SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
February 11, 2000
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Date of Report (Date of earliest event reported)
ALLIANCE PHARMACEUTICAL CORP.
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(Exact name of registrant as specified in charter)
New York 0-12950 14-1644018
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
6175 Lusk Boulevard
San Diego, California 92121
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(Address of principal executive offices)
(858) 410-5200
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Registrant's telephone number, including area code
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ITEM 5. OTHER EVENTS
As of February 11, 2000, Alliance Pharmaceutical Corp. ("Alliance")
sold $15 million principal amount four year subordinated convertible debentures
to three shareholders. The debentures are convertible into Alliance common stock
at a set price of $9.65 per share, subject to certain anti-dilution provisions.
The conversion may occur at any time through February 2004 at the investors'
option, and Alliance has certain rights to cause the debentures to convert into
common stock. The investors have the option to purchase an additional $15
million of similar debentures that are convertible into Alliance common stock at
$12.06 per share for four years after issuance. Alliance has certain rights to
require the investors to purchase the additional debentures.
Forms of the debenture and the related securities purchase agreement
and registration rights agreement are set forth as Exhibits 4.1, 4.2 and 4.3
hereto.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Finanical Statements
None.
(b) Pro Forma Financial Statements
None.
(c) Exhibits
4.1 Form of debenture.
4.2 Form of the securities purchase agreement.
4.3 Form of registration rights agreement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALLIANCE PHARMACEUTICAL CORP.
By:/s/ Lloyd A. Rowland
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Lloyd A. Rowland
Vice President and General Counsel
Dated: February 22, 2000
<PAGE>
EXHIBIT INDEX
Exhibit Description
4.1 Form of debenture.
4.2 Form of the securities purchase agreement.
4.3 Form of registration rights agreement.
Exhibit 4.1
FORM OF DEBENTURE
5% SUBORDINATED CONVERTIBLE DEBENTURES
THE DEBENTURE REPRESENTED HEREBY HAS NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION 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.
PAYMENTS ON ACCOUNT OF THE INDEBTEDNESS EVIDENCED BY THIS DEBENTURE
AND THE EXERCISE OF REMEDIES HEREUNDER ARE SUBORDINATED TO SENIOR INDEBTEDNESS
AS PROVIDED HEREIN.
No. ___ $__________
ALLIANCE PHARMACEUTICAL CORP.
5% CONVERTIBLE DEBENTURES DUE FEBRUARY __, 2004
Alliance Pharmaceutical Corp., a New York corporation (the "COMPANY"),
for value received hereby promises to pay to ______________________________ or
its registered assigns ("HOLDER") the principal sum of Four Million Nine Hundred
Thousand Dollars at the Company's office or agency for said purpose in New York,
New York on February __, 2004 in such coin or currency (or, as provided herein,
at the Holder's option in Common Stock) of the United States of America as at
the time of payment shall be legal tender for the payment of public and private
debts at the last address of the Holder (as defined herein) last appearing on
the Register (as defined herein).
This Debenture is one of a duly authorized issue of 5% Convertible
Debentures, due February __, 2004 of the Company (the "DEBENTURE") referred to
in the Securities Purchase Agreement (the "PURCHASE Agreement"), dated as of
February __, 2000, by and among the Company and the Purchasers listed on
Schedule I thereto. The Debentures are subject to the terms and conditions of
the Purchase Agreement. The Company agrees to issue from time to time
replacement Debentures in the form hereof to facilitate any transfers and
assignments. In addition, after delivery of an indemnity in form and substance
reasonably satisfactory to the Company, receipt of evidence of destruction in
accordance with Section 2.2 hereof, and, in the case of mutilated Debentures,
the delivery to the Company of such Debentures, the Company also agrees to issue
replacement Debentures for securities which have been lost, stolen, mutilated or
destroyed.
The Company shall keep at its principal office a register (the
"REGISTER") in which shall be entered the names and addresses of the registered
holders of the Debentures and particulars of the respective Debentures held by
them and of all transfers of such Debentures. References to the "HOLDER" or
"HOLDERS" shall mean the Person listed in the Register as the payee of any
Debenture unless the payee shall have presented such Debenture to the Company
for transfer and the transferee shall have been entered in the Register as a
subsequent holder, in which case the term shall mean such subsequent holder. The
ownership of the Debentures shall be proven by the Register, absent manifest
error. For the purpose of paying interest and principal on the Debentures, the
Company shall be entitled to rely on the names and addresses in the Register.
No provision of this Debenture shall alter or impair the obligations
of the Company, which are absolute and unconditional, to pay the principal of
and interest on this Debenture at the place, times, rate, and in the currency,
herein prescribed.
The Company will pay interest in arrears from and including the
Original Issue Date on the unpaid principal balance of this Debenture at the
rate of 5% per annum (the "INTEREST RATE") in an amount equal to $_______
semi-annually on August __ and February __ of each year (an "Interest Payment
Date"), commencing on February )__, 2000 to the Holder hereof until the
principal amount is paid or made available for payment. The interest so payable,
and punctually paid or duly provided for, on any Interest Payment Date will be
paid in cash, or, at the option of the Company (as provided herein), an
equivalent value of the Company's Common Stock calculated based upon the
Conversion Price (as defined herein), subject to certain conditions contained
herein, to the Holder of the Debenture at the close of business on the Business
Day immediately preceding the Interest Payment Date for the interest payable on
such Interest Payment Date.
Any amounts that have become due and payable hereunder and remain
unpaid by the Company shall accrue interest thereafter until payment in full of
such amount at the rate of twenty percent (20%) (the "DEFAULT RATE") per annum
and shall be payable upon demand by the Holder.
Interest, whether at the Interest Rate or the Default Rate, will be
computed on the basis of a fraction, the denominator of which is 365 (or 366 for
any leap year) and the numerator of which is the actual number of days elapsed
from the date such interest begins to accrue, in the case of the Interest Rate,
or becomes due and payable, in the case of the Default Rate.
Each of the Interest Rate and the Default Rate (if otherwise
applicable under the terms hereof) shall be effective both before and after any
judgment may be rendered in a court of competent jurisdiction, PROVIDED,
HOWEVER, that if either the Interest Rate or Default Rate is deemed to be in
excess of the amount permitted to be charged by the Company under applicable
laws, the Holder shall be entitled to collect an Interest Rate or Default Rate,
as the case may be, only at the highest rate permitted by law, and any interest
collected by the Holder in excess of such lawful amount shall be deemed a
payment in reduction of the principal amount then outstanding under this
Debenture and shall be so applied.
The principal of, and any interest paid in cash on, this Debenture are
payable in coin or currency of the United States of America as at the time of
payment is legal tender for payment of public or private debts, at the last
address of the Holder last appearing on the Register, except that interest due
on the principal amount, if any (but not interest overdue for more than five (5)
days), may, at the Company's option be paid in shares of Common Stock calculated
based upon the Conversion Price on the date such interest was due. It shall be
assumed that the Company shall elect to make all payments of interest in cash,
unless the Company shall have given written notice to each Holder not less than
one (1) calendar month prior to the applicable Interest Payment Date of its
intention to pay such interest in Common Stock. Notwithstanding anything to the
contrary contained herein, the Company may not issue shares of Common Stock in
payment of the interest on principal if: (i) the number of shares of Common
Stock at the time authorized, unissued and unreserved for all other purposes is
insufficient to pay interest hereunder in shares of Common Stock or there is an
insufficient number of authorized shares of Common Stock reserved (pursuant to
Section 3.6(b) of the Purchase Agreement) for issue for full conversion of all
of the Debentures issued pursuant to the Purchase Agreement; (ii) such shares
are not either registered for resale pursuant to the Registration Statement (as
defined in the Registration Rights Agreement (as defined herein)) or freely
transferable pursuant to Rule 144 promulgated under the Act, as determined by
counsel to the Company pursuant to a written opinion letter addressed and in
form and substance acceptable to the Holder and the transfer agent for such
shares, subject to receipt, if necessary for such opinion, from the Holder of a
representation from such Holder that it is not an Affiliate (as defined herein)
of the Company; (iii) such shares are not listed or quoted on the Nasdaq (as
defined herein) or a Subsequent Market (as defined herein); (iv) the issuance of
such shares would result in the recipient thereof beneficially owning more than
4.99% of the issued and outstanding shares of Common Stock as determined in
accordance with Section 4.7 hereof; (v) an Event of Default has occurred and is
continuing or an event that, with the passage of time or giving of notice or
both would constitute an Event of Default, has occurred and is continuing; or
(vi) the Company has issued the Issuable Maximum (as defined herein) upon
conversion of or pursuant to the Debentures issued pursuant to the Purchase
Agreement and the Shareholder Approval has not been obtained.
The Holder may from time to time convert the principal amount of this
Debenture, or any portion thereof, with any accrued but unpaid interest, into
Common Stock, as more particularly set forth in Section 4.2.
ARTICLE I
DEFINITIONS
1.1 CERTAIN TERMS DEFINED. The following terms for all purposes of
this Debenture shall have the respective meanings specified below. All
accounting terms used herein and not expressly defined shall have the meanings
given to them in accordance with generally accepted accounting principles (as
defined herein). Capitalized terms not otherwise defined herein shall have the
meanings assigned to them in the Purchase Agreement. The terms defined in this
Section 1.1 include the plural as well as the singular.
"ACCELERATION NOTICE" has the meaning set forth in Section 3.1.
"AFFILIATE" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with respect to any Person means the possession, directly or indirectly, 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 "controlling" and "controlled" have meanings
correlative to the foregoing.
"APPRAISER" shall mean a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
recognized standing.
"AUTHORIZATION DATE" has the meaning set forth in Section 4.9.
"AVERAGE PRICE" on any date means (x) the sum of the Per Share Market
Value for the ten (10) Trading Days immediately preceding such date minus (y)
the highest and lowest Per Share Market Value during the ten (10) Trading Days
immediately preceding such date, divided by (z) eight (8).
"BOARD OF DIRECTORS" means either the Board of Directors of the
Company or any committee of such Board duly authorized to act hereunder.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
to close.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's capital stock whether now outstanding or issued after the Original
Issue Date, including, without limitation, all Common Stock and all Preferred
Stock.
"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), other than the
Purchasers or any of their Affiliates, of in excess of 33% 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 that is not approved by those
individuals who are members of the Board of Directors on the date hereof, or
successors on a continuing Board of Directors, in one or a series of related
transactions, (iii) the merger of the Company with or into another entity where
the shareholders of the Company own less than 50% of the outstanding voting
power of the surviving corporation, (iv) the consolidation or sale of all or
substantially all of the assets of the Company in one or a series of related
transactions, or (v) 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), (iii) or (iv).
"CLOSING DATE" has the meaning set forth in the Purchase Agreement
"COMMON STOCK" means the common stock, par value $0.01 per share, of
the Company, or the common stock of any successor to the Company following a
Change in Control in which the Company's Common Stock is converted into the
Common Stock of the successor corporation.
"COMPANY" has the meaning set forth in the first paragraph hereof.
"CONVERTIBLE SECURITIES" has the meaning set forth in Section
4.5(e)(i)(A).
"CONVERSION DATE" has the meaning set forth in Section 4.4(a).
"CONVERSION DEFAULT" has the meaning set forth in Section 4.9.
"CONVERSION DEFAULT PAYMENTS" has the meaning set forth in Section
4.9.
"CONVERSION NOTICE" has the meaning set forth in Section 6.1.
"CONVERSION NOTICE DATE" has the meaning set forth in Section 6.2.
"CONVERSION PRICE" has the meaning set forth in Section 4.2(a).
"CONVERSION TRIGGER PRICE" has the meaning set forth in Section 6.1.
"DEBT" of any Person means, at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person in respect of letters of credit or bankers'
acceptance or other similar instruments (or reimbursement obligations with
respect thereto), (iv) all obligations of such Person to pay the deferred
purchase price of property or services, (v) all obligations of such Person as
lessee under capitalized leases, (vi) all Debt of others secured by a Lien on
any asset of such Person, whether or not such Debt is assumed by such Person,
provided that for purposes of determining the amount of any Debt of the type
described in this clause, if recourse with respect to such Debt is limited to
such asset, the amount of such Debt shall be limited to the fair market value of
such asset, (vii) all Debt of others guaranteed by such Person, and (viii) all
redeemable stock valued at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends.
"DEBENTURE" or "DEBENTURES" has the meaning set forth in the second
paragraph hereof.
"DEBENTURE SHARES" means the shares of Common Stock underlying the
Debentures or shares issued upon conversion of the Debentures.
"DEFAULT RATE" has the meaning set forth in the sixth paragraph
hereof.
"DETERMINATION DATE" has the meaning set forth in Section 4.6.
"DTC" means the Depositary Trust Corporation.
"EVENT OF DEFAULT" has the meaning set forth in Section 3.1.
"EXCESS AMOUNT" has the meaning set forth in Section 4.9.
"EXCESS PRINCIPAL" has the meaning set forth in Section 4.6.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FAST" has the meaning set forth in Section 4.4(c).
"GAAP" or "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means generally
accepted accounting principles in the United States.
"HOLDER", "HOLDER OF DEBENTURES", "DEBENTUREHOLDER" or other similar
terms means the registered holder of any Debenture.
"INCURRENCE" means the incurrence, creation, assumption or in any
other manner becoming liable with respect to, or the extension of the maturity
of or becoming responsible for the payment of, any Debt. "Incur" shall have a
comparable meaning.
"INTEREST PAYMENT DATE" has the meaning set forth in the fifth
paragraph hereof.
"INTEREST RATE" has the meaning set forth in the fifth paragraph
hereof.
"ISSUABLE MAXIMUM" has the meaning set forth in Section 4.6.
"MANDATORY PREPAYMENT AMOUNT" for any Debenture means the greater of
(i) the sum of (x) 120% of the principal amount of the Debenture to be prepaid
and (y) all other amounts, costs, interest, expenses and liquidated damages due
in respect of such principal amount and (ii) the sum of (x) at the option of the
Holder, either (I) the principal amount of the Debenture to be repaid, plus all
accrued and unpaid interest thereon, divided by the Conversion Price on the date
the Mandatory Prepayment Amount is demanded or otherwise due, multiplied by the
Per Share Market Value on the date the Mandatory Prepayment Amount is demanded
or otherwise due or (II) the principal amount of the Debenture to be prepaid,
plus all accrued and unpaid interest thereon, divided by the lower of either the
Conversion Price or the Average Price on the Trading Day immediately prior to
the date the Mandatory Prepayment Amount is paid in full, multiplied by the Per
Share Market Value on the Trading Day immediately prior to the date the
Mandatory Prepayment Amount is paid in full, and (y) all other amounts, costs,
interest, expenses and liquidated damages due in respect of such principal
amount.
"MATURITY DATE" means the date on which the principal of a Debenture
becomes due and payable as herein provided, whether on the Stated Maturity Date
or pursuant to acceleration upon an Event of Default.
"NASDAQ" means the Nasdaq National Market.
"NOTICE OF CONVERSION" has the meaning set forth in Section 4.2.
"OPTIONAL CONVERSION" has the meaning set forth in Section 6.1.
"OPTIONAL CONVERSION DATE" has the meaning set forth in Section 6.2.
"OPTIONS" has the meaning set forth in Section 4.5(e)(i)(A).
"ORIGINAL ISSUE DATE" of any Debenture (or portion thereof) means the
earlier of (i) the date of such Debenture and (ii) the date of any Debenture (or
portion thereof) for which such security was issued (directly or indirectly) on
registration of transfer, exchange or substitution.
"PAYMENT BLOCKAGE NOTICE" has the meaning set forth in Section 7.2(b).
"PER SHARE MARKET VALUE" means (i) on any particular Trading Day the
closing bid price per share of the Common Stock on such date (as reported by
Bloomberg Information Services, Inc., or any successor reporting service) on
Nasdaq or, if the Common Stock is not then quoted on Nasdaq, any Subsequent
Market 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 (excluding bids posted by the Company, a
Holder or an Affiliate of any such person), or (ii) if the Common Stock is not
listed then on Nasdaq or any Subsequent Market, the closing bid price for a
share of Common Stock in the over-the-counter market, as reported by 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 (excluding bids posted by a Holder or an Affiliate of a Holder), or
(iii) 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 holder of this Debenture; provided, however, that the Company, after receipt
of the determination by such Appraiser, shall have the right to select in good
faith 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 an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"PREFERRED STOCK" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's preferred or preference stock whether now outstanding or issued
after the date of this Debenture, and includes, without limitation, all classes
and series of preferred or preference stock.
"PROPERTY" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person under generally accepted
accounting principles.
"PURCHASE AGREEMENT" means that Securities Purchase Agreement dated as
of February __, 2000 by and among the Company and the Purchasers.
"PURCHASE PRICE" means, with respect to any Debenture, the purchase
price paid to the Company upon issuance of such Debenture.
"PURCHASERS" has the meaning ascribed thereto in the Purchase
Agreement.
"REGISTER" has the meaning set forth in the third paragraph hereof.
"REGISTRATION RIGHTS AGREEMENT" means that Registration Rights
Agreement dated as of February __, 2000 by and among the Company and the
Purchasers.
"RESERVED AMOUNT" has the meaning set forth in Section 4.9.
"REVERSE STOCK SPLIT" has the meaning set forth in Section 4.5(a).
"SENIOR INDEBTEDNESS" shall have the meaning set forth in Section 7.1.
"SHAREHOLDER APPROVAL" has the meaning set forth in Section 4.6.
"STATED MATURITY DATE" means February __, 2004.
"STOCK OPTION PLAN" means any contract, plan or agreement which has
been approved by the Board of Directors of the Company, pursuant to which the
Company's securities may be issued to any employee, officer, director or
consultant.
"STRATEGIC PARTNER" means any established biotechnology or
pharmaceutical company, with a minimum market capitalization of one billion
dollars, with whom the Company executes a written agreement providing that the
Company and such entity will be "partnered" in the development or distribution
of one or more of the Company's chemical compounds.
"SUBSIDIARY" means, with respect to any Person, any corporation or
other entity of which a majority of the Capital Stock or other ownership
interests having ordinary voting power to elect a majority of the Board of
Directors or other persons performing similar functions are at the time directly
or indirectly owned or controlled by such Person. A Person shall not be deemed
to directly or indirectly own a majority of the Capital Stock of another Person
solely because of ownership of an unexercised warrant to acquire Capital Stock
of such other Person if the warrant does not provide for voting control of the
warrant shares prior to its exercise.
"SUBSEQUENT MARKET" means the New York Stock Exchange, American Stock
Exchange, Nasdaq Small Cap Market, London Stock Exchange or Tokyo Stock
Exchange.
"TRADING DAY" means (a) a day on which the Common Stock is traded on
Nasdaq or, if the Common Stock is not then designated on Nasdaq, on such
Subsequent Market on which the Common Stock is then listed or quoted or (b) if
the Common Stock is not listed on Nasdaq or a Subsequent 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 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 or reporting prices) provided,
however that in any event that the Common Stock is not listed or quoted as set
forth in (a), (b), or (c) hereof, then a Trading Day shall mean any Business
Day.
ARTICLE II
PAYMENT; THE SECURITIES
2.1 PAYMENT OF PRINCIPAL AND INTEREST. The Company covenants and
agrees that it will duly and punctually pay or cause to be paid the principal,
plus all accrued interest thereon, with respect to each of the Debentures at the
place or places, at the respective times and in the manner provided in the
Debentures.
2.2 MUTILATED, DEFACED, DESTROYED, LOST AND STOLEN DEBENTURES. In case
any temporary or definitive Debenture shall become mutilated, defaced or be
apparently destroyed, lost or stolen, the Company shall execute and deliver a
new Debenture, bearing a number not contemporaneously outstanding, in exchange
and substitution for the mutilated or defaced Debenture. In every case the
applicant for a substitute Debenture shall furnish to the Company such security
or indemnity as it may reasonably require to indemnify and defend and to save it
harmless and, in every case of destruction, loss or theft evidence to the
Company's satisfaction of the apparent destruction, loss or theft of such
Debenture and of the ownership thereof.
Upon the issuance of any substitute Debenture, the Company may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expenses connected
therewith. In case any Debenture which has matured or is about to mature, or has
been called for conversion in full, or is being surrendered for conversion in
full shall become mutilated or defaced or be apparently destroyed, lost or
stolen, the Company may, instead of issuing a substitute Debenture, with the
holder's consent, pay or authorize the payment or conversion of the same
(without surrender thereof except in the case of a mutilated or defaced
Debenture), if the applicant for such payment shall furnish to the Company such
security or indemnity as it may reasonably require to save it harmless from all
risks, however remote, and, in every case of apparent destruction, loss or
theft, the applicant shall also furnish to the Company evidence to the Company's
reasonable satisfaction of the apparent destruction, loss or theft of such
Debenture and of the ownership thereof, and in the case of mutilated Debentures,
the applicant shall deliver to the Company such Debentures.
Every substitute Debenture issued pursuant to the provisions of this
Section by virtue of the fact that any Debenture is apparently destroyed, lost,
stolen or mutilated shall constitute an additional contractual obligation of the
Company, whether or not the apparently destroyed, lost, stolen or mutilated
Debenture shall be at any time enforceable by anyone and shall be entitled to
all the benefits of (but shall be subject to all the limitations of rights set
forth in) this Debenture equally and proportionately with any and all other
Debentures duly authenticated and delivered hereunder. All Debentures shall be
held and owned upon the express condition that, to the extent permitted by law,
the foregoing provisions are exclusive with respect to the replacement or
payment or conversion of mutilated, defaced, or apparently destroyed, lost,
stolen or mutilated Debentures and shall preclude any and all other rights or
remedies notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement or payment of negotiable instruments or
other securities without their surrender.
2.3 CANCELLATION OF DEBENTURES; DESTRUCTION THEREOF. All Debentures
surrendered for payment, conversion, registration of transfer or exchange shall
be delivered to the Company for cancellation, and no Debentures shall be issued
in lieu thereof except as expressly permitted by any of the provisions of this
Debenture. The Company shall destroy canceled Debentures held by it and deliver
a certificate of destruction to the Holder, unless otherwise required. If the
Company shall acquire any of the Debentures, such acquisition alone shall not
operate as a redemption or satisfaction of the indebtedness represented by such
Debentures unless and until such indebtedness is satisfied.
