<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
for the Quarterly period ended June 30, 1999
or
[ ] Transition report pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
for the transition period from _______ to ______
Commission file number 0-14691
SENETEK PLC
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
England 77-0039728
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
620 Airpark Road, Napa, California 94588
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone no. including area code: 011-44 -1536 - 312455
NOT APPLICABLE
- --------------------------------------------------------------------------------
(former name, former address and former fiscal year,
if changes since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate number of shares outstanding of each of the issuer's classes of common
stock, as of the latest date practicable.
At August 20, 1999, there were 57,332,517 of the
Registrants Ordinary shares outstanding.
<PAGE> 2
SENETEK PLC AND SUBSIDIARIES
INDEX TO FORM 10-Q
QUARTER ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Unaudited Consolidated Statements of Operations
Three Months Ended June 30, 1999 and June 30, 1998
Six Months Ended June 30, 1999 and June 30, 1998 3
Consolidated Balance Sheets
June 30, 1999 (unaudited) and December 31, 1998 4
Unaudited Consolidated Statement of Stockholders' Equity (Deficit) and
Comprehensive Loss Six Months Ended June 30, 1999 5
Unaudited Consolidated Statements of Cash Flows
Six Months Ended June 30, 1999, and June 30, 1998 6
Notes to the Unaudited Consolidated Financial Statements 8
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II. OTHER INFORMATION 19
SIGNATURES 21
</TABLE>
2
<PAGE> 3
SENETEK PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- -----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Product Sales $ 1,759 $ 1,157 $ 2,693 $ 2,772
Cost of Sales 620 767 1,213 1,670
-------- -------- -------- --------
Gross Profit 1,139 390 1,480 1,102
Operating Expenses:
Research & Development 811 1,704 1,680 3,249
General & Administration 2,093 1,897 3,678 3,739
Marketing & Promotion 128 28 219 447
Selling Expenses -- 81 -- 234
-------- -------- -------- --------
Total Operating Expenses 3,032 3,710 5,577 7,669
-------- -------- -------- --------
Loss from Operations (1,893) (3,320) (4,097) (6,567)
Other income (expense):
Settlement Expense (Note 3) (2,718) -- (2,718) --
Interest Income 40 54 41 95
Interest Expense (Including
amortization of deferred financing
costs and discount) (443) (12) (650) (31)
Other (144) -- (154) 97
-------- -------- -------- --------
Loss before extraordinary loss on
extinguishment of debt (5,158) (3,278) (7,578) (6,406)
Extraordinary Loss on
extinguishment of debt(Note 3) (1,657) -- (1,657) --
-------- -------- -------- --------
Net loss available to common
stockholders $ (6,815) $ (3,278) $ (9,235) $ (6,406)
======== ======== ======== ========
Basic and diluted loss before
extraordinary item per
Ordinary share outstanding $ (0.09) $ (0.06) $ (0.13) $ (0.12)
Basic and diluted loss from
extinguishment of debt per
Ordinary share outstanding $ (0.03) $ -- $ (0.03) $ --
Basic and diluted loss per
Ordinary share outstanding $ (0.12) $ (0.06) $ (0.16) $ (0.12)
Weighted average
Ordinary shares
Outstanding 57,258 54,106 57,237 53,328
======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
3
<PAGE> 4
SENETEK PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- ------------
(unaudited)
<S> <C> <C>
Assets (Note 3)
Current Assets:
Cash and Cash Equivalents $ 2,304 $ 808
Trade Receivables 920 1,265
Inventory at cost (Note 4) 768 731
Non-Trade Receivables 267 129
Prepaids and Deposits 1,204 1,360
-------- --------
Total Current Assets 5,463 4,293
Property and Equipment, net 3,227 3,366
Goodwill and Other Intangible Assets - net 1,698 1,766
Deferred Financing costs 3,164 1,241
Total Assets $ 13,552 $ 10,666
======== ========
Liabilities & Stockholders' Equity (Deficit)
Current Liabilities
Line of Credit (Note 3) -- 2,389
Accounts Payable 2,507 1,602
Accrued Liabilities 1,120 1,630
Accrued Compensation on Stock Options (Note 5)
- Employees 4,436 4,112
- Non-employees 2,128 1,708
-------- --------
Total Current Liabilities 10,191 11,441
Long Term Liabilities
Capital Leases 46 46
Deferred licensing income 100 --
Notes Payable, net of unamoritized discount of $351 (Note 3) 7,038 --
Stockholders' Equity (Deficit):
Ordinary shares $0.08 (5pence) par value:
Authorized shares: 100,000,000
Issued and outstanding shares:
June 30, 1999 - 57,332,517
December 31, 1998 - 57,215,856 4,631 4,625
Share Premium 72,718 66,472
Accumulated Deficit (81,203) (71,968)
Equity adjustment from Foreign Currency Translation 31 50
-------- --------
Total Stockholders' Equity (Deficit) $ (3,823) $ (821)
-------- --------
Total Liabilities and Stockholders' Equity (Deficit) $ 13,552 $ 10,666
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE> 5
SENETEK PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE LOSS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive
Ordinary Shares Income
--------------------- Share Accumulated Currency Net
Shares Amount Premium Deficit Translation Equity
---------- ------ ------- ----------- --------------- -------
<S> <C> <C> <C> <C> <C> <C>
Balances, Dec. 31,1998 57,215,856 $ 4,625 $66,472 $(71,968) $50 $(821)
Exercise of options 116,661 6 174 180
Warrants issued in connection with
$5 million note, $2.4 million
refinance and April 1999 settlement
agreement (Note 3) 6,072 6,072
Comprehensive Loss
- Net loss (9,235)
- Translation loss, net of tax (19)
Total Comprehensive Loss (9,235) (19) (9,254)
Balances, June 30,1999 57,332,517 $4,631 $72,718 $(81,203) $31 $(3,823)
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
SENETEK PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (9,235) $ (6,406)
Adjustments to reconcile net loss to net cash:
Depreciation and other amortization 320 225
Gain on disposal of fixed assets -- (7)
Stock Option Compensation 744 878
Amortization of Deferred Finance costs 500 --
Settlement Expenses 2,718 --
Extinguishment of Debt 1,657 --
Changes in assets and liabilities:
Trade Receivables 408 13
Non-trade Receivables (138) 32
Inventory (37) (1,117)
Prepaids and deposits 156 (347)
Accounts payable and accrued
liabilities (434) (952)
Deferred license fees 100 --
-------- --------
Net Cash Used by Operating Activities $ (3,241) $ (7,681)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of Property and Equipment $ (113) $ (987)
-------- --------
Net Cash Used by Investing Activities $ (113) $ (987)
======== ========
</TABLE>
6
<PAGE> 7
SENETEK PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of Issuance of Ordinary Shares from
Private placements $ -- 4,155
Proceeds from Exercise of Options 118 --
Proceeds from Notes payable issued net of $249,000
cash finance costs 4,751 --
Net increase in borrowings under
short term loans -- (705)
-------- --------
Net Cash Provided By Financing Activities $ 4,869 3,450
-------- --------
Effect of exchange rate changes on cash (19) (9)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ 1,496 $ (5,227)
Cash and cash equivalents at the beginning
of period 808 6,216
Cash and Cash Equivalents at the
end of the period $ 2,304 $ 989
======== ========
</TABLE>
Supplemental disclosures of cash flow information are as follows:
<TABLE>
<CAPTION>
Amounts Paid
------------------------
1999 1998
---- ----
(in thousands)
<S> <C> <C>
Interest $150 $31
Income Taxes -- --
</TABLE>
Non cash investing and financing activities consist of the following: As
discussed in the Notes to the unaudited Financial Statements the Company
refinanced the outstanding balance of $2,389,000 on its line of credit with an
interest bearing note in April 1999. Warrants were issued to lenders with an
aggregate fair value of $6.1 million during the six months ended June 30, 1999.
See accompanying notes to consolidated financial statements.
7
<PAGE> 8
SENETEK PLC AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The interim consolidated financial statements incorporate the accounts of
Senetek PLC ("Senetek") or ("the Company") and its wholly owned
subsidiaries, Senetek Drug Delivery Technologies Inc. ("SDDT") (formerly
MEIS Corporation) and Carme Cosmeceutical Sciences, Inc. ("CCSI")
(formerly Carme International Inc.) (both Delaware corporations) for the
six months ended June 30, 1999. CCSI was incorporated on June 21, 1995 and
commenced its operations on September 26, 1995 when it acquired certain
assets of Carme Inc. (a Nevada corporation) in an arms-length transaction.
All significant intercompany balances and transactions have been
eliminated in consolidation.
The interim consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting principles (U.S. GAAP)
and reflect all adjustments (which include only normal, recurring
adjustments) which, in the opinion of management, are necessary for the
fair presentation of the results of the Company at the dates of the
balance sheets. The interim consolidated financial statements have been
prepared by the Company without audit and are subject to year-end
adjustment. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules
and regulations of the Securities and Exchange Commission.
These interim statements should be read in conjunction with the financial
statements and notes thereto included in the Company's 1998 Annual Report
on Form 10-K.
Results of operations for the six months ended June 30, 1999 are not
necessarily indicative of results to be achieved for the full fiscal year.
2. Liquidity
The Company has been able to fund the losses of $6.8 million and $9.2
million for the three and six months ended June 30, 1999 from existing
resources and through the sale of equity securities and issuance of debt.
Management has taken steps to reduce the amount of cash used by
operations, including reducing staffing levels and closing its London
office, however the Company's operations may not provide sufficient
internally generated cash flows to meet its projected requirements in the
short term and to meet the cost of developing the Company's pharmaceutical
products.
In April 1999 we received $4.8 million (net of expenses) in cash and
refinanced $2,389,000 of our previously outstanding indebtedness that
would have been due in April 2000 for two new notes bearing interest at 8%
per annum and maturing in April 2002.
Research and development spending is decreasing as our products reach the
final stages of development and our Reliaject(TM) drug delivery device is
nearly ready for commercial deployment with almost all development and
supply chain set up costs recognized by June 30,1999.
Our patented kinetin product was made commercially available during the
first quarter of 1999 by reason of distribution agreements entered into
with ICN Pharmaceuticals Inc. and Osmotics Corporation. These arrangements
are expected to generate additional operating cash flows in 1999.
Management is engaged in continuing efforts to obtain sufficient financing
to fund its operations for the foreseeable future, however there can be no
assurance given that we will be able to obtain the necessary financing.
3. Financing Activities
In April 1999 we received $4,751,000 (net of $249,000 in expenses) in cash
and refinanced the balance owed of $2,389,000 under a 1998 Credit
Agreement in exchange for two new notes bearing interest at 8% per annum
and maturing in April 2002. The notes require semi annual payment of
interest only until maturity and are secured by all of the Company's
assets.
8
<PAGE> 9
The Company issued Series A warrants to purchase an aggregate of 738,857
ordinary shares at $1.50 per share (subject to downward adjustment under
certain circumstances), expiring in five years in connection with this
agreement. Series B and C warrants to purchase approximately 3.3 million
and 1.2 million Ordinary shares at $1.50 and $2 per share were issued in
connection with the Agreement but are only exercisable to the extent
$7,389,000 is not repaid in cash. The Series B and C warrants expire in
ten years.
The fair value of 500,000 of the Series A warrants and all of the Series B
warrants was determined to be $3.1 million using the Black Scholes model.
The fair value of these warrants will be amortized over the life of the
new notes because such warrants, under the terms of the financing
agreement, were issued in connection with the $5.0 million new financing.
On the other hand, the $1.0 million fair value of the remaining 238,857
Series A warrants and all of the 3,333,333 Series C warrants was included
in the loss on extinguishment of debt discussed below because these
warrants were issued to refinance existing debt under the terms of the
April 1999 financing agreement.
As the outstanding borrowings under the 1998 Credit Agreement were
refinanced by notes with substantially different terms as defined by EITF
96-19, Debtors Accounting for a Modification or Extinguishment of Debt
Instruments, (EITF 96-19), the Company is required to recognize the
difference between the fair value of the new notes issued to refinance the
old debt and the carrying value of the old debt net of unamoritized
issuance costs as a loss on the extinguishment of debt. During the three
months ended June 30,1999, the Company recognized a $1.7 million loss on
the extinguishment of debt.
Also, in April 1999 we entered into a settlement agreement to resolve the
terms of various transactions that had been entered into by the previous
management of the Company. The settlement terms involve the issue of
2,300,000 Series A warrants and 625,000 new Ordinary shares. Accordingly
the Company has recorded $2.7 million of expense in the second quarter of
1999 related to the settlement terms. Included in the $2.7 million
settlement expense is an estimate related to the fair value of the 625,000
ordinary shares based on the August 19, 1999 share closing price.
4. Inventory at cost comprises:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------- ------------
(in thousands)
<S> <C> <C>
Finished Goods $768 $466
Raw Materials -- 265
Work in Progress -- --
---- ----
$768 $731
---- ----
</TABLE>
5. Options and Warrants during the six months ended June 30, 1999:
The Company issued new Ordinary shares through the exercise of options
under the Company's approved plans at an average price of $1.50 per share.
Options were granted under the Company's No. 1 plan for employees
amounting to 876,500, all of which were at an exercise price of $1.50.
Options were granted under the Company's No. 2 plan for non employees and
consultants amounting to 400,000, all of which were at an exercise price
of $1.50. The fair value of these non employee options was calculated at
$420,000 and this has been recorded as compensation expense in the second
quarter.
Series A, B and C warrants were issued, in connection with both the
refinance of the $2,389,000 note and the new investment note, in the
amounts of 738,857, 3,333,333 and 1,194,285 respectively. Refer to note 3
for further discussion of the accounting treatment for these issuances.
9
<PAGE> 10
Series A warrants issued in the settlement of disputes arising from
commitments entered into by previous management amounted to 2,300,000. The
fair value of these warrants of approximately $2 million was calculated
using the Black Scholes option pricing model and included in the
settlement expense discussed in note 3.
6. Earnings per Share
Earnings per share were computed under the provisions of Statement of
Financial Accounting Standards No. 128, Earnings Per Share. The following
is a reconciliation of the numerators and denominators of basic and
diluted earnings per share computations.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
---------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- --------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Numerator:
Basic and Diluted Net Loss
Per ordinary share outstanding $ 6,815 $ 3,278 $ 9,235 $ 6,406
Denominator:
Basic and diluted weighted average
Shares outstanding 57,258 54,106 57,237 53,238
</TABLE>
Options and warrants to purchase 16,262,231 shares of stock were
outstanding at June 30,1999 and options and warrants to purchase 4,607,385
shares of stock were outstanding at June 30,1998 but were not included in
the computation of diluted loss per Ordinary share outstanding because the
effect would have been antidilutive.
7. Segment Reporting
Three months ended June 30,1999
(in thousands)
<TABLE>
<CAPTION>
Skincare and
Pharmaceutical Health and Beauty Total
-------------- ----------------- -------
<S> <C> <C> <C>
Net sales to external customers $ 355 $1,404 $ 1,759
Operating income (loss) (2,620) 727 (1,893)
Income (loss) before extraordinary
item (5,817) 659 (5,158)
</TABLE>
Three months ended June 30,1998
(in thousands)
<TABLE>
<CAPTION>
Skincare and
Pharmaceutical Health and Beauty Total
-------------- ----------------- -------
<S> <C> <C> <C>
Net sales to external customers $ 356 $ 801 $ 1,157
Operating loss (3,020) (300) (3,320)
Loss before taxation (2,913) (365) (3,278)
</TABLE>
10
<PAGE> 11
Six months ended June 30,1999
(in thousands)
<TABLE>
<CAPTION>
Skincare and
Pharmaceutical Health and Beauty Total
-------------- ----------------- -------
<S> <C> <C> <C>
Net sales to external customers $ 651 $2,042 $ 2,693
Operating income (loss) (4,406) 309 (4,097)
Income (loss) before extraordinary item (7,746) 168 (7,578)
</TABLE>
Six months ended June 30,1998
(in thousands)
<TABLE>
<CAPTION>
Skincare and
Pharmaceutical Health and Beauty Total
-------------- ----------------- -------
<S> <C> <C> <C>
Net sales to external customers $ 798 $1,974 $ 2,772
Operating loss (6,206) (361) (6,567)
Loss before taxation (6,004) (402) (6,406)
</TABLE>
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the preceding
consolidated financial statements and notes thereto and with the Company's
audited financial statements, notes to the consolidated financial statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations relating thereto included or incorporated by reference in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
Except for the historical information contained herein, the statements contained
in this 10-Q may be deemed forward looking statements that involve risks and
uncertainties. There are certain important factors and risks, including, without
limitation, the Company's need for additional financing, its history of losses
and its dependence on key personnel and the other risks detailed from time to
time in the Company's Securities and Exchange Commission filings on Form 10-K
and 10-Q, including those discussed under "Factors Affecting the Company" below,
that could cause results or prospects to differ materially from those
anticipated by the statements made herein.
RESULTS OF OPERATIONS
Revenues
Our product sales revenues of $1,759,000 for the second quarter of 1999
comprised $55,000 from the sale of pharmaceutical products, $300,000 from the
sale of monoclonal antibodies and $1,404,000 from the sale of kinetin products
and skincare and health and beauty products.
Our product sales revenues of $1,157,000 for the second quarter of 1998
comprised $89,000 from the sale of pharmaceutical products, $267,000 from the
sale of monoclonal antibodies and $801,000 from the sale of skincare and health
and beauty products.
The 38.2% sales decrease in pharmaceutical products was due to a suspension of
named patient sales in the United Kingdom, following a possible batch sterility
problem with our contract manufacturer.
The 12.4% sales increase in monoclonal antibodies was due to increased volume of
sales. Sales of monoclonal antibodies, some of which are used for the early
diagnosis of Alzheimers disease, follow sales patterns determined by project
driven research organizations, and are subject to fluctuation.
The 75.3% sales increase in skincare and health and beauty products was due
mainly to the supply of kinetin products to ICN Pharmaceuticals, following the
launch of their Kinerase(R) product in March 1999. In May 1999, exclusive rights
for the world wide distribution of Mill Creek and Silver Fox products were
granted to USITC Inc. At this time CCSI also sold its inventories of Mill Creek
and Silver Fox products to USITC. For the grant of the distribution rights CCSI
received an initial $100,000 license fee which we have recorded as deferred
income and will receive royalties on net sales of the products from September
1999 onwards.
Our product sales revenues of $2,693,000 for the first six months of 1999
comprised $131,000 from the sale of pharmaceutical products, $520,000 from the
sale of monoclonal antibodies and $2,042,000 from the sale of kinetin products
and skincare and health and beauty products.
Our product revenues of $2,772,000 for the first six months of 1998 comprised
$182,000 from the sale of pharmaceutical products, $616,000 from the sale of
monoclonal antibodies and $1,974,000 from the sale of skincare and health and
beauty products.
The 28% sales decrease in pharmaceutical products was due to a suspension of
named patient sales in the United Kingdom, following a possible batch sterility
problem with our contract manufacturer.
The 15.6% sales increase in monoclonal antibodies was due to low volume of sales
in the first quarter of 1999. Sales of monoclonal antibodies, some of which are
used for the early diagnosis of Alzheimers disease, follow sales patterns
determined by project driven research organizations, and are subject to
fluctuation.
12
<PAGE> 13
The 3.4% sales increase in skincare and health and beauty products was due
mainly to the sales of kinetin products to ICN, following the Kinerase(R) launch
in March 1999.
Cost of Goods Sold
Cost of goods sold for the second quarter of 1999, which includes contract
manufacturing and material costs, was $620,000, down 19.2% from $767,000 in the
second quarter of 1998. The decrease is due mainly to a change of product mix,
with increased sales of higher margin products becoming a feature of the
business. This is due to the launch of Kinerase(R) products in the skincare and
health and cosmetics sector.
In the Pharmaceutical Sector, cost of goods sold for the second quarter of 1999
was $150,000, down 12.8% from $172,000 in the second quarter of 1998. This is
due to a change in sales mix following the suspension of lower margin Invicorp
named patient sales in the United Kingdom.
In the Skincare and Health and Beauty Sector, cost of goods sold for the second
quarter of 1999 was $470,000, a decrease of 21.0% from $595,000 in the second
quarter of 1998. This is mainly due to a change in sales mix, following the
launch of the Kinerase (R) product in March 1999.
Cost of goods sold for the first six months of 1999, which includes contract
manufacturing and material costs, was $1,213,000, down 27.4% from $1,670,000 in
the first six months of 1998. The decrease is due mainly to the change of sales
mix, with the launch of Kinerase(R) products in the skincare and health and
cosmetics sector towards the end of the first quarter of 1999.
In the Pharmaceutical Sector, cost of goods sold for the first six months of
1999 was $276,000, down 19.3% from $342,000 in the first six months of 1998.
This is due to a change in sales mix and volume reduction following the
suspension of Invicorp named patient sales in the United Kingdom.
In the Skincare and Health and Beauty Sector, cost of goods sold for the first
six months of 1999 was $937,000, a decrease of 29.4% from $1,328,000 in the
first six months of 1998. This is mainly due to a change in sales mix, following
the launch of the Kinerase (R) product in March 1999.
OPERATING EXPENSES
Research & Development
Research and Development expenditures for the second quarter of 1999 was
$811,000, a substantial decrease of 52.4% from $1,704,000 in the second quarter
of 1998. Research spending on Invicorp development declined as clinical trials
for EU countries reach completion and Invicorp receives approvals from Medical
Evaluation Agencies in Europe and New Zealand.
The Pharmaceutical Sector research and development accounted for 98.8% of our
total research and development spending for the second quarter of 1999, compared
to 99.7% for the second quarter of 1998. The decreased expenditure is due mainly
to the fact that development spending for Invicorp and Reliaject, other than
Invicorp trials in the US, has reached final stages. Invicorp received a
Marketing Authorization Approval from Denmark in 1998. We also received a
confirmation from the United Kingdom's Committee on the Safety of Medicines in
March 1999 that it would recommend to the Medicines Control Agency in the United
Kingdom that a Marketing Authorization Approval, should be granted, if certain
specified conditions are met. During May 1999 we were notified by New Zealand's
Medicines Assessment Advisory Committee that they had recommended that Invicorp
be approved for the treatment of erectile dysfunction. In December 1998 we
received news from the Medicine Evaluation Agency in Ireland that Invicorp had
received clearance on safety and efficacy grounds and we are now waiting for
final approval. We are currently negotiating with two US and a European Drug
Company for the potential licensing of Invicorp which would provide us with an
initial license fee, future royalty streams and supply chain revenues.
In August 1999 Senetek announced that it had received word from the Medicine
Control Agency of the United Kingdom and the FDA of the US that a competitor's
safety trial on phentolamine mesylete revealed preclinical tumors (proliferation
of brown fat cells). These findings are preliminary. The FDA definition of tumor
is very broad and encompasses any growth, inflammatory or non-inflammatory,
benign or malignant and includes proliferation of brown fat cells. It is
noteworthy to mention that in Spain, Holland and some other EU countries, a
product containing phentolamine mesylete has been recently approved for usage in
erectile dysfunction.
Research and Development expenditure for the first six months of 1999 was
$1,680,000, a substantial decrease of 48.3% from $3,249,000 compared to the
first six months of 1998. Research spending on Invicorp development declined as
clinical trials for EU countries reach completion and Invicorp receives approval
from Medical Evaluation Agencies in Europe and New Zealand.
The Pharmaceutical Sector research and development accounted for 98.4% of our
total research and development spending for the first six months of 1999,
compared to 99.8% for the first six months of 1998.
13
<PAGE> 14
General and Administration
General and Administration expenses for the second quarter of 1999 totaled
$2,093,000, an increase of 10.3% from $1,897,000 in the second quarter of 1998.
Pharmaceutical Sector general & administrative expenses for the second quarter
of 1999 totaled $1,956,000, an increase of 27.6% from $1,532,000 in the second
quarter of 1998. The increase is due mainly to one time costs incurred in our
Corporate restructuring program which was launched at the end of 1998. In May
1999 we closed our UK, London operations and combined those functions in our UK
Kettering office. We also pared down our UK clinical monitoring and development
staff and have refocused substantially these functions out of our Napa office.
The reduction in headcount was 6 people and the severance packages of $125,000
which included full settlement with a former Director, were expensed in the
second quarter of 1999. Furthermore, we settled our legal disputes with a former
director and consultant and recognized the settlement costs in the second
quarter of 1999. We also incurred in the second quarter of 1999 expenses of
$140,000 relating to the write off of expense advances for former employees.
Legal costs of approximately $500,000 relating primarily to the settlements of
disputes arising from commitments made by former management to lenders, and, to
a lesser extent, the April financings were incurred in the second quarter of
1999. We also recognized during the second quarter of 1999, $170,000 of stock
compensation expense for employee based stock option plans in accordance with
Accounting Principle Board Opinion No. 25 and $200,000 for non employee based
stock option plans in accordance with Financial Accounting Standard No 123.
Skincare and Health and Beauty Sector general and administration expenses for
the second quarter of 1999 totaled $137,000, a decrease of 62.5% from $365,000
in the second quarter of 1998. This is due mainly to the decrease in our
internal administrative activities of the Skincare and Health and Beauty sector
and the set up of licensing arrangements for the Mill Creek and Allercreme
product lines. The majority of the Carme business now involves the supply of
kinetin products to ICN Pharmaceuticals.
