) Indemnification by Holders. Each Holder shall,
severally and not jointly, indemnify and hold harmless the
Company, the directors, officers, agents and employees, each
Person who controls the Company (within the meaning of Section 15
of the Securities Act and Section 20 of the Exchange Act), and
the directors, officers, agents or employees of such controlling
Persons, to the fullest extent permitted by applicable law, from
and against all Losses (as determined by a court of competent
jurisdiction in a final judgment not subject to appeal or review)
arising solely out of or based solely upon any untrue statement
of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or arising solely out of
or based solely upon any omission of a material fact required to
be stated therein or necessary to make the statements therein not
misleading to the extent, but only to the extent, that such
untrue statement or omission is contained in any information so
furnished in writing by such Holder to the Company specifically
for inclusion in the Registration Statement or such Prospectus
and that such information was reasonably relied upon by the
Company for use in the Registration Statement, such Prospectus or
such form of prospectus or to the extent that such information
relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of
Prospectus. In no event shall the liability of any selling
Holder hereunder be greater in amount than the dollar amount of
the net proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification
obligation.
(C) Conduct of Indemnification Proceedings. If any
Proceeding shall be brought or asserted against any Person
entitled to indemnity hereunder (an "Indemnified Party"), such
Indemnified Party promptly shall notify the Person from whom
indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to
the Indemnified Party and the payment of all fees and expenses
incurred in connection with defense thereof; provided, that the
failure of any Indemnified Party to give such notice shall not
relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that
it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and
materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ
separate counsel in any such Proceeding and to participate in the
defense thereof, but the fees and expenses of such counsel shall
be at the expense of such Indemnified Party or Parties unless:
(1) the Indemnifying Party has agreed in writing to pay such fees
and expenses; or (2) the Indemnifying Party shall have failed
promptly to assume the defense of such Proceeding and to employ
counsel reasonably satisfactory to such Indemnified Party in any
such Proceeding; or (3) the named parties to any such Proceeding
(including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is
likely to exist if the same counsel were to represent such
Indemnified Party and the Indemnifying Party (in which case, if
such Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at
the expense of the Indemnifying Party). The Indemnifying Party
shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such
Proceeding.
All fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent with this Section) shall
be paid to the Indemnified Party, as incurred, within 10 Business
Days of written notice thereof to the Indemnifying Party
(regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder;
provided, that the Indemnifying Party may require such
Indemnified Party to undertake to reimburse all such fees and
expenses to the extent it is finally judicially determined that
such Indemnified Party is not entitled to indemnification
hereunder).
(D) Contribution. If a claim for indemnification
under Section 5(a) or 5(b) is unavailable to an Indemnified Party
because of a failure or refusal of a governmental authority to
enforce such indemnification in accordance with its terms (by
reason of public policy or otherwise), then each Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified
Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as
any other relevant equitable considerations. The relative fault
of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified
Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action,
statement or omission. The amount paid or payable by a party as
a result of any Losses shall be deemed to include, subject to the
limitations set forth in Section 5(c), any reasonable attorneys'
or other reasonable fees or expenses incurred by such party in
connection with any Proceeding to the extent such party would
have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were
determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable
considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d),
no Holder shall be required to contribute, in the aggregate, any
amount in excess of the amount by which the proceeds actually
received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in
this Section are in addition to any liability that the
Indemnifying Parties may have to the Indemnified Parties.
6. Rule 144
As long as any Holder owns Shares or Underlying Shares,
the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof
pursuant to Section 13(a) or 15(d) of the Exchange Act and to
promptly furnish the Holders with true and complete copies of all
such filings. As long as any Holder owns Shares or Underlying
Shares, if the Company is not required to file reports pursuant
to Section 13(a) or 15(d) of the Exchange Act, it will prepare
and furnish to the Holders and make publicly available in
accordance with Rule 144(c) promulgated under the Securities Act
annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be
required to be included in reports required by Section 13(a) or
15(d) of the Exchange Act, as well as any other information
required thereby, in the time period that such filings would have
been required to have been made under the Exchange Act. The
Company further covenants that it will take such further action
as any Holder may reasonably request, all to the extent required
from time to time to enable such Person to sell Underlying Shares
without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated
under the Securities Act, including providing any legal opinions
referred to in the Purchase Agreement. Upon the request of any
Holder, the Company shall deliver to such Holder a written
certification of a duly authorized officer as to whether it has
complied with such requirements.
7. Miscellaneous
(A) Remedies. In the event of a breach by the Company
or by a Holder, of any of their obligations under this Agreement,
each Holder or the Company, as the case may be, in addition to
being entitled to exercise all rights granted by law and under
this Agreement, including recovery of damages, will be entitled
to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not
provide adequate compensation for any losses incurred by reason
of a breach by it of any of the provisions of this Agreement and
hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(B) No Inconsistent Agreements. Neither the Company
nor any of its subsidiaries has, as of the date hereof, nor shall
the Company or any of its subsidiaries, on or after the date of
this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as disclosed in Schedule 2.1(u) of the
Purchase Agreement, neither the Company nor any of its
subsidiaries has previously entered into any agreement granting
any registration rights with respect to any of its securities to
any Person. Without limiting the generality of the foregoing,
without the written consent of the Holders of a majority of the
then outstanding Registrable Securities, the Company shall not
grant to any Person the right to request the Company to register
any securities of the Company under the Securities Act unless the
rights so granted are subject in all respects to the prior rights
in full of the Holders set forth herein, and are not otherwise in
conflict or inconsistent with the provisions of this Agreement.