ARTICLE III
DEFAULTS
3.1 EVENT OF DEFAULT DEFINED; ACCELERATION OF MATURITY; WAIVER OF
DEFAULT. In case one or more of the following events ("EVENTS OF DEFAULt")
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall have occurred and be continuing:
a. default in the payment in cash (or in Common Stock, as permitted
herein), for a period of more than three (3) Business Days, of all or any part
of the principal of and the entire accrued interest on any of the Debentures as
and when the same shall become due and payable either at maturity, upon any
conversion, by declaration or otherwise; or
b. failure on the part of the Company to duly and materially observe
or perform any covenants or agreements on the part of the Company (or the making
by the Company of any announcement, statement or threat that it does not intend
to honor the obligations described in this paragraph) contained in this
Debenture (including the failure to issue Common Stock upon conversion of this
Debenture in accordance with the terms hereof) or the Purchase Agreement or the
Registration Rights Agreement for a period of five (5) Business Days (other than
with respect to an announcement, statement or threat) in the case of a failure
due to circumstances within the Company's control, or thirty (30) Business Days
in the case of a failure due to circumstances not within the Company's control,
after the earlier of (x) the date on which any executive officer of the Company
shall have obtained actual knowledge of such failure (or such announcement,
statement or threat) or (y) the date on which written notice thereof has been
given to the Company by the Holder; or
c. there shall have occurred with respect to any particular issue of
Debt of the Company and/or one or more Subsidiaries having an outstanding
principal amount of $1,000,000 or more in the aggregate for all such issues of
all such Persons, whether such Debt now exists or shall hereafter be created, an
event of default which has entitled the holder thereof to declare such Debt to
be due and payable in full prior to its stated maturity, and such Debt has not
been discharged in full or such acceleration has not been stayed, rescinded or
annulled within ten (10) Business Days of such acceleration; or
d. a judgment or order (not covered by insurance) for the payment of
money shall be rendered against the Company or any Subsidiary of the Company in
excess of $500,000 in the aggregate for all such judgments or orders against all
such Persons (treating any deductibles, self insurance or retention as not so
covered) that shall not be discharged, and all such judgments and orders remain
outstanding, and there shall be any period of thirty (30) consecutive days
following entry of the judgment or order in excess of $500,000 or the judgment
or order which causes the aggregate amount described above to exceed $500,000
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or
e. a court having jurisdiction in the premises shall enter a decree or
order for relief in respect of the Company or any of its subsidiaries in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Company or any of
its Subsidiaries or for any substantial part of the property of the Company or
any of its Subsidiaries or ordering the winding up or liquidation of the affairs
of the Company or any of its Subsidiaries, and such decree or order shall remain
unstayed and in effect for a period of thirty (30) consecutive days; or
f. the Company shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consent to the entry of an order for relief in an involuntary case under any
such law, or consent to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar official) of
the Company or for any substantial part of the property of the Company, or the
Company shall make any general assignment for the benefit of creditors; or
g. any representation, warranty or certification made by the Company
in the Purchase Agreement or in any certificate, financial statement shall prove
to have been incorrect in any material respect when made; or
h. the Common Stock shall be delisted from Nasdaq or shall be
suspended from trading on Nasdaq without resuming trading and/or being relisted
thereon or on a Subsequent Market or having such suspension lifted, as the case
may be, within five (5) Business Days (twenty (20) Business Days if the Company
is in good faith contesting such delisting or suspension); or
i. a Registration Statement (as defined in the Registration Rights
Agreement) for the Debenture Shares shall not have been declared effective by
the Securities and Exchange Commission on or prior to the 30th day after the
Effectiveness Date (as defined in the Registration Rights Agreement) or after
its initial effectiveness and prior to the expiration of the Company's
obligation to keep the Registration Statement effective as required under the
Registration Rights Agreement, such Registration Statement lapses in effect or
sales of all of the Registrable Securities (as defined in the Registration
Rights Agreement) otherwise cannot be made thereunder (whether by reason of the
Company's failure to amend or supplement the prospectus included therein in
accordance with the Registration Rights Agreement or otherwise) for more than
fifteen (15) consecutive days or thirty (30) days in any twelve (12) month
period; or
j. the Company shall fail to issue shares of Common Stock, in
accordance with the Purchase Agreement and this Debenture, within three (3)
Trading Days after the Holder delivers a Notice of Conversion pursuant to
Section 4.2 hereof; or
k. an Event of Default has occurred and is continuing under any of the
other Debentures issued pursuant to the Purchase Agreement; or
l. Failure on the part of the Company to comply with its obligations
to close the Second Closing (as defined in the Purchase Agreement) when
requested by the Holders.
Then, in each and every such case (other than an Event of Default
specified in Section 3.1(e) or 3.1(f) hereof), unless the principal shall have
already become due and payable, by notice in writing to the Company (the
"Acceleration Notice"), the Holders of at least a majority of the then
outstanding principal amount of the Debentures may declare the entire principal
of and the entire accrued interest on the Debentures owned by such Holders to be
due and payable immediately, and upon any such declaration the same shall become
immediately due and payable. If an Event of Default specified in Section 3.1(e)
or 3.1(f) occurs, the principal of and any accrued interest on the Debentures
(and the aggregate amounts described below) shall become and be immediately due
and payable without any declaration or other act on the part of any Debenture
Holder. In the event that the Company shall not have promptly, but in any event
within five (5) Business Days after receipt of an Acceleration Notice, shall
have paid a Holder the amount specified below (if applicable, as so specified)
the Conversion Price of such Holder's Debenture shall automatically be adjusted
to equal the average Per Share Market Value of the Common Stock during the
preceding thirty (30) consecutive Trading Days immediately preceding the date of
the Acceleration Notice, if such Per Share Market Value is lower than the
Conversion Price.
The aggregate amount payable upon an Event of Default described in
Section 3.1(a), (e), (f) and (i) to a Holder in respect of such Holder's
Debenture shall be equal to the sum of (i) the Mandatory Prepayment Amount
applicable to such Debenture plus (ii) at the option of the Holder, the
Mandatory Prepayment Amount for the principal amount of the Debentures (the
"Converted Debentures") that would then be held by such Holder had the principal
amount of Debentures converted into Debenture Shares that are then held by the
Holder not been so converted; provided, that the Holder shall not be entitled to
a Mandatory Prepayment Amount with respect to Converted Debentures if both the
following have occurred: (i) prior to the occurrence of an Event of Default, the
Debenture Shares into which the Converted Debentures were converted had been
held by the Holder for more than thirty (30) days and (ii) prior to the
occurrence of the Event of Default and after receipt by the Holder of the
Debenture Shares that are held by the Holder at the time of the occurrence of
the Event of Default, the Registration Statement with respect to such Debenture
Shares had been continuously effective, and the Common Stock has been quoted on
Nasdaq, for more than thirty (30) days.
The aggregate principal amount payable on each Event of Default other
than as described in Section 3.1(a), (e), (f) and (i) shall be equal to the sum
of (i) the Mandatory Prepayment Amount plus (ii) at the option of the Holder,
the Mandatory Prepayment Amount for the Converted Debentures that would then be
held by such Holder had the principal amount of Debentures converted into
Debenture Shares (as defined herein) that are then held by the Holder not been
so converted; provided, that the Holder shall not be entitled to a Mandatory
Prepayment Amount with respect to Converted Debentures if prior to the
occurrence of an Event of Default, the Debenture Shares into which the Converted
Debentures were converted had been held by the Holder for more than three (3)
Trading Days.
For purposes of this Section 3.1, the principal amount of the
Debentures is outstanding until such date as the Holder shall have been issued
Debenture Shares upon a conversion (or attempted conversion) thereof. Interest
shall accrue on the Mandatory Prepayment Amount hereunder from the day after
such amount is due (being the date of an Event of Default) through the date of
payment in full thereof at the rate of 20.0% per annum, accruing daily from the
date of conversion until such amount, plus an interest thereon, if any, is paid
in full. Payment of the Mandatory Prepayment Amount pursuant to this Section 3.1
shall be in addition to any other amounts that may be due to the Holder pursuant
to this Debenture. Within five (5) Business Days of receipt by the Holder of
payments of amounts due to the Holder, (i) the Holder shall return the
Debentures to the Company and (ii) in the event the Mandatory Prepayment Amount
relates to the Converted Debentures, the Holder shall return the Debenture
Shares into which such Converted Debentures were converted. In the event of the
occurrence of an Event of Default, the Holder need not provide and the Company
hereby waives any presentment, demand, protest or other notice of any kind, and
the Holder may immediately and without expiration of any grace period enforce
any and all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Any demand for payment may be rescinded
and annulled by a Holder at any time prior to payment hereunder. If a majority
of the Holders rescind and annul any such demand, then the remaining Holders
shall be deemed to rescind and annul any such demand. No such rescission or
annulment shall affect any subsequent Event of Default or impair any right
consequent thereon.
Upon delivery of any Acceleration Notice to the Company, the Company
shall provide a copy of such notice to the other Holders, if any, within one (1)
Business Day of the Company's receipt thereof. Failure to deliver such notice
shall not affect the validity of the notice delivered by the Holders in
accordance with the provisions referred to above.
3.2 POWERS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER OF
DEFAULT. No right or remedy herein conferred upon or reserved to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
No delay or omission of the Holders to exercise any right or power
accruing upon any Event of Default occurring and continuing as aforesaid shall
impair any such right or power or shall be construed to be a waiver of any such
Event of Default or an acquiescence therein; and every power and remedy given by
the Debentures or by law may be exercised from time to time, and as often as
shall be deemed expedient, by the Holders.
ARTICLE IV
EXCHANGE; CONVERSION
4.1 RIGHT OF DEBENTUREHOLDERS TO EXCHANGE DEBENTURES. Subject to and
upon compliance with the provisions of this Section, this Debenture is
exchangeable for an equal principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No service
charge will be made for such registration of transfer or exchange.
4.2 RIGHT OF DEBENTUREHOLDERS TO CONVERT DEBENTURES INTO COMMON STOCK.
a. CONVERSION PRICE. Subject to and upon compliance with the
provisions of this Section, the Holder of any Debenture shall have the right, at
the Holder's option, at any time prior to the close of business on the Maturity
Date to convert the principal amount of this Debenture, or any portion thereof
(and any accrued but unpaid interest thereon) into duly authorized, validly
issued, fully-paid and nonassessable shares of Common Stock at the conversion
price of $9.65 per share subject to adjustment under the provisions of this
Article IV (the "Conversion Price").
b. NOTICE OF CONVERSION. If an adjustment in the Conversion Price and,
if applicable, a change in the securities or other property issuable upon
conversion has taken place hereunder, then the conversion described in Section
4.2(a) shall be at the applicable Conversion Price and into such securities or
other property as so adjusted. The Purchaser desiring to make a conversion shall
deliver to the Company during usual business hours of the Company's office, or,
at the Purchaser's option, to the transfer agent of the Company during usual
business hours of the transfer agent, a written notice of election to convert,
as provided in the form attached hereto as Exhibit A (a "Notice of Conversion"),
accompanied, if required, by the Debenture or Debentures, representing at least
the principal amount to be converted.
4.3 ADJUSTMENT FOR DIVIDENDS; INTEREST PAYMENT AFTER CONVERSION. No
payment or adjustment will be made for dividends on any Common Stock except as
provided herein. On conversion of a Debenture, that portion of interest accrued
and unpaid attributable to the period from the Original Issue Date to the
Conversion Date with respect to the converted Debenture shall not be canceled,
extinguished or forfeited, but rather shall be paid in full to the Holder
thereof by the payment of cash; provided, however, that the Company may elect to
pay such amount in shares of Common Stock valued at the Conversion Price if it
provides the Holder with not less than ten (10) days prior written notice of
such intention. If the Holder converts more than one Debenture at the same time,
the number of shares of Common Stock issuable upon the conversion shall be based
on the total principal amount of the Debentures converted.
4.4 ISSUANCE OF SHARES UPON CONVERSION.
a. As promptly as practicable, but in any event no later than two (2)
Trading Days after delivery of a Notice of Conversion and, if required, the
surrender, as herein provided, of any Debenture or Debentures for conversion,
the Company shall deliver or cause to be delivered to the Holder of the
Debenture or Debentures delivering such Notice of Conversion, or such Holder's
designee, a certificate or certificates representing the number of duly
authorized, validly issued, fully-paid and nonassessable shares of Common Stock,
into which such Debenture or Debentures may be converted in accordance with the
provisions of this Article IV. Such conversion shall be deemed to have been made
at the close of business on the date the Notice of Conversion is delivered to
the Company, as long as, if required, the Debenture or Debentures being
converted are promptly delivered to the Company and the rights of the Holder of
such Debenture or Debentures as a Holder (subject to the Company's satisfaction
of its obligations hereunder with respect to such conversion) shall cease at
such time with respect to the Converted Debentures, the Person or Persons
entitled to receive the shares of Common Stock, upon conversion of such
Debenture or Debentures, shall be treated for all purposes as having become the
record holder or holders of such shares of Common Stock at such time, and such
conversion shall be at the Conversion Price in effect at such time (the
"Conversion Date"). Subject to paragraph 4.4(b), if any Debenture is converted
in part only, upon such conversion the Company shall execute and deliver to the
Holder thereof, as requested by such Holder, a new Debenture or Debentures of
authorized denominations in aggregate principal amount equal to the unconverted
portion of such Debenture. Without in any way limiting the Holder's right to
pursue other remedies, including actual damages and/or equitable relief, the
parties hereto agree that if the Company fails to deliver the shares of Common
Stock required to be issued upon the conversion of such Debenture or Debentures
under this Section 4.4 within the two (2) Trading Day period referred above, the
Company shall pay to the Holder upon demand an amount of cash (at the Holder's
option) equal to: (i) the commissions, discounts and similar expenses charged to
the Holder in purchasing a number of shares of Common Stock no greater than the
number of shares of Common Stock required to be issued upon the conversion of
the Debenture or Debentures, or (ii) the product of (w) the number of shares of
Common Stock required to be issued upon the conversion of the Debenture or
Debentures, (x) the Per Share Market Value of such shares on the Conversion
Date, (y) the number of days after such two (2) day period that such shares are
not delivered to the Holder, and (z) 0.005.
b. Notwithstanding anything to the contrary set forth herein, upon
conversion of a Debenture in accordance with the terms thereof, the Holder shall
not be required to physically surrender the Debenture to the Company unless the
entire unpaid principal amount of the Debenture is so converted. The Holder and
the Company shall maintain records showing the principal amount already
converted and the dates of such conversions or shall use such other method,
reasonably satisfactory to the Holder and the Company, so as not to require
physical surrender of the Debenture upon each such conversion. In the event of
any dispute or discrepancy, such records of the Company shall be controlling and
determinative in the absence of manifest error. Notwithstanding the foregoing,
if any portion of the Debenture is converted, the Holder may not transfer the
Debenture unless the Holder first physically surrenders the Debenture to the
Company, whereupon the Company shall promptly issue and deliver upon the order
of the Holder a new Debenture of like tenor, registered as the Holder (upon
payment by the Holder of any applicable transfer taxes) may request,
representing in the aggregate the remaining unpaid principal amount of the
Debenture. The Holder and any assignee, by acceptance of the Debenture,
acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of a Debenture, the unpaid and unconverted
principal amount of such Debenture represented by such Debenture may be less
than the amount stated on the face thereof.
c. In lieu of delivering physical certificates representing the
Debenture Shares, provided the shares of Common Stock issuable upon conversion
of a Debenture may be sold pursuant to Rule 144(k) under the Act or under an
effective Registration Statement and the Company's transfer agent is
participating in the Depository Trust Company Fast Automated Securities Transfer
("FAST") program, upon request of the Holder and in compliance with the
provisions of Sections 4.1, 4.2 and 4.4, the Company shall use its best efforts
to cause its transfer agent to electronically transmit the shares of Common
Stock issuable upon conversion of the Debenture to the Holder by crediting the
account of the Holder's Prime Broker with DTC through its Deposit Withdrawal
Agent Commission system. The time period for delivery described in the
immediately preceding paragraph shall apply to the electronic transmittals
described herein.
d. In addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder such certificate or certificates pursuant
to Section 4.4(a), including for purposes hereof, any shares of Common Stock to
be issued on the Conversion Date on account of accrued but unpaid interest
hereunder, by the second (2nd) Trading Day after the Conversion Date, and if
after such second (2nd) Trading Day the Holder purchases (in an open market
transaction or otherwise) Common Stock to deliver in satisfaction of a sale by
such Holder of the Debenture Shares which the Holder was entitled to receive
upon such conversion (a "Buy-In"), then the Company shall (A) pay in cash to the
Holder (in addition to any remedies available to or elected by the Holder) the
amount by which (x) the Holder's total purchase price (including brokerage
commissions, if any) for the Common Stock so purchased exceeds (y) the product
of (1) the aggregate number of shares of Common Stock that such Holder was
entitled to receive from the conversion at issue multiplied by (2) the market
price of the Common Stock at the time of the sale giving rise to such purchase
obligation and (B) at the option of the Holder, either return the Debentures for
which such conversion was not honored or deliver to such Holder the number of
shares of Common Stock that would have been issued had the Company timely
complied with its conversion and delivery obligations under Section 4.4(a). For
example, if the Holder purchases Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion of Debentures
with respect to which the market price of the Debenture Shares on the date of
conversion totaled $10,000, under clause (A) of the immediately preceding
sentence the Company shall be required to pay the Holder $1,000. The Holder
shall provide the Company written notice indicating the amounts payable to the
Holder in respect of the Buy-In.
4.5 ADJUSTMENT OF CONVERSION PRICE. In addition to any adjustment to
the Conversion Price provided elsewhere in this Debenture, the Conversion Price
in effect at any time shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
a. COMMON STOCK DIVIDENDS; COMMON STOCK SPLITS; REVERSE COMMON STOCK
SPLITS. If the Company, at any time while this Debenture is outstanding, (a)
shall pay a stock dividend on its 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 Conversion Price shall be multiplied by a fraction the numerator of
which shall be the number of shares of Common Stock (excluding treasury shares,
if any) outstanding before such event and the denominator of which shall be the
number of shares of Common Stock outstanding after such event. Any adjustment
made pursuant to this paragraph 4.5(a) 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.
Notwithstanding the foregoing, if the Company shall combine outstanding shares
of Common Stock into a smaller number of shares (a "Reverse Stock Split") at any
time prior to the Maturity Date, then the Conversion Price in effect immediately
prior to such reverse stock split shall not be adjusted and shall remain in
effect after giving effect to such reverse stock split.
b. RIGHTS; OPTIONS; WARRANTS OR OTHER SECURITIES. If the Company, at
any time while this Debenture is outstanding, shall fix a record date for the
issuance of rights, options, warrants or other securities to all of the holders
of Common Stock entitling them to subscribe for or purchase, convert to,
exchange for or otherwise acquire shares of Common Stock for no consideration or
at a price per share less than the Conversion Price, the Conversion Price shall
be multiplied by a fraction, the denominator of which shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such rights, options, warrants or other securities plus the
number of additional shares of Common Stock offered for subscription or
purchase, and the numerator of which shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance of
such rights, options, warrants or other securities plus the number of shares
which the aggregate offering price of the total number of shares so offered
would purchase at the Conversion Price. Such adjustment shall be made whenever
such rights, options, warrants or other securities are issued, and shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such rights or warrants.
c. SUBSCRIPTION RIGHTS. If the Company, at any time while this
Debenture is outstanding, shall fix a record date for the distribution to all of
the holders of Common Stock evidence of its indebtedness or assets or rights,
options, warrants or other securities entitling them to subscribe for, purchase,
convert to, exchange for or to otherwise acquire any security (excluding those
referred to in Sections 4.5(a) and (b) above), then in each such case the
Conversion Price at which the Debenture shall thereafter be exercisable shall be
determined by multiplying the Conversion Price in effect immediately prior to
the record date fixed for determination of shareholders entitled to receive such
distribution by a fraction, the denominator of which shall be the Per Share
Market Value of Common Stock determined as of the record date mentioned above,
and the numerator of which 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
twenty percent (20%) of the net assets of the Company, such fair market value
shall be determined by an Appraiser selected in good faith by the Holder; and
provided, further, that the Company, after receipt of the determination by such
Appraiser shall have the right to select an additional Appraiser meeting the
same qualifications, in good faith, in which case the fair market value shall be
equal to the average of the determinations by each such Appraiser. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
d. OTHER EVENTS. In case of (A) any reclassification of the Common
Stock into other securities of the Company or (B) any compulsory share exchange
pursuant to which the Common Stock is converted into other securities, cash or
property (each of (A) or (B), an "Extraordinary Event"), the Holder shall have
the right thereafter to convert the Debenture for shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such Extraordinary Event, that the Holder would have been
entitled to receive had it converted the Debenture immediately prior to such
Extraordinary Event (without taking into account any limitations or restrictions
on the convertibility of the Debentures) would have been entitled. In the case
of an Extraordinary Event, the terms of any such Extraordinary Event shall
include such terms so as to continue to give to the Holder the right to receive
the securities, cash or property set forth in this Section 4.5(d) upon any
conversion following such Extraordinary Event. This provision shall similarly
apply to successive Extraordinary Events.
e. ADJUSTMENT TO CONVERSION PRICE FOR DILUTIVE ISSUANCES. If the
Company, at any time while this Debenture is outstanding, takes any of the
actions described in this Section 4.5(e), then, in order to prevent dilution of
the rights granted under this Debenture, at any time prior to the Maturity Date,
the Conversion Price will be subject to adjustment from time to time as provided
in this Section 4.5(e).
(i) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF COMMON STOCK. If
at any time while this Debenture is outstanding the Company issues or sells, or
is deemed to have issued or sold, any shares of Common Stock for a consideration
per share less than the Conversion Price in effect immediately prior to such
issuance or sale, then immediately after such issuance or sale the Conversion
Price then in effect shall be reduced to an amount equal to the consideration
per share of Common Stock in such issuance or sale. For the purpose of
determining the adjusted Conversion Price under this Section 4.5(e), the
following shall be applicable:
(A) ISSUANCE OF OPTIONS. If at any time while this Debenture is
outstanding the Company in any manner grants, issues or sells any rights,
options, warrants, or options to subscribe for or to purchase Common Stock
or any stock or other securities convertible into or exchangeable for
Common Stock (such rights, warrants or options, "Options," and such
convertible or exchangeable stock or securities, "CONVERTIBLE SECURITIES")
and the price per share for which Common Stock is issuable upon the
exercise of such Options or upon conversion or exchange of such Convertible
Securities is less than the Conversion Price in effect immediately prior to
such grant or issuance, then the Conversion Price then in effect shall be
reduced to equal the price per share for which Common Stock is issuable
upon the exercise of such Options or upon the conversion or exchange of
such Convertible Securities. No adjustment of the Conversion Price shall be
made upon the actual issuance of such Common Stock upon conversion or
exchange of such Options.