General and Administration expenses for the first six months of 1999 totaled
$3,678,000, a decrease of 1.6% from $3,739,000 in the first six months of 1998.
Pharmaceutical Sector general & administration expenses for the first six months
of 1999 totaled $3,010,000, a decrease of 2.7% from $3,094,000 in the first six
months of 1998. We recognized during the first six months of 1999, $324,000 of
stock compensation expense for employee based stock option plans in accordance
with Accounting Principle Board Opinion No. 25 and $420,000 for non employee
based stock option plans in accordance with Financial Accounting Standard No
123.
Skincare and Health and Beauty Sector general and administration expenses for
the first six months of 1999 totaled $668,000, an increase of 3.6% from $645,000
in the first six months of 1998. This is due mainly to the streamlining of the
Skincare and Health and Beauty sector during the first quarter of 1999 and the
establishment of licensing arrangements for the Mill Creek and Allercreme
product lines.
Marketing and Promotion
Marketing and promotion expenses in the second quarter of 1999 totalled
$128,000, an increase of 357% from $28,000 in the second quarter of 1998.
Pharmaceutical Sector marketing and promotion expenses for the second quarter of
1999 were $110,000, an increase of over 500% from virtually no expense in the
second quarter of 1998.
Skincare and Health and Beauty Sector marketing and promotion expenses for the
second quarter of 1999 were $18,000, a decrease of 67.3% from $55,000 in the
second quarter of 1998. The decrease is the result of a more focused marketing
plan coupled with a reduction in product portfolio.
Marketing and promotion expenses in the first six months of 1999 totalled
$219,000, a decrease of 51.0% from $447,000 in the first six months of 1998.
Pharmaceutical Sector marketing and promotion expenses for the first six months
of 1999 were $161,000, a decrease of 50.9% from $328,000 in the first six months
of 1998. The decrease is mainly due to decreased levels of external consulting
as these activities are brought in house.
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<PAGE> 15
Skincare and Health and Beauty Sector marketing and promotion expenses for the
first six months of 1999 were $58,000, a decrease of 51.3% from $119,000 in the
first six months of 1998. The decrease is the result of a more focused marketing
plan coupled with a reduction in the product portfolio as the Skincare product
lines are transferred to licensing arrangements.
Selling
No field selling expenses have been recorded in the second quarter of 1999, a
decrease of $81,000 from the second quarter of 1998. This is due to the
establishment of licensing and distribution arrangements in the Skincare and
Health and Beauty sector coupled with the elimination of direct selling
expenses.
No field selling expenses have been recorded for the first six months of 1999, a
decrease of $234,000 from the first six months of 1998. This is due to the
streamlining of the Skincare and Health and Beauty sector discussed above.
OPERATING LOSS
The operating loss for the second quarter of 1999 totaled $1,893,000, a decrease
of 43.0% from $3,320,000 in the second quarter of 1998.
The operating loss in the pharmaceuticals sector for the second quarter of 1999
totaled $2,663,000, a decrease of 11.9% from $3,020,000 in the second quarter of
1998. This is mainly due to decreased research and development spending as
product development reaches its final stages.
The operating profit in the skincare and health and beauty sector for the second
quarter of 1999 totaled $727,000, an increase of 342% from a loss of $300,000 in
the second quarter of 1998. This was due mainly to sales of kinetin compounds to
ICN Pharmaceuticals and decreased operating spending as marketing activities
become the responsibility of our licensees and distributors.
The operating loss for the first six months of 1999 totaled $4,097,000, a
decrease of 37.6% from $6,567,000 in the first six months of 1998.
The operating loss in the pharmaceuticals sector for the first six months of
1999 totaled $4,406,000, a decrease of 29.0% from $6,206,000 in the first six
months of 1998. This is mainly due to decreased research and development
spending during the period. This is partly offset by the higher levels of
non-recurring general and administrative expense in the second quarter as
discussed above.
The operating profit in the skincare and health and beauty sector for the first
six months of 1999 totaled $302,000, an increase of 184% from a loss of $361,000
in the first six months of 1998. This was due mainly to sales of kinetin
compounds to ICN Pharmaceuticals and decreased operating spend as marketing
activities become the responsibility of our licensees and distributors.
OTHER INCOME AND EXPENSE AND EXTRAORDINARY ITEM
Included in other expense for the second quarter of 1999 is $2.7 million
relating to the fair value of Series A warrants and Ordinary shares issued to
Windsor Capital and others for the settlement of disputes arising from
commitments made by the previous management of the Company.
As discussed in Note 3 to the unaudited financial statements, the Company
refinanced $2.4 million in debt during the second quarter of 1999. The terms of
the refinance represented a substantial modification of the original terms
resulting in a $1.7 million loss.
There were no similar charges in the corresponding periods of 1998.
Taxation
Gross deferred tax assets, which approximate $19.0 million, and relate
periodically to substantial cumulative net operating losses incurred are 100%
reserved as realisation is not considered more probable than not.
15
<PAGE> 16
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of 1999, the Company's liquidity represented by cash
and deposits at banks increased by $1,496,000 to $2,304,000.
Net cash used by operating activities from continuing operations totaled
$3,241,000 in the first six months of 1999, a decrease of $4,440,000 from the
first six months of 1998. The overall decrease was partially attributed to the
$2,014,000 decrease in operating losses adjusted for non cash expenses and
$2,426,000 for changes in working capital.
In April 1999, we entered into a Securities Purchase Agreement with an affiliate
of the investor who originally loaned us $6.6 million in July 1998. The terms of
the agreement are that we receive $4.75 million in cash, net of expenses, and
have re-financed the remaining $2.4 million balance of the original $6.6 million
loan under the old agreement, in exchange for new notes in the aggregate amount
of $7,389,000, bearing interest at 8%. The notes require semi annual payments of
interest only until maturity in April 2002 and are secured by all of Senetek's
assets.
We also received proceeds from options during the six months ended June 30, 1999
of $118,000. This was offset by $113,000 in capital expenditures during the same
period.
History of Losses
Although we were formed almost 16 years ago in October 1983, our business is
subject to the risks inherent in the establishment of a relatively new business
enterprise in the field of biopharmaceuticals.
The likelihood of the success of our business must be considered in the light of
the problems, expenses, difficulties and delays frequently encountered in
connection with the development of new products and the competitive and
regulatory environment in which we are operating. Since inception, the Company
has only produced $22,811,000 in gross revenues and has cumulative losses of
$81,203,000 (including a net loss of $22,492,000 in fiscal 1998).
There can be no assurance that marketing of our biopharmaceutical products will
begin when we anticipate, if at all, or that revenues from our other products,
including Kinetin, will rise to a level that will allow us to operate profitably
during the fiscal year ending December 31, 1999.
With respect to our recurring operating cash losses, we have implemented major
cost reduction programs in 1999 to reduce operating expenses to include:
- In the UK, effective May 31, 1999 we combined two offices into one
with a 55% reduction in staff.
- In the US, further cost savings will occur when we close our St
Louis research facility and combine these operations with our Napa
office during the second half of 1999.
- Effective January 1999 a substantial reduction of costs in the areas
of public relations, advertising and travel.
- In the US, the licensing of our Mill Creek product line in the
second quarter of 1999, enabled us to reduce substantially our Carme
Cosmeceutical Sciences operation, allowing us the opportunity to
sublease 40% of our Napa facilities. The Mill Creek agreements
provide for a non-refundable licensing fee, the purchase of
inventory and guaranteed quarterly royalty payments.
Need for Financing
Our monthly cash requirements have been substantially reduced in 1999 to less
than 50% of the average monthly 1998 rate. The
16
<PAGE> 17
company believes that its current cash position and anticipated revenues from
the sale of its products will provide sufficient cash flow to finance its
operations through fiscal year 1999. The company expects to require additional
sources of liquidity, either through an increase in revenue or external funding
sources to fund its operations during fiscal year 2000. If the company fails to
obtain the necessary external financing or to generate sufficient revenues from
its continuing operations it will be required to curtail its operations. There
can be no assurance that we will generate sufficient revenues in fiscal year
2000 or that we will be able to obtain necessary financing from external
sources. If our cash requirements cannot be successfully addressed, there would
be a material adverse effect on our business, financial condition and results of
operations. Further, our independent auditors report on our 1998 consolidated
financial statements stated that "[Senetek] has suffered recurring losses from
its operations and . . . its ability to continue research activities to a stage
where it has a product able to be commercialised is dependent upon [Senetek's]
ability to continue as a going concern."
FACTORS AFFECTING THE COMPANY
Dependence on Key Personnel
We are dependent upon the services of Mr. Frank Massino, our Chairman and Chief
Executive Officer. If Mr. Massino was unable to provide his services to us for
whatever reason, our business could be adversely affected. Since Mr. Massino is
involved in most aspects of our business, there can be no assurance that a
suitable replacement could be found if he was unable to perform services for us.
In addition, our ability to market our products and fulfill our business plan
will depend, in large part, upon our ability to attract and retain qualified
personnel in our field. Competition for such personnel is intense and there can
be no assurance that we would be able to attract or retain such personnel.
At the present time we have a $1 million key man life insurance policy in effect
on Frank J. Massino our Chairman and Chief Executive Officer.
Product Research and Technological Obsolescence
We are engaged in a field characterized by extensive research efforts. Despite
our current access to leading expertise in the field, there remains a risk that
the research financed by us in the future could prove unproductive. Furthermore,
there can be no assurance that research and discoveries by other companies will
not render our programs superfluous or obsolete. This is true for all companies
who operate in the same field.
Exposure to Liability for the Company's Products
During recent years, lawsuits resulting in very substantial liability have been
filed against companies engaged in the manufacture of pharmaceutical and other
medical-related products or devices which have subsequently proved harmful to
human health. Many of these cases have exposed companies to liability long after
the products have been brought to market, even though, at the time of their
development, based on extensive research, there were no perceived risks of
injury. Thus, notwithstanding FDA or other foreign governmental approval, there
can be no assurance that we will not be subject to liability from the use of our
products. There is no assurance that product liability coverage will be adequate
to protect against future claims. Management intends to have third parties
manufacture and distribute certain of our products and believes that our
exposure to liability will thereby be lessened. However, there can be no
assurance that this result will be achieved.
Reliance on Suppliers
We contract out manufacture of all of our products and purchase raw materials
from third-party suppliers. We recently established a dual supply chain for
kinetin.
Although we believe that other suppliers are available who can produce similar
materials and products, there can be no assurance that such materials would be
available to us on an immediate basis if needed, or at prices similar to those
now paid by us.
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<PAGE> 18
Product Liability Risks of Cosmetics
We are subject to the risk of product liability claims related to the use of our
products which are designed for application to human hair and skin. We carry
product liability insurance which management believes will be adequate to cover
risks associated with such use; however, there can be no assurance that existing
or future insurance coverage will be sufficient to cover any possible product
liability risks or that such insurance will continue to be available to us on
economically feasible terms.
YEAR 2000 COMPUTER SOFTWARE CONVERSION
The Problem
The term "Year 2000 issues" is used to describe the various problems that may
result from the improper processing of dates and date-sensitive calculations by
computers and other machinery as the year 2000 approaches. These problems
generally arise from the fact that most of the world's computer hardware and
software have used only two digits to identify the year in a date, often meaning
that the computer will fail to distinguish dates in the "2000's" from those in
the "1900's." This could result in system failure or miscalculations causing
disruptions of operations including, among other things, a temporary inability
to process transactions, send invoices or engage in similar normal business
activities.
Our State of Readiness
We have instituted a year 2000 project. As a part of this project, we have
completed an initial evaluation of our computer systems and significant software
programs, including our network hardware and operating system and accounting and
business process software, as well as our non-information technology systems. In
anticipation of potential year 2000 system problems, we have begun to replace
our management information systems with a platform designed to be year 2000
compliant. We expect to complete this process in the third quarter of 1999. We
have retained a consulting firm to co-ordinate successful system implementation,
including testing for year 2000-related problems. We will commence testing for
year 2000 compliance upon full implementation of our new system and will
continue this testing throughout 1999. We presently believe that upon completion
of successful system conversions, the year 2000 issue will not pose significant
operational problems for us. However, although our new systems are designed to
be year 2000 compliant, we cannot assure you that the systems contain all
necessary data code changes. If we do not complete our conversions in a timely
fashion, the year 2000 issue could have a material impact on our operations.
As a part of our year 2000 project, we have assessed our products in connection
with year 2000 issues. Our products do not contain any software, date-sensitive
fields or embedded microprocessors; therefore, we do not believe that our
products will present year 2000 issues. We are also in the process of contacting
our vendors and other third parties on which we rely to obtain information about
their year 2000 compliance. We plan to complete these contacts by the end of the
third quarter of 1999. Based on our review of responses we have received to
date, we do not expect this issue to have a material adverse effect on our
business.
The Costs to Address Our Year 2000 Issues
In 1998, we spent approximately $130,000 to address year 2000 issues, including
new hardware, software and networking capabilities. We expect that our
assessment, remediation and contingency planning activities for its internal
systems will be ongoing through 1999. We currently expect the total cost for
these activities to be approximately $20,000 in 1999. This cost estimate does
not include replacement of internal software and hardware in the normal course
of business. We do not believe that these costs will materially affect our
liquidity or financial condition. The costs of our year 2000 project and the
date established for completion of year 2000 modifications are based on our
management's best estimates, which were derived using numerous assumptions of
future events, including the continued availability of certain resources, third
party modification plans and other factors. We cannot guarantee that we will
achieve these estimates; actual results could differ materially from those we
currently anticipate.
The Risks Associated With Our Year 2000 Issues
Our failure to resolve year 2000 issues by December 31, 1999 could result in
system failures or miscalculation, causing disruptions in our operations and
normal business activities. In addition, the failure of our vendors or other
third parties on whom we rely to remediate their year 2000 issues could result
in disruptions in our ability to obtain parts and materials or other problems
related to our daily operations. Since third party year 2000 compliance is not
within our control, and since we have not completed the process of obtaining
18
<PAGE> 19
compliance information from vendors and others, we cannot assure that a vendor's
or other third party's failure to achieve year 2000 compliance would not have a
material adverse effect on our business.
Part II OTHER INFORMATION
Item 1 . Legal Proceedings
On June 11, 1998 we filed a lawsuit against Mad Dogs & Englishmen Inc. and Mad
Dog Enterprises d/b/a Mad Dogs & Englishmen (together "Mad Dogs") in the
Supreme Court of New York. On December 11, 1996 we entered into a written
agreement with Mad Dogs under which Mad Dogs agreed to promote our cosmetics
business and to hire a consultant familiar with the Cosmetics industry in
connection therewith. We are seeking damages of approximately $10 million for a
breach of that agreement. Mad Dogs served us with an answer to our complaint in
August 1998. There have been no substantive developments in the lawsuit since
the filing of the answer to our complaint.
Ronald Trahan Associates, Inc. ("RTA") and Ronald C. Trahan ("Trahan") have
filed a lawsuit against Senetek PLC claiming breach of an alleged contract
between RTA and Senetek. The plaintiff alleges damages approximating $170,000.
The plaintiff also claims a right to treble damages. This breach of contract
claim was filed around January 25,1999 in Middlesex Superior Court in
Massachusetts. On March 8, 1999, we removed the lawsuit to the U.S. District
Court for the District of Massachusetts. We have entered into a settlement
agreement with the plaintiffs dated August 6, 1999 pursuant to which the parties
agreed to release all claims against each other and terminate the lawsuit in
exchange for our payment of $13,500 to RTA and our issuance to Trahan of options
to purchase 60,000 Ordinary shares.
Paul Logan, former Chief Financial Officer and Secretary of Senetek and until
May 1999 a member of our Board of Directors, filed a lawsuit against Senetek on
March 12, 1999 in the United Kingdom's Employment Tribunal. Mr. Logan alleges
that he entered into a verbal agreement with our former Chairman and Chief
Executive Officer under which Mr. Logan was to provide consulting services of
approximately 12 days per year to Senetek for three years beginning on October
1, 1998, in exchange for consulting fees of 109,000 pounds per year, a fully
expensed automobile, health insurance covering Mr. Logan and his spouse and life
insurance. Mr. Logan sought three month's unpaid consulting fees under the
alleged consulting agreement. In April 1999, Senetek filed a dissent with the
Employment Tribunal. We settled the claim in full with Mr. Logan on May 27,1999
for $69,800. At the same time Mr. Logan retired from the Board of Directors.
Item 2. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Securities Purchase Agreement ("Securities Purchase
Agreement") dated April 14, 1999 between Senetek PLC and
the various purchasers designated in the agreement.
10.2 Form of Senior Secured Note due April 14, 2002 issued by
Senetek PLC pursuant to the Securities Purchase
Agreement.
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<PAGE> 20
10.3 Form of Series A Warrant issued by Senetek pursuant to
the Securities Purchase Agreement.
10.4 Form of Series B Warrant issued by Senetek pursuant to
the Securities Purchase Agreement.
10.5 Form of Series C Warrant issued by Senetek pursuant to
the Securities Purchase Agreement.
10.6 Registration Rights Agreement dated as of April 14, 1999
among Senetek PLC and the parties designated therein.
10.7 Security Agreement dated as of April 14, 1999 by and
between Senetek PLC and the parties designated therein.
10.8 Pledge Agreement dated as of April 14, 1999 by and
between Senetek PLC and the parties designated therein.
therein.
10.9 Pledge Agreement dated April 14, 1999 by and between
Senetek Drug Delivery Technologies Inc. and and the
parties designated therein.
10.10 Guaranty dated as of April 14,1999 executed by Senetek
Drug Delivery Technologies Inc. and Carme Cosmeceutical
Sciences Inc.
10.11 Patent and Security Agreement dated as of April 14, 1999
between Senetek PLC and the parties designated therein.
10.12 Fixed and Floating Security Document dated April 14,
1999 executed by Senetek PLC in favour of the Collateral
Agent named therein.
10.13 Settlement Agreement dated April 13, 1999 among Senetek
PLC and the parties named therein.
10.14 Employment Agreement dated April 15, 1999 between
Senetek PLC and Dr. George Van Lear.
27.1 Financial Data Schedule as of and for the three months
ended June 30, 1999.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the second quarter of 1999.
20
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S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
SENETEK PLC
(Registrant)
Date: August 23, 1999 /s/ FRANK J MASSINO
----------------------------------------
Frank J Massino
Chief Executive Officer
Date: August 23, 1999 /s/ STEWART W SLADE
----------------------------------------
Stewart W Slade
Chief Financial Officer
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<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<S> <C>
10.1 Securities Purchase Agreement ("Securities Purchase Agreement")
dated April 14, 1999 between Senetek PLC and the various
purchasers designated in the agreement.
10.2 Form of Senior Secured Note due April 14, 2002 issued by Senetek
PLC pursuant to the Securities Purchase Agreement.
10.3 Form of Series A Warrant issued by Senetek pursuant to the
Securities Purchase Agreement.
10.4 Form of Series B Warrant issued by Senetek pursuant to the
Securities Purchase Agreement.
10.5 Form of Series C Warrant issued by Senetek pursuant to the
Securities Purchase Agreement.
10.6 Registration Rights Agreement dated as of April 14, 1999 among
Senetek PLC and the parties designated therein.
10.7 Security Agreement dated as of April 14, 1999 by and between
Senetek PLC and the parties designated therein.
10.8 Pledge Agreement dated as of April 14, 1999 by and between Senetek
PLC and the parties designated therein. therein.
10.9 Pledge Agreement dated April 14, 1999 by and between Senetek Drug
Delivery Technologies Inc. and and the parties designated therein.
10.10 Guaranty dated as of April 14,1999 executed by Senetek Drug
Delivery Technologies Inc. and Carme Cosmeceutical Sciences Inc.
10.11 Patent and Security Agreement dated as of April 14, 1999 between
Senetek PLC and the parties designated therein.
10.12 Fixed and Floating Security Document dated April 14, 1999 executed
by Senetek PLC in favour of the Collateral Agent named therein.
10.13 Settlement Agreement dated April 13, 1999 among Senetek PLC and
the parties named therein.
10.14 Employment Agreement dated April 15, 1999 between Senetek PLC and
Dr. George Van Lear.
27.1 Financial Data Schedule as of and for the three months ended
June 30, 1999.