(C) No Piggyback on Registrations. Neither the
Company nor any of its security holders (other than the Holders
in such capacity pursuant hereto or as disclosed in Schedule
2.1(u) of the Purchase Agreement) may include securities of the
Company in the Registration Statement other than the Registrable
Securities or as disclosed in Schedule 2.1(u) of the Purchase
Agreement, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its
securityholders.
(D) Piggy-Back Registrations. If at any time when
there is not an effective Registration Statement covering
Underlying Shares for any outstanding shares of Preferred Stock,
the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act
of any of its equity securities, other than on Form S-4 or Form
S-8 (each as promulgated under the Securities Act) 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, the Company shall send to each
holder of Registrable Securities written notice of such
determination and, if within twenty (20) days after receipt of
such notice, any such holder shall so request in writing, the
Company shall include in such registration statement all or any
part of such Registrable Securities such holder requests to be
registered; provided, however, that the Company shall not be
required to register any Registrable Securities pursuant to this
Section 7(d) that are eligible for sale pursuant to Rule 144(k)
of the Commission. In the case of an underwritten public
offering, if the managing underwriter(s) or underwriter(s) should
reasonably object to the inclusion of the Registrable Securities
in such registration statement, then if the Company after
consultation with the Underwriter's Representative should
reasonably determine that the inclusion of such Registrable
Securities, would materially adversely affect the offering
contemplated in such registration statement, and based on such
determination recommends inclusion in such registration statement
of fewer or none of the Registrable Securities of the Holders,
then (x) the number of Registrable Securities of the Holders
included in such registration statement shall be reduced pro-rata
among such Holders (based upon the number of Registrable
Securities requested to be included in the registration), if the
Company after consultation with the underwriter(s) recommends the
inclusion of fewer Registrable Securities, or (y) none of the
Registrable Securities of the Holders shall be included in such
registration statement, if the Company after consultation with
the underwriter(s) recommends the inclusion of none of such
Registrable Securities; provided, however, that if Securities are
being offered for the account of other persons or entities as
well as the Company, such reduction shall not represent a greater
fraction of the number of Registrable Securities intended to be
offered by the Holders than the fraction of similar reductions
imposed on such other persons or entities (other than the
Company).
(E) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless
the same shall be in writing and signed by the Company and the
Holders of at least two-thirds of the then outstanding
Registrable Securities; provided, however, that, for the purposes
of this sentence, Registrable Securities that are owned, directly
or indirectly, by the Company, or an Affiliate of the Company are
not deemed outstanding. Notwithstanding the foregoing, a waiver
or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders and that
does not directly or indirectly affect the rights of other
Holders may be given by Holders of at least a majority of the
Registrable Securities to which such waiver or consent relates;
provided, however, that the provisions of this sentence may not
be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.
(F) Notices. Any and all notices or other
communications or deliveries required or permitted to be provided
hereunder shall be in writing and shall be deemed given and
effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to
7:00 p.m. (New York City time) on a Business Day, (ii) the
Business Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile
telephone number specified in the Purchase Agreement later than
7:00 p.m. (New York City time) on any date and earlier than 11:59
p.m. (New York City time) on such date, (iii) the Business Day
following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the
party to whom such notice is required to be given to each Holder
at its address set forth under its name on Schedule 1 attached
hereto or such other address as may be designated in writing
hereafter, in the same manner, by such Person. Copies of notices
to any Holder shall be sent to Robinson Silverman Pearce
Aronsohn & Berman LLP, 1290 Avenue of the Americas, New York, NY
10104, Attn: Kenneth L. Henderson, Esq., fax: (212) 541-4630 and
copies of all notices to the Company shall be sent to Dewey
Ballantine LLP, 1301 Avenue of the Americas, New York, NY 10019,
Attn: Frederick Kanner, Esq., fax: (212) 259-7302.
(G) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors and
permitted assigns of each of the parties and shall inure to the
benefit of each Holder. The Company may not assign its rights or
obligations hereunder without the prior written consent of each
Holder. Each Purchaser may assign its rights hereunder in the
manner and to the Persons as permitted under the Purchase
Agreement.
(H) Assignment of Registration Rights. The rights of
each Holder hereunder, including the right to have the Company
register for resale Registrable Securities in accordance with the
terms of this Agreement, shall be automatically assignable by
each Holder to any Affiliate of such Holder, any other Holder or
Affiliate of any other Holder and up to four other assignees of
all or a portion of the shares of Preferred Stock or the
Registrable Securities if: (i) the Holder agrees in writing with
the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable
time after such assignment, (ii) the Company is, within a
reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii)
following such transfer or assignment the further disposition of
such securities by the transferee or assignees is restricted
under the Securities Act and applicable state securities laws,
(iv) at or before the time the Company receives the written
notice contemplated by clause (ii) of this Section, the
transferee or assignee agrees in writing with the Company to be
bound by all of the provisions of this Agreement, and (v) such
transfer shall have been made in accordance with the applicable
requirements of the Purchase Agreement. The rights to assignment
shall apply to the Holders (and to subsequent) successors and
assigns.