(B) ISSUANCE OF CONVERTIBLE SECURITIES. If at any time while this
Debenture is outstanding the Company in any manner issues or sells any
Convertible Securities and the price per share for which Common Stock is
issuable upon such conversion or exchange is less than the Conversion Price
in effect immediately prior to issuance or sale, then the Conversion Price
then in effect shall be reduced to an amount equal to the price per share
for which the Common Stock is issuable upon the conversion or exchange of
such Convertible Securities. No adjustment of the Conversion Price shall be
made upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities.
(C) CHANGE IN OPTION PRICE OR RATE OF CONVERSION. In the event
that there is a change at any time in (i) the exercise price provided for
in any Options, (ii) the additional consideration, if any, payable upon the
issue, conversion or exchange of any Convertible Securities or (iii) the
rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock, other than a change which results from
events set for in Sections 4.5(a), (b) and (c) which also cause a relative
change in the Conversion Price, then immediately after such change in
option price, additional consideration or rate of conversion the Conversion
Price in effect at the time of such change shall be readjusted to the
Conversion Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed exercise price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or sold;
provided that no adjustment shall be made if such adjustment would result
in an increase of the Conversion Price in effect prior to such adjustments.
(D) EFFECT ON CONVERSION PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Conversion Price under this Section 4.5(e)(i), the
following shall be applicable:
(I) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Options or Convertible Securities are issued or sold or deemed
to have been issued or sold for cash, the consideration received
therefor will be deemed to be the net amount received by the Company
therefor. In case any Common Stock, Options or Convertible Securities
are issued or sold for a consideration other than cash, the amount of
the consideration other than cash received by the Company will be the
fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration
received by the Company will be the Average Price on the Trading Day
immediately preceding the date of receipt. In case any Common Stock,
Options or Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which the
Company is the surviving entity the amount of consideration therefor
will be deemed to be the fair value of such portion of the net assets
and business of the non-surviving entity as is attributable to such
Common Stock, Options or Convertible Securities, as the case may be.
The fair value of any consideration other than cash or securities will
be determined in good faith by the Board of Directors of the Company.
(II) INTEGRATED TRANSACTIONS. In case any Option is issued in
connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the
Options will be deemed to have been issued for an aggregate
consideration of $0.01.
(III) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by
or for the account of the Company, and the disposition of any shares
so owned or held will be considered an issue or sale of Common Stock.
(IV) RECORD DATE. If the Company establishes a record of the
holders of Common Stock for the purpose of entitling them (1) to
receive a dividend or other distribution payable in Common Stock,
Options or in Convertible Securities or (2) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such
record date will be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase,
as the case may be.
(E) CERTAIN EVENTS. If any event occurs of the type contemplated
by the provisions of this Section 4.5(e) (subject to the exceptions stated
therein) but not expressly provided for by such provisions (including,
without limitation, the granting of stock appreciation rights, phantom
stock rights or other rights with equity features), then the Company's
Board of Directors will make an appropriate adjustment in the Conversion
Price so as to protect the rights of the Holder, or assigns, of this
Debenture; provided, however, that no such adjustment will increase the
Conversion Price as otherwise determined pursuant to this Section 4.5(e).
Notwithstanding anything to the contrary contained in this Section
4.5(e) no adjustment shall be made to the Conversion Price in connection with
the issuance, sale or grant of any of the following securities, whether or not
at a price that is less than the Conversion Price:
(i) shares of Common Stock issuable upon the exercise of any options
or warrants outstanding on the date hereof and listed in Schedule 2.1(c) of the
Purchase Agreement;
(ii) shares of Common Stock or options to acquire Common Stock issued
or deemed to have been issued by the Company in connection with a stock option
plan, 401(k) plan or employee stock purchase plan; and
(iii) shares of Common Stock underlying the Debentures or shares
issued upon the conversion of the Debentures.
f. ROUNDING. All calculations under this Section 4.5 shall be made to
the nearest cent or the nearest l/l00th of a share, as the case may be.
g. NOTICE OF ADJUSTMENT. The Company shall give the Holder written
notice of the occurrence of any of the events specified in Sections 4.5(a), (b),
(c), (d) or (e) as soon as practicable, but in no event later than three (3)
Business Days after such event, provided further, that if such notice contains
material non-public information, the Company shall (i) publicly disclose such
information prior to or concurrently with the giving of such notice or (ii) only
disclose such information to the extent that the Holder shall not be in
possession of material non-public information. Such notice shall contain at
least: (A) a description of the event, (B) the adjusted Conversion Price with a
reference to the applicable paragraph in Section 4.5 hereof, if calculable at
the time, and (C) the date on which the adjusted Conversion Price is effective.
4.6 NASDAQ LIMITATION. If on any date (the "DETERMINATION DATE") (a)
the Common Stock is listed for trading on Nasdaq, (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 in full of the then outstanding principal
amount of the Debentures as if all such Debentures were converted on such
Determination Date (without regard to any limitations on conversions) and as
payment of interest thereon, would equal or exceed 20% of the number of shares
of the Common Stock outstanding immediately prior to the "CLOSING DATE" (the
"ISSUABLE MAXIMUM"), and (c) the Company shall not have previously obtained the
vote of the shareholders of the Company (the "SHAREHOLDER Approval"), if any, as
may be required by the applicable rules and regulations of Nasdaq (or any
successor entity) to approve the issuance of shares of Common Stock in excess of
the Issuable Maximum in a private placement whereby shares of Common Stock are
deemed to have been issued at a price that is less than the greater of book
value or fair market value of the Common Stock, then with respect to the
aggregate principal amount of the Debentures then held by the Holders for which
a conversion in accordance with the Conversion Price would result in an issuance
of shares of Common Stock in excess of such Holder's pro rata allocation (as
described below) of the Issuable Maximum (the "EXCESS PRINCIPAL") the Company
may elect to prepay cash to the Holders in an amount equal to the Mandatory
Prepayment Amount. Any such election by the Company must be made in writing to
the Holders within two (2) Trading Days after the first such Determination Date
and the payment of such Mandatory Prepayment Amount applicable to such
prepayment must be made in full to the Holders with ten (10) Business Days after
the date such notice is delivered. If the Company does not deliver timely a
notice of its election to prepay under this Section or shall, if it shall have
delivered such a notice, fail to pay the prepayment amount hereunder within ten
(10) Business Days thereafter, then each Holder shall have the option by written
notice to the Company, to, if applicable, declare any such notice given by the
Company, if given, to be null and void and require the Company to either: (i)
use its best efforts to obtain the Shareholder Approval applicable to such
issuance as soon as is possible, but in any event not later than the 60th day
after such request unless the Company has previously used its best efforts to,
but has failed to, obtain such approval (provided, that if the Company shall
fail to obtain the Shareholder Approval during such 60-day period, the Holder
may demand the cash payment set forth in Section 4.6(ii) herein) or (ii) pay
cash to such Holder, within five (5) Business Days of such Holder's notice, in
an amount equal to the Mandatory Prepayment Amount for such Holder's portion of
the Excess Principal. The payment of the Mandatory Prepayment Amount to each
Holder pursuant to this Section shall be determined on a pro rata basis upon the
principal amount of the Debentures held by such Holder on the Determination Date
which is in excess of the pro rata allocation of the Issuable Maximum. If the
Company fails to pay the Mandatory Prepayment Amount in full pursuant to this
Section within five (5) Business Days after the date payable, the Company will
pay interest thereon at a rate of 20% per annum to the converting Holder,
accruing interest daily from the date of conversion until such amount, plus all
such interest thereon, if any, is paid in full. Until the Company has received
the Shareholder Approval no Holder of the Debentures shall be issued, upon
conversion of Debentures, shares of Common Stock in an amount greater than such
Holder's allocated portion of the Issuable Maximum pursuant to Section 4.14.
4.7 RESTRICTION ON CONVERSION BY EITHER THE HOLDER OR THE COMPANY.
Notwithstanding anything herein to the contrary, in no event shall any Holder or
the Company have the right or be required to convert any or all of the aggregate
principal amount and interest accrued thereon of this Debenture if as a result
of such conversion the aggregate number of shares of Common Stock beneficially
owned by such Holder and its Affiliates would exceed 4.99% of the outstanding
shares of the Common Stock following such conversion. For purposes of this
Section 4.7, beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended. The provisions of this
Section 4.7 may be waived by a Holder as to itself (and solely as to itself)
upon not less than 65 days prior written notice to the Company, and the
provisions of this Section 4.7 shall continue to apply until such 65th day (or
later, if stated in the notice of waiver).
4.8 OFFICER'S CERTIFICATE. Whenever the number of shares purchasable
upon conversion shall be adjusted as required by the provisions of Section 4.5,
the Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted number of shares determined as herein
provided, setting forth in reasonable detail the facts requiring such adjustment
and the manner of computing such adjustment. Each such officer's certificate
shall be signed by the chairman, president or chief financial officer of the
Company and by the secretary or any assistant secretary of the Company. Each
such officer's certificate shall be made available at all reasonable times for
inspection by any holder of the Debentures and the Company shall, forthwith
after each such adjustment, deliver a copy of such certificate to the each of
the Holders.
4.9 RESERVATION OF SHARES. The Company covenants that it will at all
times reserve and keep available out of its authorized shares of Common Stock,
free from preemptive rights, solely for the purpose of issue upon conversion of
the Debentures as herein provided, such number of shares of the Common Stock as
shall then be issuable upon the conversion of all outstanding Debentures into
Common Stock in accordance with Section 3.6(b) of the Purchase Agreement (the
"Reserved Amount"). The Company covenants that all shares of the Common Stock
issued upon conversion of the Debenture which shall be so issuable shall, when
issued, be duly and validly issued and fully paid and non-assessable.
If, at any time a Holder of this Debenture submits a Notice of
Conversion, and the Company does not have sufficient authorized but unissued
shares of Common Stock available to effect such conversion in accordance with
the provisions of this Article IV (a "CONVERSION DEFAULT"), subject to Section
4.14, the Company shall issue to the Holder all of the shares of Common Stock
which are then available to effect such conversion. The portion of this
Debenture which the Holder included in its Conversion Notice and which exceeds
the amount which is then convertible into available shares of Common Stock (the
"EXCESS AMOUNT") shall, notwithstanding anything to the contrary contained
herein, not be convertible into Common Stock in accordance with the terms hereof
until (and at the Holder's option at any time after) the date additional shares
of Common Stock are authorized by the Company to permit such conversion at which
time the Conversion Price in respect thereof shall be the lesser of (i) the Per
Share Market Value on the Conversion Default Date (as defined below) and (ii)
the Per Share Market Value on the Conversion Date thereafter elected by the
Holder in respect thereof. In addition, the Company shall pay to the Holder
payments ("CONVERSION DEFAULT PAYMENTS") for a Conversion Default in the amount
of (x) the sum of (1) the then outstanding principal amount of this Debenture
plus (2) accrued and unpaid interest on the unpaid principal amount of this
Debenture through the Authorization Date (as defined below) plus (3) Default
Interest, if any, on the amounts referred to in clauses (1) and/or (2),
multiplied by (y) .24, multiplied by (z) (N/365), where N equals the number of
days from the day the holder submits a Notice of Conversion giving rise to a
Conversion Default (the "CONVERSION DEFAULT DATE") to the date (the
"AUTHORIZATION DATE") that the Company authorizes a sufficient number of shares
of Common Stock to effect conversion of the full outstanding principal balance
of this Debenture. The Company shall use its best efforts to authorize a
sufficient number of shares of Common Stock as soon as practicable following the
earlier of (i) such time that the Holder notifies the Company or that the
Company otherwise becomes aware that there are or likely will be insufficient
authorized and unissued shares to allow full conversion thereof and (ii) a
Conversion Default. The Company shall send notice to the Holder of the
authorization of additional shares of Common Stock, the Authorization Date and
the amount of Holder's accrued Conversion Default Payments. The accrued
Conversion Default Payments for each calendar month shall be paid in cash or
shall be convertible into Common Stock (at such time as there are sufficient
authorized shares of Common Stock following the Authorization Date) at the
applicable Conversion Price, at the Holder's option, as follows:
(a) In the event Holder elects to take such payment in cash, cash
payment shall be made to Holder by the fifth (5th) Business Day of the month
following the month in which it has accrued; and
(b) In the event Holder elects to take such payment in Common Stock,
the Holder may convert such payment amount into Common Stock at the lesser of
the Conversion Price (as in effect at the time of conversion) and the Per Share
Market Value (on the fifth day of the month referred to below) at any time after
the fifth day of the month following the month in which it has accrued in
accordance with the terms of this Article IV (so long as there is then a
sufficient number of authorized shares of Common Stock).
The Holder's election shall be made in writing to the Company at any
time prior to 8:00 p.m., New York City Time, on the third day of the month
following the month in which Conversion Default payments have accrued. If no
election is made, the Holder shall be deemed to have elected to receive cash.
Nothing herein shall limit the Holder's right to pursue actual damages (to the
extent in excess of the conversion Default Payments) for the Company's failure
to maintain a sufficient number of authorized shares of Common Stock, and each
Holder shall have the right to pursue all remedies available at law or in equity
(including degree of specific performance and/or injunctive relief).
4.10 COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. The Company covenants
that if any shares of Common Stock required to be reserved for purposes of
conversion of Debentures hereunder require registration with or approval of any
governmental authority under any Federal or state law, or any national
securities exchange, before such shares may be issued upon conversion, the
Company will use its best efforts to cause such shares to be duly registered or
approved, as the case may be.
4.11 FRACTIONAL SHARES. Upon a conversion hereunder, the Company shall
not be required to issue stock certificates representing fractions of shares of
the 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 shall be entitled to receive, in lieu of the final fraction of a share,
one whole share of Common Stock.
4.12 PAYMENT OF TAX UPON ISSUE OR TRANSFER. The issuance of
certificates for shares of the Common Stock on conversion of the Debentures
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 Debentures 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.
4.13 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 received by
8:00 p.m. EST where such notice is to be received), or the first Business Day
following such delivery (if received after 8:00 p.m. EST 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 are (i) if to the Company to Alliance Pharmaceutical Corp.,
6175 Lusk Boulevard, San Diego, California 92121, Attention: President,
facsimile number: (858) 410-5343 with a copy to Stroock & Stroock & Lavan LLP,
180 Maiden Lane, New York, New York 10038, Attention: Melvin Epstein, facsimile
number: (212) 896-6006 and (ii) if to any Holder to the address set forth on
Schedule II to the Purchase Agreement with copies to Akin, Gump, Strauss, Hauer
& Feld, L.L.P., 590 Madison Avenue, New York, New York 10022, Attention: James
Kaye, fax no. (212) 872-1002, or such other address as may be designated in
writing hereafter, in the same manner, by such Person.
4.14 ALLOCATIONS OF ISSUABLE MAXIMUM AND RESERVED AMOUNT. The Issuable
Maximum and Reserved Amount shall be allocated pro rata among the Holders based
on the principal amount of Debentures issued to each Holder. Each increase to
the Issuable Maximum and Reserved Amount shall be allocated pro rata among the
Holders based on the principal amount of Debentures held by each Holder at the
time of the increase in the Issuable Maximum or Reserved Amount. In the event a
Holder shall sell or otherwise transfer any of such Holder's Debentures, each
transferee shall be allocated a pro rata portion of such transferor's Issuable
Maximum and Reserved Amount. Any portion of the Issuable Maximum or Reserved
Amount which remains allocated to any person or entity which does not hold any
Debentures shall be allocated to the remaining Holders, pro rata, based on the
principal amount of such Debentures then held by such Holders.
ARTICLE V
CONSOLIDATION, MERGER OR SALE OF COMPANY
5.1 CONSOLIDATION, MERGER OR SALE ONLY ON CERTAIN TERMS. The Company
shall not consolidate with or merge into any other Person or convey, transfer or
lease its properties and assets substantially as an entirety to any Person, and
the Company shall not permit any Person to consolidate with or merge into the
Company or convey, transfer or lease its properties and assets substantially as
an entirety to the Company, unless:
a. in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, the Person formed by such consolidation or into which
the Company is merged or the Person which acquires by conveyance or transfer, or
which leases, the properties and assets of the Company substantially as an
entirety shall be a corporation, partnership or trust whose Common Stock is
traded on the Nasdaq or a Subsequent Market, and shall expressly assume, by a
Debenture supplemental hereto, executed and delivered to the Holders, in form
satisfactory to the Holders of a majority of the then outstanding principal
amount of the Debentures, the due and punctual payment of the principal of and
interest on all the Debentures and the performance or observance of every
covenant of this Debenture on the part of the Company to be performed or
observed and shall have provided for conversion rights in accordance with
Section 5.3; and
b. immediately after giving effect to such transaction and treating
any indebtedness which becomes an obligation of the Company or a Subsidiary as a
result of such transaction as having been incurred by the Company or such
Subsidiary at the time of such transaction, no Event of Default shall have
happened and be continuing.
5.2 SUCCESSOR SUBSTITUTED. Upon any consolidation of the Company with,
or merger of the Company into, any other Person or any conveyance, transfer or
lease of the properties and assets of the Company substantially as an entirety
in accordance with Section 5.1, the successor person formed by such
consolidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Debenture with the
same effect as if such successor Person had been named as the Company herein,
and thereafter, except in the case of a lease, the predecessor Person shall be
relieved of all obligations and covenants under this Debenture.
5.3 CONVERSION RIGHTS. In case of any consolidation of the Company
with, or merger of the Company into, any other Person, any merger of another
Person into the Company (other than a merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock of the Company) or any sale or transfer of all or substantially all
of the assets of the Company, the Person formed by such consolidation or
resulting from such merger or which acquires such assets, as the case may be,
shall in the supplemental Debenture provided pursuant to Section 5.1(a) provide
that the Holder of each Debenture then outstanding shall have the right
thereafter, during the period such Debenture shall be convertible as specified
in Article IV, to convert such Debenture only into the kind and amount of
securities, cash or other assets receivable upon such consolidation, merger,
sale or transfer by a holder of the number of shares of Common Stock of the
Company into which such Debenture might have been converted immediately prior to
such consolidation, merger, sale or transfer. The supplemental indenture also
shall provide that if in connection with such consolidation, merger, sale or
transfer, each holder of Common Stock is entitled to elect to receive either
securities, cash or other assets receivable upon such consolidation, merger,
sale or transfer, the Company or the surviving or transferee corporation shall
provide each holder of securities with the right to elect to receive the
securities, cash or other assets into which the Debentures held by such Holder
shall be convertible after completion of such consolidation, merger, sale or
transfer on the same terms and subject to the same conditions applicable to
holders of Common Stock (including, without limitation, notice of the right to
elect, limitations on the period in which such election shall be made and the
effect of failing to exercise the election). Such supplemental Debenture shall
provide for adjustments which, for events subsequent to the effective date of
such supplemental Debenture, shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Article. The above provisions of this
Section shall similarly apply to successive consolidations, mergers, sales or
transfers.
ARTICLE VI
OPTIONAL CONVERSION
6.1 OPTIONAL CONVERSION.
a. The Debentures issued at the First Closing are convertible in whole
at the option of the Company, from time to time, subject to the following
condition, and subject also to the other conditions set forth in this Article VI
(the "OPTIONAL CONVERSION"):
(i) If, after nine (9) months following the Effectiveness
Date (as defined in the Registration Rights Agreement), the Per Share
Market Value has been greater than Nineteen Dollars and Thirty Cents
($19.30) subject to adjustment in the same manner in which the
Conversion Price is adjusted as provided in Sections 4.5(a), (b), (c)
and (d) (the "CONVERSION TRIGGER PRICE") for at least twenty five (25)
out of thirty (30) consecutive Trading Days.
b. Subject to the condition set forth in Section 5.1(a), so long as
(i) no Event of Default (or any event that with the passage of time or giving of
notice or both would constitute an Event of Default) shall have occurred and be
continuing, (ii) any Registration Statement required to be filed and be
effective pursuant to the Registration Rights Agreement is then in effect and
has been in effect and sales of all of the Registrable Securities can be made
thereunder for at least twenty (20) days prior to the Conversion Notice Date (as
defined below) and (iii) the Company has a sufficient number of authorized
shares of Common Stock reserved for issuance upon full conversion of the
Debentures, upon ten (10) Business Days prior written notice to the Holder (a
"CONVERSION NOTICE"), the entire principal amount of the Debenture may be
converted by the Company, in whole into shares of Common Stock at the Conversion
Price, and accrued interest may be converted into shares of Common Stock at the
Conversion Price on the Business Day prior to conversion.
6.2 MECHANICS OF CONVERSION. The Company must exercise its right to
cause an Optional Conversion hereunder by delivering Conversion Notice by
facsimile and overnight courier to each Holder, no later than three (3) Business
Days after the occurrence of a condition set forth in Section 6.1(a)(i) (such
deadline the "Conversion Notice Date"). Such Conversion Notice shall indicate
(a) the Conversion Price, (b) the number of shares of Common Stock that each
Holder shall receive as a result of the Optional Conversion and (c) a
confirmation of the date that the Company shall effect the Optional Conversion
and issue shares of Common Stock to the Holders (the "Optional Conversion
Date"), on the Optional Conversion Date, unless there is a disagreement as
described below. The Company shall issue the Common Stock on the Optional
Conversion Date unless the Holder notifies the Company within three (3) Business
Days after receipt of the Conversion Notice from the Company that the Holder
disagrees with the occurrence of the Optional Conversion or any other matter
contained in the Conversion Notice. If the Holder and the Company fail to agree
upon the occurrence of the Optional Conversion or any other matter contained in
the Conversion Notice within one (1) Business Day after the Holder has given
such notice, the matter shall be determined promptly by a securities firm (the
fees and expenses of which shall be paid by the Company) acceptable to both the
Holder and the Company, and such computation shall be final and binding. The
Optional Conversion shall be subject to the provisions set forth in Section 4.4,
mutatis mutandis.
If the Company does not deliver the Conversion Notice by the
Conversion Notice Date, then the Company shall not have the right to effect an
Optional Conversion until a condition set forth in Section 6.1(a)(i) occurs
again after such Conversion Notice Date. An example of how the Optional
Conversion right operates is as follows: Thirty (30) consecutive Trading Days
occur during which the Per Share Market Value of the Common Stock is greater
than the Conversion Trigger Price. The Conversion Notice Date is two (2)
Business Days after the end of the thirty (30) day trading period. If the
Company delivers the Conversion Notice by the Conversion Notice Date, it has
properly exercised its Optional Conversion right and subject to this Section
6.2, the Debentures will be converted as provided herein. If the Company fails
to deliver the Conversion Notice on or prior to the Conversion Notice Date, then
there must again occur a thirty (30) consecutive day trading period in which the
Per Share Market Value is in excess of the Conversion Trigger Price before the
Company may again exercise its Optional Conversion right.