</TABLE>
<PAGE> 1
EXHIBIT 10.1
- --------------------------------------------------------------------------------
-------------------------
SENETEK PLC
SECURITIES PURCHASE AGREEMENT
-------------------------
APRIL 14, 1999
<PAGE> 2
TABLE OF CONTENTS
(Not Part of Agreement)
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS................................................................................2
2. AUTHORIZATION OF FINANCING; SETTLEMENT....................................................16
3. PURCHASE AND SALE OF SECURITIES; SETTLEMENT NOTE; CERTAIN REPRESENTATIONS, WARRANTIES
AND AGREEMENTS...........................................................................17
4. CLOSING OF SALE OF SECURITIES.............................................................17
5. CONDITIONS OF CLOSING.....................................................................18
5.1 OPINIONS OF COUNSEL................................................................18
5.2 REPRESENTATIONS AND WARRANTIES; NO DEFAULT.........................................18
5.3 PURCHASE AND LOAN PERMITTED BY APPLICABLE LAWS.....................................18
5.4 NO ADVERSE ACTION OR DECISION......................................................19
5.5 APPROVALS AND CONSENTS.............................................................19
5.6 PROCEEDINGS........................................................................19
5.7 TRANSACTION FEE; LEGAL FEES........................................................19
5.8 COMPLIANCE CERTIFICATE.............................................................20
5.9 NOTE AND WARRANT CERTIFICATES......................................................20
5.10 SECRETARY'S CERTIFICATE; GOOD STANDING.............................................20
5.11 CERTIFICATES.......................................................................20
5.12 OTHER DOCUMENTS AND OPINIONS.......................................................20
6. PREPAYMENT OF THE NOTES...................................................................21
6.1 MANDATORY PREPAYMENT...............................................................21
6.2 OPTIONAL PREPAYMENT................................................................21
6.3 NOTICE OF PREPAYMENT...............................................................21
7. AFFIRMATIVE COVENANTS.....................................................................22
7.1 FINANCIAL STATEMENTS AND OTHER REPORTS.............................................22
7.2 INSPECTION OF PROPERTY.............................................................24
7.3 MAINTENANCE OF PROPERTIES; INSURANCE...............................................24
7.4 CORPORATE EXISTENCE; LIENS.........................................................25
7.5 PAYMENT OF TAXES AND CLAIMS........................................................26
7.6 COMPLIANCE WITH LAWS...............................................................27
7.7 ATTENDANCE AT BOARD MEETINGS.......................................................27
7.8 USE OF PROCEEDS....................................................................27
7.9 INDEPENDENT ACCOUNTANTS............................................................27
7.10 REGULATORY COMPLIANCE..............................................................28
7.11 RESERVATION OF SHARES..............................................................28
7.12 ACCOUNTS AND RECORDS...............................................................28
7.13 KEY MAN LIFE INSURANCE.............................................................28
7.14 EXECUTIVE OFFICERS.................................................................28
7.15 EMPLOYEE BENEFIT PLANS.............................................................29
7.16 FURTHER ASSURANCES.................................................................29
7.17 DELIVERY OF CERTIFICATES ..........................................................29
8. NEGATIVE COVENANTS........................................................................30
8.1 LIMITATION ON LIENS................................................................30
8.2 LIMITATION ON INDEBTEDNESS.........................................................30
8.3 LIMITATION ON RESTRICTED PAYMENTS..................................................30
8.4 LIMITATION ON INVESTMENTS..........................................................30
8.5 TRANSACTIONS WITH AFFILIATES AND DIRECTORS.........................................30
8.6 MERGER, CONSOLIDATION, SALE OR TRANSFER OF ASSETS..................................31
8.7 SALES OF ASSETS....................................................................31
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
8.8 SALE AND LEASEBACK.................................................................32
8.9 AMENDMENT OF BY-LAWS AND CHARTER...................................................32
8.10 LOANS BY THE COMPANY...............................................................32
8.11 CERTAIN CONTRACTS..................................................................32
8.12 NO SUBSIDIARIES....................................................................32
8.13 CHANGE IN BUSINESS.................................................................32
8.14 WITHHOLDING TAXES..................................................................33
8.15 NO PLEDGE OF SUBSIDIARIES' SHARES..................................................33
8.16 CHANGE IN ACCOUNTING POLICIES......................................................33
8.17 DIVIDENDS AND REDEMPTIONS..........................................................34
9. EVENTS OF DEFAULT.........................................................................34
9.1 DEFAULT; ACCELERATION..............................................................34
9.2 OTHER REMEDIES.....................................................................38
10. REPRESENTATIONS AND WARRANTIES............................................................38
10.1 ORGANIZATION; CORPORATE AUTHORITY..................................................38
10.2 AUTHORIZATION......................................................................38
10.3 CAPITAL STOCK AND RELATED MATTERS..................................................39
10.4 CHARTER; BY-LAWS...................................................................40
10.5 SUBSIDIARIES.......................................................................40
10.6 RESERVATION OF SHARES..............................................................40
10.7 LITIGATION.........................................................................41
10.8 COMPLIANCE WITH LAW................................................................41
10.9 OFFERING...........................................................................41
10.10 COMPLIANCE WITH ERISA..............................................................41
10.11 EXCHANGE ACT FILINGS; FINANCIAL STATEMENTS.........................................43
10.12 OUTSTANDING INDEBTEDNESS...........................................................44
10.13 TAXES..............................................................................44
10.14 YEAR 2000 COMPLIANCE...............................................................45
10.15 ENVIRONMENTAL AND OTHER REGULATIONS................................................45
10.16 INVESTMENT COMPANY ACT.............................................................46
10.17 LICENSES, PERMITS AND GOVERNMENTAL APPROVALS.......................................46
10.18 BROKER'S OR FINDER'S COMMISSIONS...................................................47
10.19 COMPLIANCE WITH OTHER INSTRUMENTS AND CONTRACTS....................................47
10.20 INTELLECTUAL PROPERTY..............................................................47
10.21 REAL PROPERTY......................................................................48
10.22 EMPLOYEES..........................................................................49
10.23 INSURANCE..........................................................................49
10.24 TITLE TO ASSETS....................................................................50
10.25 FDA MATTERS........................................................................50
11. REPRESENTATIONS OF THE PURCHASER..........................................................51
11.1 AUTHORIZATION......................................................................51
11.2 PURCHASE ENTIRELY FOR OWN ACCOUNT..................................................51
11.3 ACCREDITED INVESTOR................................................................51
11.4 RESTRICTED SECURITIES..............................................................52
11.5 FURTHER LIMITATIONS ON DISPOSITION.................................................52
11.6 LEGENDS............................................................................53
11.7 CONSENTS...........................................................................53
11.8 DISCLOSURE OF INFORMATION..........................................................53
12. MISCELLANEOUS.............................................................................53
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
12.1 PAYMENTS...........................................................................53
12.2 EXPENSES...........................................................................54
12.3 CONSENT TO AMENDMENTS AND PROCEDURE FOR COVENANT WAIVER............................54
12.4 FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES.....................55
12.5 PERSONS DEEMED OWNERS..............................................................56
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.......................56
12.7 SUCCESSORS AND ASSIGNS.............................................................57
12.8 DISCLOSURE TO OTHER PERSONS........................................................57
12.9 NOTICES............................................................................57
12.10 GOVERNING LAW......................................................................58
12.11 SECTION 151(1) OF THE COMPANIES ACT 1985 (UNITED KINGDOM)..........................59
12.12 SEVERABILITY.......................................................................59
12.13 CONSTRUCTION.......................................................................59
12.14 COUNTERPARTS.......................................................................60
12.15 REPRESENTATIVE OF THE PURCHASERS...................................................60
</TABLE>
iii
<PAGE> 5
SCHEDULES
Schedule 1 - Purchaser Information
Schedule 8.8 - Sale and Leaseback
Schedule 10.1 - Qualification
Schedule 10.3 - Capital Stock
Schedule 10.5 - Subsidiaries
Schedule 10.7 - Litigation
Schedule 10.10 - ERISA
Schedule 10.12 - Indebtedness
Schedule 10.14 - Conflicting Agreements
Schedule 10.15 - Environmental Matters
Schedule 10.17 - Permits
Schedule 10.19 - Compliance
Schedule 10.20 - Intellectual Property
Schedule 10.21(a) - Owned Real Property
Schedule 10.21(b) - Leased Real Property
Schedule 10.22 - Employees
Schedule 10.23 - Insurance
Schedule 10.25 - Pending Drug Applications
EXHIBITS
Exhibit A - Form of Senior Secured Note
Exhibit B - Form of Series A Warrant Certificate
Exhibit C - Form of Legal Opinion of Company Counsel
Exhibit D - Registration Rights Agreement
Exhibit E - Security Agreement
Exhibit F - Pledge Agreement
Exhibit G - Guaranty
Exhibit H - Patent and Trademark Security Agreement
Exhibit I - U.K. Security Agreement
Exhibit J - Form of Series B Warrant Certificate
Exhibit K - Form of Series C Warrant Certificate
v
<PAGE> 6
SECURITIES PURCHASE AGREEMENT, dated as of April 14, 1999, by and between
Senetek PLC, a corporation organized under the laws of England (the "Company"),
and the Purchasers set forth on Schedule 1 hereto (the "Purchasers")
WHEREAS, the Company and Windsor Capital Management, Ltd. ("Windsor") are
parties to a Credit Agreement dated as of April 28, 1998, as the same may have
been amended (the "Credit Agreement"), pursuant to which Windsor has extended to
Senetek a line of credit in the amount of $10,000,000;
WHEREAS, prior to the date of this Agreement, the Company borrowed an
aggregate amount of $6,600,000 under the Credit Agreement, of which $2,388,750
remained outstanding and unpaid immediately prior to the execution of this
Agreement (the "Borrowing");
WHEREAS, the Company, the Purchasers, Windsor and certain other parties
have entered into an agreement dated as of April 13, 1999 (the "Settlement
Agreement") pursuant to which, among other things, Windsor has assigned to the
Purchasers all of its rights under the Credit Agreement, including its right to
receive payment from the Company of the Borrowing (collectively, the "Credit
Agreement Rights"), as well as all right, title and interest in and to 2,105,715
of the Company's Ordinary Shares, 5 pence par value ("Ordinary Shares")
previously issued by the Company upon the exercise of certain warrants (the
"Previously Issued Shares");
WHEREAS, upon the return to the Company by or on behalf of Windsor of
certificates representing the Previously Issued Shares, the Company will cancel
the certificates and reissue certificates representing the Previously Issued
Shares in the names of the Purchasers in the respective amounts set forth
opposite each Purchaser's name on Schedule 1 hereto;
WHEREAS, the Company desires, upon the terms and conditions hereinafter
provided to issue the Notes and the Warrants, each as hereinafter defined, to
the Purchasers;
WHEREAS, the Purchasers desire, upon the terms and conditions hereinafter
provided, to acquire from the Company the Notes and Warrants;
<PAGE> 7
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and conditions contained herein, the parties hereto hereby agree as follows:
1. DEFINITIONS.
For the purpose of this Agreement the following terms shall have the
meanings specified with respect thereto below:
"Accounts Receivable" shall mean, with respect to the Company,
all present and future accounts, receivables, all rights to payment for goods
sold or leased or for services rendered or work performed that are not evidenced
by an instrument or chattel paper (whether or not earned by performance),
chattel paper, notes, drafts and other forms of obligations and other
instruments and documents, whether now or hereafter owed to or owned or acquired
by the Company or in which the Company has or may hereafter have any interest or
right, all sums of money or other proceeds due or to become due thereon, all
guaranties and security therefor, and all goods and rights represented thereby
or arising therefrom, including but not limited to, the right of stoppage in
transit, replevin and reclamation.
"Affiliate" shall mean, with respect to any Person, any other
Person (i) which directly or indirectly controls, is controlled by, or is under
direct or indirect common control with, such Person, (ii) which directly or
indirectly, of record or beneficially, owns or holds ten percent (10%) or more
of the shares of any class of capital stock of such Person, or (iii) ten percent
(10%) or more of the shares of such stock of which are owned or held, directly
or indirectly, of record or beneficially, by such Person. A Person shall be
deemed to control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such other Person, whether through the ownership of voting
securities, by contract or otherwise. All officers and directors of a Person
shall be deemed to be an Affiliate of that Person.
"Authorized Representative" means any of the President or any
Vice President of the Company or, with respect to financial matters, the chief
financial officer of the Company, or any other Person expressly designated by
the Board of Directors of the Company (or the appropriate committee thereof) as
an Authorized Representative of the Company.
2
<PAGE> 8
"Bankruptcy Law" shall have the meaning specified in clause (vii)
of Section 9.1.
"Business Day" shall mean any day other than a Saturday, a Sunday
or a day on which commercial banks in New York City are required or authorized
to be closed.
"Capital Leases" means all leases which have been or should be
capitalized in accordance with GAAP as in effect from time to time including
Statement No. 13 of the Financial Accounting Standards Board and any successor
thereof.
"Capital Stock" shall mean any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock.
"Change of Control" shall mean any transaction or series of
related transactions whereby any one Person or "group" within the meaning of
Rule 13d-5(b)(1) under the Securities Exchange Act of 1934, as amended, who as
of the date of this Agreement beneficially own, directly or indirectly, in the
aggregate, less than 30% of the Ordinary Shares on a fully diluted basis,
outstanding as of the date hereof, after giving effect to such transaction(s),
beneficially own, directly or indirectly, in the aggregate, 30% or more of the
Ordinary Shares on a fully diluted basis on any date.
"Closing Date" shall mean the date and time of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended, and
any regulations promulgated thereunder.
"Commission" shall mean the United States Securities and Exchange
Commission or any governmental body or agency succeeding to the functions
thereof.
"Company" shall have the meaning specified in the Preamble.
"Contract" shall mean any mortgage, indenture, contract or
agreement to which the Company or any Subsidiary is a party.
3
<PAGE> 9
"CSA" shall mean the United States Comprehensive Drug Abuse
Prevention and Control Act of 1970, as may be amended from time to time.
"Default" shall have the meaning specified in this paragraph 11
under the definition of "Event of Default".
"Dollars" and the symbol "$" means dollars constituting legal
tender for the payment of public and private debts in the United States of
America.
"Employee Benefit Plan" shall have the meaning specified in
Section 10.10.
"Environmental Claim" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter or other communication from any
Governmental Authority, or any third party involving violations of Environmental
Laws or Releases.
"Environmental Laws" shall mean any and all laws, statutes,
ordinances, rules, regulations, orders, or determinations of any governmental
authority pertaining to health or the environment in effect in any and all
jurisdictions in which the Company is conducting or at the time has conducted
business, including, without limitation, the Clean Air Act, as amended, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, the Federal Water Pollution Control Act, as amended, the Resource
Conservation and Recovery Act of 1976, as amended the Occupational Safety and
Health Act of 1970, as amended, the Safe Drinking Water Act, as amended, the
Toxic Substances Control Act, as amended, the Superfund Amendments and
Reauthorization Act of 1986, as amended, and other environmental, conservation
or protection laws.
"Environmental Liabilities" means any monetary obligations,
losses, damages, punitive damages, consequential damages, treble damages, costs
and expenses (including all reasonable out-of-pocket fees, disbursements and
expenses of counsel, out-of-pocket expert and consulting fees and out-of-pocket
costs for environmental site assessments, remedial investigation and feasibility
studies), fines, penalties,
4
<PAGE> 10
sanctions and interest incurred as a result of any Environmental Claim filed by
any Governmental Authority or any third party which relate to any environmental
condition, remedial action, Release or threatened Release from or onto (i) any
facility presently or formerly owned by the company or a predecessor in
interest, or (ii) any facility which received Hazardous Materials generated by
the Company or a predecessor in interest, or (ii) any facility which received
Hazardous Materials generated by the Company or a predecessor in interest.
"Environmental Permit" means any permit, license, notice, order,
approval or other authorization under any applicable law, rule, regulation or
other requirement of the United States or of any state, municipality or other
subdivision thereof required by any Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" shall mean each trade or business (whether or
not incorporated) which together with the Company as of any relevant measuring
date under ERISA or the Code, is treated as a "single employer" under section
414 of the Code and the regulations promulgated thereunder; provided that in no
event shall any Purchaser or any Affiliate of any Purchaser be deemed to be an
ERISA Affiliate for purposes of this Agreement.
"Event of Default" shall mean any of the events specified in
Section 9.1, provided that there has been satisfied any requirement in
connection with such event for the giving of notice, or the lapse of time, or
the happening of any further condition, event or act, and "Default" shall mean
any of such events, whether or not any such requirement has been satisfied.
"FDCA" shall mean the United States Federal Food, Drug and
Cosmetic Act, as may be amended from time to time.
"GAAP" or "Generally Accepted Accounting Principles" means
generally accepted accounting principles, being those principles of accounting
set forth in pronouncements of the Financial Accounting Standards Board, the
American Institute of Certified Public Accountants or which have other
substantial authoritative support and are applicable in the circumstances as of
the date of a report.
5
<PAGE> 11
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guaranty" shall have the meaning set forth in Section 5.14
hereof.
"Hazardous Materials" means (a) any element, compound, or
chemical that is defined, listed or otherwise classified by a Governmental
Authority as a contaminant, pollutant, toxic pollutant, toxic or hazardous
substances, extremely hazardous substance or chemical, hazardous waste, medical
waste, biohazardous or infectious waste, special waste, or solid waste under
Environmental Laws; (b) petroleum and its refined products; (c) polychlorinated
biphenyls; (d) any substance exhibiting a hazardous waste characteristic as
defined in 40 C.F.R. 261.21-.24; and (e) any raw materials, building components,
including but not limited to asbestos-containing materials and manufactured
products, containing Hazardous Materials.
"Holder of a Note or Warrant" shall mean the person in whose name
the Note or Warrant is registered on the books and records of the Company.
"Indebtedness" shall mean, with respect to the Company and any
Subsidiary the principal of (and premium, if any, on) and unpaid interest on the
following:
(i) indebtedness for money borrowed from another person
whether secured or unsecured;
(ii) indebtedness guaranteed, directly or indirectly, in
any manner by the Company and any Subsidiary, or in effect guaranteed,
directly or indirectly, by the Company and any Subsidiary, through an
agreement, contingent or otherwise, to supply funds to or in any manner
invest in the debtor or to purchase indebtedness, or to purchase
property or services primarily for the purpose of enabling the debtor to
make payment of the indebtedness or of assuring the owner of the
indebtedness against loss (whether by direct guaranty, suretyship,
discount, endorsement, take-or-pay
6
<PAGE> 12
agreement, agreement to purchase or advance or keep in funds or other
agreement having the effect of a guarantee);
(iii) all indebtedness secured by any mortgage, lien,
pledge, charge or other encumbrance upon property or assets owned by the
Company and any Subsidiary, even if the Company and any Subsidiary, has
not in any manner become liable for the payment of such indebtedness;
(iv) all indebtedness of the Company and any Subsidiary,
created or arising under any conditional sale, capital lease or other
title retention agreement with respect to property or assets acquired by
the Company and any Subsidiary, even though the rights and remedies of
the seller, lessor or lender under any such agreement or capital lease
in the event of default are limited to repossession or sale of such
property or assets; and
(v) renewals, extensions and refundings of any or all of
such indebtedness.
"Indebtedness for Money Borrowed" means with respect to any
Person, without duplication, all indebtedness in respect of money borrowed,
including without limitation all Capital Leases and the deferred purchase price
of any property or asset, evidenced by a promissory note, bond, debenture or
similar written obligation for the payment of money (including conditional sales
or similar title retention agreements), other than trade payables incurred in
the ordinary course of business.
"Intellectual Property Rights" means, as to any Person, that
Person's Patents and Patent Applications, Trademarks, licenses and trade/brand
names, and including without limitation all logos and designs, trade secrets,
technical information, proprietary rights, engineering procedures, designs,
know-how and processes, software, copyrights and other intellectual property.
"Inventory Financing" shall mean Indebtedness arising from an
agreement for the financing of inventory entered into in the ordinary course of
business between the Company or any of its Subsidiaries and a bank or financial
institution experienced in providing financing of inventory.
7
<PAGE> 13
"Investment" in any Person shall mean all investments by stock
purchase, capital contribution, loan, advance, guarantee of any indebtedness or
creation or assumption of any other liability in respect of any indebtedness of
such Person.
"Investment Notes" shall have the meaning set forth in Section 2
hereof.
"IRS" shall mean the Internal Revenue Service of the United
States.
"Knowledge," "best knowledge" and similar phrases, when used with
respect to the Company or any of its Subsidiaries, shall mean the actual
knowledge after due inquiry of the Company's Chief Executive Officer, President,
Chief Financial Officer or Executive Vice President of Operations.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
lease in the nature thereof and the filing of or agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction).
"Material Adverse Effect" shall mean a material adverse effect on
the business, condition (financial or otherwise), assets, properties or
operations of the Company and its Subsidiaries, taken as a whole.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA which is maintained for any employees or former
employees of the Company or any ERISA Affiliates.
"Notes" shall mean the Senior Secured Notes due 2002 (together
with any such notes which may be issued hereunder in substitution or exchange
thereof) of the Company to bear interest on the unpaid balance thereof from the
date of issue until the principal thereof shall become due and payable at the
rate of 8.0% per annum (accruing daily and payable quarterly in arrears) and on
overdue principal, premium and interest at the rate specified therein, and be
stated to mature on April 13, 2002, issued pursuant to Section 2 hereof.
8
<PAGE> 14
"Obligations" shall mean the obligations, liabilities and
Indebtedness of the Company with respect to (i) the principal, interest and all
other amounts owed pursuant to the terms of the Notes and (ii) the payment and
performance of all other obligations, liabilities and Indebtedness of the
Company to the Purchaser, under any one or more of the Transaction Documents
other than the Warrants.
"Officers' Certificate" shall mean a certificate signed in the
name of the Company by its Chief Executive Officer, President or one of its Vice
Presidents and by its Chief Financial Officer, Treasurer or Controller.
"Ordinary Shares" shall mean the Company's ordinary shares, (5p)
par value per share.
"Patent and Patent Applications" shall mean, as to any Person,
all of such Person's right, title and interest in and to all of its now owned or
existing and filed and hereinafter acquired or arising and filed patents and
patent applications, inventions and improvements thereto, and (a) the reissues,
divisions, continuations, renewals, extensions, and continuations, in-part
thereof, (b) all income, royalties, damages and payments now or hereafter due
and/or payable under or with respect thereto, including without limitation
damages and payments for past or future infringements thereof, (c) the right to
sue for past, present and future infringements thereof, (d) all rights
corresponding thereto throughout the world, and (e) all right as licensor or
licensee with respect to any of the foregoing.
"Patent and Trademark Security Agreement" shall have the meaning
set forth in Section 5.12 hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
corporation or governmental body or agency succeeding to the functions thereof.
"Pension Plan" shall mean an employee pension benefit plan within
the meaning of section 3(2) of ERISA, maintained or contributed to by the
Company or an ERISA Affiliate, and which is subject to Section 412 of the Code.
"Permitted Acquisition" means an acquisition by the Company or
its Subsidiaries of assets or capital stock or other
9
<PAGE> 15
ownership interest in a Person provided that (a) the Person to be (or whose
assets are to be) acquired does not oppose such acquisition and the line or
lines of business of the Person to be acquired are substantially the same as one
or more line or lines of business conducted by the Company and its Subsidiaries;
(b) the Person acquired shall be a wholly-owned Subsidiary, or be merged into
the Company or a wholly-owned Subsidiary, immediately upon consummation of the
acquisition (or if assets are being acquired, the acquiror shall be the Company
or a wholly-owned Subsidiary); (c) if the cost of Acquisition shall be financed
with cash consideration in excess of $1,000,000, the Purchaser shall consent to
such Acquisition in their discretion; provided, that the aggregate purchase
price for such acquisitions consummated during any twelve month period for less
than $1,000,000 shall not exceed $3,000,000; and (d) no Default or Event of
Default shall have occurred and be continuing either immediately prior to or
immediately after giving effect to such acquisition.
"Permitted Indebtedness" shall mean
(i) purchase money Indebtedness and Indebtedness arising
from Receivables Financing, Inventory Financing and Indebtedness under
capital leases entered into in the ordinary course of business;
(ii) the Indebtedness represented by the Notes;
(iii) Indebtedness used to finance the cost of Permitted
Acquisitions;
(iv) Indebtedness with terms substantially similar to that
represented by the Notes not to exceed $15,000,000 in the aggregate,
provided such Indebtedness is issued on a pari passu basis with the
Notes;
(v) Any extension, renewal, refunding or refinancing of
Indebtedness permitted in (i), (ii), (iii) or (iv) above without any
increase in the principal or commitment amount thereof and on terms, in
the aggregate, no less favorable to the Company, as the case may be,
than the terms of such debt prior to such extension, renewal, refunding
or refinancing;
10
<PAGE> 16
(vi) Indebtedness between wholly-owned Subsidiaries and
the Company;
(vii) Unsecured Indebtedness which is expressly
subordinated to the Notes in payment of principal and interest and in
all other respects; and
(viii) Indebtedness secured by Permitted Liens.
"Permitted Liens" shall mean, as to the property, personal, real,
tangible and intangible, of any Person:
(i) Other Liens in existence on the Closing Date listed on
Schedule 8.1 hereto;
(ii) Purchase money Liens upon or in any plant, machinery
or equipment acquired after the Closing Date by the Company to secure a
portion of the purchase price of such plant, machinery or equipment or
to secure Indebtedness incurred solely for the purpose of financing the
acquisition of such plant, machinery or equipment and Liens incurred in
connection with Inventory Financing and Receivables Financing;
(iii) Liens existing on any plant, machinery or equipment
at the time of its acquisition whether by merger, consolidation,
purchase of assets, or otherwise;
(iv) Liens incurred to refinance existing secured
obligations permitted by clauses (i) through (iii) above;
(v) Liens incurred or pledges and deposits in connection
with workers' compensation, unemployment insurance and other social
security benefits, or securing the performance of bids, tenders, leases,
contracts (other than for the repayment of borrowed money), statutory
obligations, progress payments, surety and appeal bonds and other
obligations of like nature, incurred in the ordinary course of business;
(vi) Liens imposed by law, such as mechanics' carriers'
warehousemen's, materialmen's, supplier's and vendors' in good faith by
appropriate proceedings which have
11
<PAGE> 17
the effect of staying any action to foreclose or to obtain a judgment to
enforce such Liens;
(vii) zoning restrictions, easements, licenses, covenants,
reservations restrictions on the use of real property or minor
irregularities of title incident thereto which do not in the aggregate
materially impair the use of such property in the operation of the
businesses of such Person;
(viii) Liens for taxes or assessments not yet due or which
are being contested in good faith for which adequate reserves have been
established in accordance with GAAP.
"Person" shall mean and include an individual, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
"Pledge Agreement" shall have the meaning set forth in Section
5.12 hereof.
"Prohibited Transaction" shall mean any "prohibited transaction"
(within the meaning of Section 406 of ERISA or 4975 of the IRC) with respect to
any Employee Benefit Plan for which transaction no statutory or administrative
exemption is available.
"Receivables Financing" shall mean Indebtedness arising from an
agreement for the financing of account receivables entered into in the ordinary
course of business between the Company or any of its Subsidiaries and a bank or
financial institution experienced in providing financing of receivables.
"Registration Rights Agreement" shall have the meaning set forth
in Section 5.12 hereof.
"Release" means any spilling, leaking, pumping, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of
Hazardous Materials (including the abandonment or discarding of barrels,
containers or other closed receptacles containing Hazardous Materials) into the
environment.
"Requirements of Environmental Law" means any and all regulations
imposed by and provisions of any law, rule,
12
<PAGE> 18
regulation, order, decision or decree of any federal, state or local executive,
legislative, judicial, regulatory or administrative agency, board or authority
which relate to (i) pollution, contamination, protection, cleanup, restoration,
destruction, loss or injury to or of the air, surface water, groundwater, land
(including, without limitation, surface and subsurface strata) or other natural
resources; (ii) solid, gaseous or liquid waste generation, handling,
transportation, treatment, processing, cleanup, storage, disposal, recycling, or
reclamation; (iii) exposure to pollutants, contaminants, Hazardous Materials,
hazardous substances, toxic materials or substances, or wastes; (iv) the safety
or health of employees (other than social security laws); (v) the manufacture,
generation, processing, distribution, use, treatment, storage, disposal,
transport, recycling, reclamation or handling of chemical substances,
pollutants, contaminants, Hazardous Materials, hazardous substances, toxic
materials or substances, or wastes; or (vi) noise.
"Restricted Investment" means an Investment in any Person other
than (i) an Investment by the Company or any Wholly- Owned Subsidiary of the
Company in a Wholly-Owned Subsidiary of the Company, subject, in the case of any
such Investments that constitute debt, to the provisions of Section 8.2; (ii)
loans or advances made in the ordinary course of business to employees of the
Company and its Subsidiaries for travel and like expenses; (iii) Investments in
direct obligations of the United States of America or obligations of any
instrumentality or agency thereof, the payment of which is unconditionally
guaranteed by the United States of America; (iv) negotiable certificates of
deposit issued by any commercial bank or trust company organized under the laws
of the United States of America or any state thereof having capital and surplus
of not less than $100,000,000; (v) readily marketable commercial paper rated A-1
by Standard & Poor's Corporation or Prime-1 by NCO/Moody's Commercial Paper
Division of Moody's Investor Services, Inc. (all of which Investments shall be
payable in U.S. dollars in the United States of America and shall have
maturities not in excess of twelve months); and (vi) Permitted Acquisitions.
"Restricted Payment" shall mean (i) any dividend on, or any
distribution of property or cash in respect of, any shares of Capital Stock of
the Company or any Subsidiary or the incurrence of any liability in respect
thereof, and (ii) any payment or distribution of property or cash on account of
the redemption,
13
<PAGE> 19
purchase, retirement or other acquisition of any shares of Capital Stock of the
Company or any Subsidiary or any warrant, option or other right to purchase or
acquire any shares of Capital Stock of the Company or any Subsidiary, other than
the exercise of the Warrants.
"Securities" shall have the meaning specified in Section 2.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Security Agreement" shall have the meaning set forth in Section
5.12 hereof.
"Series A Warrants" shall mean warrants to purchase an aggregate
of 3,000,000 Ordinary Shares, subject to adjustment, at an exercise price of
$1.50 per Ordinary Share, subject to adjustment.