(I) Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed shall
be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that
any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party
executing (or on whose behalf such signature is executed) the
same with the same force and effect as if such facsimile
signature were the original thereof.
(J) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York, without regard to principles of conflicts of law.
(K) Cumulative Remedies. The remedies provided herein
are cumulative and not exclusive of any remedies provided by law.
(L) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions
set forth herein shall remain in full force and effect and shall
in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid,
illegal, void or unenforceable.
(M) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(N) Shares Held by The Company and its Affiliates.
Whenever the consent or approval of Holders of a specified
percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company or its Affiliates
(other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by
reason of its holdings of such Registrable Securities) shall not
be counted in determining whether such consent or approval was
given by the Holders of such required percentage.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
CYTOGEN CORPORATION SOUTHBROOK INTERNATIONAL INVESTMENTS,
LTD.
By: /s/ Thomas J. McKearn By: /s/ Kenneth L. Henderson
----------------------------- -----------------------------
Name: Thomas J. McKearn Name: Kenneth L. Henderson
Title: Chairman, President Title: Attornedy In Fact
& Chief Executive Officer
WESTOVER INVESTMENTS L.P.
By: /s/ William E. Rose
-----------------------------
Name: William E. Rose
Title: Authorized Signatory
MONTROSE INVESTMENTS L.P.
By: /s/ William E. Rose
------------------------------
Name: William E. Rose
Title: Authorized Signatory
HERACLES FUND
By Promethean Investment Group
L.L.C., its investment advisor
By: /s/ James F. O'Brien, Jr.
------------------------------
Name: James F. O'Brien, Jr.
Title: Managing Member
THEMIS PARTNERS, L.P.
By Promethean Investment Group
L.L.C., its general partner
By: /s/ James F. O'Brien, Jr.
------------------------------
Name: James F. O'Brien, Jr.
Title: Managing Member
BROWN SIMPSON STRATEGIC GROWTH
FUND, L.P.
By: /s/ Mitchell D. Kay
-----------------------------
Name: Mitchell D. Kay
Title: Principal
BROWN SIMPSON STRATEGIC GROWTH
FUND, LTD.
By: /s/ Mitchell D. Kay
----------------------------
Name: Mitchell D. Kay
Title: Principal
EXHIBIT 99.1
CYTOGEN ARRANGES $20 MILLION OF
CONVERTIBLE PREFERRED STOCK FINANCING
Initial Investment will be $7.5 million
PRINCETON, N.J., December 9, 1997 -- CYTOGEN Corporation
(NASDAQ: CYTO) todayannounced that it has completed the initial
$7.5 million of a financing commitment which totals up to $20
million with a small and select group of private investors. The
financing is in the form of a 6% convertible preferred stock which
is convertible by the investors at any time and convertible or
redeemable by the Company, at its option, in three years. The
Company, on satisfaction of certain conditions, has the option to
draw down up to an additional $12.5 million with the same investors
over the course of the next year. UBS Securities was instrumental
in arranging the financing.
Conversions to common stock will be based on the price of CYTOGEN
common stock at the time of conversion. Holders may convert, at
their option, at either 120 per cent of the average closing bid
price during the ten day period preceding closing, or at a stated
discount to the price of CYTOGEN common stock at the time of
conversion ranging from 5% to 15%, depending on when the
conversions occur. No underwriting or placement commissions were
paid by the Company.
"We believe this transaction is beneficial to the Company and our
stockholders. We have arranged a bridge financing which
significantly strengthens our balance sheet and fosters
arelationship which enhances our capital financing alternatives.
The proceeds will support themarketing efforts for our hallmark
products - Quadramet and ProstaScint , development oflate stage
products in the pipeline, and provide additional operating
capital," stated Thomas J.McKearn, President, Chief Executive
Officer and Chairman of CYTOGEN. "We will continueto assess our
longer term capital needs as well as reduce our cash burn rate as
we guide theCompany toward profitability."
For the most current news on CYTOGEN and a current listing of PIE
sites, visit the Company'sweb site at www.cytogen.com, or call
1-800-758-5804, extension 224650, to receive news releases by
facsimile.
CYTOGEN is a biopharmaceutical company engaged in the development,
manufacture and commercialization of products for the targeted
delivery of diagnostic and therapeutic substances directly to
disease sites. CYTOGEN has demonstrated its ability to develop new
technology from early discovery through clinical development,
regulatory approval and commercial-scale biologic manufacturing.
Information in this press release which is not historical is
forward looking and involves risks and uncertainties. Actual
results may differ materially, for reasons discussed in the
Company's filings with the Securities and Exchange Commission,
including risks related to the market price of the Company's Common
Stock and the commercial success of its products.
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