ARTICLE VII
SUBORDINATION OF DEBENTURES
7.1 DEBENTURES SUBORDINATE TO SENIOR INDEBTEDNESS. The Company
covenants and agrees, and each Holder of a Debenture, by his acceptance thereof,
likewise covenants and agrees, that, to the extent and in the manner hereinafter
set forth in this Article, the payment of the principal of (and premium, if any)
and interest on each and all of the Debentures are hereby expressly made
subordinate and subject in right of payment to the prior payment in full of all
Senior Indebtedness. "SENIOR INDEBTEDNESS" shall mean any indebtedness,
liabilities and other obligations of the Company (whether as primary obligor or
as guarantor) to any Person (each a "SENIOR LENDER"), now existing or incurred
hereafter, with respect to a Twenty Five Million dollar ($25,000,000) basket of
senior corporate debt from a traditional lender and debt incurred as a result of
a transaction with a corporate Strategic Partner.
7.2 NO PAYMENT ON DEBENTURES IN CERTAIN CIRCUMSTANCES.
a. No payment or distribution of cash or property (other than Common
Stock of the Company or other securities of the Company that are subordinated to
Senior Indebtedness to at least the same extent as the Debentures) of the
Company will be made on account of principal of or interest on the Debentures,
or to defease or acquire any of the Debentures, or on account of the conversion
provisions of the Debentures and no action shall be taken (judicial or
otherwise) to collect any such payment or distribution (i) upon the maturity of
any Senior Indebtedness by lapse of time, acceleration or otherwise, unless and
until all Senior Indebtedness shall first be paid in full in cash, or such
payment duly made in a manner satisfactory to the holders of such Senior
Indebtedness or (ii) in the event that the Company defaults in the payment of
any principal of, premium, if any, or interest on or any other amounts payable
on or due in connection with any Senior Indebtedness when it becomes due and
payable, whether at maturity or at a date fixed for prepayment or by declaration
or otherwise, unless and until such default has been waived in writing by the
holders of the Senior Indebtedness. Payments on the Debentures may and shall be
resumed in the case of a payment default only upon the date on which such
default is waived in writing by the holders of the Senior Indebtedness or their
agent.
b. If any default OTHER than a default contemplated by Section
7.2(a)(ii) above shall have occurred and be continuing that would permit the
holders of the Senior Indebtedness to accelerate the maturity of Senior
Indebtedness, upon written notice (a "PAYMENT BLOCKAGE NOTICE") of the default
given to the Company and the Holders by the holders of, or an agent, trustee or
other representative for, such Senior Indebtedness, then, unless and until such
default has been waived in writing, no payment or distribution of cash or
property (other than Common Stock of the Company or other securities of the
Company that are subordinated to Senior Indebtedness to at least the same extent
as the Debentures) shall be made by the Company with respect to the principal of
or interest on the Debentures or on account of conversion of the Debentures or
to acquire or repurchase any of the Debentures for cash or property other than
Common Stock of the Company, and no action shall be taken (judicial or
otherwise) to collect any such payment or distribution. If such Senior
Indebtedness is not declared due and payable within 180 days after written
notice of the event of default is given, promptly after the end of the 180-day
period the Company will pay all sums due in respect of the Debentures and not
paid during the 180-day period. During any 360-day consecutive period, only one
such period during which payment with respect to the Debentures may not be made
as the result of a Payment Blockage Notice may commence and the duration of such
period may not exceed 180 days. No nonpayment default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the Holders
shall be, or be made, the basis for a subsequent Payment Blockage Notice unless
such default shall have been waived for a period of not less than 90 days.
c. If any payment or distribution of assets of the Company is received
by any Holder in respect of the Debentures at a time when that payment or
distribution should not have been made because of paragraph (a) or (b) of this
Section 7.2, and provided that prior to the Company's disbursement of such
distribution or payment, the Holders shall have received a written notice from
the Company or from an agent or representative for one or more holders of Senior
Indebtedness, such payment or distribution will be received and held and will be
paid over to the holders of Senior Indebtedness (pro rata as to each of such
holders on the basis of the respective amounts of Senior Indebtedness held by
them) until all such Senior Indebtedness has been paid in full, after giving
effect to any concurrent payment or distribution or provision therefor to the
holders of such Senior Indebtedness.
7.3 DEBENTURES SUBORDINATED TO PRIOR PAYMENT OF ALL SENIOR
INDEBTEDNESS ON DISSOLUTION, LIQUIDATION OR REORGANIZATION. Upon any
distribution of assets of the Company upon any dissolution, winding up,
liquidation or reorganization of the Company (whether in bankruptcy, insolvency,
receivership or similar proceedings relating to the Company or its property or
upon an assignment for the benefit of creditors or any marshalling of the
Company's assets or liabilities or otherwise):
a. the holders of all Senior Indebtedness will first be entitled to
receive payment in full of the principal of and interest due on Senior
Indebtedness (including interest accruing after the commencement of a bankruptcy
or insolvency) at the rate specified in the applicable Senior Indebtedness
documents and including, without limitation, in respect of premiums, indemnities
or otherwise, before the Holders are entitled to receive any payment or
distribution on account of the principal of or interest on the Debentures;
b. any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (except that Holders may
receive securities that are subordinated at least to the same extent as the
Debentures to Senior Indebtedness and any securities issued in exchange for
Senior Indebtedness), to which Holders would be entitled except for the
provisions of this Section 7.3 will be paid by the liquidating trustee or agent
or other persons legally empowered to make such a payment or distribution
directly to the holders of Senior Indebtedness (pro rata to such holders on the
basis of the respective amounts of Senior Indebtedness held by such holders) or
their representatives to the extent necessary to make or provide for payment in
full in cash of all Senior Indebtedness remaining unpaid, after giving effect to
any concurrent payment or distribution to the holders of such Senior
Indebtedness or provision for that payment or distribution; and
c. if, notwithstanding the foregoing, any payment or distribution of
assets of the Company of any kind or character, whether in cash, property or
securities (except that Holders may receive securities that are subordinated at
least to the same extent as the Debentures to Senior Indebtedness and any
securities issued in exchange for Senior indebtedness) is received by the
Holders on account of the principal of or interest on the Debentures before all
Senior Indebtedness is paid in full, such payment or distribution will be
received and held in trust for and will be forthwith paid over to the holders of
the Senior Indebtedness remaining unpaid or unprovided for or their
representatives for application (in the cash of cash) to, or as collateral (in
the case of non-cash property or securities) for the payment of such Senior
Indebtedness until all such Senior Indebtedness has been paid in full, after
giving effect to any concurrent payment or distribution or provision therefor to
the holders of such Senior Indebtedness.
The Company will give prompt written notice to the Holders of any
dissolution, winding up, liquidation or reorganization of it or any assignment
for the benefit of its creditors.
7.4 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS. Subject
to the payment in full of all Senior Indebtedness, the Holders shall be
subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions of cash, property or securities of the Company
applicable to the Senior Indebtedness until all amounts owing on the Debentures
shall be paid in full; and, for the purposes of such subrogation:
a. no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the Holders would be
entitled except for the provisions of this Article VII and no payment pursuant
to the provisions of this Article VII to the holders of Senior Indebtedness by
the Holders shall, as between the Company, its creditors (other than holders of
Senior Indebtedness) and the Holders, be deemed to be a payment by the Company
to or on account of the Senior Indebtedness; and
b. no payment or distributions of cash, property or securities to or
for the benefit of the Holders pursuant to the subrogation provision of this
Article VII, which would otherwise have been paid to the holders of Senior
Indebtedness, shall be deemed to be a payment by the Company to or for the
account of the Debentures.
7.5 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The provisions of
this Article are and are intended solely for the purpose of defining the
relative rights of the Holders on the one hand and the holders of Senior
Indebtedness on the other hand. Nothing contained in this Article or elsewhere
in this Debenture or in the Debentures is intended to or shall (a) impair, as
among the Company, its creditors other than holders of Senior Indebtedness and
the Holders of the Debentures, the obligation of the Company, which is absolute
and unconditional to pay to the Holders of the Debentures the principal of (any
premium, if any) and interest on the Debentures as and when the same shall
become due and payable in accordance with their terms; or (b) affect the
relative rights against the Company of the Holders of the Debentures and
creditors of the Company other than the holders of Senior Indebtedness; or (c)
prevent the Holder of any Debenture from exercising all remedies otherwise
permitted by applicable law upon default under this Debentures, subject to the
rights, if any, under this Article VII of the holders of Senior Indebtedness to
receive cash, property and securities otherwise payable or deliverable to the
Holder upon the exercise of any such remedy.
7.6 RIGHT TO FILE PROOF OF CLAIM. In the event of any dissolution,
winding up, liquidation or reorganization of the Company (whether in bankruptcy,
insolvency, receivership, reorganization or similar proceedings or upon any
assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business and assets of the Company, with respect to the
filing of a claim for the unpaid balance of any Holder's Debentures in the form
required in those proceedings, if the Holder does not file a proper claim or
proof of debt in the form required in such proceeding at least thirty (30) days
before the expiration of the time to file such claim or claims, then the holders
of Senior Indebtedness and their agents, trustees, or other representatives are
hereby authorized to have the right to file, and are hereby authorized to file,
an appropriate claim for and on behalf of each such Holder.
7.7 NO WAIVER OF SUBORDINATION PROVISIONS. No right of any present or
future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Debenture, regardless of any knowledge
thereof any such holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Holders of the Debentures, without
incurring responsibility to the Holders of the Debentures and without impairing
or releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Debentures to the holders of Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness
or any instrument evidencing the same or any agreement under which Senior
Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii)
release any Person liable in any manner for the collection of Senior
Indebtedness; and (iv) exercise or refrain from exercising any rights against
the Company and any other Person.
7.8 NOTICE TO HOLDERS. The Company shall give prompt written notice to
the Holders of any fact known to the Company which would prohibit the making of
any payment to or by the Holders in respect of the Debentures. Notwithstanding
the provisions of this Article or any other provision of this Debenture, the
Holders shall not be charged with knowledge of the existence of any facts which
would prohibit the making of any payment to the Holders in respect of the
Debentures, unless and until the Holders shall have received written notice
thereof from the Company or a holder of Senior Indebtedness; and, prior to the
receipt of any such written notice, the Holders shall be entitled in all
respects to assume that no such facts exist; provided, however, that if the
Holders shall not have received the notice provided for in this Section at least
two Business Days prior to the date upon which by the terms hereof any money may
become payable for any purpose (including, without limitation, the payment of
the principal of, and premium, if any, or interest on any Debenture), then,
anything herein contained to the contrary notwithstanding, the Holders shall
have full power and authority to receive such money and to apply the same to the
purpose for which such money was received and shall not be affected by any
notice to the contrary which may be received by it within two Business Days
prior to such date.
The Holders shall be entitled to rely on the delivery to them of a
written notice by a Person representing himself to be a holder of Senior
Indebtedness (or a representative thereof) to establish that such notice has
been given by a holder of Senior Indebtedness (or representative thereof). In
the event that the Holders determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness (or a representative thereof) to participate in any payment or
distribution pursuant to this Article, the Holders may request such Person to
furnish evidence to the reasonable satisfaction of the Holders as to the amount
of Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article, and if such evidence
is not furnished, the Holders may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such payment.
7.9 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
Upon the payment or distribution of assets of the Company referred to in this
Article, the Holders of the Debentures shall be entitled to rely upon any order
or decree entered by any court of competent jurisdiction in which such
proceeding is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of the creditors, agent
or other Person making such payment or distribution, delivered to the Holders of
Debentures, for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of the Senior Indebtedness and
other indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article VII.
7.10 NO ADVERSE MODIFICATION TO DEBENTURE. Neither the Holders nor the
Company shall enter into any modification of the Debentures which is in any way
adverse to the holders of the Senior Indebtedness.
7.11 NOTICE TO HOLDERS OF SENIOR INDEBTEDNESS. The Company will
furnish to the holders of Senior Indebtedness at the time Senior Indebtedness is
initially incurred, when there is a change in the Holders thereof, or at any
time upon request therefor, a true and correct copy of the then most current
register setting forth the names and addresses of the Holders as of such date.
7.12 SUBORDINATION AGREEMENT. The Holder by its acceptance hereof
agrees to execute and deliver to any Senior Lender such subordination agreement
as may be reasonably requested by such Senior Lender, which may deviate in
certain minor respects from the subordination provisions contained herein but
which is commercially reasonable and customary, and to execute, acknowledge,
deliver, file, notarize and register all such further agreements, instruments,
certificates, documents and assurances, and perform such acts as such Senior
Lender shall deem necessary or appropriate to effectuate the purposes of the
subordination provisions contained herein.
ARTICLE VIII
OPTIONAL REDEMPTION
8.1 OPTIONAL REDEMPTION. In the case of a Change of Control then, each
Holder shall have the right, for a period of thirty (30) Business Days following
such Change of Control, unless the principal shall have already become due and
payable, by giving the Company an Acceleration Notice, to require the Company to
immediately redeem the Debenture owned by such Holder at the Mandatory
Prepayment Amount.
In the event that the Company shall not have promptly, but in any
event within five (5) Business Days after receipt of an Acceleration Notice,
shall have paid a Holder the amount specified above the Conversion Price of such
Holder's Debenture shall automatically be adjusted to equal the average Per
Share Market Value of the Common Stock during the preceding thirty (30)
consecutive Trading Days immediately preceding the date of the Acceleration
Notice, if such Per Share Market Value is lower than the Conversion Price.
The aggregate principal amount payable in the event of an Optional
Redemption shall be equal to the sum of (i) the Mandatory Prepayment Amount plus
(ii) at the option of the Holder, the Mandatory Prepayment Amount for the
Converted Debentures that would then be held by such Holder had the principal
amount of Debentures converted into Debenture Shares (as defined herein) that
are then held by the Holder not been so converted; provided, that the Holder has
not physically received the Debenture Shares.
For purposes of this Section 8.1, the principal amount of the
Debentures is outstanding until such date as the Holder shall have been issued
Debenture Shares upon a conversion (or attempted conversion) thereof. Interest
shall accrue on the Mandatory Prepayment Amount hereunder from the day after
such amount is due (being the date of a Change of Control) through the date of
payment in full thereof at the rate of 20.0% per annum, accruing daily from the
date of conversion until such amount, plus an interest thereon, if any, is paid
in full. Payment of the Mandatory Prepayment Amount pursuant to this Section 3.1
shall be in addition to any other amounts that may be due to the Holder pursuant
to this Debenture. Within five (5) Business Days of receipt by the Holder of
payments of amounts due to the Holder, (i) the Holder shall return the
Debentures to the Company and (ii) in the event the Mandatory Prepayment Amount
relates to the Converted Debentures, the Holder shall return the Debenture
Shares into which such Converted Debentures were converted. Any demand for
redemption may be rescinded and annulled by a Holder at any time prior to
payment hereunder. No such rescission or annulment shall affect any subsequent
Redemption or impair any right consequent thereon.
Upon delivery of any Acceleration Notice to the Company, the Company
shall provide a copy of such notice to the other Holders, if any, within one (1)
Business Day of the Company's receipt thereof. Failure to deliver such notice
shall not affect the validity of the notice delivered by the Holders in
accordance with the provisions referred to above.
ARTICLE IX
MISCELLANEOUS
9.1 MODIFICATION OF DEBENTURES. This Debenture may be modified without
prior notice to any Holder upon the written consent of the Company and the
Holders of more than 75% of the principal amount of the Debentures then
outstanding. The Holders of more than 75% of the principal amount of the
Debentures then outstanding may waive compliance by the Company with any
provision of this Debenture without prior notice to any Holder. However, without
the consent of each Holder affected, an amendment, supplement or waiver may not
(1) reduce the amount of Debentures whose Holders must consent to an amendment,
supplement or waiver, (2) reduce the principal amount of or extend the fixed
maturity of any Debenture or (3) make any Debenture payable in money or property
other than as stated in the Debentures.
9.2 MISCELLANEOUS. This Debenture 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 nonexclusive 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. Except as specifically provided
herein, the parties hereto, including all guarantors or endorsers, hereby waive
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Debenture, and assent to extensions of the time of payment, or forbearance or
other indulgence without notice. The Holder of this Debenture by acceptance of
this Debenture agrees to be bound by the provisions of this Debenture which are
expressly binding on such Holder.
9.3 RANK AND SUBORDINATION. Except as expressly provided herein, no
provision of this Debenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, interest and
liquidated damages (if any) on, this Debenture at the time, place, and rate, and
in the coin or currency (or, as provided herein, in Common Stock), herein
prescribed. This Debenture is a direct obligation of the Company and ranks
senior/pari passu with all Debt other than Senior Indebtedness, and is
subordinate to such Senior Indebtedness. Except as otherwise provided herein,
the Company may not voluntarily prepay the outstanding principal amount of the
Debenture.
9.4 DEBENTURES OWNED BY COMPANY DEEMED NOT OUTSTANDING. In determining
whether the Holders of the requisite aggregate principal amount of Debentures
have concurred in any direction, consent or waiver under this Debenture,
Debentures which are owned by the Company or any other obligor on the Debentures
or by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any other obligor on the
Debentures shall be disregarded and deemed not to be outstanding for the purpose
of any such determination; provided that any Debentures owned by the Purchasers
shall be deemed outstanding for purposes of making such a determination.
Debentures so owned which have been pledged in good faith may be regarded as
outstanding if the pledgee establishes to the satisfaction of the Company the
pledgee's right so to act with respect to such Debentures and that the pledgee
is not the Company or any other obligor upon the Debentures or any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company 9.5 Notice to Debentureholders Prior to Taking
Certain Types of Action. In case:
a. the Company shall authorize the issuance, at any time from and
after the Original Issue Date, to all holders of any class or series of its
Capital Stock, of rights or warrants to subscribe for or purchase shares of its
capital stock or of any other right;
b. the Company shall authorize, at any time from and after the
Original Issue Date, the distribution to all holders of any class or series of
its Capital Stock, of evidences of its indebtedness or assets;
c. the Company shall declare a dividend (or other distribution) on its
Common Stock or the Company shall declare a special nonrecurring dividend on or
a redemption of its Common Stock;
d. of any subdivision, combination or reclassification of any class or
series of Capital Stock of the Company at any time from and after the Original
Issue Date or of any consolidation or merger to which the Company is a party and
for which approval by the shareholders of the Company is required, or of the
sale or transfer of all or substantially all of the assets of the Company or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; or
e. of the voluntary or involuntary dissolution, liquidation or winding
up of the Company; then the Company shall cause to be mailed to the Holders of
this Debenture, at their last addresses as they shall appear upon the
registration books of the Company, at such time as the Company so notifies its
stockholders, a notice stating (i) the date as of which the holders of record of
such class or series of Capital Stock are to be entitled to receive any such
rights, warrants or distribution are to be determined, or (ii) the date on which
any such subdivision, combination, reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation, winding up or other action is expected
to become effective, and the date as of which it is expected that holders of
record of such class or series of Capital Stock record shall be entitled to
exchange their stock for securities or other property, if any, deliverable upon
such subdivision, combination, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation, winding up or other action.
The failure to give the notice required by this Section 9.5 or any
defect therein shall not affect the legality or validity of any distribution,
right, warrant, subdivision, combination, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation, winding up or other action, or
the vote upon any of the foregoing.
9.6 EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
9.7 NO RIGHTS AS STOCKHOLDER. This Debenture shall not entitle the
Holder to any rights as a stockholder of the Company, including without
limitation, the right to vote, to receive dividends and other distributions
unless and to the extent converted into shares of Common Stock in accordance
with the terms hereof.
9.8 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part
of the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privileges. All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed as of February __, 2000.
ALLIANCE PHARMACEUTICAL, INC.
By
--------------------------------
Name:
Title:
<PAGE>
FORM OF DEBENTURE
EXHIBIT A
ALLIANCE PHARMACEUTICAL, INC.
CONVERSION NOTICE
Reference is made to the Debenture issued by Alliance Pharmaceutical, Inc. (the
"DEBENTURE"). In accordance with and pursuant to the Debenture, the undersigned
hereby irrevocably elects to convert the principal amount of the Debenture,
indicated below into shares of Common Stock, par value $.01 per share (the
"COMMON STOCK"), of the Company, by tendering the Debenture specified below as
of the date specified below.
Date of Conversion:____________________________________________________________
Aggregate Principal Amount to be
converted:_____________________________________________________________________
Debenture no(s). of Debenture to be converted:_________________________________
Please confirm the following information:
Conversion Price:______________________________________________________________
Number of shares of Common Stock to be
issued:________________________________________________________________________
Please issue the Common Stock into which the Debenture is being converted and,
if applicable, any check drawn on an account of the Company in the following
name and to the following address:
Issue to:______________________________________________________________________
Facsimile Number: _____________________________________________________________
Authorization: By:_____________________________________________________________
Title:_________________________________________________________________________
Dated:___________________________________
Account Number (if electronic book entry
transfer):_____________________________________________________________________
Transaction Code Number (if electronic book entry
transfer):____________________________________________________________
Exhibit 4.2
===============================================================================
FORM OF
SECURITIES PURCHASE AGREEMENT
Among
ALLIANCE PHARMACEUTICAL CORP.
and
THE PURCHASERS LISTED ON SCHEDULE I
Dated as of February __, 2000
===============================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I PURCHASE AND SALE................................................4
1.1 Purchase and Sale...................................................4
1.2 Closings............................................................5
ARTICLE II REPRESENTATIONS AND WARRANTIES..................................8
2.1 Representations, Warranties and Agreements of the Company...........8
2.2 Representations and Warranties of the Purchasers...................17
ARTICLE III OTHER AGREEMENTS..............................................18
3.1 Transfer Restrictions..............................................18
3.2 Transfer Instruction...............................................19
3.3 Furnishing of Information..........................................20
3.4 Blue Sky Laws......................................................20
3.5 Integration........................................................20
3.6 Listing and Reservation of Debenture Shares........................21
3.7 Notice of Breaches.................................................22
3.8 Form D.............................................................22
3.9 Use of Proceeds....................................................22
3.10 Transactions with Affiliates......................................23
3.11 Transfer Agent Instructions.......................................23
3.12 Press Release; Filing of Form 8-K.................................24
3.13 Ordinary Course Brokerage and Trading.............................24
3.14 Best Efforts......................................................24
3.15 Corporate Existence...............................................24
3.16 No Violation of Applicable Law....................................24
3.17 Subsequent Registrations..........................................25
3.18 Trading Restrictions..............................................25
ARTICLE IV CONDITIONS.....................................................25
4.1 First Closing Conditions...........................................25
4.2 Second Closing.....................................................28
ARTICLE V INDEMNIFICATION.................................................31
5.1 Indemnification....................................................32
ARTICLE VI MISCELLANEOUS..................................................33
6.1 Entire Agreement...................................................33
6.2 Notices............................................................33
6.3 AMENDMENTS; WAIVERS................................................34
6.4 Headings...........................................................35
6.5 Successors and Assigns.............................................35
6.6 No Third-Party Beneficiaries.......................................35
6.7 Governing Law......................................................35
6.8 Survival...........................................................35
6.9 Counterparts.......................................................36
6.10 Publicity.........................................................36
6.11 Severability......................................................36
6.12 Remedies..........................................................36
6.13 Independent Nature of Purchasers' Obligations and Rights..........37
6.14 Payment Set Aside.................................................37
6.15 Further Assurances................................................37
6.16 Fees and Expenses.................................................37
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "AGREEMENT") is dated as of
February __, 2000 among Alliance Pharmaceutical Corp., a New York corporation
(the "COMPANY"), and the various purchasers identified and listed on Schedule I
hereto (each referred to herein as a "PURCHASER" and, collectively, the
"PURCHASERS.")