"Series B Warrants" shall mean warrants to purchase an aggregate
of 3,333,333 Ordinary Shares, subject to adjustment, at an exercise price of
$1.50 per Ordinary Share, subject to adjustment.
"Series C Warrants" shall mean warrants to purchase an aggregate
of 1,194,285 Ordinary Shares, subject to adjustment, at an exercise price of
$2.00 per Ordinary Share, subject to adjustment.
"Settlement Notes" shall have the meaning set forth in Section 2
hereof.
"Significant Holder" shall mean as long as the Notes are
outstanding any holder holding at least 25% of the principal amount of the Notes
outstanding from time to time (it being agreed that two or more investment funds
which have the same investment manager shall be treated as one holder for this
purpose).
"Substantial Part" shall mean, as of any date, assets (i) having
a net book value equal to or in excess of 10% of the assets of the Company and
its Subsidiaries, taken as a whole (determined in accordance with United States
GAAP) or (ii) which have provided 10% or more of consolidated net revenue
(defined in
14
<PAGE> 20
accordance with GAAP) of the Company and its Subsidiaries in the most recent
fiscal year of the Company.
"Subsidiary" shall mean, with respect to the Company, any
corporation or similar entity, a majority of the Capital Stock or other equity
of which shall, at the time as of which any determination is being made, be
owned by the Company either directly or through Subsidiaries.
"Termination Event" shall mean (i) a "Reportable Event" described
in 4043 of ERISA and the regulations issued thereunder, but not including any
such event for which the 30 day notice requirement has been waived by applicable
PBGC regulation; or (ii) the withdrawal of the Company or any ERISA Affiliate
from a Pension Plan during a plan year in which it was a "substantial employer"
as defined in Section 4001(a)(2) of ERISA; or (iii) the filing of a notice of
intent to terminate a Pension Plan or the treatment of a Pension Plan amendment
as a termination under Section 4041 of ERISA; or (iv) the institution of
proceedings to terminate a Pension Plan by the PBGC; or (v) the complete or
partial withdrawal of the Company or an ERISA Affiliate from a Multiemployer
Plan; or (vi) an event occurs which requires the Company or an ERISA Affiliate
to provide security to a Pension Plan within the meaning of Section 401(a)(29)
of the Code; or (vii) the imposition of a lien pursuant to Section 412 of the
Code or Section 302 of ERISA; or (viii) any event or condition which results in
the reorganization or insolvency of a Multiemployer Plan under Section 4241 or
Section 4245 of ERISA; or (ix) any other event or condition which might
reasonably be expected to constitute grounds under ERISA for the termination by
the PBGC of, or the appointment of a trustee to administer any Pension Plan.
"Trademarks" means, as to any Person, all of such Person's right,
title and interest in and to all of its now owned or existing and filed, and
hereafter acquired or arising and filed, trademarks, service marks, trademark or
service mark registration, trade names, trademark rights, trade name rights and
trademark or service mark applications, and (a) the reissues, divisions,
continuations, renewals, extensions and continuations-in-part thereof, (b) all
income, royalties, damages and payments now or hereafter due and/or payable with
respect thereto, including, without limitation, damages and payment for past or
future infringements thereof, (c) the right to sue for past, present and future
infringements thereof, (d) all rights
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corresponding thereto throughout the world, (e) all rights as licensor or
licensee with respect to any of the foregoing, and (f) together with each case
with the goodwill of such Person's business connected with the use of, and
symbolized by any of the foregoing.
"Transaction Documents" shall mean, collectively, this Agreement,
the Notes, the Warrants, the Registration Rights Agreement, the Security
Agreement, the U.K. Security Agreement, the Pledge Agreement, the Guaranty and
the Patent and Trademark Security Agreement, the Copyright Security Agreement
and all exhibits and schedules thereto and hereto.
"U.K. Security Agreement" shall have the meaning set forth in
Section 5.12 hereof.
"Warrants" shall have the meaning specified in Section 2.
"Warrant Shares" shall mean the shares of Ordinary Shares
issuable upon the exercise of the Warrants.
"Wholly-Owned Subsidiary" as applied to any Subsidiary, shall
mean a Subsidiary all of the outstanding shares of every class of Capital Stock
of which are at the time owned by or for the benefit of the Company or by one or
more Wholly-Owned Subsidiaries or by the Company and one or more Wholly-Owned
Subsidiaries.
2. AUTHORIZATION OF FINANCING; SETTLEMENT. (a) In order to provide funds
for working capital for the Company and its Subsidiaries, the Company has
authorized the issue, sale and delivery of (i) Notes in the aggregate principal
amount of $5,000,000, substantially in the form of Exhibit A attached hereto
(the "Investment Notes") to the Purchasers in accordance with Schedule 1; (ii)
500,000 Series A Warrants; and (iii) 3,333,333 Series B Warrants.
(b) In addition, the Company will issue on the Closing Date to
the Purchasers in accordance with Schedule 1, (i) Notes in the aggregate
principal amount of $2,388,570, which shall be substantially in the form of
Exhibit A attached hereto (the "Settlement Notes"); (ii) 238,857 Series A
Warrants; (iii) 2,261,143 Series A Warrants and (iv) 1,194,285 Series C
Warrants.
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(c) The Series A Warrants, Series B Warrants and Series C
Warrants shall be evidenced by warrant certificates substantially in the forms
of Exhibit B, Exhibit I and Exhibit J, respectively, attached hereto (the
"Warrant Certificates") and are collectively referred to herein as the
"Warrants".
(d) As used herein, the term "Securities" means the Investment
Notes, the Settlement Notes and the Warrants issued pursuant to this Section 2.
3. PURCHASE AND SALE OF SECURITIES; SETTLEMENT NOTE; CERTAIN
REPRESENTATIONS, WARRANTIES AND AGREEMENT. Subject to the terms and conditions
herein set forth, the Company hereby agrees to sell to the Purchasers and the
Purchasers agree to purchase from the Company $5,000,000 in aggregate principal
amount of the Investment Notes, together with 500,000 Series A Warrants and
3,333,333 Series B Warrants in the respective amounts set forth opposite their
names on Schedule 1 hereto, represented by one or more Notes or Warrant
Certificates in the appropriate form attached hereto as an Exhibit, registered
in the Purchaser's name or that of the Purchasers' nominee, as the Purchaser
shall request, and, in the case of the Investment Notes, in such denominations
as the Purchasers shall request. In addition, in connection with the
transactions provided for in the Settlement Agreement, the Company hereby agrees
to issue the Settlement Notes and the Series A and Series C Warrants described
in Section 2(b) hereof to the Purchasers in the respective amounts set forth
opposite their names on Schedule 1 hereto, represented by one or more Notes or
Warrant Certificates in the appropriate form attached hereto as an Exhibit. Each
Purchaser hereby agrees that the issuance of the Settlement Notes and the Series
A and Series C Warrants to the Purchasers pursuant hereto shall satisfy in full
all of the obligations of the Company under the Credit Agreement, including,
without limitation, the obligation of the Company to repay the Borrowing, and
(ii) upon issuance of the Settlement Notes and Series A and Series C Warrants to
the Purchasers pursuant hereto, the Credit Agreement shall be deemed to be
terminated and of no further force or effect.
4. CLOSING OF SALE OF SECURITIES. The purchase and delivery of the
Securities shall take place at the offices of Pryor Cashman Sherman & Flynn LLP,
410 Park Avenue, New York, New York 10022 (the "Closing") to be held on April
14, 1999, or at
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such other place or on such other date as the Purchasers and Company may agree
upon. At the Closing, the Company will deliver (i) the Investment Notes, 500,000
Series A Warrants and 3,333,333 Series B Warrants to the Purchasers, against
payment of the purchase price therefor by transfer of immediately available
funds in the amount of $5,000,000 to such bank or other financial institution as
the Company shall direct in writing for credit to the Company's account, and
(ii) the Settlement Notes, 238,857 Series A Warrants, 2,261,143 Series A
Warrants and 1,194,285 Series C Warrants to the Purchasers in full satisfaction
of all obligations of the Company under the Credit Agreement. If at the Closing
the Company shall fail to tender to the Purchaser any of the Securities or any
of the conditions specified in Section 5 shall not have been satisfied or waived
by the Purchasers, the Purchasers shall, at the Purchasers' election, be
relieved of all further obligations under this Agreement, without thereby
waiving any other rights the Purchaser may have by reason of such failure or
such non-fulfillment.
5. CONDITIONS OF CLOSING. The Purchasers' obligation to purchase and pay
for the Securities is subject to the satisfaction prior to or at the Closing of
the following conditions:
5.1 OPINIONS OF COUNSEL. The Purchasers shall have received from
Latham & Watkins, United States counsel for the Company and Trowers and Hamlins,
English counsel to the Company, opinions covering the matters contained in the
opinion form set forth in Exhibit C attached hereto, addressed to the Purchaser
dated the date of the Closing and otherwise satisfactory in substance and form
to the Purchaser.
5.2 REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The
representations and warranties of the Company contained in this Agreement and
the Transaction Documents, shall be true and correct when made and at the time
of the Closing as though made at such time, and the Company shall have performed
or complied with the covenants, conditions and agreements contained in this
Agreement and the Transaction Documents required to be performed and complied
with by the Company at or prior to the Closing; and there shall exist at the
time of the Closing and after giving effect to such transactions no Event of
Default or Default.
5.3 PURCHASE AND LOAN PERMITTED BY APPLICABLE LAWS. The purchase
of and payment for the Securities shall not violate
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any applicable law or governmental regulation (including, without limitation,
Section 5 of the Securities Act) and shall not subject the Purchaser to any tax,
penalty, liability or other onerous condition under or pursuant to any
applicable law or governmental regulation or order.
5.4 NO ADVERSE ACTION OR DECISION. There shall be no action,
suit, investigation, or proceeding pending, or to the Company's knowledge,
threatened, before any court, arbitrator or administrative or governmental body
which (i) seeks to restrain, enjoin, prevent the consummation of the
transactions contemplated by this Agreement or (ii) questions the validity or
legality of any such transactions or seeks to recover damages or to obtain other
relief in connection with any such transactions.
5.5 APPROVALS AND CONSENTS. The Company shall have duly received
all authorizations, waivers, consents, approvals, licenses, franchises, permits
and certificates (collectively, "Consents") by or of all United States federal,
state and local governmental authorities and all United Kingdom and other
foreign governmental authorities and all Consents by or of all other Persons
necessary for the issuance of the Securities and all such Consents shall be in
full force and effect at the time of Closing and copies thereof shall be
delivered to the Purchaser at the Closing.
5.6 PROCEEDINGS. All proceedings taken or to be taken in
connection with the transactions contemplated hereby, and all documents incident
thereto shall be reasonably satisfactory in form and substance to the Purchaser
and its special counsel, and the Purchaser and its special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as the Purchaser or its special counsel may reasonably request.
5.7 TRANSACTION FEE; LEGAL FEES. (a) Scorpion Holdings LLC shall
have received payment in full of USD $75,000 representing the transaction fee
referred to in Section 12.2 hereof.
(b) Pryor Cashman Sherman & Flynn LLP, special counsel
to the Purchaser, shall have received payment of its fees and expenses referred
to in Section 12.2 hereof.
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5.8 COMPLIANCE CERTIFICATE. The Purchaser shall have received an
Officers' Certificate, dated the Closing Date, certifying that the conditions
specified in this Article 5 required to be fulfilled on the Closing Date have
been fulfilled.
5.9 NOTE AND WARRANT CERTIFICATES. The Company shall have
delivered to the Purchasers the Investment Notes, Series A Warrants, Series B
Warrants, the Settlement Notes and the Series C Warrants, as required by Section
2 hereof.
5.10 SECRETARY'S CERTIFICATE; GOOD STANDING. The Company and each
Subsidiary shall have delivered to the Purchaser (i) a certificate of its
corporate secretary or assistant secretary as to (A) resolutions of its Board of
Directors approving and authorizing the execution, delivery and performance of
each of the Transaction Documents to which it is a party and, in the case of the
Company, authorizing the issuance and delivery of the Notes and Warrants, as
being in full force and effect without modification or amendment and (B) its
Certificate of Incorporation (or equivalent organizational document) and By-Laws
and all amendments thereto to the Closing Date as being in full force and
effect; with true, correct and complete copies of such resolutions, Certificates
of Incorporation (or equivalent organizational document)and By-laws (or
equivalent document) attached thereto, and (ii) an incumbency certificate of its
officers executing this Agreement and any other Transaction Documents to which
it is a party, (iii) a certificate of subsistence and/or good standing of the
Company and each Subsidiary, dated as of the Closing Date, issued by the
Companies House of the United Kingdom and the Secretary of State of California,
and of each other jurisdiction in which the Company and any Subsidiary is
qualified to do business.
5.11 CERTIFICATES. The Company shall have delivered a certificate
of its Chief Financial Officer certifying that the Company is in compliance with
all covenants under all existing credit facilities of the Company.
5.12 OTHER DOCUMENTS AND OPINIONS. The Purchaser shall have
received each of the following documents, duly executed by the Company and, if
applicable, each Subsidiary: (i) the Registration Rights Agreement,
substantially in the form of Exhibit D hereto (the "Registration Rights
Agreement"), (ii) the Security Agreement, substantially in the form of Exhibit E
hereto
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(the "Security Agreement"), (iii) the Pledge Agreement, substantially in the
form of Exhibit F hereto (the "Pledge Agreement"), (iv) a Guaranty,
substantially in the form of Exhibit G hereto from each Subsidiary ("Guaranty"),
(v) the Patent and Trademark Security Agreement, substantially in the form of
Exhibit H hereto ("Patent and Trademark Security Agreement") and (vi) the Fixed
and Floating Security Document, substantially in the form of Exhibit I hereto
(the "U.K. Security Agreement").
6. PREPAYMENT OF THE NOTES. The Notes shall be subject to prepayment as
provided below.
6.1 MANDATORY PREPAYMENT. Upon the occurrence of (a) any
registered underwritten public offering of any class or classes of Capital Stock
of the Company, (b) the sale of all or substantially all of the assets of the
Company (c) a merger or consolidation involving the Company in which the Company
is not the surviving entity or (d) a Change of Control, then all of the
principal amount of Notes then outstanding shall be immediately and indefeasibly
prepaid in full, together with all accrued and unpaid interest thereon and any
other amounts owing in connection therewith;
6.2 OPTIONAL PREPAYMENT. Subject to Section 6.3 and 6.4, the
Notes shall, in accordance with their terms, be subject to prepayment, without
penalty, in full or in part at any time at the option of the Company, together
with all accrued and unpaid interest thereon and any other amounts owing in
connection therewith.
6.3 NOTICE OF PREPAYMENT. The Company shall give the holder of
each Note written notice of its intent to prepay such Note pursuant to Section
6.1 or 6.2 hereof not less than 15 Business Days prior to the prepayment date as
specified in the notice ("Prepayment Notice"). Notice of prepayment having been
given as aforesaid, the principal amount of the Notes to be prepaid, together
with all accrued and unpaid interest thereon to the prepayment date, shall
become due and payable on such prepayment date. All payments received by the
holders of the Note, shall be applied in the following manner: first, in payment
of any amounts owing under the Notes other than principal and interest, second,
in respect of any accrued and unpaid interest on the Notes to the repayment
date, and third, in payment of principal under the Notes.
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7. AFFIRMATIVE COVENANTS. The Company covenants that from and after the
date of this Agreement and thereafter so long as any Notes remain outstanding,
as follows:
7.1 FINANCIAL STATEMENTS AND OTHER REPORTS. The Company covenants
that it will deliver, or cause to be delivered, to each holder of the Notes:
(i) promptly upon transmission thereof, (a) copies of all
such financial statements, proxy statements, quarterly reports, annual
reports, notices and all other reports as the Company or any Subsidiary
shall send to its security holders or directors, (b) copies of all
reports (and all registration statements) which the Company or any
Subsidiary, files with the Commission or the NASDAQ Stock Market or any
securities exchange or automated quotation system on which any
securities of the Company may be listed or quoted, (c) copies of all
press releases and other statements made generally available by the
Company or any Subsidiary to the public concerning material developments
in the business of the Company or any Subsidiary, and (d) to the
Significant Holders, copies of all notices of default, term sheets that
have been agreed to by the Company or any Subsidiary and commitment
letters received from any lender to the Company or any Subsidiary, and
copies of all minutes of meetings of the Company's or any Subsidiary's
Board of Directors or any Committee thereof, in each case as the
Significant Holders may reasonably request;
(ii) within 45 days after the end of each fiscal quarter
and within 90 days after the end of each fiscal year, a certificate of
the Chief Financial Officer of the Company stating that the signer has
reviewed the terms of this Agreement and the Securities and has made, or
caused to be made under his supervision, a review in reasonable detail
of the transactions and condition of the Company and its Subsidiaries
during the fiscal period covered by such financial statements and that
such review has not disclosed the existence during or at the end of such
fiscal period, and that the signer does not have knowledge of the
existence, as at the date of the certificate of the Chief Financial
Officer, of any condition or event which constitutes a Default or Event
of Default or, if any such condition or
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event existed or exists, specifying the nature and period of existence
thereof and what action, if any, the Company has taken or is taking or
proposes to take with respect thereto.
(iii) with reasonable promptness upon the Company or any
Subsidiary obtaining knowledge (a) of any condition or event which
constitutes a Default or Event of Default, (b) that the holder of any
Note has given any notice or taken any other action with respect to a
claimed Default or Event of Default under this Agreement, (c) of any
condition or event which, in the opinion of management of the Company,
would have a Material Adverse Effect, (d) that any Person has given any
notice to the Company or any Subsidiary or taken any other action with
respect to a claimed default or event or condition of the type referred
to in Section 9.1(ii) or (e) of the institution of any litigation
involving claims against the Company or any of its Subsidiaries equal to
or greater than $200,000 with respect to any single cause of action or
of any adverse determination in any litigation involving a potential
liability to the Company or any of its Subsidiaries equal to or greater
than $200,000 with respect to any single cause of action, an officers'
certificate specifying the nature and period of existence of any such
condition or event, or specifying the notice given or action taken by
such holder or Person and the nature of such claimed Default, Event of
Default, event or condition, and what action, if any, the Company has
taken, is taking or proposes to take with respect thereto; and
(iv) copies of all relevant documentation as soon as
reasonably practicable after the Company or any ERISA Affiliate first
becomes aware of the occurrence of (a) the establishment of a new
Employee Benefit Plan, the commencement of contributions to any Employee
Benefit Plan to which the Company or any ERISA Affiliate was not
previously contributing, any Employee Benefit Plan amendment providing
for a material increase in the aggregate benefits provided under any
existing Employee Benefit Plans, each funding waiver request filed with
respect to any Employee Benefit Plan and all communications received or
sent by the Company or any ERISA Affiliate with respect to such request
and the failure of the Company or any ERISA Affiliate to make a required
installment or payment under Section 302 of ERISA or Section 412 of the
Code by the due date; (b) any Termination
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Event, any Prohibited Transaction, along with a notice specifying the
nature thereof, what action the Company or any ERISA Affiliate has
taken, is taking or proposes to take with respect thereto and when
known, any action taken or threatened by the IRS, the Department of
Labor or the PBGC with respect thereto; or (c) any unfavorable
determination letter from the IRS regarding the qualification of an
Employee Benefit Plan under Section 401(a) of the Code, the institution
of proceedings or the taking or expected taking of action by the PBGC or
the Company or any ERISA Affiliate to terminate any Pension Plan
(including the filing or intent to file a notice to terminate any
Pension Plan under a distress termination within the meaning of Section
4041(c) of ERISA) or have a trustee appointed to administer any Pension
Plan or withdraw or partially withdraw from any Multiemployer Plan; each
Schedule B (actuarial report) to the annual report (Form 5500 Series)
filed by the Company or any ERISA Affiliate with the IRS with respect to
each Pension Plan; all notices received by the Company or any ERISA
Affiliate from a Multiemployer Plan sponsor concerning the imposition or
amount of withdrawal liability pursuant to Section 4002 of ERISA.
7.2 INSPECTION OF PROPERTY. The Company and each Subsidiary will
permit any Person or Persons designated by the Purchasers in writing, subject to
the execution by that Person or Persons of a confidentiality agreement
reasonably satisfactory to the Company, to visit and inspect any of the
properties of the Company or any Subsidiary, to examine the books and financial
records of the Company or any Subsidiary and all scientific information and
data, and make copies thereof or extracts therefrom and to discuss its affairs,
finances and accounts with its officers and its independent public accountants,
all at such reasonable times and as often as the Purchaser may reasonably
request. The Company shall pay the reasonable, out-of-pocket expenses incurred
by the Purchasers for one such visit by one Person per calendar year; provided,
however, that if an Event of Default (as defined herein) has occurred and is
continuing, the Company shall reimburse the Purchasers for all such expenses for
an unlimited number of such visits.
7.3 MAINTENANCE OF PROPERTIES; INSURANCE. The Company and each
Subsidiary will maintain or cause to be maintained in good repair, working order
and condition all properties used or
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useful in the business of the Company or any Subsidiary and which are material
to the conduct of the business of the Company and the Subsidiaries, taken as a
whole, and from time to time will make or cause to be made all appropriate
repairs, renewals and replacements thereof and additions and improvements
thereto; and the Company and each Subsidiary at all times will comply with each
provision of all leases to which it is a party or pursuant to which it occupies
property and which are material to the conduct of the business of the Company
and the Subsidiaries, taken as a whole. The Company and each Subsidiary will
maintain or cause to be maintained, with financially sound and reputable
insurers, which shall have the same or higher rating by A.M. Best Co. (or
another nationally recognized insurance rating agency of similar standing if
A.M. Best Co. is not then in the business of rating insurers) as the insurers
insuring the Company's assets on the date hereof, (or, as to workers'
compensation or similar insurance, in an insurance fund or by self-insurance
authorized by the laws of the jurisdiction in question), insurance with respect
to their respective properties and businesses which are material to the conduct
of the business of the Company and the Subsidiaries, taken as a whole, against
loss or damage from fire, explosion or other risks customarily insured against
by corporations of established reputation engaged in the same or similar
businesses and similarly situated, of such type and in such amounts as are
customarily carried under similar circumstances by such other corporations and
as are sufficient to prevent the Company from becoming a co-insurer within the
terms of the policies in question. The Company shall provide 30 days prior
written notice to the holders of the Notes prior to the termination of any such
insurance policy by the Company or of which the Company has received notice from
the insurer. The Company, in its discretion, will use the proceeds of all such
casualty insurance policies to (i) repay the debt evidenced by the Notes on a
pro rata basis, or (ii) repair or replace the damaged property. The Company
agrees to pay in a timely manner any and all premiums required to maintain such
policies in full force and effect.
7.4 CORPORATE EXISTENCE; LIENS. (a) Except as set forth on
Schedule 7.4 hereto, the Company will, and will cause each Subsidiary to, at all
times preserve and keep in full force and effect its corporate existence, and
rights, licenses, franchises, trademarks, tradenames, patents and other
proprietary information material to the business of the Company and the
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Subsidiaries taken as a whole, and will qualify and cause each Subsidiary to
qualify to do business in any jurisdiction where the ownership of property or
the operation of its business makes such qualification necessary, except where
the failure to so qualify would not have a Material Adverse Effect.
(b) As soon as practicable but no later than ninety (90) days of
the Closing, the Company will deliver to each of the Purchasers a certificate of
good standing of the Company from the Secretary of State of the States of
California and Missouri.
(c) As soon as practicable but no later than ninety (90) days of
the Closing, the Company will provide the Significant Holders with evidence that
the Liens previously held by Bank of New York and Michigan National Bank against
a Subsidiary of the Company have been discharged.
(d) As soon as practicable but no later than thirty (30) days of
the Closing, the Company will provide the Significant Holders with the results
of lien searches performed in the following jurisdictions: Buffalo County,
Nebraska, and Macomb County, Michigan. As soon as practicable but no later than
ninety (90) days of the delivery to the Significant Holders of the
above-mentioned lien searches for each of the above jurisdictions, the Company
will provide the Significant Holders with evidence that any Liens other than
Permitted Liens found on such lien searches have been discharged.
7.5 PAYMENT OF TAXES AND CLAIMS. Except as set forth on Schedule
7.5 hereto, the Company will, and will cause each Subsidiary to, promptly pay
and discharge, when due and payable, all material taxes, assessments and other
governmental charges imposed upon them or any of their respective properties or
assets or in respect of any of their respective franchises, business income or
properties before any penalty or interest accrues thereon, and all material
claims (including, without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by law have or
may become a Lien upon any of their properties or assets; provided, that no such
charge or claim need be paid if being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and if such accrual or
other appropriate provision, if any, as shall be required by GAAP shall have
been made therefor.
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7.6 COMPLIANCE WITH LAWS. The Company will, and will cause its
Subsidiaries to, comply in all respects with the requirements of all applicable
laws, rules, regulations and orders of any court or other governmental authority
except where a failure to do so would not have a Material Adverse Effect. The
Company, at its expense, will promptly upon request make all state securities or
"blue sky" filings as may be necessary or appropriate in connection with the
issuance of Ordinary Shares hereunder or upon exercise of the Warrants.