WHEREAS, the Company and the Purchasers are executing and delivering
this Agreement in reliance upon (i) the exemption from securities registration
afforded by Rule 506 under Regulation D as promulgated by the United States
Securities and Exchange Commission (the "COMMISSION") under Section 4(2) of the
Securities Act of 1933, as amended (the "SECURITIES ACT") and (ii) Regulation S
as promulgated by the Commission under the Securities Act;
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, an aggregate of $15,000,000
principal amount of the Company's 5% convertible debentures due 2004, and under
certain conditions a second tranche of 5% convertible debentures due four years
after issuance (collectively, the "DEBENTURES," each of which a "DEBENTURE"), in
the form of EXHIBIT A annexed hereto, convertible into shares of the Company's
common stock, par value $0.01 per share (the "COMMON STOCK"); and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement substantially in the form of EXHIBIT B attached hereto (the
"REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company has agreed to
provide certain registration rights under the Securities Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, in consideration of the promises and mutual covenants
and agreements hereinafter, the Company and the Purchasers hereby agree as
follows:
ARTICLE I
1.1 PURCHASE AND SALE.
a. On the First Closing Date (as defined below), subject to the terms
and conditions set forth herein, the Company shall issue and sell to each
Purchaser and each Purchaser, severally and not jointly, shall purchase from the
Company the principal amount of Debentures as set forth on Schedule I. The
aggregate principal amount of Debentures purchased by the Purchasers shall be
$15,000,000.
b. On the Second Closing Date (as defined below), subject to the terms
and conditions set forth herein, the Company shall issue and sell to the
Purchasers an additional $15,000,000 principal amount of the Debentures.
1.2 CLOSINGS.
a. THE FIRST CLOSING. The closing of the purchase and sale of the
initial $15,000,000 aggregate principal amount of Debentures (the "FIRST
CLOSING") shall take place at the offices of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., 590 Madison Avenue, New York, New York 10022, or by transmission by
facsimile and overnight courier, immediately following the execution hereof or
such later date or different location 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 "FIRST CLOSING DATE"). At the First
Closing:
(i) Each Purchaser shall deliver, as directed by the Company, its
portion of the purchase price as set forth next to its name on SCHEDULE I in
United States dollars in immediately available funds to an account or accounts
designated in writing by the Company;
(ii) The Company shall deliver to each Purchaser a Debenture, in
the form of EXHIBIT A hereto, representing the principal amount purchased by
such Purchaser as set forth on SCHEDULE I hereto;
(iii) The parties shall execute (except for the opinion referred
to in Section 4.1(c)(i)) and deliver each of the documents referred to in
Section 4.1 hereof.
b. PURCHASERS CALL OPTION. Subject to the terms and conditions set
forth in Section 4.2 and elsewhere in this Agreement, each Purchaser shall have
the right (the "PURCHASERS CALL OPTION") at any time within a four-year period
commencing on the First Closing Date to deliver a written notice to the Company
(a "PURCHASERS CALL OPTION NOTICE") requiring the Company to issue and sell (in
which event such Purchaser shall purchase) up to its pro rata portion of an
additional $15,000,000 principal amount of a four (4) year Debenture at a
conversion price of $12.06 per share, provided that the Company shall not be
required to issue and sell debentures in an aggregate amount of less than
$5,000,000. The closing of the purchase and sale of the additional Debentures
(such closing or the closing under the Company Put Option Notice (defined
below), the "SECOND CLOSING") under the Purchasers Call Option Notice shall take
place in the same manner as the First Closing, on such date indicated on the
Purchasers Call Option Notice but no earlier than ten (10) Business Days and no
later than twenty (20) Business Days after the date of delivery of the
Purchasers Call Option Notice (such date or the date of the Second Closing under
the Company Put Option Notice, the "SECOND CLOSING DATE"); provided that in no
case shall the Second Closing take place unless and until the conditions listed
in Section 4.2 have been satisfied or waived by the appropriate party. Upon the
occurrence of any Change of Control, the Company shall take appropriate action
to ensure that the Purchasers shall have the right to exercise the Purchasers
Call Option after the Change of Control. At the Second Closing:
(i) Each Purchaser shall deliver, as directed by the Company, its
portion of the purchase price as set forth next to its name on a schedule
similar to SCHEDULE I (the "SECOND CLOSING SCHEDULE"), to be attached to the
Purchasers Call Option Notice, in United States dollars in immediately available
funds to an account or accounts designated in writing by the Company;
(ii) The Company shall deliver to each Purchaser a Debenture, in
the form of EXHIBIT A hereto (which shall mature four (4) years from the date it
is issued and in which the conversion price shall be $12.06 per share (such
price, as may be adjusted pursuant to the terms of the Debenture)), representing
the principal amount purchased by such Purchaser as set forth on the Second
Closing Schedule.
(iii) The parties shall execute and deliver each of the documents
referred to in Section 4.2 hereof.
c. COMPANY PUT OPTION. Subject to the terms and conditions in Section
4.2 and elsewhere in this Agreement, after the Optional Conversion Date of the
Optional Conversion of the Debentures (as defined in Article VI of the
Debentures), the Company shall have the one time right (the "COMPANY PUT
OPTION") at any time subsequent to the First Closing to deliver a written notice
to the Purchasers (a "COMPANY PUT OPTION NOTICE") requiring the Purchasers to
exercise in full the Purchasers Call Option, provided that for at least twenty
five (25) out of thirty (30) consecutive Trading Days (as defined in the
Debentures) prior to the exercise of the Company Put Option the Per Share Market
Value (as defined in the Debentures) was more than $21.10 dollars (such price,
as may be adjusted pursuant to the terms of the Debentures), the "PUT TRIGGER
PRICE," and the occurrence of thirty (30) consecutive Trading Days at such
price, a "PUT TRIGGER"). The Company must exercise its Company Put Option by
delivering the Company Put Option Notice to each Holder within ten (10) Business
Days of the occurrence of a Put Trigger (such deadline, the "PUT NOTICE DATE").
If the Company does not deliver the Company Put Option Notice by the Put Notice
Date, then the Company shall not have the right to effect a Company Put Option
until a Put Trigger occurs again after such Put Notice Date. An example of how
the Company Put Option operates is as follows: Thirty (30) consecutive Trading
Days occur during which the Per Share Market Value of the Common Stock is
greater than the Put Trigger Price. The Put Notice Date is ten (10) Business
Days after the end of the thirty (30) day trading period. If the Company
delivers the Company Put Option Notice by the Put Notice Date, it has properly
exercised its Company Put Option. If the Company fails to deliver the Put Option
Notice by the Put Notice Date, then there must again occur a consecutive thirty
(30) day trading period in which the Per Share Market Value is in excess of the
Put Trigger Price before the Company may again exercise its Company Put Option.
The Second Closing under this Company Put Option Notice shall take place on such
date indicated in the Company Put Option Notice but no earlier than ten (10)
Business Days after the Purchasers' receipt of the Company Put Option Notice;
PROVIDED THAT in no case shall the Second Closing take place unless and until
the conditions listed in Section 4.2 have been satisfied or waived by the
appropriate party. Five (5) Business Days after receipt of the Company Put
Option Notice, the Purchasers shall deliver to the Company a Second Closing
Schedule, indicating the principal amount of Debentures that each Purchaser
shall purchase for an aggregate total of $15,000,000. At the Second Closing
under the Company Put Option Notice:
(i) Each Purchaser shall deliver, as directed by the Company, its
portion of the purchase price as set forth next to its name on the Second
Closing Schedule, in United States dollars in immediately available funds to an
account or accounts designated in writing by the Company;
(ii) The Company shall deliver to each Purchaser a Debenture, in
the form of EXHIBIT A hereto, representing the principal amount purchased by
such Purchaser as set forth on the Second Closing Schedule;
(iii) The parties shall execute and deliver each of the documents
referred to in Section 4.2 hereof.
d. LIQUIDATED DAMAGES. In addition to any other rights available to
the Purchasers, if the Company defaults in its obligation to deliver to each
Purchaser the Debenture required to be delivered to it at the Second Closing,
the Company shall pay such Purchaser, upon the Purchaser's demand, as liquidated
damages by cash or wire transfer in immediately available funds to the account
of such Purchaser, or as otherwise directed by such Purchaser, the difference
between the Per Share Market Price (as defined in the Debentures) on the Second
Closing Date and the Conversion Price (as defined in the Debentures) multiplied
by the number of shares of Common Stock into which the Debentures that should
have been delivered at the Second Closing could have been converted.
e. ADJUSTMENT OF PUT TRIGGER PRICE. The Put Trigger Price shall be
adjusted from time to time in the same manner and for the same reasons that
Conversion Price is subject to adjustment pursuant to Section 4.5(a), (b) and
(c) of the Debenture, including without limitation, for stock splits, reverse
stock splits, stock dividends and the like. The adjustment shall automatically
be effected on the record date established for purposes of determining the event
that causes the adjustment to the Put Trigger Price, and will reset if such
event does not transpire. Notice of adjustment to the Put Trigger Price need not
be given when such adjustment occurs, but must be stated in the Notice of
Company Put Option Notice.
f. REGISTRATION. The shares of Common Stock underlying the Debentures
issued pursuant to either the Purchasers Call Option or the Company Put Option
shall be deemed Registrable Securities (as defined in the Registration Rights
Agreement) and the Registration Rights Agreement shall apply to such Registrable
Securities mutatis mutandis, PROVIDED, HOWEVER, that with regard to Debentures
issuable pursuant to the Company Put Option, the Debenture Shares shall have
been registered prior to the issuance of any such Debenture (see Section
4.2(b)(v)(B)), PROVIDED FURTHER, that with specific regard to Debentures
issuable pursuant to the Purchasers Call Option, in subsection (i) of the
definition of "Effectiveness Period" in the Registration Rights Agreement, the
90th day shall be changed to the 60th day.
ARTICLE II
2.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
The Company hereby makes the following representations and warranties
as of the date hereof to each of 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 New York, with the requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Except as set forth on Schedule 2.1(a), the Company has no subsidiaries
(collectively, the "Subsidiaries"). A "Subsidiary" for purposes of this
Agreement means any entity in which the Company, directly or indirectly, owns
the majority of such entity's capital stock or holds an equivalent equity or
similar interest, but does not include an entity in which the Company holds a
warrant or similar right to acquire controlling equity in the entity and does
not otherwise have a controlling equity interest in the entity. 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 as a foreign corporation
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) materially adversely affect the legality, validity or
enforceability of any of this Agreement or the Transaction Documents (as defined
in Section 2.1(b)) or any of the transactions contemplated hereby or thereby,
(y) have or result in a material adverse effect on the results of operations,
assets, prospects, or financial condition of the Company and its Subsidiaries,
taken as a whole or (z) materially 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"). The Company has furnished to
each of the Purchasers, as requested, true and correct copies of the Company's
Certificate of Incorporation, as amended and as in effect on the date hereof
(the "Certificate of Incorporation"), and the Company's Bylaws, as in effect on
the date hereof (the "Bylaws").
b. AUTHORIZATION; ENFORCEMENT. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by this Agreement, the Debenture and the Registration Rights
Agreement (collectively, the "TRANSACTION DOCUMENTS"), and otherwise to carry
out its obligations hereunder and thereunder. The execution and delivery of each
of this Agreement and 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 corporate action and no further action is
required by the Company, its Board of Directors or its stockholders. Each of
this Agreement and 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 and
except that rights to indemnification and contribution may be limited by Federal
or state securities laws or public policy relating thereto. Neither the Company
nor any Subsidiary is in any material violation of any of the provisions of its
respective certificate of incorporation, bylaws or other charter documents such
that any right of a holder of the Debentures would be affected.
c. CAPITALIZATION. As of the date hereof, the authorized capital stock
of the Company is as set forth in Schedule 2.1(c). All of such outstanding
shares of capital stock have been, or upon issuance will be, validly authorized
and issued, fully paid and nonassessable and were issued in accordance with the
registration provisions of the Securities Act, or pursuant to valid exemptions
therefrom. Except as disclosed in Schedule 2.1(c) or the SEC Documents (as
defined in Section 2.1(k) hereof), (i) no shares of the Company's capital stock
are subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company, 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 Transaction
Document, (ii) there are no outstanding options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, or giving any Person
(as defined below) any right to subscribe for or acquire, any shares of capital
stock of the Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (iii) there are no outstanding debt
securities of the Company or any of its Subsidiaries, (iv) there are no
agreements or arrangements under which the Company or any of its Subsidiaries is
obligated to register the sale of any of their securities under the Securities
Act (except the Registration Rights Agreement), (v) there are no outstanding
securities of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the shares of Common Stock as described in this Agreement, (vii) the Company
does not have any stock appreciation rights or "phantom stock" plans or
agreements or any similar plan or agreement and (viii) except as specifically
disclosed in the SEC Documents, no Person (as defined below) or group of related
Persons, to the knowledge of the Company, 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. "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. AUTHORIZATION AND VALIDITY; ISSUANCE OF SHARES. The shares of
Common Stock issuable upon conversion of the Debentures (the "DEBENTURE SHARES")
are and will at all times hereafter continue to be duly authorized and reserved
for issuance and the Debenture Shares will be validly issued, fully paid and
non-assessable, free and clear of all liens, encumbrances and Company rights of
first refusal, other than liens and encumbrances created by the Purchasers
(collectively, "LIENS") and will not be subject to any preemptive or similar
rights. The issuance by the Company of the Debentures and the Debenture Shares
is exempt from registration under the Securities Act, assuming the accuracy of
the Purchasers' representations and warranties herein.
e. NO CONFLICTS. The execution, delivery and performance of this
Agreement and each of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including the issuance of the Debenture Shares) do not and will not (i)
conflict with or violate any provision of the Certificate of Incorporation,
Bylaws or other organizational documents of the Company or any of the
Subsidiaries, (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, patent, patent license or instrument (evidencing a Company
or Subsidiary debt or otherwise) to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any Subsidiary 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 or any Subsidiary is subject
(including Federal and state securities laws and regulations and the rules and
regulations of the principal market or exchange on which the Common Stock is
traded or listed) applicable to the Company or any of its Subsidiaries, or by
which any material property or asset of the Company or any Subsidiary is bound
or affected.
f. CONSENTS AND APPROVALS. Except as specifically set forth on
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, regulatory or self regulatory agency, or other Person in
connection with the execution, delivery and performance by the Company of this
Agreement or the Transaction Documents, other than (i) the filing of a
registration statement with the Commission (ii) the application(s) or any
letter(s) acceptable to the Nasdaq National Market ("NASDAQ") for the listing of
the Debenture Shares with Nasdaq (and with any other national securities
exchange or market on which the Common Stock is then listed) and (iii) any
filings, notices or registrations under applicable state securities laws
(together with the consents, waivers, authorizations, orders, notices and
filings referred to on Schedule 2.1(f), the "REQUIRED APPROVALS").
g. LITIGATION; PROCEEDINGS. Except as specifically set forth on
Schedule 2.1(g), there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company or any of its
subsidiaries, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties or assets 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 this Agreement or the Transaction
Documents 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 other credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties or assets is bound and which is required to be
included as an exhibit to any SEC Document or will be required to be included as
an exhibit to the Company's next filing under either the Securities Act or
Exchange Act, (ii) is in violation of any order of any court, arbitrator or
governmental body applicable to it, (iii) is in violation of any statute, rule
or regulation of any governmental authority to which it is subject, (iv) is in
default under or in violation of its Certificate of Incorporation, Bylaws or
other organizational documents, respectively, or (v) is in default under or in
violation of any of the listing requirements of Nasdaq as in effect on the date
hereof and is not aware of any facts which would reasonably lead to delisting or
suspension of the Common Stock by Nasdaq in the foreseeable future, except in
each case referred to in the preceding clauses (i) through (iv) where such
violations have not resulted or would not reasonably be expected to result,
individually or in the aggregate, in a Material Adverse Effect. The business of
the Company and its Subsidiaries is not being conducted in violation of any law,
ordinance, rule or regulation of any governmental entity, except where such
violations have not resulted or would not reasonably be expected to result,
individually or in the aggregate, in a Material Adverse Effect. Neither the
Company nor any of its Subsidiaries is in breach of any agreement where such
breach, individually or in the aggregate, would have a Material Adverse Effect.
i. DISCLOSURE; ABSENCE OF CERTAIN CHANGES. This Agreement, the
Schedules to this Agreement, the Transaction Documents, the SEC Documents and
any other written or formally presented information, report, financial
statement, exhibit, schedule or document furnished by or on behalf of the
Company in connection with the negotiation of the transactions contemplated
hereby have not contained, do not contain, and will not contain at the time it
was or is so furnished any untrue statement of a material fact or omitted, omits
or will omit at such time to state any material fact necessary in order to make
the statements made herein and therein, in light of the circumstances under
which they were made, not misleading. Except as disclosed on Schedule 2.1(i) or
in SEC Documents filed on EDGAR at least five Business Days prior to the date
hereof, since June 30, 1999, there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition, liabilities or results of operations or, insofar as can reasonably be
foreseen, prospects of the Company or the Subsidiaries. The Company has not
taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Company or any of its
Subsidiaries have any knowledge or reason to believe that its creditors intend
to initiate involuntary bankruptcy proceedings. Except as disclosed on Schedule
2.1(i), no event, liability, development or circumstance has occurred or exists,
or is contemplated to occur, with respect to the Company or its Subsidiaries or
their respective businesses, properties, operations or financial condition or,
insofar as can reasonably be foreseen, prospects, that would be required to be
disclosed by the Company under applicable securities laws on a registration
statement (including by way of incorporation by reference) filed with the
Commission, on the date this representation is made or deemed to be made,
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly disclosed.
j. PRIVATE OFFERING. Subject to the accuracy and completeness of the
representations and warranties of the respective Purchasers contained in Section
2.2 hereof, the Company and all Persons acting on its behalf have not made,
directly or indirectly, and will not make, offers or sales of any securities or
solicited any offers to buy any security under circumstances that would require
registration of the Debentures or the Debenture Shares or the issuance of such
securities under the Securities Act. The offer, sale and issuance of the
Debentures and the Debenture Shares to the Purchasers will not be integrated
with any other offer, sale and issuance of the Company's securities (past,
current, or future) under the Securities Act or any regulations of any exchange
or automated quotation system on which any of the securities of the Company are
listed or designated or for purposes of any stockholder approval provision
applicable to the Company or its securities. Subject to the accuracy and
completeness of the representations and warranties of the respective Purchasers
contained in Section 2.2 hereof, the offer, sale and issuance by the Company to
the Purchasers of the Debentures and the Debenture Shares are exempt from the
registration requirements of the Securities Act.
k. SEC DOCUMENTS; FINANCIAL STATEMENTS. The Common Stock of the
Company is registered pursuant to Section 12(g) of the Exchange Act. The
Company, during the last twelve (12) months, has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the
Commission pursuant to the reporting requirements of the Exchange Act, including
pursuant to Section 13, 14 or 15(d) thereof (the foregoing materials and all
exhibits included therein and financial statements and schedules thereto and
documents (other than exhibits to such documents) incorporated by reference
therein being collectively referred to herein as the "SEC DOCUMENTS"), 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 agreements to which the Company or any
Subsidiary is a party or to which the property or assets of the Company or any
Subsidiary are subject and which are required to be filed as exhibits to the SEC
Documents have been filed as exhibits to the SEC Documents as required and
neither the Company nor any Subsidiary nor to the Company's knowledge, any other
party is in material breach of any such agreement. As of their respective dates,
the financial statements of the Company included in the SEC Documents complied
as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the Commission with respect thereto as in
effect at the time of filing. Such financial statements have been prepared in
accordance with United States 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 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, immaterial year-end
audit adjustments. Neither the Company nor any of its Subsidiaries or any of
their officers, directors, employees or agents have provided the Purchasers with
any information that will be material, nonpublic information after March 31,
2000. The Company acknowledges that the Purchasers will be trading in the
securities of the Company in reliance on the foregoing representation and
warranty.
l. 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.
m. BROKER'S FEES. No fees or commissions or similar payments with
respect to the transactions contemplated by this Agreement or the Transaction
Documents have been paid or will be payable by the Company to any broker,
financial advisor, finder, investment banker, or bank, other than as set forth
in Schedule 2.1(m). 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
introduced or retained by the Company for fees of a type contemplated in this
Section 2.1(m) that may be due in connection with the transactions contemplated
by this Agreement and the Transaction Documents.
n. FORM S-3 ELIGIBILITY. The Company is, and at the Closing Date will
be, eligible to register securities (including the Debenture Shares) for resale
with the Commission under Form S-3 (or any successor form) promulgated under the
Securities Act.
o. LISTING AND MAINTENANCE REQUIREMENTS COMPLIANCE. The principal
markets on which the Common Stock is currently traded is Nasdaq. The Company has
not in the three years preceding the date hereof received notice (written or
oral) from Nasdaq (or 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 market or exchange. The Company is not aware of any facts
that would reasonably lead to delisting or suspension of the Common Stock by
Nasdaq. After giving effect to the transactions contemplated by this Agreement
and the Transaction Documents, the Company is and will be in compliance with all
such maintenance requirements.
p. INTELLECTUAL PROPERTY RIGHTS. The Company and each of its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trademark applications, trade names and service marks, whether or not
registered, and all patents, patent applications, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and intellectual
property rights (collectively, "INTELLECTUAL PROPERTY RIGHTS") which are
necessary for use in connection with their respective businesses as now
conducted and as described in the SEC Documents.
q. EMPLOYEE RELATIONS. Neither the Company nor any of its Subsidiaries
is involved in any union labor dispute nor, to the knowledge of the Company or
any of its Subsidiaries, is any such dispute threatened. Neither the Company nor
any of its Subsidiaries is a party to a collective bargaining agreement, and the
Company and its Subsidiaries believe that relations with their employees are
good. Since June 30, 1999, no executive officer (as defined in Rule 501(f) under
the Securities Act) has notified the Company that such officer intends to leave
the Company or otherwise terminate such officer's employment with the Company.
r. REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION. Except as described
on Schedule 2.1(r) hereto, (i) 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 (ii) no Person,
including, but not limited to, current or former stockholders 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 Transaction Document.
s. TITLE. Except as disclosed on Schedule 2.1(s), the Company and each
of its 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 that 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 the Subsidiaries. Any real property and facilities held under lease
by the Company and the Subsidiaries are held by them under valid, subsisting
and, to the Company's best knowledge, 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 the Subsidiaries.
t. PERMITS. The Company and each of its Subsidiaries possess all
certificates, authorizations, licenses, easements, consents, approvals, orders
and permits necessary to own, lease and operate their respective properties and
to conduct their respective businesses as currently conducted except where the
failure to possess such permits would not, individually or in the aggregate,
have a Material Adverse Effect ("MATERIAL PERMITS"), and there is no proceeding
pending, or, to the knowledge of the Company, threatened relating to the
revocation, modification, suspension or cancellation of any Material Permit.
Neither the Company nor any of the Subsidiaries is in any material respect, in
conflict with or default or violation of any Material Permit.
u. INSURANCE. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business, at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its Subsidiaries, taken as a whole.
v. INTERNAL ACCOUNTING CONTROLS. The Company and each of the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with United States generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
w. TAX STATUS; FIRPTA. The Company and each of its Subsidiaries has
made or filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith,
and has set aside on its books, in accordance with standard accounting
practices, provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim. The Company is not a "United States real property
holding corporation" within the meaning of Section 847(c)(2) of the Internal
Revenue Code of 1986, as amended.
x. TRANSACTIONS WITH AFFILIATES. The Company has reported, in
accordance with law, any transactions with officers, directors or employees of
the Company who are parties to any transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
y. APPLICATION TO TAKEOVER PROTECTION. The Company and its Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination or other
similar anti-takeover provision under the Certificate of Incorporation, Bylaws
or the laws of the state of incorporation which is or could become applicable to
the Purchasers or the Transaction Documents as a result of the transactions
contemplated by this Agreement or the Transaction Documents. None of the
transactions contemplated by this Agreement or the Transaction Documents,
including the conversion of the Debentures, will trigger any poison pill
provisions of any of the Company's stockholders' rights or similar agreements.
z. ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permits, licenses or other approvals except where the
failure of any of the foregoing would not result in a Material Adverse Effect.
aa. FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee form corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
bb. SOLICITATION MATERIALS. The Company has not (i) distributed any
offering materials in connection with the offering and sale of the Debentures,
other than the SEC Documents, the Schedules to this Agreement, any amendments
and supplements thereto and the materials listed on Schedule 2.1(bb), or (ii)
solicited any offer to buy or sell the Debentures by means of any form of
general solicitation or advertising. Neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the Debentures.
cc. ACKNOWLEDGEMENT OF DILUTION. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Debenture Shares upon conversion of the Debentures. The Company
further acknowledges that its obligation to issue Debenture Shares upon
conversion of the Debentures in accordance with this Agreement and the
Debentures is absolute and unconditional (but subject to the terms and
conditions of the Debentures and this Agreement) regardless of the dilutive
effect that such issuance may have on the ownership interests of other
stockholders of the Company.
dd. ACKNOWLEDGEMENT REGARDING PURCHASERS' PURCHASE OF DEBENTURES. The
Company acknowledges and agrees that the Purchasers are acting solely in the
capacity of arm's length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any statement made by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is merely
incidental to the Purchasers' purchase of the securities. The Company further
represents to each Purchaser that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation of the Company and
its representatives.
ee. SENIORITY; EXCLUSIVITY. No class of equity securities of the
Company will be senior to the Debentures in right of payment, whether upon
liquidation, dissolution or otherwise. So long as any Debenture issued hereunder
remains outstanding, the Company shall not exchange, redeem or convert any of
the Company's capital stock for indebtedness, including convertible debt, of the
Company. Except as expressly permitted in this Agreement, the Company shall not
issue and sell any Debentures, other than to the Purchasers pursuant to this
Agreement, without the prior written consent of each of the Purchasers.
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 or a
limited duration company or a limited liability company or 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 Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The purchase by such
Purchaser of the Debentures 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 Debentures for
its own account and not with a present view to or for distributing or reselling
the Debentures the Debenture Shares or any part thereof or interest therein in
violation of the Securities Act; provided, however, that by making the
representations herein, such Purchaser does not agree to hold any of the
Debentures or the Debenture Shares for any minimum or other specific term and
reserves the right to dispose of the Debentures at any time in accordance with
or pursuant to a registration statement or an exemption under the Securities
Act.
c. PURCHASER STATUS. At the time such Purchaser was offered the
Debentures, and at the Closing Date, (i) it was and will be an "accredited
investor" as defined in Rule 501 under the Securities Act and (ii) such
Purchaser, either alone or together with its representatives, had and will have
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 Debentures.
d. RELIANCE. Such Purchaser understands and acknowledges that (i) the
Debentures are being offered and sold to such 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, Regulation D promulgated thereunder or Regulation S promulgated
under the Securities Act and (ii) the availability of such exemptions depend in
part on, and the Company will rely upon the accuracy and truthfulness of, the
representations set forth in this Section 2.2 and such Purchaser hereby consents
to such reliance.
e. INFORMATION. Such Purchaser and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Debentures
which have been requested by such Purchaser or its advisors. Such Purchaser and
its advisors, if any, have been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigation
conducted by Purchaser or any of its advisors or representatives shall modify,
amend or affect Purchaser's right to rely on the Company's representations and
warranties contained in Section 2.1 above or representations and warranties of
the Company contained in any other Transaction Document. Such Purchaser
understands that its investment in the Debentures involves a significant degree
of risk.
f. GOVERNMENTAL REVIEW. Such Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Debentures.
g. RESIDENCY. Such Purchaser is a resident of the jurisdiction set
forth immediately below such Purchaser's name on Schedule II hereto.
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. The Company
further acknowledges that, to the best of its knowledge, the Purchasers,
collectively, are not acting as a group pursuant to Rule 13d of the Exchange
Act.
ARTICLE III
3.1 TRANSFER RESTRICTIONS.
a. If any Purchaser should decide to dispose of the Debentures or the
Debenture Shares held by it, such 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 or Rule 144 promulgated under the Securities
Act ("RULE 144"). The Company shall announce any material non-public information
that it legally is required to announce on or prior to the Effectiveness Date
(as defined in the Registration Rights Agreement) of the registration statement
filed pursuant to the Registration Rights Agreement and shall not enter into any
subsequent non-disclosure agreements that would prevent it from announcing any
such information that otherwise legally is required to be announced on or prior
to the Effectiveness Date, unless confidential treatment for such information is
granted by the Commission. In connection with any transfer of any Debentures or
Debenture Shares other than pursuant to an effective registration statement,
Rule 144 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 and reasonably
acceptable to the Company, the form and substance of which opinion shall be
customary for opinions of counsel in comparable transactions, to the effect that
such transfer does not require registration of such transferred securities under
the Securities Act; provided, however, that if the Debentures or Debenture
Shares may be sold pursuant to Rule 144(k), no written opinion of counsel shall
be required from the Purchaser if such Purchaser provides reasonable assurances
that such security can be sold pursuant to Rule 144(k). Notwithstanding the
foregoing, the Company hereby consents to and agrees to register any transfer by
any Purchaser to an Affiliate of such Purchaser, provided that the 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 agree in writing to
be bound by the terms of this Agreement and shall have the rights of a Purchaser
under this Agreement and the Transaction Documents. If a Purchaser provides the
Company with an opinion of counsel, the form and substance of which opinion
shall be customary for opinions of counsel in comparable transactions, to the
effect that a public sale, assignment or transfer of the Debentures and the
Debenture Shares may be made without registration under the Securities Act or
the Purchaser provides the Company with reasonable assurances that the
Debentures and the Debenture Shares can be sold pursuant to Rule 144 without any
restriction as to the number of securities acquired as of a particular date that
can then be immediately sold, the Company shall permit the transfer, and, in the
case of the Debenture Shares, promptly instruct its transfer agent to issue one
or more certificates in such name and in such denominations as specified by such
Purchaser and without any restrictive legend. Notwithstanding the foregoing or
anything else contained herein to the contrary, the securities may be pledged as
collateral in connection with a bona fide margin account or other lending
arrangement.
b. Each Purchaser agrees to the imprinting, so long as is required by
this Section 3.1(b), of the following legend on the Debentures and the Debenture
Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION 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.
Neither the Debentures nor the Debenture Shares shall contain the
legend set forth above (or any other legend) (i) 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) or (ii) if such Debentures or Debenture Shares may be sold
pursuant to Rule 144(k). The Company agrees that it will provide each Purchaser,
upon request, with a certificate or certificates representing Debentures or
Debenture Shares, free from such legend at such time as such legend is no longer
required hereunder. If such certificate or certificates had previously been
issued with such a legend or any other legend, the Company shall, upon request
and delivery of such certificate or certificates to the Company for such
Purchaser, reissue to such Purchaser such certificate or certificates free of
any legend.
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
on transfer set forth in Section 3.1.
3.3 FURNISHING OF INFORMATION.
As long as any Purchaser owns the Debentures or the Debenture Shares,
the Company will cause the Common Stock to continue at all times to be
registered under Section 12(g) of the Exchange Act, will 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, 14 or 15(d) of the Exchange Act and, unless filed by EDGAR, promptly
furnish, but in no event later than two (2) Business Days after the filing
thereof with the Commission, such Purchaser with true and complete copies of all
such filings, and will not take any action or file any document (whether or not
permitted by the Exchange Act or the rules thereunder) to terminate or suspend
such reporting and filing obligations. As long as any Purchaser owns the
Debentures or the Debenture 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 also agrees to send the following to each Purchaser
prior to and during the Effectiveness Period (as defined in the Registration
Rights Agreement): (i) on the same day as the release thereof, facsimile copies
of all press releases issued by the Company or any of its Subsidiaries and (ii)
copies of any notices and other information sent to the stockholders of the
Company generally, contemporaneously with the making available or giving thereof
to the stockholders. The Company further covenants that it will take such
further action as any holder of the Debentures or the Debenture Shares may
reasonably request, all to the extent required from time to time to enable such
Person to sell the Debentures or the Debenture 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 Section 3.1(b). 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 if required under applicable law (i) qualify the Debenture Shares under
the securities or "blue sky" laws of such jurisdictions as the Purchasers may
request (or obtain an exemption from such qualification), (ii) shall provide
evidence of any such action so taken to each Purchaser on or prior to the
Closing Date and (iii) shall continue such qualification at all times through
the resale of all Debenture Shares, but in any event not past the fourth
anniversary of the Closing Date.
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
Debentures or the Debenture Shares in a manner that would require the
registration under the Securities Act of the sale of the Debentures or the
Debenture Shares to any Purchaser or cause the offering of such securities to be
integrated with any other offering of securities by the Company for the purpose
of any stockholder approval provision applicable to the Company or its
securities.
3.6 LISTING AND RESERVATION OF DEBENTURE SHARES.
a. The Company shall (i) not later than the time the Company filed the
registration statement on Form S-3 to register the Debenture Shares for resale,
prepare and file with Nasdaq (as well as any other national securities exchange
or market on which the Common Stock is then listed) additional shares listing
applications or letters acceptable to Nasdaq covering and listing a number of
shares of Common Stock which is at least equal to the maximum number of
Debenture Shares then issuable, assuming that the payment of all interest
payments on the Debentures for a period of one year and all future dividends on
such shares then outstanding were made in shares of Common Stock, (ii) take all
steps necessary to cause the Debenture Shares to be approved for listing on
Nasdaq (as well as on any other national securities exchange or market on which
the Common Stock is then listed) as soon as possible thereafter, (iii) maintain,
so long as any other shares of Common Stock shall be so listed, such listing of
all such Debenture Shares, and (iv) provide to the Purchasers evidence of such
listing. Neither the Company nor any of its Subsidiaries shall take any action
that would result in the delisting or suspension of the Common Stock on Nasdaq.
The Company shall promptly provide to each Purchaser copies of any notices it
receives from Nasdaq regarding the continued eligibility of the Common Stock for
listing on such automated quotation system, so long as such notice does not
include material, nonpublic information. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section
3.6(a).
b. The number of shares of Common Stock initially included in the
Initial Registration Statement (as defined in the Registration Rights Agreement)
shall be determined pursuant to Section 2(a) of the Registration Rights
Agreement.
c. The Company at all times shall reserve a sufficient number of
shares of its authorized but unissued Common Stock to provide for the full
conversion of the outstanding Debentures (including the payment of all interest
thereon for a one year period). Shares of Common Stock reserved for issuance
upon conversion of the Debentures shall be allocated pro rata to each of the
Purchasers in accordance with the amount of Debentures issued and delivered to
such Purchaser at the Closing. If at any time the number of shares of Common
Stock authorized and reserved for issuance is insufficient to cover the number
of Debenture Shares issued and issuable upon conversion of the Debentures (based
on the Conversion Price (as defined in the Debenture) in effect from time to
time without regard to any limitation on conversions or exercises and the number
of shares of Common Stock issuable upon the payment of interest on the principal
amount of the Debentures then outstanding for a one year period, the Company
will promptly take all corporate action necessary to authorize and reserve such
number of shares of Common Stock of such shares, including, without limitation,
calling a special meeting of stockholders to authorize additional shares to meet
the Company's obligations under this Section 3.6(c), in the case of an
insufficient number of authorized shares, and using its best efforts to obtain
stockholder approval of an increase in such authorized number of shares. In
addition, if on the actual date of an adjustment of the Conversion Price
pursuant to Section 4.5 of the Debenture, the registration statements are
insufficient to register such number of shares of Common Stock, the Company
shall immediately, but in no more than five (5) Business Days thereafter, file a
registration statement sufficient to register such additional shares of Common
Stock. All calculations of the above amount shall be made without regard to any
limitation on conversions of Debentures.
3.7 NOTICE OF BREACHES.
a. The Company and each Purchaser shall give prompt written notice to
the other of any breach by it of any representation, warranty or other agreement
contained in this Agreement or in the Transaction Documents, as well as any
events or occurrences arising after the date hereof and prior to the 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 the Closing Date, provided such notice will not
constitute material non-public information unless, after being told by the
Company that the notice would constitute material non-public information, the
Purchaser agrees to receive such notice. However, no disclosure by either party
pursuant to this Section 3.7 shall be deemed to cure any breach of any
representation, warranty or other agreement contained herein or in the
Transaction Documents.
b. Notwithstanding the generality of Section 3.7(a), the Company shall
promptly notify, provided such notification will not constitute material
non-public information, each Purchaser of any notice or claim (written or oral)
that it receives from any lender of the Company or any Subsidiary to the effect
that the consummation of the transactions contemplated hereby and by the
Transaction Documents violates or would violate any written agreement or
understanding between such lender and the Company or any Subsidiary, and the
Company shall promptly furnish by facsimile to the Purchasers 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 this Agreement or the Transaction Documents
shall not be imputed to, and shall have no effect upon, any other Purchaser or
affect the Company's obligations under this Agreement or any Transaction
Document to any non-defaulting Purchaser.
3.8 FORM D.
The Company agrees to file a Form D with respect to the Debentures as
required by Rule 506 under Regulation D and to provide a copy thereof to each
Purchaser promptly after such filing.
3.9 USE OF PROCEEDS.
The Company shall use the proceeds from the sale of the Debentures for
working capital, including ongoing Company obligations in clinical trials.
3.10 TRANSACTIONS WITH AFFILIATES.
So long as any Debentures are outstanding, the Company shall not, and
shall cause each of its Subsidiaries not to, enter into, amend, modify or
supplement, or permit any Subsidiary to enter into, amend, modify or supplement,
any agreement, transaction, commitment or arrangement with any of its or any
Subsidiary's officers, directors or persons who were officers or directors at
any time during the previous two years, stockholders who beneficially own 5% or
more of the Common Stock, or Affiliates or any individual related by blood,
marriage or adoption to any such individual or with any entity in which any such
entity or individual owns a 5% or more beneficial interest (each a "RELATED
PARTY"), except for (a) customary employment arrangements and benefit programs
on reasonable terms, (b) any agreement, transaction, commitment or arrangement
on an arms-length basis on terms no less favorable than terms which would have
been obtainable from a Person other than such Related Party, or (c) any
agreement, transaction, commitment or arrangement which is approved by a
majority of the disinterested directors of the Company. For purposes hereof, any
director who is also an officer of the Company or any Subsidiary of the Company
shall not be a disinterested director with respect to any such agreement,
transaction, commitment or arrangement. "AFFILIATE" for purposes of this section
only means, with respect to any person or entity, another person or entity that,
directly or indirectly, (i) has a 5% or more equity interest in that person or
entity, (ii) has 5% or more common ownership with that person or entity, (iii)
controls that person or entity, or (iv) shares common control with that person
or entity. "CONTROL" or "Controls" for purposes of this section means that a
person or entity has the power, direct or indirect, to conduct or govern the
policies of another person or entity.
3.11 TRANSFER AGENT INSTRUCTIONS.
At each Closing the Company shall issue irrevocable instructions to
its transfer agent (and shall issue to any subsequent transfer agent as
required), to issue certificates, registered in the name of each such Purchaser
or its respective nominee(s), for the Debenture Shares in such amounts, in
accordance with the terms of the Debentures, as specified from time to time by
each Purchaser to the Company in a form acceptable to such Purchasers (the
"IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 3.11, and stop transfer instructions to give effect to Section
3.1 hereof (in the case of the Debenture Shares, prior to registration of the
Debenture Shares under the Securities Act) will be given by the Company to its
transfer agent and that the Debentures and the Debenture Shares shall otherwise
be freely transferable on the books and records of the Company as and to the
extent provided in this Agreement and the Transaction Documents. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Purchasers by violating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 3.11 will be
inadequate and agrees, in the event of a beach or threatened breach by the
Company of the provisions of this Section 3.11, that the Purchasers, shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
3.12 PRESS RELEASE; FILING OF FORM 8-K.
Subject to the provisions of Section 6.10 hereof, on or before the
fifth (5th) Business Day following the Closing Date, the Company shall (i) file
a press release in form and substance reasonably acceptable to the Purchasers
(except as otherwise required by law) and (ii) file a Form 8-K with the
Commission describing the terms of the transaction contemplated by this
Agreement and the Transaction Documents in the form required by the Exchange
Act.
3.13 ORDINARY COURSE BROKERAGE AND TRADING.
Subject to compliance with all applicable securities laws and Nasdaq
regulations, no Purchaser shall be prohibited from engaging in its ordinary
course brokerage and trading activities in respect of the Company's Common
Stock; PROVIDED that the personnel engaged in such activities have not been
involved with the transactions contemplated hereby and have not been provided
with confidential information with respect to the Company.
3.14 BEST EFFORTS. Each of the parties hereto shall use its best
efforts to satisfy each of the conditions to be satisfied by it as provided in
Article IV of this Agreement.
3.15 CORPORATE EXISTENCE. Until such time, while the Debentures are
outstanding, as all of the Purchasers provide the Company with written notice
that they do not beneficially own any Debentures, the Company shall maintain its
corporate existence and shall not sell all or substantially all of the Company's
assets, except in the event of a merger or consolidation or sale of all or
substantially all of the Company's assets, where the surviving or successor
entity in such transaction (i) assumes the Company's obligations hereunder and
under the agreements and instruments entered into in connection herewith and
(ii) is a publicly traded corporation whose common stock is listed for trading
on the Nasdaq or any subsequent Market (as defined in the Debentures).
3.16 NO VIOLATION OF APPLICABLE LAW. Notwithstanding any provision of
this Agreement to the contrary, if the redemption of Debentures or Debenture
Shares otherwise required under this Agreement or the Registration Rights
Agreement would be prohibited by the relevant provisions of the Business
Corporation Law of the State of New York, such redemption shall be effected as
soon as it is permitted under such law; provided, however, that from the fifth
(5th) day after such redemption notice until such redemption price is paid in
full, interest on any such unpaid amount shall accrue and be payable at the rate
of 15% per annum in accordance with the Debentures.
3.17 SUBSEQUENT REGISTRATIONS. Other than Debenture 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 Registration Statement is declared effective by the Commission, without
the prior written consent of Purchasers holding two-thirds of the principal
amount of the Debentures, (i) except for securities issuable in connection with
the transactions identified on Schedule 3.17 hereto, issue or sell any of its or
any of its Affiliates' equity or equity-equivalent securities unless such
issuance or sale is equal to or at a premium to the Per Share Market Price (as
defined in the Debenture) on the date of such issuance or sale, (ii) except in
connection with the transactions identified on Schedule 3.17 hereto, register
for resale any securities of the Company if the per Share Market Price is twelve
dollars ($12.00) or less or (iii) except in connection with the transactions
identified on Schedule 3.17 hereto, have a registration statement declared
effective covering an issuance by the Company of any of its securities if the
Per Share Market Price is twelve dollars ($12.00) or less. Any days that any
Purchaser is unable to sell Debenture Shares under an effective Registration
Statement shall be added to such 90 Trading Day period for the purposes of (i),
(ii) and (iii) above.
3.18 TRADING RESTRICTIONS. Each Purchaser represents and agrees:
(i) that it has not and will not maintain a short position within twenty (20)
days of the First Closing, (ii) that all short positions taken in the Company's
Common Stock, by such Purchaser, will be covered within thirty (30) Trading
Days, (iii) that if such Purchaser exercises the Purchasers Call Option, then
within twenty (20) days of the Second Closing Date, such Purchaser will not
short the Company's Common Stock at a price below the applicable Conversion
Price (as set forth in the Debenture) and (iv) upon notice from the Company that
the Company, in its good faith belief, is planning to consummate a transaction
pursuant to which there will be a reset event pursuant to Section 4.5(e) of the
Debenture, the Purchasers shall not hold a short position below the applicable
Conversion Price for the lesser of twenty (20) days and the closing of such
transaction.