7.7 ATTENDANCE AT BOARD MEETINGS. For so long as any of the Notes
are outstanding, the Company shall and will cause each Subsidiary to (i) give
the Purchasers written or other notice of any meeting of the Company's or each
Subsidiary's Board of Directors and any committees thereof at the time and in
the manner that such notice thereof is given to members of its Board of
Directors or such committee, and shall permit Kevin McCarthy, as representative
of the Purchasers (or any other person designated by the Purchasers as their
representative and approved by the Company, which approval shall not be
unreasonably withheld), to attend as an observer and in person (at the Company's
expense) or, in the case of meetings held by telephonic conference call, by
telephone, each meeting of the Company's or a Subsidiary's Board of Directors
and committees thereof, and (ii) deliver to the Purchaser, concurrently with the
delivery thereof to Board members, any written communication including, without
limitation, financial information, directed to members of the Company's or its
Subsidiary's Board of Directors.
7.8 USE OF PROCEEDS. The Company shall use all of the proceeds
received from the sale of the Securities pursuant to this Agreement as follows
(i) the payment of closing costs associated with the closing under this
Agreement and (ii) all remaining amounts for general corporate purposes of the
Company.
7.9 INDEPENDENT ACCOUNTANTS. The Company's financial statements
for the year ended December 31, 1998 have been or are being audited by BDO
Seidman. In the event the services of BDO Seidman or any firm of independent
public accountants hereafter employed by the Company are terminated, the Company
will promptly thereafter notify the Significant Holders and will request the
firm of independent public accountants whose services are terminated to deliver
to the Significant Holders a letter of such firm setting forth the reasons for
the termination of their
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services. In its notice, the Company shall state whether the change of
accountants was recommended or approved by the Board of Directors or any
committee thereof. In the event of any such termination, the Company will
promptly thereafter engage another nationally recognized firm of independent
public accountants or, if the Company is unable through commercially reasonable
efforts to retain a nationally recognized firm of independent public
accountants, another firm of independent public accountants reasonably
acceptable to the Significant Holders.
7.10 REGULATORY COMPLIANCE. The Company and each Subsidiary will
timely make all filings required to be made by it by all relevant federal, state
or local regulatory bodies except where failure to do so would not have a
Material Adverse Effect.
7.11 RESERVATION OF SHARES. The Company shall at all times keep
reserved and available for issuance the number of Ordinary Shares necessary for
issuance upon exercise of all of the Warrants (as such number may be adjusted or
changed pursuant to the terms of the Warrants).
7.12 ACCOUNTS AND RECORDS. The Company and each Subsidiary will
keep true records and books of account in which full, true and correct entries
will be made of all dealings or transactions in relation to its business and
affairs.
7.13 KEY MAN LIFE INSURANCE. The Company shall have obtained as
of the Closing Date from a financially sound and reputable insurer, a "key man"
life insurance policy with respect to Frank J. Massino in an amount equal to at
least $1,000,000, and any proceeds (after payment of applicable taxes) received
by the Company thereunder shall be applied to repay the debt evidenced by the
Notes on a pro rata basis.
7.14 EXECUTIVE OFFICERS. The Company covenants that Frank J.
Massino will continue as an executive officer of the Company; provided, however,
that the failure of such person to continue as an executive officer of the
Company shall not be deemed a breach of this covenant if, within six (6) months
of such individual's ceasing to serve as an executive officer, such individual's
position is filled or responsibilities are assumed by an individual reasonably
acceptable to the Significant Holders.
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7.15 EMPLOYEE BENEFIT PLANS. The Company will and will continue
to cause each of its ERISA Affiliates to (a) comply in all material respects
with all requirements imposed by ERISA, the Code and all other laws and the
regulations thereof, applicable from time to time to any of its Employee Benefit
Plans, (b) make full payment when due of all amounts which, under the provisions
of such Employee Benefit Plans or under applicable law, are required to be paid
as contributions thereto, including any payments or contributions to
Multiemployer Plans required to be made under any agreement relating to such
Multiemployer Plans, or under any law pertaining thereto, (c) not permit to
exist, with respect to any Pension Plan, any material accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, (d) not permit the actuarial present value of all benefit
liabilities under any Pension Plan to be less than the current value of the
assets of such Pension Plans allocable to such benefit liabilities, (e) not
permit the occurrence of a Termination Event which would result in a liability
on the part of the Company or any ERISA Affiliate to the PBGC, (f) not engage in
any Prohibited Transaction, (g) not establish, or amend or otherwise alter any
Employee Benefit Plan if such establishment or amendment could result in a
material liability to the Company or any ERISA Affiliate or increase the
material obligation of the Company or any ERISA Affiliate to a Multiemployer
Plan or permit the establishment of any Employee Benefit Plan providing
post-retirement welfare benefits or (h) take no action which would reasonably be
expected to cause any of the Employee Benefit Plans to fail to meet any
applicable qualification requirement imposed by the Code.
7.16 FURTHER ASSURANCES. From time to time the Company will
execute and deliver such other instruments, certificates, agreements and
documents and will take such other action and do all other things as may be
reasonably requested by the Significant Holders in order to implement or
effectuate the terms and provisions of this Agreement.
7.17 Delivery of Certificates. As soon as practicable after the
return to the Company by or on behalf of Windsor of certificates representing
the 1,885,715 Ordinary Shares, the Company will cancel the certificates and
reissue certificates representing the Previously Issued Shares in the names of
the Purchasers in the respective amounts set forth opposite each Purchaser's
name on Schedule 1 hereto.
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8. NEGATIVE COVENANTS. The Company covenants and agrees that from and
after the date of this Agreement through the Closing and thereafter so long as
any Notes remain outstanding, as follows:
8.1 LIMITATION ON LIENS. The Company will not, and will not
permit any Subsidiary to, create, assume or suffer to exist any Lien upon any of
its properties or assets, whether now owned or hereafter acquired, except
Permitted Liens.
8.2 LIMITATION ON INDEBTEDNESS. The Company will not and will not
permit any Subsidiary to, create, incur, assume, suffer to exist or otherwise
become or be liable with respect to any Indebtedness, except Permitted
Indebtedness.
8.3 LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and
will not permit any Subsidiary to, directly or indirectly, pay or declare or set
apart for payment any Restricted Payment.
8.4 LIMITATION ON INVESTMENTS. The Company will not, and will not
permit any Subsidiary to, make or obligate itself to make, directly or
indirectly, any Restricted Investment.
8.5 TRANSACTIONS WITH AFFILIATES AND DIRECTORS. The Company will
not, and will not permit any Subsidiary to, directly or indirectly, enter into
any transaction with any Affiliate of the Company (other than the granting of
stock options, or the exercise thereof, pursuant to the Company's existing share
option scheme or pursuant to any other incentive plan approved by a majority of
members of the Board of Directors of the Company) if such transaction involves
in excess of $100,000, unless such transaction is approved by a majority of the
non-employee directors of the Company. Transactions with Affiliates involving
less than $100,000 may be entered into, provided (i) such transaction is on an
arm's length basis on terms which are no less favorable to the Company or any
Subsidiary than would by the case with a similar transaction with an
unaffiliated Person or (ii) such transaction is approved by a majority of the
non-employee directors of the Company.
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8.6 MERGER, CONSOLIDATION, SALE OR TRANSFER OF ASSETS. The
Company will not, and will not permit any Subsidiary to, be a party to any
merger or consolidate with any Person, acquire any other company or invest in,
or purchase, any stock, security or evidence of indebtedness of any other
enterprise or individual, or sell, lease or transfer or otherwise dispose of all
or substantially all of its assets to any Person, provided, however, that the
Company may engage in any of the following transactions provided that that
immediately after giving effect to any such transaction or transactions, no
condition or event shall exist which constitutes a Default or an Event of
Default: (i) the merger of any Wholly-Owned Subsidiary of the Company into the
Company or a Wholly-Owned Subsidiary of the Company if the Company or such
Wholly-Owned Subsidiary, as the case may be, shall be the surviving corporation,
(ii) the sale, lease, transfer or other disposition of any of the assets of any
Wholly-Owned Subsidiary of the Company to the Company or to any other
Wholly-Owned Subsidiary of the Company, whether by dissolution, liquidation or
otherwise, (iii) Permitted Acquisitions, (iv) the sale of the Allercreme(R)
product line, (v) the sale of the Silver Fox(R) product line, (vi) the sale of
the Mill Creek(R) product line, and (vii) the sale, lease, transfer or other
disposition of any assets of any Wholly-Owned Subsidiary of the Company to the
Company or to any other Wholly-Owned Subsidiary of the Company.
8.7 SALES OF ASSETS. The Company will not, and will not permit
any Subsidiary of the Company to, sell, lease, transfer or otherwise dispose of,
in a single transaction or a series of related transactions, any assets,
directly or through the sale of Capital Stock or other equity of a Subsidiary of
the Company, other than (i) sales of inventory in the ordinary course of
business, (ii) sales of obsolete capital equipment in arms-length transactions
in the ordinary course of business, where the proceeds of such capital equipment
sales are immediately reinvested in the Company, (iii) sales during any fiscal
year of assets of the Company having a value (as determined in good faith by the
Board of Directors) of less than $150,000.00, (iv) the sale of the Allercreme(R)
product line, (v) the sale of the Silver Fox(R) product line, (vi) the sale of
the Mill Creek(R) product line, and (vii) the sale, lease, transfer or other
disposition of any assets of any Wholly-Owned Subsidiary of the Company to the
Company or to any other Wholly-Owned Subsidiary of the Company.
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8.8 SALE AND LEASEBACK. Except as set forth on Schedule 8.8, the
Company will not, and will not permit any Subsidiary to, enter into any
arrangement with any lender or investor or to which such lender or investor is a
party providing for the leasing by the Company or a Subsidiary of any real or
personal property (i) which has been or is to be sold or transferred by the
Company or any Subsidiary to such lender or investor or to any Person to whom
funds have been or are to be advanced by such lender or investor on the security
of such property or rental obligations of the Company or any Subsidiary or (ii)
which has been or is to be acquired from another Person by such lender or
investor, or on which one or more buildings have been or are to be constructed
by such lender or investor, for the purpose of leasing such property to the
Company or such Subsidiary.
8.9 AMENDMENT OF BY-LAWS AND CHARTER. Neither the Company nor any
Subsidiary shall amend its By-Laws or its Certificate of Incorporation (or
equivalent organizational document) in any manner that would have an adverse
effect on the interests the holders of the Notes and/or Warrants.
8.10 LOANS BY THE COMPANY. Neither the Company nor any Subsidiary
shall make any loans or advances to, or enter into any arrangement for the
purpose of providing funds or credit to, any officer, director, employee or
other person, other than reasonable advances to directors, officers and/or
employees for reasonable travel and other normal business expenses relating to
the business of the Company or such Subsidiary.
8.11 CERTAIN CONTRACTS. The Company will not, and will not permit
any Subsidiary to, enter into or be a party to any contract or agreement which
would constitute a breach of the covenants of the Company set forth in this
Agreement or the Transaction Documents.
8.12 NO SUBSIDIARIES. Neither the Company nor any Subsidiary will
create any new Subsidiaries.
8.13 CHANGE IN BUSINESS. Neither the Company nor any Subsidiary
will enter into or engage in any business other than the business currently
engaged in by the Company and any such Subsidiary as of the date hereof.
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8.14 WITHHOLDING TAXES. (a) Unless otherwise required by law, the
Company will not withhold United States withholding taxes from payments to be
made to holders of Notes if such holders (i) are corporations organized under
the laws of a jurisdiction outside the United States or are otherwise persons
not resident in the United States for U.S. federal income tax purposes, and (ii)
provide the Company, upon the Company's reasonable request, with one or more of
Internal Revenue Service Form W-8, Form 4224 or other applicable form,
certificate or document prescribed by the Internal Revenue Service certifying as
to such holders' entitlement to an exemption from any such withholding
requirements.
(b) Unless otherwise required by law, the Company will
not withhold United States withholding taxes from payments to be made to holders
of Notes in excess of an applicable treaty rate if such holders (i) are
corporations organized under the laws of a jurisdiction outside the United
States or are otherwise persons not resident in the United States for U.S.
federal income tax purposes, and (ii) provide the Company upon the Company's
reasonable request, with one or more of certification of their residence
address, Internal Revenue Service Form 1001 or other applicable form,
certificates or documents certifying as to such holders' entitlement to a
reduced rate of withholding under any such withholding requirements.
(c) Neither Section 8.14(a) nor Section 8.14(b) hereof
shall require the Company to apply an exemption or reduced rate of withholding
during any period when it shall have received notice or has knowledge that (i)
the residence or other information previously provided on any applicable form,
certificate or document is incorrect and no corrected form, certificate or
document as applicable has been provided to the Company, or (ii) of any other
information which would render such exemption or reduced rate inapplicable.
8.15 NO PLEDGE OF SUBSIDIARIES' SHARES. The Company will not
mortgage, pledge, hypothecate or create or permit to exist any security interest
in, or lien on, any shares of the Capital Stock of any Subsidiary, except
pursuant to the Transaction Documents.
8.16 CHANGE IN ACCOUNTING POLICIES. Except as set forth in
Schedule 8.16 hereto, neither the Company nor any of its
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Subsidiaries shall change its accounting policies, except in accordance with
changes mandated by GAAP.
8.17 DIVIDENDS AND REDEMPTIONS. Neither the Company nor any of
its Subsidiaries shall (a) declare, pay or make any dividend or other
distribution of assets, properties, cash, rights, obligations or Capital Stock
on account of, or redeem, retire, purchase or otherwise acquire, directly or
indirectly, any shares of its Capital Stock, or (b) make any payments
(including, without limitation, prepayments) of principal of, or retire, redeem,
purchase or otherwise acquire any Indebtedness, other than with respect to the
Notes or any scheduled payments of Permitted Indebtedness.
9. EVENTS OF DEFAULT.
9.1 DEFAULT; ACCELERATION. If any of the following events shall
occur and be continuing for any reason whatsoever (and whether such occurrence
shall be voluntary or involuntary or come about or be effected by operation of
law or otherwise):
(i) the Company defaults in the payment of any principal
of or interest on any Note when the same shall become due, either by the
terms thereof or otherwise as herein provided, and such default
continues for ten (10) days; or
(ii) the Company or any Subsidiary (a) breaches any of the
terms of or defaults under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any Subsidiary or
(b) fails to perform or observe any other agreement, term or condition
contained in any agreement under which any Indebtedness is created and
the effect of such failure or other event is to cause, or to permit the
holder or holders of such Indebtedness to cause such debt in a principal
amount in excess of $100,000 to become due prior to any stated maturity
date; or
(iii) any representation or warranty made in writing by or
on behalf of the Company or any Subsidiary in this Agreement or any of
the Transaction Documents, shall be false or misleading in any respect
on the date as of which made; or
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(iv) the Company or any Subsidiary fails perform or
observe any agreement contained in clause (iii) of Section 7.1 or
Section 8; or
(v) the Company or any material Subsidiary fails to
perform or observe any other agreement, term or condition contained in
this Agreement or any of the Transaction Documents, and such failure
shall not have been remedied within 30 days after such failure shall
first have become known to the Chief Executive Officer, President, Chief
Financial Officer or Executive Vice President of Operations of the
Company or such Subsidiary or written notice shall have been received by
the Company (regardless of the source of such notice); or
(vi) the Company or any material Subsidiary makes an
assignment for the benefit of creditors or is generally unable to pay
its debts as such debts become due; or
(vii) any order or decree for relief in respect of the
Company or any material Subsidiary is entered under any bankruptcy,
reorganization, compromise, arrangement, insolvency, readjustment of
debt, dissolution or liquidation or similar law, whether now or
hereafter in effect (herein called the "Bankruptcy Law"), of any
jurisdiction; or
(viii) the Company or any material Subsidiary petitions or
applies to any tribunal for, or consents to, the appointment of, or
taking possession by, a trustee, receiver, custodian, liquidator or
similar official of the Company or any material Subsidiary, or of any
Substantial Part of the assets of the Company or any material
Subsidiary, or commences a voluntary case under the Bankruptcy Law of
the United States or any proceedings (other than proceedings for the
voluntary liquidation and dissolution of a Subsidiary) relating to the
Company or any material Subsidiary under the Bankruptcy Law of any other
jurisdiction; or
(ix) any such petition or application is filed, or any
such proceedings are commenced, against the Company or any Subsidiary
and such petition, application or proceeding is unstayed or undismissed
within 60 days, or any such petition or application is filed, or any
such proceedings are
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commenced against the Company or any material Subsidiary and the Company
or such Subsidiary by any act indicates its approval thereof, consent
thereto or acquiescence therein, or an order, judgment or decree is
entered appointing any such trustee, receiver, custodian, liquidator or
similar official, or approving the petition in any such proceedings, and
such order, judgment or decree remains unstayed and in effect for more
than 60 days; or
(x) any order, judgment or decree is entered in any
proceedings against the Company or any material Subsidiary decreeing the
dissolution of the Company or such Subsidiary and such order, judgment
or decree remains unstayed and in effect for more than 60 days; or
(xi) any order, judgment or decree is entered in any
proceedings against the Company or any Subsidiary decreeing a split-up
of the Company or such Subsidiary which requires the divestiture of a
Substantial Part, or the divestiture of the stock of a Subsidiary, the
assets of which constitute a Substantial Part, of the assets of the
Company and its Subsidiaries, taken as a whole, and such order, judgment
or decree remains unstayed and in effect for more than 60 days; or
(xii) a final judgment, the payment of which is not
covered by existing insurance policies, in an amount in excess of
$200,000 is rendered against the Company or any Subsidiary and, within
60 days after entry thereof, such judgment is not discharged or
execution thereof stayed pending appeal, or within 60 days after the
expiration of any such stay, such judgment is not discharged;
(xiii) the Company defaults under any of the material
terms of the Transaction Documents;
(xiv) there shall occur a cessation of a Substantial Part
of the business of the Company and/or any of its Subsidiaries for a
period which significantly affects the Company's and/or any of its
Subsidiaries' capacity to continue their businesses, or the Company or
any Subsidiary shall suffer the loss or revocation of any material
certificate, license or permit, now held or hereafter acquired by the
Company or any Subsidiary, which is necessary
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to the continued or lawful operation of a Substantial Part of their
businesses; or the Company or any Subsidiary shall be enjoined,
restrained or in any way prevented by court, governmental or
administrative order from conducting all or any Substantial Part of
their business affairs for a period of 30 days; or any lease or
agreement pursuant to which the Company or any Subsidiary leases, uses
or occupies any of its respective real or personal property shall be
canceled or terminated by the other party to such lease or agreement
prior to the expiration of its stated term which individually or in the
aggregate which would have a Material Adverse Effect; or
(xv) any Termination Event shall occur and as of the date
hereof or any subsequent date, the sum of the various liabilities of the
Company and its ERISA Affiliates (such liabilities to include, without
limitation, any liability to the PBGC (or any successor thereto) or to
any other party under Section 4062, 4063, or 4064 of ERISA or any other
provision of law resulting from or otherwise associated with such event)
exceeds $200,000 or the Company or any of its ERISA Affiliates as an
employer under any Multiemployer Plan shall have made a complete or
partial withdrawal from such Multiemployer Plan and the plan sponsors of
such Multiemployer Plan shall have notified such withdrawing employer
that such employer has incurred a withdrawal liability requiring a
payment in an amount exceeding $200,000.
then (a) if such event is an Event of Default specified in clause (viii), (ix)
or (x) of this Section 9.1, all of the Notes at the time outstanding shall
automatically become due and payable at par, together with interest accrued
thereon, (b) if such event is an Event of Default specified in Section 9.1(i),
any holder may, at such holder's option, by notice in writing to the Company,
declare the Notes held by such holder to be, and all of such holder's Notes
shall thereupon be and become, immediately due and payable at par together with
interest accrued thereon, and (c) if such event is any Event of Default other
than under (i), (viii), (ix) or (x) of this Section 9.1, the Purchaser may, at
its option, by notice in writing to the Company, declare all of the Notes to be,
and all of the Notes shall thereupon be and become, immediately due and payable
at par, together with interest accrued thereon. Each amount that becomes payable
pursuant to this
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Section 9.1 shall become due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Company, except
where notice is specifically required by the terms of this Agreement; provided,
however, that if, at any time after the principal of the Notes shall so become
due and payable prior to the date of maturity stated in such Notes, all arrears
of scheduled payments of principal and interest on such Notes shall be paid by
or for the account of the Company, the Purchaser, by written notice or notices
to the Company, may waive such Event of Default and its consequences and rescind
or annul such declaration, but no such waiver shall extend to or affect any
subsequent Event of Default or impair any right resulting therefrom.
9.2 OTHER REMEDIES. No remedy conferred in this Agreement upon
the holder of any Note is intended to be exclusive of any other remedy available
to such holder, and each and every such remedy shall be cumulative and shall be
in addition to every other remedy conferred herein or now or hereafter existing
at law or in equity or by statute or otherwise.
10. REPRESENTATIONS AND WARRANTIES. Except as set forth on Schedule 10.1
hereto, the Company represents and warrants for the benefit of each holder from
time to time of Notes and/or Warrants, as of the date hereof and as of Closing
and after giving effect to the transactions contemplated by this Agreement, as
follows:
10.1 ORGANIZATION; CORPORATE AUTHORITY. Except as set forth on
Schedule 10.1, each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to own and operate its properties and to carry on its business as
presently conducted and as proposed to be conducted after the Closing Date. Each
of the Company and its Subsidiaries is duly qualified and in good standing as a
foreign corporation duly authorized to do business in each jurisdiction where it
is or will be on the Closing Date required so to qualify, except in those
jurisdictions in which the failure to so qualify will not individually or in the
aggregate have a Material Adverse Effect.
10.2 AUTHORIZATION. All corporate action on the part of the
Company and its Subsidiaries, and their directors and stockholders, necessary
for the authorization, execution, delivery
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and performance of the Transaction Documents and the consummation of the
transactions contemplated thereby and for the authorization, issuance and
delivery of the Warrants and the Notes and of the Ordinary Shares issuable
hereunder or upon exercise of the Warrants, has been taken or will be taken
prior to the Closing. Each of the Transaction Documents to which the Company or
any of its Subsidiaries are a party is the valid and binding obligation of the
Company and such Subsidiary, enforceable in accordance with their terms. The
execution, delivery and performance by the Company and its Subsidiaries of the
Transaction Documents to which any is a party and compliance therewith and, with
respect to Company, the issuance and sale of the Warrants and the Notes and the
Ordinary Shares issuable hereunder or upon exercise of the Warrants, will not
result in any violation of and will not conflict with, or result in a breach of,
any of the terms of, or constitute a default under, any provision of federal,
state or local law to which the Company or any Subsidiary is subject, their
respective Certificates of Incorporation (or equivalent organizational document)
or By-Laws (or equivalent document), or any mortgage, indenture, agreement,
instrument, judgment, decree, order, rule or regulation, or other restriction to
which the Company or its Subsidiaries, is a party or by which it is bound, or
result in the creation of any Lien upon any of the properties or assets of the
Company or its Subsidiaries pursuant to any such term, or result in the
suspension, revocation, impairment, forfeiture or nonrenewal of any permit,
license, authorization or approval applicable to the Company's or its
Subsidiaries' operations or any of their assets or properties. No stockholder
has any preemptive rights or rights of first refusal by reason of the issuance
of the Warrants or the Notes or the Ordinary Shares issuable hereunder or upon
exercise of the Warrants. The Ordinary Shares issuable hereunder and upon
exercise of the Warrants have been duly and validly reserved and are not subject
to any preemptive rights or rights of first refusal and, upon issuance, will be
validly issued, fully paid and non-assessable.
10.3 CAPITAL STOCK AND RELATED MATTERS. (i) The authorized
capital stock of the Company consists of 100,000,000 Ordinary Shares, par value
(5 pence) per share, of which 54,793,472 shares are outstanding and 7,527,618
shares are reserved for issuance upon exercise of the Warrants; (ii) the
authorized and issued capital stock of each of the Company's Subsidiaries is set
forth on Schedule 10.3(ii) attached hereto (iii) all of the outstanding shares
of Capital Stock of the
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Company and each Subsidiary listed on Schedule 10.3(iii) are validly issued and
outstanding, fully paid and non-assessable; (iv) except as listed on Schedule
10.3(iv) and for the Warrants, neither the Company nor its Subsidiaries has any
outstanding stock or securities convertible into or exchangeable for any shares
of Capital Stock, or any outstanding rights (either preemptive or other, except
as provided under English law) to subscribe for or to purchase, or any
outstanding options for the purchase of, or any agreements providing for the
issuance (contingent or otherwise) of, or any outstanding commitments of any
character to issue any Capital Stock or any stock or securities convertible into
or exchangeable for any Capital Stock of the Company or its Subsidiaries, or,
except as set forth on Schedule 10.3(iv), any outstanding demand or piggy-back
registration rights to register any Capital Stock or any stock or securities
convertible into or exchangeable for the Capital Stock of the Company or its
Subsidiaries; (v) neither the Company nor its Subsidiaries is subject to any
obligation (contingent or other) to repurchase, otherwise acquire or retire any
shares of their respective Capital Stock; and (vi) except as set forth on
Schedule 10.3(vi) neither the Company nor its Subsidiaries has knowledge of any
agreement (except as set forth in this Agreement) restricting the transfer of
any shares of their respective Capital Stock except for restrictions imposed as
a consequence of U.S. federal or state securities laws or the equivalent laws of
the United Kingdom.