ARTICLE IV
CONDITIONS
4.1 FIRST CLOSING CONDITIONS.
a. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO SELL THE
DEBENTURES. The obligation of the Company to sell the Debentures is subject to
the satisfaction or waiver (with prior written notice to each Purchaser) by the
Company, at or before the First Closing Date of each of the following
conditions:
(i) ACCURACY OF THE PURCHASERS' REPRESENTATIONS AND WARRANTIES.
The representations and warranties of each Purchaser in this Agreement shall be
true and correct in all material respects as of the date when made as though
made at that time (except for representations and warranties that speak as of a
specific date) and as of the First Closing;
(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 before the First 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 Transaction Documents.
b. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASERS TO
PURCHASE THE DEBENTURES AT THE FIRST CLOSING. The obligation of each Purchaser
hereunder to acquire and pay for the Debentures at the First Closing is subject
to the satisfaction or waiver (with prior written notice to the Company and each
other Purchaser) by such Purchaser, at or before the First Closing Date, 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 as though made at that time (except for
representations and warranties that speak as of a specific date) and as of the
First Closing 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 before the First Closing Date;
(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 and the Transaction Documents;
(iv) NO SUSPENSIONS OF TRADING IN COMMON STOCK. The trading in
the Common Stock shall not have been suspended by the Commission, on Nasdaq
(except for any suspension of trading of limited duration solely to permit
dissemination of material information regarding the Company);
(v) LISTING OF COMMON STOCK. The Common Stock shall have been at
all times since the date of this Agreement and on the Closing Date listed for
trading on the Nasdaq;
(vi) REQUIRED APPROVALS. All Required Approvals, other than those
relating solely to Closing Dates other than the First Closing Date, shall have
been obtained and copies thereof delivered to the Purchasers other than those
relating solely to Closing Dates other than the First Closing Date;
(vii) SHARES OF COMMON STOCK. The Company shall have duly
reserved the number of Debenture Shares required by this Agreement and the
Transaction Documents to be reserved upon the conversion of the Debentures
acquired by the Purchaser on the First Closing Date;
(viii) 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 shall have occurred
which is not disclosed on any Schedule hereto (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);
(ix) LITIGATION. No litigation shall have been instituted or
threatened against the Company which could reasonably be expected to,
individually or in the aggregate, have had a Material Adverse Effect;
(x) CHANGE OF CONTROL. No Change of Control shall have occurred
between the date hereof and the First Closing Date. "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), other than the Purchasers or any of their
Affiliates, of in excess of 33% 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 that is not approved by those individuals who are members of the Board
of Directors on the date hereof, or successors on a continuing Board of
Directors, in one or a series of related transactions, (iii) the merger of the
Company with or into another entity where the shareholders of the Company own
less than 50% of the outstanding voting power of the surviving corporation, (iv)
the consolidation or sale of all or substantially all of the assets of the
Company in one or a series of related transactions, or (v) 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), (iii) or (iv); and
(xi) TRANSFER AGENT INSTRUCTIONS. The Irrevocable Transfer Agent
Instructions, in a form reasonably acceptable to the Purchasers, shall have been
delivered to and acknowledged in writing by the Company's transfer agent with a
copy forwarded to each Purchaser.
(xii) RESOLUTIONS. The Board of Directors of the Company shall
have adopted resolutions consistent with Section 2.1(b) and in a form reasonably
acceptable to each Purchaser (the "Resolutions").
c. DOCUMENTS AND CERTIFICATES. At the First Closing, the Company
shall have delivered to the Purchasers, the following in form and substance
reasonably satisfactory to the Purchasers:
(i) OPINION. An opinion of the Company's legal counsel in the
form attached hereto as Exhibit C dated as of the First Closing Date;
(ii) DEBENTURE. A Debenture(s) representing the principal amount
of Debentures purchased by such Purchaser as set forth next to such Purchaser's
name on Schedule I, registered in the name of such Purchaser, each in form
satisfactory to the Purchaser;
(iii) REGISTRATION RIGHTS. The Company shall have executed and
delivered the Registration Rights Agreement;
(iv) OFFICER'S CERTIFICATE. An Officer's Certificate dated the
First 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 First Closing Date and confirming the compliance by the Company with the
conditions precedent set forth in this Section 4.1 as of the First Closing Date;
(v) SECRETARY'S CERTIFICATE. A Secretary's Certificate dated the
First Closing Date and signed by the Secretary or Assistant Secretary of the
Company certifying (A) that attached thereto is a true and complete copy of the
Certificate of Incorporation of the Company, as in effect on the First Closing
Date, (B) that attached thereto is a true and complete copy of the by-laws of
the Company, as in effect on the First Closing Date and (C) that attached
thereto is a true and complete copy of the Resolutions duly adopted by the Board
of Directors of the Company authorizing the execution, delivery and performance
of this Agreement and of the Transaction Documents, and that such Resolutions
have not been modified, rescinded or revoked;
(vi) CERTIFICATE OF INCORPORATION. The Company shall have
delivered to each of the Purchasers a copy of a certificate evidencing the
incorporation and good standing of the Company, in such corporation's state of
incorporation issued by the Secretary of State of such state of incorporation as
of a date within ten days of the First Closing Date;
(vii) TRANSFER AGENT LETTER. The Company shall have delivered to
each Purchaser a letter from the Company's transfer agent certifying the number
of shares of Common Stock outstanding as of a date within five days of the First
Closing Date;
4.2 SECOND CLOSING.
a. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO SELL THE
DEBENTURES. The obligation of the Company to sell the Debentures is subject to
the satisfaction or waiver (with prior written notice to each Purchaser) by the
Company, at or before the Second Closing Date of each of the following
conditions:
(i) FIRST CLOSING. The First Closing shall have occurred for an
aggregate amount of $15,000,000.
(ii) MINIMUM ISSUANCE.An aggregate amount of at least five
million dollars ($5,000,000) in Debentures has been requested to be issued in
the Second Closing.
(iii) ACCURACY OF THE PURCHASERS' REPRESENTATIONS AND WARRANTIES.
The representations and warranties of each Purchaser in this Agreement shall be
true and correct in all material respects as of the date when made as though
made at that time (except for representations and warranties that speak as of a
specific date) and as of the Second Closing;
(iv) 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 before the Second Closing; and
(v) 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 Transaction Documents.
b. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASERS TO
PURCHASE. The obligation of each Purchaser hereunder to acquire and pay for the
Debentures at the Second Closing is subject to the satisfaction or waiver (with
prior written notice to the Company and each other Purchaser) by such Purchaser,
at or before the Second Closing Date, of each of the following conditions:
(i) FIRST CLOSING. The First Closing shall have occurred;
(ii) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company set forth in this Agreement
and the Registration Rights Agreement shall be true and correct in all respects
as of the date when made and as of the Second Closing Date as though made at
that time, except for changes made to the Schedules to update them since the
First Closing and except for other exceptions to the representations and
warranties necessary to update then since the First Closing (in either case with
information about matters that do not have a Material Adverse Effect);
(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 Transaction
Documents to be performed, satisfied or complied with by the Company at or
before to the Second Closing;
(iv) 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 and the Transaction Documents;
(v) REGISTRATION STATEMENTS FOR DEBENTURES AND WARRANTIES OF
FIRST CLOSING. (A) The Registration Statement with respect to the Debenture
Shares with respect to the Debenture(s) sold at the First Closing shall have
been declared effective under the Securities Act by the SEC; (B) a Registration
Statement with respect to the Debenture Shares with respect to the Debenture(s)
to be sold at the Second Closing shall have been declared effective under the
Securities Act; and (C) on the Second Closing Date such Registration Statements
shall be effective, not subject to any stop order and not be subject to any
suspension of the Registration Rights Agreement, and shall have been effective
and shall not have been subject to any stop order for the thirty (30) Business
Days prior to the Second Closing Date and no stop order shall be pending or
threatened at the Second Closing Date.
(vi) 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 shall have occurred which is not
disclosed on any Schedule hereto or otherwise in writing to each of the
Purchasers;
(vii) LITIGATION. No litigation shall have been instituted or
threatened against the Company which could reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect;
(viii) NO SUSPENSIONS OF TRADING IN COMMON STOCK. The trading in
the Common Stock shall not have been suspended by the Commission, on Nasdaq
during the sixty (60) days prior to the Second Closing (except for any
suspension of trading of limited duration solely to permit dissemination of
material information regarding the Company);
(ix) LISTING OF COMMON STOCK. The Debenture Shares shall on the
Second Closing Date be, listed for trading on Nasdaq, or other exchange
acceptable to Purchasers;
(x) REQUIRED APPROVALS. All Required Approvals shall have been
obtained and copies thereof delivered to the Purchasers.
(xi) SHARES OF COMMON STOCK. The Company shall have duly reserved
the number of Debenture Shares required by this Agreement to be reserved for
issuance upon the conversion of the Debentures purchased on the First Closing
Date and on the Second Closing Date.
(xii) PERFORMANCE OF CONVERSION/EXERCISE OBLIGATIONS. The Company
shall have delivered Debenture Shares upon any demand for conversion of any of
the Debentures and otherwise performed its obligations in accordance with the
terms, conditions and timing requirements of the Transaction Documents.
(xiii) CHANGE OF CONTROL. Subject to Section 4.2(c), no Change of
Control in the Company shall have occurred;
(xiv) TRANSFER AGENT INSTRUCTIONS. The Irrevocable Transfer Agent
Instructions, in a form reasonably acceptable to the Purchasers, shall have been
delivered to and acknowledged by the Company's transfer agent with a copy
forwarded to each Purchaser;
(xv) MINIMUM PER SHARE MARKET VALUE. On the date of the Company
Put Option Notice, the Per Share Market Value was more than ten dollars ($10);
and
(xvi) OPTIONAL CONVERSION. The Company shall have exercised the
Optional Conversion (as defined in the Debentures).
c. DOCUMENTS AND CERTIFICATES. On the Second Closing Date, the Company
shall have delivered to the Purchasers, the following in form and substance
reasonably satisfactory to the Purchasers:
(i) OPINION. An opinion of the Company's legal counsel, in
substantially the form attached hereto as EXHIBIT C dated as of the Second
Closing Date;
(ii) DEBENTURE(S). A Debenture(s) representing the Debenture(s)
purchased by such Purchaser as set forth next to such Purchaser's name on the
Second Closing Schedule registered in the name of such Purchaser, each in form
satisfactory to the Purchaser;
(iii) OFFICER'S CERTIFICATE. The Company shall deliver to the
Purchasers an Officer's Certificate dated the Second 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 Second Closing Date and
confirming the compliance by the Company with the conditions precedent set forth
in this Section 4.2(b) as of the Second Closing Date;
(iv) SECRETARY'S CERTIFICATE. A Secretary's Certificate dated the
Second Call Option Closing Date and signed by the Secretary or Assistant
Secretary of the Company certifying (A) that attached thereto is a true and
complete copy of the Certificate of Incorporation of the Company, as in effect
on the Second Closing Date, (B) that attached thereto is a true and complete
copy of the bylaws of the Company, as in effect on the Second Closing Date and
(C) that attached thereto is a true and complete copy of the resolutions duly
adopted by the Board of Directors of the Company authorizing the execution,
delivery and performance of the Agreement and the Transaction Documents and that
such resolutions have not been modified, rescinded or revoked;
(v) CERTIFICATE OF INCORPORATION. The Company shall have
delivered to each of the Purchasers a copy of a certificate evidencing the
incorporation and good standing of the Company, in such corporation's state of
incorporation issued by the Secretary of State of such state of incorporation as
of a date within ten days of the Second Closing Date;
(vi) TRANSFER AGENT LETTER. The Company shall have delivered to
each Purchaser a letter from the Company's transfer agent certifying the number
of shares of Common Stock outstanding as of a date within five days of the
Second Closing Date; and
(vii) OTHER DOCUMENTS. The Company shall have delivered to each
Purchaser such other documents relating to the transactions contemplated by the
Transaction Documents as the Purchasers or its counsel may reasonably request.
ARTICLE V
INDEMNIFICATION
5.1 INDEMNIFICATION.
a. Except to the extent that matters which could be covered by this
Section 5 are covered by Section 5 of the Registration Rights Agreement, in
consideration of the Purchasers, execution and delivery of this Agreement and
the Transaction Documents and acquiring the Debentures and Debenture Shares
thereunder and in addition to all of the Company's other obligations under this
Agreement and the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless each Purchaser, its past and present Affiliates and
their successors and assigns (in accordance with the provisions of Section 6.5
hereof), each other holder of the Debenture Shares and all of their
stockholders, officers, directors, employees and direct or indirect investors
and any of the foregoing Person's agents or other representatives (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Indemnitees") from and
against any and all actions, causes of action, suits, claims, losses,
proceedings, costs (as incurred), penalties, fees (including legal fees and
expenses), liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including interest, penalties and
attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in this Agreement or in the Transaction Documents, or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in this
Agreement or the Transaction Documents, or any other certificate, instrument or
document contemplated hereby or thereby, or (c) any cause of action, suit or
claim brought or made, other than by the Company, against such Indemnitee and
arising out of or resulting from (i) any wrongful action or inaction by the
Company in connection with the execution, delivery, performance or enforcement
of this Agreement or the Transaction Documents, assuming that the Purchaser
seeking indemnification has not committed a material breach of its
representations, warranties or obligation under this Agreement or the
Transaction Documents, which breach is the cause of the Company's wrongful
action or inaction, (ii) any transaction financed or to be financed in whole or
in part, directly or indirectly, with the proceeds of the issuance of the
Debentures or (iii) solely the status of such Purchasers or holders of the
Debentures or the Debenture Shares as an investor in the Company. The
indemnification 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 the Purchasers and
partners, directors, agents, employees and controlling Persons (if any), as the
case may be, of the Purchasers 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, the Purchasers and any such affiliate and any
such Person. The Company also agrees that neither the Purchasers nor 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
this Agreement or any of the Transaction Documents except to the extent that any
losses, claims, damages, liabilities or expenses incurred by the Company result
from the breach of representations, warranties or obligation or the gross
negligence or willful misconduct of such Purchaser or entity in connection with
the transactions contemplated by this Agreement or the Transaction Documents. To
the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law.
b. All fees and expenses (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) of the Indemnitees
shall be paid to the Indemnities as incurred, within ten (10) Business Days of
written notice thereof to the Company, which notice shall be delivered no more
frequently than on a monthly basis (regardless of whether it is ultimately
determined that an Indemnitee is not entitled to indemnification hereunder;
provided, that the Company may require such Indemnitee to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnitee is not entitled to indemnification hereunder), provided,
however, that the Company shall only be required to pay the legal fees of one
legal counsel, which counsel shall be Akin, Gump, Strauss, Hauer & Feld, L.L.P.
ARTICLE VI
MISCELLANEOUS
6.1 ENTIRE AGREEMENT. This Agreement, together with the Exhibits and
Schedules hereto and the Transaction Documents 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.
6.2 NOTICES. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile, provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party (if received by 8:00 p.m. EST where such
notice is received) or the first business day following such delivery (if
received after 8:00 p.m. EST where such notice is received); or (iii) one
business day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the Company:
Alliance Pharmaceutical Corp.
6175 Lusk Boulevard
San Diego, California 92121
Telephone: (858) 410-5107
Facsimile: (858) 410-5343
Attention: President
With a copy to:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Telephone: (212) 806-5400
Facsimile: (212) 806-6006
Attention: Melvin Epstein
If to the Transfer Agent:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
Telephone: (718) 921-8275
Facsimile: (718) 921-8331
Attention: Paula Caroppoli
If to _________________________________ to:
_________________________________
_________________________________
_________________________________
Telephone: _________________________________
Facsimile: _________________________________
Attention: _________________________________
Each party shall provide written notice to the other party of any
change in address or facsimile number in accordance with the provisions hereof.
6.3 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
each of the Purchasers or, in the case of a waiver, by the Company (if a waiver
of the Company' rights) or Purchasers holding a majority of the then outstanding
principal amount of Debentures or who will be purchasing the majority of the
principal amount of the Debentures (if a waiver of the Purchasers' rights). 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 Debentures outstanding without
the consent of the Company and those Holders who might be adversely affected by
such an amendment. 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.
6.4 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.
6.5 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, except
pursuant to a merger by operation of law. The Purchasers may assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Company, provided, that any assignees must make the
representations and warranties set forth in Section 2.2 and otherwise comply
with the terms of this Agreement otherwise applicable to its assignor. This
provision shall not limit a Purchaser's right to transfer securities in
accordance with all of the terms of this Agreement or the Transaction Documents.
6.6 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.
6.7 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 nonexclusive 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 for such 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. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
6.8 SURVIVAL. The representations and warranties of the Company
and the Purchasers contained in Sections 2.1 and 2.2, the agreements and
covenants set forth in Section 3, and the indemnification provisions set forth
in Section 5, shall survive the Closing and any conversion of the Debentures
regardless of any investigation made by or on behalf of the such Purchaser or by
or on behalf of the Company, except that, in the case of representations and
warranties such survival shall be limited to the period of four (4) years
following the Closing Date on which they were made or deemed to have been made
(other than with respect to any claim by a third party against the party to this
Agreement who seeks to assert a claim based on such representations and
warranties). This section shall have no effect on the survival of the
indemnification provisions of the Registration Rights Agreement.
6.9 COUNTERPARTS. 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.
6.10 PUBLICITY. The Company and the Purchasers 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 such Purchaser's prior written consent. The Purchasers and their
affiliated companies shall, without further cost, have the reasonable right to
use in its advertising, marketing or other similar materials the Company's logo
and trademarks and all or parts of the Company's press releases that focus on
the transaction forming the subject matter of this Agreement or which make
reference to the transaction. The Purchasers understand that this grant by the
Company only waives objections that the Company might have to the use of such
materials by the Purchasers and in no way constitutes a representation by the
Company that references in such materials to the activities of third-parties
have been cleared or constitute a fair use.
6.11 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 affected 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.
6.12 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
this Agreement or the Transaction Documents without the showing of economic loss
and without any bond or other security being required. 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 agree to waive in any
action for specific performance of any such obligation the defense that a remedy
at law would be adequate.
6.13 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser hereunder are 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
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.
6.14 PAYMENT SET ASIDE. To the extent that the Company makes a
payment or payments to the Purchasers hereunder or pursuant to the Transaction
Documents or the Purchasers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be
refunded, repaid or otherwise restored to the Company, a trustee, receiver or
any other Person under any law (including, without limitation, any bankruptcy
law, state or federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.
6.15 FURTHER ASSURANCES. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
6.16 FEES AND EXPENSES. Except as set forth in the Registration
Rights Agreement, 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; PROVIDED, HOWEVER, that the Company shall pay the
Purchasers an aggregate fee of $50,000 at the First Closing. The Company shall
pay all stamp and other taxes and duties levied in connection with the issuance
of the Debenture Shares pursuant hereto.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
ALLIANCE PHARMACEUTICAL CORP.
By:___________________________
Name:
Title:
PURCHASERS
---------------------------
<PAGE>
SCHEDULE I
PRINCIPAL AMOUNT OF NUMBER OF SHARES
NAME OF PURCHASER DEBENTURES AT CLOSING DATE UNDERLYING DEBENTURES
- ----------------- -------------------------- ---------------------
<PAGE>
SCHEDULE II
NAME OF PURCHASER ADDRESS
<PAGE>
Exhibit A
Form of Convertible Debenture
(attached)
<PAGE>
Exhibit B
Form of Registration Rights Agreement
(attached)
<PAGE>
Exhibit C
Company's Legal Opinion
(attached)
Exhibit 4.3
FORM OF
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of February __, 2000 among Alliance Pharmaceutical Corp., a New
York corporation (the "COMPANY"), and the parties who have executed this
Agreement and whose names appear on Schedule I hereto (each party listed on
Schedule I hereto is sometimes individually referred to herein as a "PURCHASER"
and all such parties are sometimes collectively referred to herein as the
"PURCHASERS").
This Agreement is made pursuant to the Securities 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" has meaning set forth in Section 3(o) hereof.
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "CONTROL," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "AFFILIATED," CONTROLLING" and "CONTROLLED" have meanings
correlative to the foregoing.
"AGGREGATE PRICE" has the meaning set forth in Section 2(b) hereof.
"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 mean the Closing Date as defined in the Purchase
Agreement.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's Common Stock, par value $0.01 per
share.
"DEBENTURES" means the Company's 5% convertible debentures due
February __, 2004 issuable pursuant to the Debenture and the Purchase Agreement,
and under certain conditions a second tranche of 5% convertible debentures due
four years after issuance.
"EFFECTIVENESS DATE" means the earlier of (i) the 90th day following
the Closing Date, or (ii) the fifth business day after the Company has received
notice (written or oral) from the Commission that the Commission Staff will not
be reviewing the Registration Statement or has no further comments on the
Registration Statement.
"EFFECTIVENESS PERIOD" has the meaning set forth in Section 2(a)
hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EVENT" has the meaning set forth in Section 2(b) hereof.
"FILING DATE" means as soon as practicable but in no event later than
the 30th day following the Closing Date.
"HOLDER" or "HOLDERS" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"INDEMNIFIED PARTY" has the meaning set forth in Section 5(c) hereof.
"INDEMNIFYING PARTY" has the meaning set forth in Section 5(c) hereof.
"INITIAL REGISTRATION STATEMENT" has the meaning set forth in Section
2(a) hereof. "LOSSES" has the meaning set forth in Section 5(a) hereof.
"NASDAQ" has the meaning set forth in Section 2(b).
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"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 the shares of Common Stock issued or
issuable upon (i) conversion of or with respect to $15,000,000 principal amount
of the Debentures, (ii) payment of interest or any other payments in respect of
the Debentures and (iii) any shares of the Company's capital stock issued with
respect to (i) or (ii) as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise.
"REGISTRATION DELAY PAYMENT" has the meaning set forth in Section 2(b)
hereof.
"REGISTRATION STATEMENT" means the Initial Registration Statement and
any additional registration statements contemplated by Sections 2(a), 2(b) and
7(d), 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.
"TRADING DAY" means a day on which Nasdaq (or such other securities
market on which the Common Stock is listed) is open for trading.
"UNDERLYING SHARES" means the shares of Common Stock issuable upon
conversion of the Debentures.
"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. REGISTRATION REQUIREMENTS
a. FILING AND EFFECTIVENESS OBLIGATIONS. On or prior to the Filing
Date, the Company shall prepare and file with the Commission a Registration
Statement (the "INITIAL REGISTRATION STATEMENT") which shall cover all
Registrable Securities for an offering to be made on a continuous basis pursuant
to a "Shelf" registration statement under Rule 415. The Initial Registration
Statement shall be on Form S-3 or any successor form (except if the Company is
not then eligible to register for resale the Registrable Securities on Form S-3,
in which case such registration shall be on another appropriate form in
accordance herewith, subject to the reasonable consent of the Holders of the
Registrable Securities). The Company shall (i) not permit any securities other
than the Registrable Securities to be included in the Initial Registration
Statement and (ii) use its best efforts to cause the Initial Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event on or prior to the
Effectiveness Date, and to keep such Initial Registration Statement continuously
effective under the Securities Act until the date which is four years after the
date that such Initial Registration Statement is declared effective by the
Commission or such earlier date when all Registrable Securities covered by such
Initial Registration Statement have been sold or may be sold without volume
restrictions pursuant to Rule 144 as determined by counsel to the Company
pursuant to a written opinion letter, addressed to the Holders and the Company's
transfer agent to such effect (the "EFFECTIVENESS PERIOD"). The number of shares
of Common Stock initially included in the Initial Registration Statement shall
be no less than (a) the number of shares of Common Stock that are then issuable
upon conversion of the Debentures (based on the Conversion Price (as defined in
the Debentures) as would then be in effect at such time), without regard to any
limitation on the Investor's ability to convert the Debentures, and (b) the
number of shares of Common Stock that could be issued as payment of interest on
the Debentures for a one year period. If on the date of an actual adjustment to
the Conversion Price pursuant to Section 4.5 of the Debenture the Registration
Statements are insufficient to register all Underlying Shares (after giving
effect to such adjustment) and the number of shares of Common Stock issuable
upon the payment of interest on the principal amount of the then outstanding
Debentures for a one year period, the Company shall immediately, but in no more
than ten (10) Business Days, file a Registration Statement sufficient to
register such additional shares of Common Stock.;
b. UNDERWRITTEN OFFERING. In addition to the Initial Registration
Statement, at any time when a Registration Statement covering the Registrable
Securities is not effective (during any period in which a Registration Statement
is required to be effective pursuant to the terms hereof), if the Holders of a
majority of the Registrable Securities covered by a Registration Statement so
elect on or after August __, 2000 an offering of Registrable Securities pursuant
to such Registration Statement may be effected on no more than two (2) 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.
c. UNDERWRITER. 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.
d. If (i) any of the Holders desires to sell Underlying Shares and the
Initial Registration Statement covering all the applicable Registrable
Securities required to be filed by the Company pursuant to this Agreement is not
(A) filed with the Commission on or before the Filing Date or (B) declared
effective by the Commission on or before the applicable Effectiveness Date, (ii)
on any day after the Registration Statement has been declared effective by the
Commission any of the Holders desires to sell Underlying Shares and cannot do so
pursuant to Rule 144 and (A) sales of all the Registrable Securities which such
Holders desire to sell cannot be made pursuant to the Registration Statement
(including, without limitation, because of a failure to keep the Registration
Statement effective, to disclose such information as is necessary for sales to
be made pursuant to the Registration Statement, or to register sufficient shares
of Common Stock) or (B) the Common Stock is not listed or included for quotation
on the National Market System of the Nasdaq Stock Market ("NASDAQ"), the Nasdaq
SmallCap Market, the New York Stock Exchange ("NYSE") or the American Stock
Exchange (the "AMEX") after being so listed or included for quotation or (iii)
the Company shall otherwise fail to file a Registration Statement required by
Section 2(a) hereof that is necessary in order to permit sales of Underlying
Shares that Holders desire to sell (each such event specified in (i), (ii) and
(iii) above, an "EVENT"), then, as partial relief for the damages to any Holder
by reason of any such delay in or reduction of its ability to sell the
Registrable Securities (which remedy shall not be exclusive of any other
remedies available at law or in equity), the Company shall pay to each Holder an
amount in cash (a "REGISTRATION DELAY PAYMENT") equal to the portion of the then
outstanding principal amount of the Debentures which the Holders desired to
convert to Common Stock and sell and cannot sell under Rule 144 (and, in the
case of Holders, the principal amount of such Debentures from which such
Registrable Securities were converted) (the "AGGREGATE PRICE") multiplied by two
hundredths (.020) times the sum of: (i) the number of months (prorated for
partial months) after the end of the Effectiveness Date and prior to the date
the Registration Statement is declared effective by the Commission or such
shares can be sold under Rule 144, PROVIDED, HOWEVER, that there shall be
excluded from such period any delays which are solely attributable to changes
required by the Purchasers in the Registration Statement with respect to
information relating to the Purchasers, or to the failure of the Purchasers to
conduct their review of the Registration Statement pursuant to Section 3(a);
(ii) the number of months (prorated for partial months) that sales cannot be
made either pursuant to Rule 144 or the Registration Statement after the
Registration Statement has been declared effective (including, without
limitation, when sales cannot be made by reason of the Company's failure to
properly supplement or amend the Prospectus in accordance with the terms of this
Agreement, or otherwise, but excluding when such sales cannot be made solely by
reason of any act or omission solely attributable to the Purchasers); and (iii)
the number of months (prorated for partial months) that the Common Stock is not
listed or included for quotation on the Nasdaq, NYSE or AMEX or that trading
thereon is halted after the Registration Statement has been declared effective.
The Company shall pay any Required Registration Delay Payments to each Holder in
cash on the last Business Day of each month during which an Event has occurred
and is continuing. In the event the Company fails to make a Registration Delay
Payment within ten (10) Business Days of the date such Registration Delay
Payment is due, such Registration Delay Payment shall bear interest at the rate
of 2.0% per month (prorated for partial months) until paid in full.
e. The Company represents and warrants that it meets the registrant
eligibility and transaction requirements for the use of Form S-3 (for secondary
offerings) for the registration of the sale of Registrable Securities by the
Purchasers and any other Holders and the Company shall file all reports required
to be filed by the Company with the Commission in a timely manner so as to
maintain such eligibility for the use of Form S-3.
3. REGISTRATION PROCEDURES
In connection with the Company's registration obligations hereunder,
the Company shall:
a. PREPARATION OF REGISTRATION STATEMENT. Prepare and file with the
Commission on or prior to the Filing Date a Registration Statement on Form S-3
or its successor form (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 (which shall include a plan of
distribution reasonably agreed upon by the parties hereto, in the form of
EXHIBIT A annexed hereto, unless in connection with an Underwritten Offering) 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 to be covered by such Registration Statement) (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
counsel and any managing underwriters, copies of all such documents proposed to
be filed (including documents incorporated by reference), which documents will
be subject to the review of such Holders, their 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 counsel or any managing
underwriters shall reasonably object within three (3) Business Days after
receipt of copies of any such documents, and will not request acceleration of
such Registration Statement without prior notice to such counsel. The sections
of such Registration Statement covering information with respect to the Holders,
the Holder's beneficial ownership of securities of the Company or the Holders
intended method of disposition of Registrable Securities shall conform to the
information provided to the Company by each of the Holders.
b. AMENDMENTS. (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
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. In the event the number of shares available under
a Registration Statement filed pursuant to this Agreement is insufficient to
cover the number of the Registrable Securities required by Section 2(a) hereof,
the Company shall amend the Registration Statement, or file a new Registration
Statement (on the short form available therefore, if applicable), or both, so as
to cover such number of the Registrable Securities, in each case, as soon as
practicable, but in any event within ten (10) Business Days after the necessity
therefor arises (based on the Conversion Price of the Debentures and other
relevant factors on which the Company reasonably elects to rely). The Company
shall use its best efforts to cause such amendment and/or new Registration
Statement to become effective as soon as practicable following the filing
thereof. The provisions of Section 2(b) above shall be applicable with respect
to such obligation, with the ninety (90) days running from the day after the
date on which the Company reasonably first determines (or reasonably should have
determined) the need therefor.
c. NOTIFICATIONS. Notify the Holders of Registrable Securities to be
sold, their 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, in the case of (i)(C) below, not later than the first Business Day after
effectiveness) 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. SUSPENSIONS. 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. SUPPLEMENTS AND POST-EFFECTIVE AMENDMENTS. 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, reasonably acceptable to the purchasers,
for the Company, violate applicable law.
f. COPIES OF REGISTRATION STATEMENT. Furnish to each Holder, their
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. COPIES OF PROSPECTUS. Promptly deliver to each Holder, their
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. BLUE SKY. 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 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. CERTIFICATES. 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 and the Purchase Agreement, 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
(2) Business Days prior to any sale of Registrable Securities.
j. SUPPLEMENTS AND AMENDMENTS. 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. LISTING. Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on Nasdaq 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. UNDERWRITING AGREEMENT. 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,
or in the case of non-Underwritten Offerings, if reasonably requested by the
selling Holders, obtain and deliver copies thereof to such selling Holders, 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 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 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, and, in the case of
non-Underwritten Offerings, at such time as the selling Holders may reasonably
request, 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 required, 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 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 5 (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 counsel and any managing underwriters to evidence the
continued validity of the representations and warranties made pursuant to clause
3(1)(i) above and to evidence compliance with any customary conditions contained
in the underwriting agreement or other agreement entered into by the Company.
m. DUE DILIGENCE. 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 if any information is determined in good faith by the Company in writing to
be of a confidential nature at the time of delivery of such information, then
prior to delivery of such information, the Company and the Holders shall enter
into a confidentiality agreement reasonably acceptable to the Company and the
Holders providing that such information shall be kept confidential, unless (i)
disclosure of such information is required by court or administrative order or
is necessary to respond to inquiries of regulatory authorities (PROVIDED,
HOWEVER, that the Company shall be given notice of any such pending disclosure
so that the Company may seek a protective order); (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. EARNINGS STATEMENT. Comply in all material respects with all
applicable rules and regulations of the Commission and make generally available
to its securityholders 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. INFORMATION. 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.
The Company shall hold in confidence and not make any disclosure of
information concerning a Holder provided to the Company unless (i) disclosure of
such confidential information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such confidential information is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (iii) the release of such confidential information is ordered
pursuant to a subpoena or other order from a court or governmental body of
competent jurisdiction, or (iv) such confidential information has been made
generally available to the public other than by disclosure in violation of this
or any other agreement. The Company agrees that it shall, if possible, upon
learning that disclosure of such information concerning a Holder is sought in or
by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to such Holder prior to making such disclosure, and
allow the Holder, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
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. Notwithstanding anything to the contrary, the Company
shall cause its transfer agent to deliver unlegended shares of Common Stock to a
transferee of a Holder in accordance with the terms of the Securities Purchase
Agreement in connection with any sale of Registrable Securities with respect to
which an Holder has entered into a binding contract for sale prior to the
Holder's receipt of a notice from the Company of the happening 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)
and for which the Holder has not yet settled.
p. RESPONSES TO THE COMMISSION. The Company agrees to respond fully
and completely, in the Company's best judgement, to any and all comments on a
Registration Statement received from the Commission staff as promptly as
possible but, for non-Underwritten Offerings, in no event later than ten (10)
Business Days of the receipt of such comments, regardless of whether such
comments are in oral or written form.
q. CONFIRMATION OF EFFECTIVENESS. Within two (2) Business Days after a
Registration Statement which covers applicable Registrable Securities is ordered
effective by the Commission, the Company shall deliver, and shall cause legal
counsel for the Company to deliver, to the transfer agent for such Registrable
Securities (with copies to the Holders whose Registrable Securities are included
in such Registration Statement) confirmation that such Registration Statement
has been declared effective by the Commission in the form attached hereto as
EXHIBIT B.
4. REGISTRATION EXPENSES
a. All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company, whether or not
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
(and except as provided herein), (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with Nasdaq 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 counsel for the Holders, (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, and 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 reasonable 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 joint or several losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and attorneys' fees) and expenses (collectively, together with actions,
proceedings or inquiries by any regulatory or self-regulatory organization,
whether commenced or threatened, "LOSSES"), as incurred, arising out of or
relating to (i) 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 (provided that the Company amended any disclosure with
respect to the method of distribution upon written notice from the Holders that
such section of the Prospectus should be revised in any way) or (ii) any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of
Registrable Securities. The Company shall not, however, be liable for any Losses
to any Holder with respect to any untrue or alleged untrue statement of material
fact or omission or alleged omission of material fact if such statement or
omission was made in a preliminary Prospectus and such Holder did not receive a
copy of the final Prospectus (or any amendment or supplement thereto) at or
prior to the confirmation of the sale of the Registrable Securities in any case
where such delivery is required by the Securities Act and the untrue or alleged
untrue statement of material fact or omission or alleged omission of material
fact contained in such preliminary Prospectus was corrected in the final
Prospectus (or any amendment or supplement thereto), unless the failure to
deliver such final Prospectus (as amended or supplemented) was a result of
noncompliance by the Company with Section 3(g) of this Agreement. 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
incurred, 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; PROVIDED, HOWEVER, that the indemnity
agreement contained in this Section 5(b) shall not apply to amounts paid in
settlement of any Losses if such settlement is effected without the prior
written consent of such Holder, which consent shall not be unreasonably
withheld. 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,
HOWEVER, 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 ten (10)
Business Days of written notice thereof to the Indemnifying Party, which notice
shall be delivered no more frequently than on a monthly basis (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
court of competent jurisdiction 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. In no
event shall any selling Holder be required to contribute an amount under this
Section 5(d) in excess of the net proceeds received by such Holder upon sale of
the Registrable Securities pursuant to the Registration Statement giving rise to
such contribution obligation.
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.
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 Registrable Securities, the Company
covenants to timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to Section 13(a) or l5(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 Registrable Securities, if the Company
is not required to file reports pursuant to Section 13(a) or l5(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(r) 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 subordinated in all respects to the rights in
full of the Holders set forth in Section 2 herein, and are not otherwise in
conflict or inconsistent with the provisions of this Agreement; notwithstanding
the foregoing, the Company may grant pari passu rights to a Strategic Partner
(as defined in the Debenture). This Agreement, together with the Purchase
Agreement, 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.
c. NO PIGGYBACK ON REGISTRATIONS. Except as disclosed on Schedule
2.1(r) of the Purchase Agreement, neither the Company nor any of its
securityholders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in the Registration Statements and the Company
shall not after the date hereof enter into any agreement providing such right to
any of its securityholders, unless the right so granted is subordinated in all
respects to the rights in full of the Holders set forth herein, and is not
otherwise in conflict or inconsistent with the provisions of this Agreement;
notwithstanding the foregoing, the Company may grant pari passu rights to a
Strategic Partner (as defined in the Debenture).
d. PIGGY-BACK REGISTRATIONS. Except as provided herein if, at any time
when there is not an effective Registration Statement covering the Registrable
Securities, 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 fifteen (15) days after receipt of
such notice, any such Holder shall so request in writing, (which request shall
specify the Registrable Securities intended to be disposed of by the Holders),
the Company will use reasonable efforts to effect the registration under the
Securities Act of all Registrable Securities which the Company has been so
requested to register by the Holder, to the extent requisite to permit the
disposition of the Registrable Securities so to be registered; PROVIDED, that if
at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to such Holder and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay expenses in accordance with
Section 4 hereof), and (ii) in the case of a determination to delay registering,
shall be permitted to delay registering any Registrable Securities being
registered pursuant to this Section 7(d) for the same period as the delay in
registering such other securities. 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 Securities Act. 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
Registrable Securities then proposed to be sold by 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) 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). Notwithstanding the foregoing, the
Company shall not file any registration statement under the Securities Act
(other than on Form S-4 or Form S-8) relating to the offer and sale of any
equity securities of the Company, or offer or sell any equity securities of the
Company in a transaction exempt from registration pursuant to Regulation S under
the Securities Act, if the Per Share Market Value is twelve dollars ($12.00) or
less, until the earlier of (i) such time as the Initial Registration Statement
has been effective for a period of sixty (60) Trading Days, which period shall
be tolled if and during the period the effectiveness of the Initial Registration
Statement is suspended for any reason whatsoever or (ii) all of the Registrable
Securities covered therein shall have been sold; provided, further, that in the
case of warrants or other securities which the Company has issued with
piggy-back registration rights, as set forth on Schedule 2.1(r) to the
Securities Purchase Agreement, the Company shall be allowed to file a separate
registration statement during the same time period as the Initial Registration
Statement and/or any Registration Statement being filed pursuant to this
sentence.
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 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 received by 8:00 p.m. EST
where such notice is to be received), or the first Business Day following such
delivery (if received after 8:00 p.m. EST 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 are (i) if to the Company to Alliance Pharmaceutical Corp., 6175
Lusk Boulevard, San Diego, California 92121, Attention: President, facsimile
number: (858) 410-5343 with a copy to Stroock & Stroock & Lavan LLP, 180 Maiden
Lane, New York, New York 10038, Attention: Melvin Epstein, facsimile number:
(212) 896-6006 and (ii) if to any Purchaser to the address set forth on Schedule
I hereto with copies to those specified on the signature pages hereto and to
Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New
York 10022, Attn: James Kaye, Esq., fax no. (212) 872-1002 or such other address
as may be designated in writing hereafter, in the same manner, by such Person.
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, which will not be unreasonably withheld. Each Holder may assign its
rights hereunder in the manner and to the Persons as permitted under the
Purchase Agreement. In addition, 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 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.
h. 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 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 were the original thereof.
i. GOVERNING LAW. The corporate laws of the State of New York shall
govern all issues concerning the relative rights of the Company and the
Purchasers as its stockholders. All other questions concerning the construction,
validity, enforcement and interpretation of 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. Each party hereby irrevocably submits
to the 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
consent to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such 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.
j. CUMULATIVE REMEDIES. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
k. 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.
l. HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
m. 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]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as of the date first written above.
ALLIANCE PHARMACEUTICAL CORP.
By:
--------------------------
Name:
Title:
PURCHASERS
------------------------------
<PAGE>
SCHEDULE I
COMPANY
ALLIANCE PHARMACEUTICAL CORP.
6175 Lusk Boulevard
San Diego, California 92121
Attention: President
Facsimile: (858) 410-5343
PURCHASERS:
<PAGE>
EXHIBIT A
PLAN OF DISTRIBUTION
The Company is registering the Registrable Securities on behalf of the
Holder. As used herein, the term Holder means the holder of the Registrable
Securities and includes donees and pledgees selling Registrable Securities
received from a named Holder after the date of this Prospectus. All costs,
expenses and fees in connection with the registration of the Registrable
Securities offered hereby will be borne by the Company. Brokerage commissions
and similar selling expenses, if any, attributable to the sale of Registrable
Securities will be borne by the Holders. Sales of Registrable Securities may be
effected by Holders from time to time in one or more types of transactions
(which may include block transactions) on the Nasdaq National Market, in the
over-the-counter market, in negotiated transactions, through put or call options
transactions relating to the Registrable Securities, through short sales of
Registrable Securities, or a combination of such methods of sale, at market
prices prevailing at the time of sale, or at negotiated prices. Such
transactions may or may not involve brokers or dealers. The Holders have advised
the Company that they have not entered into any agreements, understandings or
arrangements with any underwriters or broker-dealers regarding the sale of their
securities, nor is there an underwriter or coordinated broker acting in
connection with the proposed sale of Registrable Securities by the Holders.
The Holders may enter into hedging transactions with broker-dealers or
other financial institutions. In connection with such transactions,
broker-dealers or other financial institutions may engage in short sales of the
Registrable Securities or of securities convertible into or exchangeable for the
Registrable Securities in the course of hedging positions they assume with
Holders. The Holders may also enter into options or other transactions with
broker-dealers or other financial institutions which require the delivery to
such broker-dealers or other financial institutions of Registrable Securities
offered by this Prospectus, which Registrable Securities such broker-dealer or
other financial institution may resell pursuant to this Prospectus (as amended
or supplemented to reflect such transaction).
The Holders may effect such transactions by selling Registrable
Securities directly to purchasers or to or through broker-dealers, which may act
as agents or principals. Such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from Holders and/or the purchasers
of Registrable Securities for whom such broker-dealers may act as agents or to
whom they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The Holders and any broker-dealers that act in connection with the
sale of Registrable Securities might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any commissions received by
such broker-dealers any profit on the resale of the Registrable Securities sold
by them while acting as principals might be deemed to be underwriting discounts
or commissions under the Securities Act. The Company has agreed to indemnify
each Holder against certain liabilities, including liabilities arising under the
Securities Act. The Holders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the
Registrable Securities against certain liabilities, including liabilities
arising under the Securities Act.
The Holders may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act.
The Holders will be subject to the prospectus delivery requirements of
the Securities Act. The Company has informed the Holders that the
anti-manipulative provisions of Regulation M promulgated under the Exchange Act
may apply to their sales in the market.
Holders also may resell all or a portion of the Registrable Securities
in open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of such Rule.
Upon the Company being notified by a Holder that any material
arrangement has been entered into with a broker-dealer for the sale of
Registrable Securities through a block trade, special offering, exchange
distribution or secondary distribution or a purchase by a broker or dealer, a
supplement to this Prospectus will be filed, if required, pursuant to Rule
424(b) under the Securities Act, disclosing (i) the name of each such Holder and
of the participating broker-dealer(s), (ii) the number of Registrable Securities
involved, (iii) the initial price at which such Registrable Securities were
sold, (iv) the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not
conduct any investigation to verify the information set out or incorporated by
reference in this Prospectus and (vi) other facts material to the transactions.
In addition, upon the Company being notified by a Holder that a donee or pledgee
intends to sell more than 500 Registrable Securities, a supplement to this
Prospectus will be filed.
<PAGE>
EXHIBIT B
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
Attn.:
Re: Alliance Pharmaceutical Corp.
Ladies and Gentlemen:
We are counsel to Alliance Pharmaceutical Corp., a New York
corporation (the "Company"), and have represented the Company in connection with
that certain Securities Purchase Agreement (the "Purchase Agreement") entered
into by and among the Company and the buyers named therein (collectively, the
"Holders") pursuant to which the Company issued to the Holders its 5%
convertible debentures due February __, 2004 (the "Debentures") convertible into
shares of the Company's common stock, par value $0.01 per share (the "Common
Stock"). Pursuant to the Purchase Agreement, the Company also has entered into a
Registration Rights Agreement with the Holders (the "Registration Rights
Agreement") pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement), including the shares of Common Stock issuable upon conversion of the
Debentures, under the Securities Act of 1933, as amended (the "1933 Act"). In
connection with the Company's obligations under the Registration Rights
Agreement, on _______________, 1999, the Company filed a Registration Statement
on Form S-3 (File No. 333-_____________) (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") relating to the Registrable
Securities which names each of the Holders as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
CC: [LIST NAMES OF HOLDERS]