10.4 CHARTER; BY-LAWS. Each of the Company and its Subsidiaries
has furnished the Purchasers and their special counsel with true, correct and
complete copies of their respective Certificates of Incorporation (or equivalent
organizational documents) and By-Laws and all amendments thereto to date.
10.5 SUBSIDIARIES. Except as listed on Schedule 10.5, the Company
has no Subsidiaries and does not own of record or beneficially any Capital Stock
or equity interest or investment in any corporation, association, partnership,
joint venture or other entity.
10.6 RESERVATION OF SHARES. The Company has reserved for issuance
the number of its authorized but unissued Ordinary Shares necessary to permit
the exercise in full of all of the Warrants.
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10.7 LITIGATION. Except as set forth on Schedule 10.7, there is
no action, suit, investigation or proceeding pending, or, to the Company's
knowledge threatened, whether or not purportedly on behalf of the Company or its
Subsidiaries, to which the Company or its Subsidiaries are or may be named as a
party or their property is or may be subject or which challenges this Agreement,
the Transaction Documents or any of the transactions contemplated hereby or
thereby, or to the Company's knowledge, to which any officer, employee or
stockholder of the Company or its Subsidiaries is subject.
10.8 COMPLIANCE WITH LAW. Except as set forth in the Schedules to
this Agreement, the operations of the Company and its Subsidiaries have been
conducted in accordance with all applicable laws, regulations, orders and other
requirements of all courts and other Governmental Authorities having
jurisdiction over the Company or its Subsidiaries and their respective assets,
properties and operations, including, without limitation, all Environmental
Laws, the CSA and FDCA, except where a failure to do so would not have a
Material Adverse Effect. Except as set forth in Schedule 10.8, none of the
Company or its Subsidiaries have received notice of any material violation of
any such law, regulation, order or other legal requirement, and none of the
Company or its Subsidiaries is in violation of or default with respect to any
order, writ, judgment, award, injunction or decree of any national, state or
local court or Governmental Authority or arbitrator, domestic or foreign,
applicable to the Company its Subsidiaries or any of their respective assets,
properties or operations except for any such violation or default which would
not have a Material Adverse Effect.
10.9 OFFERING. Assuming the accuracy of the representations and
warranties of each of the Purchasers set forth in Section 11 of this Agreement,
the offer, sale and issuance of the Warrants and the Notes and the Ordinary
Shares issuable upon the exercise of the Warrants, as contemplated by this
Agreement, are exempt from the registration requirements of the Securities Act
and from the registration or qualification requirements of the laws of any
applicable U.S. state, and neither the Company nor anyone acting on its behalf
will take any action hereafter that would cause the loss of such exemption.
10.10 COMPLIANCE WITH ERISA. Schedule 10.10 attached hereto
contains a true and complete list of the Company's and each
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of its Subsidiaries' or ERISA Affiliates' written, foreign or domestic, employee
bonus, retirement, pension, profit sharing, savings, stock option, stock
appreciation, stock purchase, incentive, deferred compensation, employment,
hospitalization, medical, dental, vision, life or other health or disability
(whether provided by insurance or otherwise), severance, termination or other
similar plan, policy or program, including, without limitation, any collective
bargaining agreement involving direct or indirect compensation (including any
employment agreement), any Pension Plan or any "employee welfare benefit plan"
as defined in Section 3(1) of ERISA that provides or may provide benefits or
compensation to or in respect of any employee of the Company, its Subsidiaries
or ERISA Affiliates, including any employee of the Company, its Subsidiaries, or
ERISA Affiliates who has retired or has otherwise terminated his or her
employment with the Company, its Subsidiaries or ERISA Affiliates (the "Employee
Benefit Plans"). With respect to former employees or retirees, neither the
Company, nor its Subsidiaries or ERISA Affiliates provides any life insurance,
medical, severance, pension benefits, and similar benefits to such former
employees and retirees, except as set forth on Schedule 10.10. The Company and
its ERISA Affiliates, are in compliance in all material respects with any
applicable provisions of ERISA and the regulations thereunder and of the Code
and regulations thereunder with respect to all Employee Benefit Plans. Each
Employee Benefit Plan that is intended to be qualified under Section 401(a) of
the Code has received a determination letter from the IRS so qualifying it, and
each related trust of such Employee Benefit Plan has been determined to be
exempt under Section 501(a) of the Code and nothing has occurred since the date
of such letter that would adversely affect the qualified status of such Employee
Benefit Plan. No material liability has been incurred by the Company or any
ERISA Affiliate which remains unsatisfied of for any taxes or penalties with
respect to any Employee Benefit Plan.
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Neither the Company nor any ERISA Affiliate has engaged in any Prohibited
Transaction. No Termination Event has occurred or is reasonably expected to
occur with respect to any Pension Plan or Multiemployer Plan maintained or
contributed to by the Company or any ERISA Affiliate. Neither the Company nor
any ERISA Affiliate has incurred or reasonably expects to incur any withdrawal
liability under ERISA to any Multiemployer Plans. The actuarial present value of
all benefit liabilities under each Pension Plan maintained or contributed to by
the Company or any ERISA Affiliate, does not exceed the assets of such Pension
Plan. Neither the Company nor any ERISA Affiliate has (i) failed to make a
required installment or other required payment under Section 412 of the Code,
Section 302 of ERISA or the terms of such Pension Plans, (ii) incurred an
accumulated funding deficiency, whether or not waived, or any other liability to
the PBGC which remains outstanding other than the payment of premiums and there
are no premium payments which are due and unpaid or (iii) failed to make a
contribution or payment to a Multiemployer Plan. The offer, sale and issuance of
the Warrants and Notes hereunder or the conversion of the Notes or exercise of
the Warrants, as contemplated by this Agreement will not involve any Prohibited
Transaction. No material proceeding, claim, lawsuit and/or investigation exists
or, to the best of the knowledge of the Company, is threatened concerning or
involving any Employee Benefit Plan.
10.11 EXCHANGE ACT FILINGS; FINANCIAL STATEMENTS. (a) The Company
has furnished the Purchaser with the Company's most recent filings under the
Securities Exchange Act of 1934 (the "Exchange Act Filings"). The Exchange Act
Filings are accurate and complete in all material respects as of the date
thereof. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 (the "1998 10-K") will, when filed with the U.S. Securities
and Exchange Commission, be accurate and complete in all material respects as of
the date of its filing. The Exchange Act Filings do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The 1998 10-K will not, when filed, contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(b) The financial statements (including any related
notes thereto) contained in the Exchange Act Filings and the 1998 10-K (the
"Financial Statements") (i) were prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q under the Exchange Act) and (ii) fairly presented or, in the case
of the Financial Statements included in the 1998 10-K, will fairly present the
financial position of
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Company as at the respective dates thereof and the results of its operations and
cash flows for the periods indicated, consistent with the books and records of
Company.
10.12 OUTSTANDING INDEBTEDNESS. Other than with respect to the
Notes and except as set forth on Schedule 10.12 hereto, neither the Company nor
its Subsidiaries has any outstanding secured or unsecured Indebtedness or
commitments for any such Indebtedness.
10.13 TAXES. Except as set forth on Schedule 10.13 hereto, each
of the Company and its Subsidiaries have timely filed all United States federal,
state, United Kingdom and other tax returns required by law to be filed by them,
and timely paid all taxes, assessments and other governmental charges required
to have been paid by them, other than those presently payable without penalty or
interest, have been timely paid. There are no tax liens upon any properties or
assets of the Company or any Subsidiary, other than liens securing payment of
taxes not yet due or which are being contested in good faith by the Company or
any of its Subsidiaries and for which adequate reserves are being maintained by
the Company. All such tax reports or returns fairly reflect the taxes of the
Company and its Subsidiaries for the periods covered thereby. Neither the
Company nor its Subsidiaries is delinquent in the payment of any material tax,
assessment or governmental charge, there is no material tax deficiency or
delinquency asserted against the Company or its Subsidiaries, and, except as
provided above, there is no material unpaid assessment, proposal for additional
taxes, deficiency or delinquency in the payment of any of the taxes of the
Company or its Subsidiaries or any violation of any federal, state, local or
foreign tax law currently being asserted by any taxing authority. No Internal
Revenue Service or Inland Revenue audit of the Company or its Subsidiaries is
pending or, to the knowledge of the Company, threatened, and the results of any
completed audits are properly reflected in the financial statements. Neither the
Company nor its Subsidiaries have granted any extension to any taxing authority
of the limitation period during which any tax liability may be asserted. Neither
the Company nor its Subsidiaries have committed any material violation of any
federal, state, local or foreign tax laws. All monies required to be withheld by
the Company or its Subsidiaries from employees or collected from customers for
income taxes, social security and unemployment insurance taxes and sales, excise
and use taxes, and the portion
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of any such taxes to be paid by the Company or its Subsidiaries to governmental
agencies or set aside in accounts for such purpose have been so paid or set
aside, or such monies have been approved, reserved against and entered upon the
books and financial statements of the Company or any Subsidiary.
10.14 YEAR 2000 COMPLIANCE. The Company is Year 2000 Compliant,
as that term is defined below, and there are no foreseeable expenses or other
liabilities associated with the process of securing full Year 2000 Compliance
except for any noncompliance that would not be reasonably expected to have a
Material Adverse Effect. "Year 2000 Compliant" means that such hardware or
software used by the Company or any of its Subsidiaries including, but not
limited to, microcode, firmware, system and application programs, files,
databases, computer services, and microcontrollers, including those embedded in
computer and non-computer equipment (the "Computer Systems") will (a) process
date data from at least the years 1900 through 2101 without error or
interruption; (b) maintain functionality with respect to the introduction,
processing, or output of records containing dates falling on or after January 1,
2000; and (c) be interoperable with other software or hardware which may deliver
records to, receive records from, or interact with such Computer Systems in the
course of conducting the business of the Company.
10.15 ENVIRONMENTAL AND OTHER REGULATIONS. (i) The operations of
the Company and its Subsidiaries are in compliance with Environmental Laws and
Requirements of Environmental Law, except where the failure to be in compliance
would not have a Material Adverse Effect; (ii) the Company and its Subsidiaries
have obtained all necessary Environmental Permits or authorizations required
under Environmental Laws except where a failure to do so would not have a
Material Adverse Effect; (iii) to the knowledge of the Company, there has been
no Release at any of the properties owned, leased or operated by the Company or
its Subsidiaries or any predecessor in interest, or at any disposal or treatment
facility which received Hazardous Materials generated by the Company or its
Subsidiaries or any predecessor in interest; (iv) no Environmental Claims
relating to (A) any assets, properties or businesses of the Company or its
Subsidiaries or any predecessor in interest; (B) properties adjoining properties
or businesses owned or operated by the Company or its Subsidiaries or any
predecessor in interest; or (C) any facilities which received Hazardous
Materials generated by the Company or its Subsidiaries
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or any predecessor in interest, have been asserted against the Company or its
Subsidiaries or, to the Company's knowledge, any predecessor in interest, nor
does the Company have knowledge or notice that any such Environmental Claim is
threatened or pending; (v) to the knowledge of the Company, no Environmental
Claim has been asserted against any facilities that may have received Hazardous
Materials, if any, generated by the Company or its Subsidiaries; and (vi) none
of the Company or its Subsidiaries are subject to any Environmental Liabilities
which would have a Material Adverse Effect. None of the Company or its
Subsidiaries have received any notice from any governmental agency or other
authority alleging noncompliance with any material health, safety or
environmental laws or regulations.
10.16 INVESTMENT COMPANY ACT. Neither the Company nor its
Subsidiaries is an "investment company," or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
10.17 LICENSES, PERMITS AND GOVERNMENTAL APPROVALS. Each of the
Company and its Subsidiaries has all material licenses, permits, franchises,
authorizations and approvals (the "Licenses and Permits") required of it by any
Governmental Authority to conduct its business as presently conducted. Schedule
10.17 sets forth a true and complete list of all such Licenses and Permits
issued to, or in the name of, the Company and its Subsidiaries, and all pending
applications therefor. Any and all past litigation concerning such Licenses and
Permits and all claims and causes of action raised therein, has been finally
adjudicated. No such License or Permit has been revoked, conditioned (except as
may be customary) or restricted, and no action (equitable, legal or
administrative), arbitration or other process is pending, or to the knowledge of
the Company, threatened, which in any way challenges the validity of, or seeks
to revoke, condition or restrict any such License, certificate of need, or
regulatory approval and each License and Permit has been duly obtained, is valid
and in full force and effect. The Licenses and Permits are sufficient and
adequate in all material respects to permit the continued lawful conduct of the
business of the Company and its Subsidiaries in the manner now conducted, and
none of the operations of the business of the Company or its Subsidiaries are
being conducted in a manner that violates any of the terms or conditions under
which any License or Permit was granted. No such License and Permit will in any
way be affected
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by, terminate or lapse by reason of, the transactions provided for in this
Agreement.
10.18 BROKER'S OR FINDER'S COMMISSIONS. No broker's or finder's
fee or commission will be payable by the Company with respect to the issuance
and sale of the Securities or the transactions contemplated hereby; provided,
however, that the Company makes no representation or warranty with respect to
any fee or commission that might be payable to Mohamed Hadid, Al-Sabah Trading
and Development Co., The Alma Group, Ltd. or any Affiliate of any of the
foregoing.
10.19 COMPLIANCE WITH OTHER INSTRUMENTS AND CONTRACTS. Neither
the Company nor its Subsidiaries is in violation of any term of their respective
Certificate of Incorporation (or equivalent organizational document), or
By-Laws. Schedule 10.19 hereto contains a list of the material Contracts of the
Company and its Subsidiaries. Neither the Company nor its Subsidiaries is in
violation of any term of any material Contract which would permit any party to
any material Contract to terminate, amend or modify such material Contract
except for any violations which do not cause and are not likely to result in a
Material Adverse Effect. To the Company's knowledge, none of the Company or its
Subsidiaries have waived any right or default by any party under any material
Contract. All material Contracts are in full force and effect, and the Company
has no knowledge that any party to any material Contract is or is seeking or
presently intends to seek to terminate, amend or modify any material Contract,
except where the termination, amendment or modification does not have, and is
not likely to result in, a Material Adverse Effect. All Contracts involving
aggregate consideration payable by or to the Company in any twelve-month period
in excess of $100,000 are listed on Schedule 10.19 as a material Contract.
10.20 INTELLECTUAL PROPERTY. Set forth on Schedule 10.20 hereto
is a true, correct and complete list of all Patents and Patent Applications,
material Trademarks, copyrights, licenses and trade/brand names owned by, or
licensed to, the Company and its Subsidiaries. Each of the Company and its
Subsidiaries possesses all Intellectual Property Rights necessary to conduct its
business as now being conducted, without conflict with or infringement upon any
valid rights of others, except where a failure to do so would not have a
Material Adverse Effect and has not received any notice of infringement upon or
conflict with the
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asserted rights of others. Except as set forth on Schedule 10.20, there are no
outstanding options, licenses, or agreements of any kind relating to the
foregoing to which the Company or any Subsidiary is a party, nor is the Company
or its Subsidiaries bound by or a party to any option, license or agreement of
any kind with respect to the Patents and Patent Applications, material
Trademarks, copyrights, licenses and trade/brand names of any other person or
entity. No stockholder, director, officer or employee of the Company or its
Subsidiaries has any interest in any Intellectual Property Rights.
10.21 REAL PROPERTY. (a) Set forth on Schedule 10.21(a) hereto is
a true, correct and complete list of all real property owned by the Company and
its Subsidiaries. Each of the Company and its Subsidiaries has good and
marketable title to all real property owned by it free and clear of all Liens
other than Permitted Liens. All required certificates of occupancy, certificates
relating to electrical work, zoning, building, housing, safety, fire and health
approvals, and other permits, franchises and licenses necessary to enable the
Company and its Subsidiaries to use or operate its facilities in the manner
currently used or operated by it or its Subsidiaries, have been issued and are
in full force and effect, except for those, the absence of which would not have
a Material Adverse Effect. No default or breach now exists and no event has
occurred or is continuing which, with notice or the passage of time or both,
would constitute a default under any of the covenants, restrictions, rights of
way, easements or other agreements affecting any of the facilities of the
Company or its Subsidiaries, except for those defaults, breaches or events that
would not have a Material Adverse Effect. Neither the Company nor its
Subsidiaries have knowledge of any condemnation or eminent domain proceedings
now pending with respect to their facilities.
(b) Set forth on Schedule 10.21(b) hereto is a true,
correct and complete list of all material leases of real property under which
the Company or its Subsidiaries is a lessee. Each of the Company and its
Subsidiaries enjoys peaceful and undisturbed possession under all such leases,
all of such leases are valid and subsisting and none of them is in default in
any material respect, nor has the Company or its Subsidiaries received any
written notice of its default under any such lease.
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10.22 EMPLOYEES. (a) Set forth on Schedule 10.22 hereto is a
true, correct and complete list (including the term, expiration dated and amount
of annual compensation) of all written employment agreements to which the
Company or its Subsidiaries is a party or by which the Company or its
Subsidiaries is bound. No employee of the Company or its Subsidiaries is in
violation of any term of any written employment agreement to which it is a
party, and to the knowledge of the Company, no employee of the Company is in
violation of any contract or agreement with any former employer relating to the
right of any such employee to be employed by the Company or its Subsidiaries
because of the nature of the business conducted or to be conducted by the
Company or its Subsidiaries or to the use of trade secrets or proprietary
information of others, and the employment of the employees of the Company and
its Subsidiaries does not subject the Company or its Subsidiaries to liability
in connection with such covenants or agreements. There is neither pending nor,
to the Company's knowledge, threatened any actions, suits, proceedings or claims
with respect to any contract, agreement, covenant or obligation referred to
above. Neither the Company nor its Subsidiaries has any collective bargaining
agreement covering any of its employees.
(b) There are no labor disputes between the Company or its
Subsidiaries and any of their employees or representatives of such employees.
There are no discrimination charges (relating to sex, age, race, national
origin, handicap or veteran status or otherwise) pending or threatened, in
writing, against, or involving the Company or its Subsidiaries before any court,
administrative agency or arbitrator. Except as set forth on Schedule 10.8 or
otherwise disclosed to the Purchasers prior to the Closing Date, neither the
Company nor its Subsidiaries is delinquent in payments to any of its employees
for any wages, salaries, commissions, bonuses, benefits or other direct or
indirect compensation for any services performed by them to the Closing Date or
amounts required to be reimbursed to such employees. Each of the Company and its
Subsidiaries is in compliance with all federal, state, local and foreign laws
and regulations respecting labor, employment and employment practices, terms and
conditions of employment, wages, hours and benefits, except where a failure to
comply would not have a Material Adverse Effect.
10.23 INSURANCE. Schedule 10.23 contains a list and brief
description of all policies or binders of fire, liability,
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product liability, workers compensation, health and other forms of insurance
policies or binders currently in force insuring against risks to which the
Company and its Subsidiaries have been a party, a named insured or otherwise the
beneficiary of coverage. With respect to each insurance policy listed in
Schedule 10.23: (A) the policy is in full force and effect; (B) none of the
Company and its Subsidiaries or any other party to the policy is in breach of
default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination or modification
under the policy; (C) no party to the policy has repudiated any provision
thereof; (D) there is no claim pending under any of such policies as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or any notice that a defense will be afforded with reservation of
rights; (E) none of the Company or its Subsidiaries have received (i) any notice
that any issuer of any such policy has filed for protection under applicable
bankruptcy laws or is otherwise in the process of liquidating or has been
liquidated, or (ii) any other indication that such policies are no longer in
full force and effect or that the issuer of any such policy is not longer
willing or able to perform its obligations thereunder; and (F) none of the
Company or its Subsidiaries have received any written notice from or on behalf
of any insurance carrier issuing such policies, that there will hereafter be a
cancellation, or an increase in a deductible or non-renewal of existing
policies.
10.24 TITLE TO ASSETS. The Company has good and valid title to
all of its assets now carried on its books, free and clear of all Liens except
for Permitted Liens.
10.25 FDA MATTERS. (a) The testing, manufacture, storage,
distribution, use, promotion and sale of the Company's and its Subsidiaries'
products by the Company and its Subsidiaries and contractors has been performed
and is performed in compliance with all applicable requirements under the FDCA
and the CSA, including, without limitation, those relating to investigational
use, premarket clearance, good manufacturing practices, labeling, advertising,
record keeping, filing of reports, and security.
(b) All pending new drug applications of the Company and its
Subsidiaries are listed on Schedule 10.26. With respect
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to all such new drug applications, the Company has complied with all applicable
requirements in the submission of such application.
11. REPRESENTATIONS OF THE PURCHASER. Each Purchaser severally (as to
itself and not any other Purchaser) and not jointly, represents and warrants to
the Company as follows:
11.1 AUTHORIZATION. Such Purchaser has full power and authority
to enter into this Agreement. This Agreement has been duly authorized, executed
and delivered by such Purchaser and constitutes its valid and legally binding
obligation, enforceable in accordance with its terms. Neither the execution,
delivery or performance by this Agreement by such Purchaser nor the consummation
by such Purchaser of the transactions contemplated hereby will result in a
violation of, conflict with, or result in any breach of any of the terms of, or
constitute a default under, any provision of federal, state or local law or
foreign law to which such Purchaser is subject, the organizational documents of
the Purchaser or any mortgage, indenture, agreement, instrument, judgment,
decree, order, rule or regulation or other restriction to which such Purchaser
is a party or by which it is bound.
11.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made
with such Purchaser in reliance upon such Purchaser's representation to the
Company, which by such Purchaser's execution of this Agreement such Purchaser
hereby confirms, that the Warrants, the Notes and the Ordinary Shares issuable
hereunder and upon exercise of the Warrants (collectively, the "Acquired
Securities") will be acquired for investment for such Purchaser's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part of the Acquired Securities in contravention of applicable law, and that
such Purchaser has no present intention of selling, granting any participation
in, or otherwise distributing the same. Such Purchaser does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person in or
with respect to any of the Acquired Securities.
11.3 ACCREDITED INVESTOR. Such Purchaser is and upon the
acquisition of Ordinary Shares upon exercise of the Warrants will be an
"accredited investor" within the meaning of Rule 501 of Regulation D of the
Rules and Regulations of the Securities and Exchange Commission under the
Securities Act. Such Purchaser has
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not been organized for the purposes of acquiring the Acquired Securities.
11.4 RESTRICTED SECURITIES. Such Purchaser understands that the
Acquired Securities it is acquiring and may acquire as contemplated by this
Agreement are "restricted securities" within the meaning of Rule 144 under the
Securities Act ("Rule 144") inasmuch as they will be acquired from the Company
in a transaction not involving a public offering and that under the federal
securities laws and applicable regulations such Acquired Securities may be
resold without registration under the Securities Act only in certain limited
circumstances. In this connection, such Purchaser represents that it is familiar
with Rule 144 and understands the resale limitations imposed thereby and by the
Securities Act. Such Purchaser acknowledges that its investment in the Acquired
Securities may be an illiquid investment requiring such Purchaser to bear the
economic risk of the investment for an indefinite period.
11.5 FURTHER LIMITATIONS ON DISPOSITION. Without in any way
limiting the representations set forth above, such Purchaser further agrees not
to make any disposition of all or any portion of the Acquired Securities unless
and until the transferee has agreed in writing for the benefit of the Company to
be bound by the terms of this Agreement (provided and to the extent that such
terms are then applicable and provided that such Purchaser is making such
disposition in a transaction other than pursuant to Rule 144 or under an
effective registration statement under the Securities Act and in accordance with
any applicable state securities laws), and
(a) Such Purchaser shall have notified the Company of the
proposed disposition, and
(b) If requested by the Company, such Purchaser shall have
furnished the Company with an opinion of counsel, in form and substance
reasonably satisfactory to the Company, rendered by a law firm experienced in
matters involving the sale of securities under federal and state securities
laws, that such disposition will not require registration of the Acquired
Securities under the Securities Act or registration or qualification under any
state securities or "blue sky" law.
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11.6 LEGENDS. It is understood that the certificates evidencing
the Acquired Securities will bear an appropriate legend restricting transfers
substantially in the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") OR ANY APPLICABLE STATE SECURITIES LAWS.
THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER THE ACT AND THE REGISTRATION OR QUALIFICATION OF THE
SECURITIES UNDER APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, IN FORM AND CONTENT
REASONABLY SATISFACTORY TO THE COMPANY, THAT REGISTRATION OR
QUALIFICATION UNDER THE ACT AND STATE SECURITIES LAWS IS NOT REQUIRED."
11.7 CONSENTS. To such Purchaser's knowledge, no consent,
approval or authorization of or designation, declaration or filing with any
state, federal or foreign governmental authority on the part of such Purchaser
is required in connection with the valid execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
11.8 DISCLOSURE OF INFORMATION. The Purchaser represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the Company and its business and prospects and the terms and
conditions of the sale of the Acquired Securities.
12. MISCELLANEOUS.
12.1 PAYMENTS. The Company agrees that, so long as the Purchasers
shall hold any Notes, it will make payments of principal and interest on such
Notes, in compliance with the terms of this Agreement and the Notes, by wire
transfer of immediately available funds for credit to the account or accounts as
each Purchaser may designate in writing, notwithstanding any contrary provision
herein or in any Note with respect to the place of payment. Each Purchaser
agrees that, before disposing of any Note, the Purchaser will make a notation
thereon (or on a schedule attached thereto) of all principal payments previously
made thereon and of the date to which interest thereon has been paid and, as
soon as practicable thereafter, shall deliver a copy of
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such Note or schedule to the Company. The Company agrees to afford the benefits
of this Section 12.1 to any transferee which shall have made the same agreement
as the Purchasers have made in this Section 12.1.
12.2 EXPENSES. The Company agrees, whether or not the
transactions hereby contemplated shall be consummated, to pay, and save each
Purchaser harmless against liability for the payment of, (i) a transaction fee
to Scorpion Holdings, LLC in the amount of $75,000, (ii) the reasonable fees and
expenses (including document production and duplication charges) of one special
counsel engaged by the Purchasers in connection with this Agreement, (iii) the
reasonable out-of-pocket expenses of the Purchasers in connection with this
Agreement, (iv) the reasonable fees and expenses of one special counsel engaged
by the Purchasers in connection with any subsequent proposed amendment to,
modification of, or proposed consent under this Agreement, whether or not such
proposed modification shall be effected or proposed consent granted, and (v) the
costs and expenses, including attorney's fees, incurred by the Purchasers or any
subsequent Significant Holder in enforcing any rights under this Agreement, the
Notes, the Warrants or in responding to any subpoena or other legal process
issued in connection with this Agreement or the transactions contemplated hereby
or by reason of any Purchaser's or any subsequent Significant Holder's having
acquired any Notes or Warrants, including without limitation, costs and expenses
incurred in any bankruptcy case involving the Company or any of its Subsidiaries
provided, however, that the Company shall not be obligated to pay any costs,
fees and expenses incurred by any of the Purchasers substantially by reason of a
Purchaser's gross negligence or willful misconduct; and provided, further, that
the Company shall not be obligated to make payments described in clauses (ii) or
(iii) of this Section 12.2 in an aggregate amount in excess of $75,000. The
Company agrees to pay all depositary fees payable to the depositary in respect
of the issuance of American Depositary Shares or American Depositary Receipts in
respect of Ordinary Shares issued upon exercise of the Warrants. The obligations
of the Company under this Section 12.2 shall survive the transfer of any
Securities or portion thereof or interest therein by any Purchaser or any
subsequent Significant Holder and the payment of any Note.
12.3 CONSENT TO AMENDMENTS AND PROCEDURE FOR COVENANT WAIVER. (a)
As long as any of the Notes are outstanding, this
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Agreement may be amended and the Company may take any action herein prohibited,
or omit to perform any act herein required to be performed by it, only if the
Company shall have obtained the written consent to such amendment, action or
omission to act, of holders of Notes representing at least 51% of the principal
amount of the Notes then outstanding, and each holder of any Note at the time or
thereafter outstanding shall be bound by any consent authorized by this Section
12.3; provided, however, that without the written consent of the holder or
holders of 100% in principal amount of the Notes at the time outstanding, no
amendment to this Agreement shall change the maturity of any Note or reduce the
rate or time of payment of interest payable with respect to any Note or affect
the time, amount or allocation of any prepayments, or reduce the proportion of
the principal amount of the Notes required with respect to any consent.
(b) Once all of the Notes are repaid in full, this Agreement
shall terminate and the provisions hereof shall have no further force or effect.
12.4 FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST
NOTES. (a) The Notes are issuable as registered Notes, as to both principal and
any stated interest, without coupons in denominations of at least $100,000,
except as may be necessary to reflect any principal amount not evenly divisible
by $100,000. The Company shall keep at its principal office a register in which
the Company shall provide for the registration of Notes and of transfers of
Notes. Upon surrender for registration of transfer of any Note at the principal
office of the Company, the Company shall, at its expense, execute and deliver
one or more new Notes of like tenor and of a like aggregate principal amount,
registered in the name of such transferee or transferees. Prior to effectuating
a transfer, the Company may require the transferor or transferee to deliver such
documents and provide such information as the Company reasonably believes is
necessary in order for such transfer to be made in compliance with applicable
tax and securities laws and regulatory requirements. At the option of the holder
of any Note, such Note may be exchanged for other Notes of like tenor and of any
authorized denominations, of a like aggregate principal amount, upon surrender
of the Note to be exchanged at the principal office of the Company. Whenever any
Notes are so surrendered for exchange, the Company shall, at its expense,
execute and deliver the Notes which the holder making the exchange is entitled
to
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receive. Every Note surrendered for registration of transfer or exchange shall
be duly endorsed, or be accompanied by a written instrument of transfer duly
executed, by the holder of such Note or such holder's attorney duly authorized
in writing. Any Note or Notes issued in exchange for any Note or upon transfer
thereof shall carry the rights to unpaid interest and interest to accrue which
were carried by the Note so exchanged or transferred, so that neither gain nor
loss of interest shall result from any such transfer or exchange. Upon receipt
of written notice from the holder of any Note of the loss, theft, destruction or
mutilation of such Note and, in the case of any such loss, theft or destruction,
upon receipt of such holder's unsecured indemnity agreement, or indemnity bond
or in the case of any such mutilation upon surrender and cancellation of such
Note, the Company will make and deliver a new Note, of like tenor, in lieu of
the lost, stolen, destroyed or mutilated Note. Notwithstanding anything to the
contrary contained herein, nothing in this Section 12.4 shall be construed so as
to limit the transferability of any of the Notes.
(b) Notwithstanding anything contained in Section 12.4(a) or in
any other provision of this Agreement, prior to the occurrence of an Event of
Default, the Purchasers shall not transfer any of the Notes to any Person other
than an Affiliate of such Purchaser (i) without the prior written consent of the
Company, which consent shall not be unreasonably withheld and (ii) without
complying with the other provisions of this Agreement, including the provisions
of Section 11.5 hereof. Upon the occurrence of an Event of Default, the
foregoing consent of the Company shall not be required but any transfer shall
otherwise comply with the provisions of this Agreement, including the provisions
of Section 11.5 hereof.
12.5 PERSONS DEEMED OWNERS. Prior to due presentment for
registration of transfer, the Company may treat the Person in whose name any
Note is registered as the owner and holder of such Note for the purpose of
receiving payment of principal of, and interest and premium on, such Note and
for all other purposes whatsoever, whether or not such Note shall be overdue,
and the Company shall not be affected by notice to the contrary.
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT. All representations and warranties contained herein or made in
writing by or on behalf of the Company in connection
56
<PAGE> 62
herewith or in connection with the transactions contemplated hereby shall
survive the execution and delivery of this Agreement and the Notes and Warrants,
the transfer by any of the Purchasers of any Notes and Warrants or portion
thereof or interest therein but shall expire upon the payment of the Notes in
full, and may be relied upon by any transferee regardless of any investigation
made at any time by or on behalf of any of the Purchasers or any subsequent
Significant Holder. Subject to the preceding sentence, this Agreement and the
Notes and Warrants and the side letter, dated the date hereof, regarding United
Kingdom withholding taxes embody the entire agreement and understanding among
the Purchaser and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
12.7 SUCCESSORS AND ASSIGNS. All covenants and other agreements
in this Agreement contained by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective permitted successors and assigns
of the parties hereto (including, without limitation, any subsequent Significant
Holder) whether so expressed or not.
12.8 DISCLOSURE TO OTHER PERSONS. The Company acknowledges that
the holder of any Notes may deliver copies of any financial statements and other
documents delivered to such holder, and disclose any other information disclosed
to such holder, by or on behalf of the Company or any Subsidiary in connection
with or pursuant to this Agreement to (i) such holder's directors, officers,
employees, agents and professional consultants, (ii) any other holder of any
Notes, (iii) any Person to which such holder offers to sell such Notes or any
part thereof in accordance with this Agreement; or (iv) any other Person to
which such delivery or disclosure may be necessary or appropriate (a) in
compliance with any law, rule, regulation or order applicable to such holder,
(b) in response to any subpoena or other legal process, (c) in connection with
any litigation to which such holder is a party or (d) in order to protect such
holder's investment in such Notes; provided, however, that prior to such
disclosure pursuant to this Section 12.8, such holder shall cause the recipient
of such information to execute a reasonable and appropriate confidentiality
agreement with the Company.
12.9 NOTICES. All written communications provided for hereunder
shall be sent by airmail, first class mail or nationwide
57
<PAGE> 63
overnight delivery service (with charges prepaid) and (i) if to any Purchaser,
addressed to it at c/o Robert T. Tucker, Esq., 61 Purchase Street, Suite #2,
Rye, New York 10580, with a copy to Pryor Cashman Sherman & Flynn LLP, 410 Park
Avenue, New York, New York 10022, Attention: Selig D. Sacks, Esq., or to such
other address or addresses as any Purchaser shall have specified to the Company
in writing, (ii) if to any other holder of any Note, addressed to such holder at
such address as such other holder shall have specified to the Company in writing
or, if any such other holder shall not have so specified an address to the
Company, then addressed to such other holder in care of the last holder of such
Note which shall have so specified an address to the Company, and (iii) if to
the Company addressed to it at 620 Airport Road, Napa, California 94558,
Attention: Mr. Frank J. Massino with copies to Latham & Watkins, 505 Montgomery
Street, Suite 1900, San Francisco, California 94111, Attention: Jeffrey T. Pero,
Esq. or to such other address or addresses as the Company may have designated in
writing to each holder of the Securities at the time outstanding.
12.10 GOVERNING LAW. This Agreement has been executed and
delivered at and shall be deemed to have been made in New York, New York. This
Agreement and the rights granted herein shall be governed by and construed and
enforced under the laws of the State of New York (without giving effect to any
conflicts of law rules or principles). Any judicial proceeding brought by or
against the Company with respect to this Agreement or any related Agreement
shall be brought in any court of competent jurisdiction in the United States of
America in the Southern District of New York, and, by execution and delivery of
this Agreement, the Company accepts the exclusive jurisdiction of the aforesaid
courts and irrevocably agrees to be bound by any judgment rendered thereby in
connection with this Agreement. If any action is commenced in any other
jurisdiction the parties hereto hereby consent to the removal of such action to
the United States District Court for the Southern District of New York. The
Company hereby irrevocably designates Latham & Watkins-New York as the designee,
appointee and agent of the Company to receive, for and on behalf of the Company,
service of process in the above described jurisdiction in any legal action or
proceeding with respect to this Agreement or any other Transaction Document or
the rights and obligations hereunder or thereunder and such service shall be
deemed completed upon delivery thereof to such agent. It is understood that a
copy of such process served on such agent
58
<PAGE> 64
will be promptly forwarded by mail to the Company at its address set forth in
Section 12.9 hereof, but the failure of the Company to receive such copy shall
not affect in any way the service of such process. The Company further
irrevocably consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to the Company at its address,
such service to become effective 10 days after such mailing. Nothing herein
shall affect the right of the Purchaser to serve process in any other manner
permitted by law or commence legal proceedings in or otherwise proceed against
the Company in any other jurisdiction.
12.11 SECTION 151(1) OF THE COMPANIES ACT 1985 (UNITED KINGDOM).
For the avoidance of doubt and notwithstanding any other provision of any
Transaction Document, none of the Security Agreement, the UK Security Agreement,
the Patent and Trademark Security Agreement or the Pledge Agreement secure
amounts owing or payable by the Company under the Transaction Documents
(including, without limitation, the Warrants) where to do so would constitute a
breach of Section 151(1) of the Companies Act 1985 (United Kingdom).
12.12 SEVERABILITY. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
12.13 CONSTRUCTION. The Company acknowledges that it has had the
benefit of legal counsel of its own choice and has been afforded the opportunity
to review this Agreement, the Warrants, the Notes and other related documents
with its legal counsel and this Agreement, the Warrants, the Notes and related
documents shall be construed as if jointly drafted by the Company and the
Purchasers. Unless otherwise indicated, references to statutes are to statutes
of the United States of America. Accounting terms used herein shall be construed
in accordance with GAAP practiced in the United States of America. In addition,
unless the contrary intention appears, terms and expressions having a defined or
generally accepted meaning under the
59
<PAGE> 65
securities laws of the United States shall have the same meaning in this
Agreement.
12.14 COUNTERPARTS. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, and it
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.
12.15 REPRESENTATIVE OF THE PURCHASERS. Notwithstanding anything
to the contrary provided in this Agreement, prior to any transfer by the
Purchasers of the Notes and the Purchaser so transferring the Notes providing
the Company with written notice of the transfer and the name and address of the
transferee or an authorized agent of such transferee, whenever the Company is
required pursuant to this Agreement to (i) obtain the consent, waiver or
approval of any of the Purchasers or Significant Holders, or to (ii) provide any
notice to the Purchasers, the Company shall be deemed to have so obtained such
consent, waiver or approval if it shall have obtained, the written consent,
waiver or approval of Robert T. Tucker, Esq. acting on behalf of the Purchasers
and shall be deemed to have so provided such notice if it shall have provided
such notice to Robert T. Tucker, Esq. at his address set forth in Section 12.9.
The Purchasers should have the right, upon written notice to the Company, to
designate a representative other than Robert T. Tucker, Esq.
60
<PAGE> 66
IN WITNESS WHEREOF, the Company and each of the Purchasers have executed
this Agreement as a deed as of the date first above written.
SENETEK PLC
By: /s/ FRANK MASSINO
----------------------
Name:
Title:
PURCHASERS:
SILVER CREEK INVESTMENTS, LTD.
By:
----------------------
Name:
Title:
BOMOSEEN INVESTMENTS, LTD.
By:
----------------------
Name:
Title:
ELSTREE HOLDINGS, LTD.
By:
----------------------
Name:
Title:
DANDELION INVESTMENTS, LTD.
By:
----------------------
Name:
Title:
(Signature page to Security Purchase Agreement)
<PAGE> 67
IN WITNESS WHEREOF, the Company and each of the Purchasers have executed
this Agreement as a deed as of the date first above written.
SENETEK PLC
By:
----------------------
Name:
Title:
PURCHASERS:
SILVER CREEK INVESTMENTS, LTD.
By: /s/ ROBERT T. TUCKER
----------------------
Name: Robert T. Tucker
Title: Director
BOMOSEEN INVESTMENTS, LTD.
By: /s/ ROBERT T. TUCKER
----------------------
Name: Robert T. Tucker
Title: Director
ELSTREE HOLDINGS, LTD.
By: /s/ ROBERT T. TUCKER
----------------------
Name: Robert T. Tucker
Title: Attorney-in-Fact
DANDELION INVESTMENTS, LTD.
By: /s/ ROBERT T. TUCKER
----------------------
Name: Robert T. Tucker
Title: Attorney-in-Fact
<PAGE> 68
SCHEDULE 1
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Principal Principal
Number of Amount of Amount of Number of Number of Number of
Ordinary Investment Settlement Series A Series B Series C
Shares Notes Notes Warrants Warrants Warrants
- ------------------------------------ ----------- ---------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Silver Creek Investments, Ltd. 626,269 $1,487,069 $710,394 892,241 991,379 355,197
- ------------------------------------ ----------- ---------- ----------- ---------- --------- ---------
Bomoseen Investments, Ltd. 626,269 $1,487,069 $710,394 892,241 991,379 355,197
- ------------------------------------ ----------- ---------- ----------- ---------- --------- ---------
Elstree Holdings, Ltd. 426,589 $1,012,931 $483,891 607,759 675,287 241,946
- ------------------------------------ ----------- ---------- ----------- ---------- --------- ---------
Dandelion Investments, Ltd. 426,588 $1,012,931 $483,891 607,759 675,287 241,946
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.2
EXHIBIT A
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED. THIS NOTE MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT. THIS NOTE IS
SUBJECT IN ALL RESPECTS TO THE PROVISIONS OF THE SECURITIES PURCHASE
AGREEMENT DESCRIBED BELOW.
SENETEK PLC
SENIOR SECURED NOTE DUE APRIL 14, 2002
No. 01 April 14, 1999
$
-----------
FOR VALUE RECEIVED, the undersigned, SENETEK PLC, a corporation
organized and existing under the laws of England (herein called the "Company"),
hereby promises to pay to _____________________ ("____________") at such bank or
other financial institution and account therein as shall be designated by the
Holder, the principal sum of ________________ ($________________) with the
aggregate principal amount due and payable on April 14, 2002, with interest
(computed on the basis of a 360-day year of twelve 30-day months and compounded
daily) on the unpaid balance thereof from the date hereof at the rate of 8.0%
per annum, payable semi-annually on the last day of June and December in each
year, commencing with the June 30 next succeeding the date hereof, until the
principal hereof shall have become due and payable, and on the maturity date
hereof. Interest not paid on the due date for payment thereof shall be
capitalized and added to the principal amount outstanding under this Note. The
Company will pay interest on any overdue payment (including any overdue
prepayment) of principal and any overdue payment of interest, payable
semi-annually as aforesaid (or, at the option of the registered holder hereof,
on aforesaid (or, at the option of the registered holder hereof, on demand), at
a rate per annum from time to time equal to 12% per annum.
1. Definitions. Capitalized terms used herein and not otherwise defined
shall have the meaning ascribed to them in the Securities Purchase Agreement
(the "Purchase Agreement"), dated as of the date hereof, between the Company and
Silver Creek Investments, Ltd., Dandelion Investments, Ltd., Bomoseen
Investments, Ltd., and Elstree Holdings, Ltd. (the "Investors").
2. Payments. (a) Payments of principal are to be made in immediately
available funds in the manner provided for in the Purchase Agreement, in lawful
money of the United States of America.
(b) Payments of interest are to be made (i) in immediately available
funds in the manner provided for in the Purchase Agreement, in lawful money of
the United States of America or at the Company's option (ii) by the issuance on
the applicable interest payment date of such number of Ordinary Shares, which
Ordinary Shares shall be registered under the Securities Act of 1933, as
amended, pursuant to an effective registration statement, which when
<PAGE> 2
each Ordinary Share is multiplied by its Fair Market Value the product shall
equal the amount of interest due under this Note on the applicable interest
payment date. For purposes of the preceding sentence, "Fair Market Value" shall
mean the average of the daily closing sales price for Ordinary Shares for the
five (5) consecutive trading days commencing eight (8) trading days prior to the
date interest is to be paid in accordance with this Section 2(b), as reported in
The Wall Street Journal, or if not reported therein, as reported in another
newspaper of national circulation chosen by the Board of Directors or as
reported by the National Association of Securities Dealers, Inc. Automated
Quotations System, or if the Ordinary Shares are not on the National Market
List, the average of the closing reported bid and asked prices on such day in
the over-the counter market, as furnished by the National Quotation Bureau,
Inc., or, if such firm at the time is not engaged in the business of reporting
such prices, as furnished by any similar firm then engaged in such business and
selected by the Company or, if there is no such firm, as furnished by any member
of the National Association of Securities Dealers, Inc., selected by the
Company.
3. Issuance. This Note is one of a series of Senior Secured Notes (herein
called the "Notes") issued pursuant to the Purchase Agreement. The obligations
of the Company evidenced by this Note are secured on a parri passu basis
pursuant to the Security Agreement, the Pledge Agreement, the Guaranty and the
Patent and Trademark Security Agreement; provided, that any liability in
connection with any issue or proposed issue of Ordinary Shares by the Company in
satisfaction of interest payments pursuant to this Note shall not be subject to
such security interest. The holder of this Note is entitled to the benefits of
the Purchase Agreement, the Security Agreement, the Pledge Agreement, the
Guaranty, the U.K. Security Agreement and the Patent and Trademark Security
Agreement and is bound by their provisions.
4. Usury. Notwithstanding any provision to the contrary contained in this
Note or any of the other Transaction Documents, it is expressly provided that in
no case or event shall the aggregate of (i) all interest on the unpaid balance
of the Notes, accrued or paid from the date hereof and (ii) the aggregate of any
other amounts accrued or paid pursuant to the Notes or any of the other
Transaction Documents, which under applicable laws are or may be deemed to
constitute interest upon the indebtedness evidenced by the Notes from the date
hereof, ever exceed the maximum nonusurious rate of interest permitted for that
day under the applicable law (the "Ceiling Rate"). By acceptance of this Note,
the Company and the holder of this Note agree that it is their common and
overriding intent to contract in strict compliance with applicable federal and
New York usury laws (and the usury laws of any other jurisdiction whose usury
laws are deemed to apply to the Notes or any of the other Transaction Documents
despite the intention and desire of the parties to apply the usury laws of the
State of New York, including, without limitation, the laws of the State of
California). In furtherance thereof, none of the terms of the Notes or any of
the other Transaction Documents shall ever be construed to create a contract to
pay, as consideration for the use, forbearance or detention of money, interest
at a rate in excess of the Ceiling Rate. The Company or other parties now or
hereafter becoming liable for payment of the indebtedness evidenced by the Notes
shall never be liable for interest in excess of the Ceiling Rate. If, for any
reason whatever, the interest paid or received on the Notes during their full
term produces a rate which exceeds the Ceiling Rate, the holders of the Notes
shall credit against the principal of the Notes (or, if such indebtedness shall
have been paid in full, shall refund to the payor of such interest) such portion
of said interest as shall be necessary to cause the interest paid
2
<PAGE> 3
on the Notes to produce a rate equal to the Ceiling Rate. All sums paid or
agreed to be paid to the holders of the Notes for the use, forbearance or
detention of the indebtedness evidenced hereby shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread in equal parts
throughout the full term of the Notes, so that the interest rate is uniform
throughout the full term of the Notes. The provisions of this Section 4 shall
control all agreements, whether now or hereafter existing and whether written or
oral, between the Company and the holder of this Note.
5. Loss, Destruction of Notes. Upon receipt of evidence satisfactory to
the Company of the loss, theft, mutilation or destruction of this Note, and in
the case of any such loss, theft or destruction upon delivery of a bond of
indemnity in such form and amount as shall be reasonably satisfactory to the
Company (the original Noteholder's indemnity being satisfactory indemnity in the
event of loss, theft or destruction of any Notes owned by such holder), or in
the event of such mutilation upon surrender and cancellation of this Note, the
Company will make and deliver a new Note, of like tenor, as provided for in such
lost, stolen, destroyed or mutilated Note, in lieu of such lost, stolen,
destroyed or mutilated Note. Any Notes issued under the provisions of this
Section 5 in lieu of any Note alleged to be lost, destroyed or stolen, or of any
mutilated Note, shall constitute an original contractual obligation on the part
of the Company.
6. Registered Note. This Note is a registered Note and, to the extent
provided in and subject to the terms of the Purchase Agreement, upon surrender
of this Note for registration of transfer, duly endorsed, or accompanied by a
written instrument of transfer duly executed, by the registered holder hereof or
such holder's attorney duly authorized in writing, a new Note for a like
principal amount will be issued to, and registered in the name of, the
transferee. Prior to due presentment for registration of transfer, the Company
shall treat the person in whose name this Note is registered as the owner hereof
for the purpose of receiving payment and for all other purposes, and the Company
shall not be affected by any notice to the contrary.
7. Default. In case an Event of Default, as defined in the Agreement,
shall occur, the principal of this Note may be declared or otherwise become due
and payable in the manner and with the effect provided in the Purchase
Agreement.
8. Amendments. Neither this Note nor any term hereof may be changed,
waived, discharged or terminated orally or in writing, provided that any term of
this Notes may be amended or the observance of such term may be waived (either
generally or in a particular instance and either retroactively or prospectively)
with, but only with, the written consent of the Company and the holders of the
Notes that represent in the aggregate at least a majority of the total principal
amount of the Notes then outstanding (whether or not the Holder of this Note
consents).
9. Severability. If in any jurisdiction, any provision of this Agreement
or its application to any party or circumstance is restricted, prohibited or
unenforceable, such provision shall, as to such jurisdiction, be ineffective
only to the extent of such restriction, prohibition or unenforceability without
invalidating the remaining provisions hereof and without affecting the validity
or enforceability of such provision in any other jurisdiction or its application
to other parties or circumstances.
3
<PAGE> 4
10. Notice. Any notice or document required or permitted by this Agreement
to be given to a party hereto shall be in writing and is sufficiently given if
delivered personally, or if sent by prepaid certified mail, return receipt
requested, to such party addressed as follows:
(i) If to the Company: Senetek Plc
620 Airport Road
Napa, California 94558
Attention: President
copy to: Latham & Watkins
505 Montgomery Street, Suite 1900
San Francisco, California 94111
Attention: Jeff Pero, Esq.
(v) If to the Holder: c/o Robert T. Tucker, Esq.
61 Purchase Street
Suite 2R
Rye, New York 10580
Notice so mailed shall be deemed to have been given upon receipt if delivered
personally or on the fifth business day next following the date of the returned
receipt. Any notice delivered to the party to whom it is addressed shall be
deemed to have been given and received on the day it is delivered. Any party may
from time to time notify the others in the manner provided herein of any change
of address which thereafter, until changed by like notice, shall be the address
of such party for all purposes hereof.
11. Governing Law; Choice Of Forum; Certain Consents; Waiver Of Jury
Trial, Counterclaim, Setoff. This Agreement has been executed and delivered at
and shall be deemed to have been made in New York, New York. This Agreement and
the rights granted herein shall be governed by and construed and enforced under
the laws of the State of New York (without giving effect to any conflicts of law
rules or principles). Any judicial proceeding brought by or against the Company
with respect to this Agreement or any related Agreement shall be brought in any
court of competent jurisdiction in the United States of America in the Southern
District of New York, and, by execution and delivery of this Agreement, the
Company accepts the exclusive jurisdiction of the aforesaid courts and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement. If any action is commenced in any other jurisdiction the
parties hereto hereby consent to the removal of such action to the United States
District Court for the Southern District of New York. The Company hereby
irrevocably designates Latham & Watkins-New York as the designee, appointee and
agent of the Company to receive, for and on behalf of the Company, service of
process in the above described jurisdiction in any legal action or proceeding
with respect to this Agreement or any other Transaction Document or the rights
and obligations hereunder or thereunder and such service shall be deemed
completed upon delivery thereof to such agent. It is understood that a copy of
such process served on such agent will be promptly forwarded by mail to the
Company at its address set forth in Section 10 hereof, but the failure of the
Company to receive such copy shall not affect in any way the service of
4
<PAGE> 5
such process. The Company further irrevocably consents to the service of process
out of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
the Company at its address, such service to become effective 10 days after such
mailing. Nothing herein shall affect the right of the Purchaser to serve process
in any other manner permitted by law or commence legal proceedings in or
otherwise proceed against the Company in any other jurisdiction. The Company
waives in each such action and other legal proceeding the right to trial by jury
and the right to assert any counterclaim or setoff.
[SIGNATURE APPEARS ON NEXT PAGE]
5
<PAGE> 6
IN WITNESS WHEREOF, the Corporation has caused this Note to be executed
and delivered as of the day and year and at the place first above written.
SENETEK PLC
By:
--------------------------------------
Frank J. Massino
President
6
<PAGE> 1
EXHIBIT 10.3
EXHIBIT B
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE HEREUNDER NOR ANY
AMERICAN DEPOSITARY SHARES REPRESENTING THE SECURITIES ISSUABLE HEREUNDER HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
NONE OF THEM MAY BE OFFERED, SOLD, TRANSFERRED, ASSIGNED NOR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH SECURITIES
UNDER THE ACT AND APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT
TO PURCHASE __________ ORDINARY SHARES OF
SENETEK PLC
Issued: April 14, 1999
Expires: April 14, 2004
Series A
NO. ___
This Warrant certifies that _________________ or its registered and
permitted successors or assigns ("_________" or the "Holder"), is entitled to,
subject to the terms set forth below, purchase from ____________, a corporation
organized under the laws of England (the "Company"), from time and time up to
____________(___________) duly authorized, validly issued, fully paid and
nonassessable Ordinary Shares (as such number may be adjusted pursuant to
Section 4(a) and Section 5 herein) which may be exchanged for American
Depositary Shares ("ADS") represented by American Depositary Receipts ("ADR")
(the Ordinary Shares of the Company, including any shares into which it may be
changed, reclassified, or converted, are herein referred to as the "Ordinary
Shares"). This Warrant is one of the Series A Warrants (the "Warrants") issued
pursuant to Section 2 of the Securities Purchase Agreement (the "Securities
Purchase Agreement"), dated as of April 14, 1999, by and between the Company,
Silver Creek Investments, Ltd., Bomoseen Investments, Ltd., Dandelion
Investments, Ltd. and Elstree Holdings, Ltd. The Ordinary Shares issuable upon
exercise of the Warrants (and any other or additional shares, securities or
property that may hereafter be issuable upon exercise of the Warrants) are
sometimes referred to herein as the "Warrant Shares," and the maximum number of
shares so issuable under this Warrant is sometimes referred to as the "Aggregate
Number" (as such number may be increased or decreased as more fully set forth
herein).
This Warrant is subject to the following provisions, terms and conditions:
Section 1. Exercise of Warrant.
(a) To exercise this Warrant in whole or in part, the Holder shall deliver
to the Company at its principal office located at 620 Airpark Road, Napa,
California 94558, (A) a
<PAGE> 2
written notice, in substantially the form of the Exercise Notice attached hereto
as Exhibit 1, of the Holder's election to exercise this Warrant, which notice
shall specify the number of Warrant Shares to be purchased, (B) (i) cash, money
order, certified check or wire transfer of immediately available funds payable
to the Company, in an amount equal to the Exercise Price (as defined below)
multiplied by the number of Warrant Shares being purchased, (ii) a copy of an
instrument representing outstanding principal amount of indebtedness of the
Company owed to the Holder, accompanied by a notice stating the Holder's intent
to exercise this Warrant, in whole or in part, by the reduction of the amount of
indebtedness stated in the notice and represented by the instrument in an amount
equal to the Exercise Price multiplied by the number of Warrant Shares being
purchased, or (iii) a notice stating the Holder's intent to effect the exchange
of this Warrant, in whole or in part, into such number of Warrant Shares as
shall equal (x) the number of Warrant Shares specified by the Holder in its
notice (the "Total Number") less (y) the number of Warrant Shares equal to the
quotient obtained by dividing (aa) the product of the Total Number and the
existing Exercise Price by (bb) the Fair Market Value of an Ordinary Share and
(C) this Warrant. The Company shall as promptly as practicable, and in any event
within ten (10) Business Days thereafter, execute and deliver or cause to be
executed and delivered, in accordance with such notice, a certificate or
certificates representing the aggregate number of Warrant Shares specified in
such notice. The stock certificate or certificates so delivered shall be in such
denominations as may be specified in such notice and shall be issued in the name
of the Holder or such other name as shall be designated in such notice. Such
certificate or certificates shall be deemed to have been issued and the Holder
or any other person so designated to be named therein shall be deemed for all
purposes to have become a Holder of record of such shares immediately prior to
the close of business on the date such notice is received by the Company as
aforesaid. If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of said stock certificate or certificates,
deliver to the Holder a new Warrant evidencing the rights of the Holder to
purchase the remaining Ordinary Shares called for by this Warrant, which new
Warrant shall in all other respects be identical to this Warrant, or, at the
request of the Holder, appropriate notation may be made on this Warrant and the
same returned to the Holder. The Company shall pay all expenses, taxes (except
United Kingdom stamp tax duties) and other charges payable in connection with
the preparation, issue and delivery of such certificates and new Warrants,
except that in case such stock certificates or new Warrants shall be registered
in a name or names other than the name of the Holder, funds sufficient to pay
all stock transfer taxes that are payable upon the issuance of such stock
certificates or new Warrants shall be paid by the Holder at the time of
delivering the notice of exercise mentioned above.
(b) All Ordinary Shares issued upon the exercise of this Warrant shall be
validly issued, fully paid and nonassessable and free from all preemptive rights
of any stockholder, and from all taxes, liens and charges with respect to the
issue thereof (other than United Kingdom stamp duty taxes and any other transfer
taxes and, if any Ordinary Shares are then listed on a national securities
exchange (as defined in the Securities Exchange Act of 1934, as amended) or
quoted on an automated quotation system, shall be listed or quoted thereon, as
the case may be, to the extent permissible under the rules of such exchange and
not prohibited by law, it being understood that such listing does not bear upon
the transferability of such shares under the Act and the other provisions of
this Agreement.
2
<PAGE> 3
(c) The Company shall not be required upon any exercise of this Warrant to
issue a certificate representing any fraction of an Ordinary Share, but, in lieu
thereof, shall pay to the Holder cash in an amount equal to a corresponding
fraction (calculated to the nearest 1/100 of a share) of the Fair Market Value
(as defined below) of one Ordinary Share on the Business Day immediately prior
to the date of receipt by the Company of notice of exercise of this Warrant.
(d) The Company shall pay all depositary fees payable to the depositary in
respect of the issuance of American Depositary Shares or American Depositary
Receipts in respect of Ordinary Shares issued upon exercise of the Warrant.
Section 2. Terms and Conditions of Warrants.
(a) Exercise. Warrants to purchase 458,075 (as adjusted in accordance with
the principles of Section 4(a) or Section 5 hereof) Ordinary Shares shall be
exercisable at any time, and from time to time, on or after the date hereof (the
"Exercise Date"), and shall expire at 11:59 p.m., New York City time, on April
14, 2004 (the "Expiration Date").
(b) Purchase Price. Subject to the provisions of Sections 5 and 6 hereof,
the purchase price per Ordinary Share shall be $1.50 (the "Exercise Price");
provided, however, that if on or before May 31, 1999 the Company has not filed
and had declared effective by the United States Securities and Exchange
Commission (the "Commission") a registration statement registering for resale
the Warrant Shares under the Securities Act of 1933, as amended (the "Securities
Act") and all other Ordinary Shares owned or held by the Holder or which the
Company has committed to issue to the Holder on or prior to April 14, 1999, the
Exercise Price shall be reduced to $1.30; provided, further, however, that if on
or before June 30, 1999 the Company has not filed and had declared effective by
the Commission a registration statement registering for resale the Warrant
Shares under the Securities Act and all other Ordinary Shares owned or held by
Holder or which the Company has committed to issue to the Holder on or prior to
April 14, 1999, the Exercise Price shall be reduced to $1.20.
(c) Restrictions on Transfer and Registration Rights.
(i) Each certificate for any Warrant Shares issued upon the exercise
of this Warrant, and each certificate issued upon the transfer of any such
Warrant Shares and each American Depositary Receipt representing American
Depositary Shares (except as otherwise permitted by this Section 2(c)) shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH SECURITIES UNDER THE
ACT AND REGISTRATION OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES
LAW OR AN OPINION OF COUNSEL REASONABLY
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SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND QUALIFICATION IS
NOT REQUIRED.
(ii) The restrictions imposed by this Section 2(c) upon the
transferability of Warrants and Warrant Shares and related American Depositary
Shares shall cease and terminate as to any particular Warrants, Warrant Shares
or related American Depositary Shares, (a) when such securities shall have been
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering such securities, or (b) when in the
reasonable opinion of counsel for the Company such restrictions are no longer
required in order to comply with the Securities Act. Whenever such restrictions
shall terminate as to any Warrants, Warrant Shares or related American
Depositary Shares, the Holder thereof shall be entitled to receive from the
Company, without expense, new certificates of like tenor not bearing the
restrictive legend set forth in Section 2(c)(i).
(d) Investment Representation. The Holder, by acceptance hereof,
represents as of the date hereof, as follows:
(i) The Warrant Shares issuable upon exercise of the Warrants
(collectively, the "Acquired Securities") will be acquired for investment for
the Holder's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part of the Acquired Securities in contravention
of applicable law, and that the Holder has no present intention of selling,
granting any participation in, or otherwise distributing the same. The Holder
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person in or with respect to any of the Acquired Securities.
(ii) The Holder is and upon the acquisition of Acquired Securities
upon exercise of the Warrants will be an "accredited investor" within the
meaning of Rule 501 of Regulation D of the Rules and Regulations of the
Securities and Exchange Commission under the Securities Act. The Holder has not
been organized for the purposes of acquiring the Acquired Securities.
(iii) The Holder understands that the Acquired Securities it may
acquire as contemplated by this Warrant are "restricted securities" within the
meaning of Rule 144 under the Securities Act ("Rule 144") inasmuch as they will
be acquired from the Company in a transaction not involving a public offering
and that under the federal securities laws and applicable regulations such
Acquired Securities may be resold without registration under the Securities Act
only in certain limited circumstances. In this connection, the Holder represents
that it is familiar with Rule 144 and understands the resale limitations imposed
thereby and by the Securities Act. The Holder acknowledges that its investment
in the Acquired Securities may be an illiquid investment requiring the Holder to
bear the economic risk of the investment for an indefinite period; and
(iv) Without in any way limiting the representations set forth in
this Section 2(d), the Holder agrees not to make any disposition of all or any
portion of the Acquired
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<PAGE> 5
Securities unless and until the transferee has agreed in writing for the benefit
of the Company to be bound by the terms of this Warrant (provided that such
Holder is making such disposition in a transaction other than pursuant to Rule
144 or under an effective registration statement under the Securities Act and in
accordance with any applicable state securities laws), and (A) the Holder shall
have notified the Company of the proposed disposition, and (B) if requested by
the Company, the Holder shall have furnished the Company with an opinion of
counsel, in form and substance reasonably satisfactory to the Company, rendered
by a law firm experienced in matters involving the sale of securities under
federal and state securities laws, that such disposition will not require
registration of the Acquired Securities under the Securities Act or registration
or qualification under any state securities or "blue sky" law.
In the event certificates for Ordinary Shares are delivered upon the
exercise of this Warrant, the Company may cause a legend or legends to be placed
on such certificates to make appropriate reference to such foregoing
representations and to restrict transfer in the absence of compliance with
applicable federal or state securities laws.
Section 3. Transfer, Division and Combination. The Company agrees to maintain at
its offices in Napa, California, books for the registration and transfer of this
Warrant and, subject to the provisions of Section 2 hereof, this Warrant and all
rights hereunder are transferable, in whole or in part, on such books at such
office, upon surrender of this Warrant at such office, together with a written
assignment of this Warrant duly executed by the Holder or his agent or attorney
and funds sufficient to pay any stock transfer taxes payable upon the making of
such transfer. Upon such surrender and payment, the Company shall execute and
deliver a new Warrant or Warrants in the name of the assignee or assignees and
in the denominations specified in such instrument of assignment, and this
Warrant shall promptly be canceled. Notwithstanding the foregoing, a Warrant may
be exercised by a new Holder for the purchase of Ordinary Shares without having
a new Warrant issued if Holder shall otherwise have complied with the foregoing
provisions of this Section 3 and the applicable provisions of Section 2 hereof.
All of the provisions of this Section 3 are subject to the provisions of
Sections 2 above. This Warrant may be divided or combined with other Warrants
upon surrender hereof and of any Warrant or Warrants with which this Warrant is
to be combined, together with a written notice specifying the names and
denominations in which the new Warrant or Warrants are to be issued, signed by
the holders thereof or their respective duly authorized agents or attorneys. The
Company shall execute and deliver a new Warrant or Warrants exchangeable for the
Warrant or Warrants to be divided or combined in accordance with such notice.
Section 4. Successor; Taxes.
(a) Successor Company. The obligations of the Company under this Warrant
shall be binding upon any successor company or organization resulting from the
merger, consolidation or other reorganization of the Company, or upon any
successor company or organization succeeding to substantially all of the assets
and business of the Company. The Company agrees that it will make appropriate
provision for the preservation of Holder's rights under this Warrant in any
agreement or plan which it may enter into or adopt to effect any such merger,
consolidation, reorganization or transfer of assets.
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<PAGE> 6
(b) Taxes on Conversion. The issuance of certificates for Warrant Shares
upon the exercise of this Warrant shall be made without charge to the Holder
exercising this Warrant for any issue or stamp tax in respect of the issuance of
such certificates, and such certificates shall be issued in the respective names
of, or in such names as may be directed by, the holder; provided, however, 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 in
a name other than that of the Holder, 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.
(c) Withholding Taxes.
(i) Except to the extent otherwise required by law, the Company will
not withhold United States or United Kingdom withholding taxes from payments to
be made to holders of Warrants if such holders (a) are corporations organized
under the laws of a jurisdiction outside the United States or United Kingdom or
are otherwise persons not resident in the United States or United Kingdom for
U.S. federal income tax purposes or United Kingdom tax purposes, and (b) provide
the Company, upon the Company's reasonable request, with one or more of Internal
Revenue Service Form W-8, Form 4224 or other applicable form, certificate or
document prescribed by the Internal Revenue Service of the United States or
Inland Revenue of the United Kingdom certifying as to such holders' entitlement
to an exemption from any such withholding requirements.
(ii) Except to the extent otherwise required by law, the Company
will not withhold United States or United Kingdom withholding taxes from
payments to be made to holders of Warrants in excess of an applicable treaty
rate if such holders (a) are corporations organized under the laws of a
jurisdiction outside the United States or United Kingdom or are otherwise
persons not resident in the United States or United Kingdom for U.S. federal
income tax purposes or United Kingdom tax purposes, and (b) provide the Company
upon the Company's reasonable request, with one or more of certification of
their residence address, Internal Revenue Service Form 1001 or other applicable
form, certificates or documents certifying as to such holders' entitlement to a
reduced rate of withholding under any such withholding requirements.
(iii) Except to the extent otherwise required by law, neither
Section 4(c)(1) nor Section 4(c)(ii) hereof shall require the Company to apply
an exemption or reduced rate of withholding during any period when it shall have
received notice or has knowledge that (a) the residence or other information
previously provided on any applicable form, certificate or document is incorrect
and no corrected form, certificate or document as applicable has been provided
to the Company, or (b) of any other information which would render such
exemption or reduced rate inapplicable.
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<PAGE> 7
(iv) Notwithstanding the preceding Sections 4(c)(i) and 4(c)(ii), if
the Company is required by law to withhold from amounts otherwise payable to a
holder of Warrants, whether by reason of a change in law or applicable treaty,
or because the applicable treaty withholding rate is greater than zero or by
reason of the failure of a holder of Warrants to provide a valid certification
or form, the Company shall withhold the amounts required to be withheld. Amounts
so withheld with respect to a holder in accordance with this Section 4 shall be
treated as distributed to such holder for all purposes of this Warrant.
Section 5. Adjustments to Aggregate Number. The Aggregate Number shall be
subject to adjustment from time to time as follows and thereafter as adjusted
shall be deemed to be the Aggregate Number hereunder.
(a) Reorganization, Reclassification, Consolidation, Merger or Sale. If
any capital reorganization or reclassification of the Company, or any
consolidation or merger of the Company with another person, or the sale,
transfer or lease of all or substantially all of its assets to another person
shall be effected in such a way that holders of Ordinary Shares shall be
entitled to receive stock, securities or assets with respect to or in exchange
for their shares, then provision shall be made, in accordance with this Section
5, whereby the Holder hereof shall thereafter have the right to purchase and
receive, upon the basis and upon the terms and conditions specified in this
Warrant and in addition to or in exchange for, as applicable, the Warrant Shares
subject to this Warrant immediately theretofore purchasable and receivable upon
the exercise of the rights represented hereby, such securities or assets as
would have been issued or payable with respect to or in exchange for the
Aggregate Number immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby if exercise of the Warrant has
occurred immediately prior to such reorganization, reclassification,
consolidation, merger or sale. The Company will not effect any such
consolidation, merger, sale, transfer or lease unless prior to the consummation
thereof the successor entity (if other than the Company) resulting from such
consolidation or merger or the entity purchasing or leasing such assets shall
assume by written instrument (1) the obligation to deliver to such Holder such
securities or assets as, in accordance with the foregoing provisions, such
Holder may be entitled to purchase, and (2) all other obligations of the Company
under this Warrant. The provisions of this Section 5(a) shall similarly apply to
successive consolidations, mergers, exchanges, sales, transfers or leases.
(b) Distributions. If at any time or from time to time the Company shall
take a record of the holders of its Ordinary Shares for the purpose of entitling
them to receive or pays any dividend or other distribution to holders of
Ordinary Shares (collectively, a "Distribution") of:
(i) cash,
(ii) any evidences of its indebtedness (other than securities
convertible into Ordinary Shares ("Convertible Securities")), any shares
of its capital stock (other than additional Ordinary Shares or Convertible
Securities) or any other securities or property of any nature whatsoever
(other than cash), or
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<PAGE> 8
(iii) any options or warrants or other rights to subscribe for or
purchase any of the following: any evidences of its indebtedness (other
than Convertible Securities), any shares of its capital stock (other than
additional Ordinary Shares or Convertible Securities) or any other
securities or property of any nature whatsoever,
then the holder of this Warrant shall be entitled to receive upon the exercise
hereof at any time on or after the taking of such record the number of Ordinary
Shares to be received upon exercise of such Warrant determined as stated herein
and, in addition and without further payment, the cash, stock, securities, other
property, options, warrants and/or other rights to which such holder or holders
would have been entitled by way of the Distribution and subsequent dividends and
distributions if such Holder (x) had exercised such Warrants immediately prior
to such Distribution, and (y) had retained the Distribution in respect of the
Ordinary Shares and all subsequent dividends and distributions of any nature
whatsoever in respect of any stock or securities paid as dividends and
distributions and originating directly or indirectly from such Ordinary Shares.
A reclassification of the Ordinary Shares into any other class of stock shall be
deemed a distribution by the Company to the holders of its Ordinary Shares or
such shares of such other class of stock within the meaning of paragraph (c) of
this Section 5 and, if the outstanding Ordinary Shares shall be changed into a
larger or smaller number of Ordinary Shares as a part of such reclassification,
such event shall be deemed a subdivision or combination, as the case may be, of
the outstanding Ordinary Shares within the meaning of paragraph (c) of this
Section 5. If the securities to be distributed by the Company involve rights,
warrants, options or any other form of Convertible Securities and the right to
exercise or convert such securities would expire in accordance with its terms
prior to the exercise of this Warrant, then the terms of such securities shall
provide that such exercise or convertibility right shall remain in effect until
30 days after the date the Holder of this Warrant receives such securities
pursuant to the exercise hereof.
(c) In addition to those adjustments set forth in Sections 5(a) and 5(b),
but without duplication of the adjustments to be made under such Sections 5(a)
and 5(b) and Section 6, if the Company:
(i) takes a record of the holders of its Ordinary Shares for the
purpose of entitling them to receive or pays a dividend payable in, or
other distribution of, Ordinary Shares;
(ii) subdivides its outstanding shares of Ordinary Shares into a
greater number of Ordinary Shares;
(iii) combines its outstanding Ordinary Shares into a lesser number
of shares of Ordinary Shares; and/or
(iv) makes a distribution on its Ordinary Shares in shares of its
capital stock other than Ordinary Shares,
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<PAGE> 9
then (A) the Aggregate Number in effect immediately prior thereto shall be
adjusted so that the holder or holders of this Warrant shall thereafter be
entitled to receive, upon exercise hereof, the number of Ordinary Shares or
other securities of the Company (such other securities thereafter enjoying the
rights of Warrant Shares under this Warrant) that such Holder would have owned
or have been entitled to receive after the occurrence of such event had such
Warrants been exercised immediately prior to the occurrence of such event or the
record date with respect thereto, and (B) the Exercise Price shall (until
another such event) be adjusted to equal (calculated to the nearest full cent)
the quotient derived by dividing (x) the Aggregate Number in effect immediately
prior to such adjustment multiplied by the Exercise Price in effect immediately
prior to such adjustment, divided by (y) the Aggregate Number in effect after
adjustment pursuant to this Section 5(c).
Section 6. Adjustment to Exercise Price.
(a) If the Company shall issue or sell any Ordinary Shares at a price
which is less than the Exercise Price, then the Exercise Price in effect
immediately prior thereto shall be adjusted immediately so that the Exercise
Price thereafter shall equal the price per Ordinary Share at which such Ordinary
Shares described in this Section 6(a) were issued. The provisions of this
paragraph (a) shall not apply to any issuance of additional Ordinary Shares for
which an adjustment is provided under Sections 5(a), (b) or (c).
(b) If the Company shall take a record of the holders of its Ordinary
Shares for the purpose of entitling them to receive a distribution of, or shall
in any manner issue or sell, any warrants or other rights to subscribe for or
purchase (x) any shares of Ordinary Shares or (y) any Convertible Securities,
whether or not the rights to subscribe, purchase, exchange or convert thereunder
are immediately exercisable, at a purchase price per Ordinary Share which is
less than the Exercise Price, then the Exercise Price in effect immediately
prior thereto shall be adjusted immediately so that the Exercise Price
thereafter shall equal the consideration for which such Ordinary Shares or
Ordinary Shares subject to Convertible Securities described in this Section (b)
were issued. For purposes of this Section 6(b), the consideration for any
additional Ordinary Shares issuable pursuant to any warrants or other rights to
subscribe for or purchase the same or for any additional Ordinary Shares
issuable pursuant to Convertible Securities subject to any warrants or other
rights shall be the consideration received or receivable by the Company for
issuing such warrants or other rights, plus the additional consideration payable
to the Company upon the exercise of such warrants or other rights and upon the
exercise of the Convertible Securities, as the case may be.
(c) If the Company shall take a record of the holders of its Ordinary
Shares for the purpose of entitling them to receive a distribution of or shall
in any manner issue or sell Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, at a purchase price
per Ordinary Share which is less than the Exercise Price, then the Exercise
Price in effect immediately prior thereto shall be adjusted immediately so that
the Exercise Price thereafter shall equal the purchase price per Ordinary Share
issuable pursuant to the terms of any Convertible Securities. For purposes of
this Section 6(c), the purchase price per Ordinary Share issuable pursuant to
the terms of any Convertible Security
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shall be the consideration received or receivable by the Company for issuing the
Convertible Security, plus the additional consideration, if any, payable to the
Company upon the purchase of the Ordinary Share pursuant to the Convertible
Security.
Section 7. General Provisions Regarding Adjustments to Aggregate Number or
Exercise Price.
(a) The following provisions shall be applicable to the making of
adjustments of (i) the Aggregate Number as provided in Section 5 or (ii) the
Exercise Price as provided in Section 6:
(i) The sale or other disposition of any issued Ordinary Shares
owned or held by or for the account of the Company shall be deemed an
issuance thereof for the purposes of Sections 5 and 6.
(ii) The adjustments required by Sections 5 and 6 shall be made
whenever and as often as any specified event requiring an adjustment shall
occur, except as expressly provided herein. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the
close of business on the date of its occurrence.
(iii) In computing adjustments under Sections 5 and 6, fractional
interests in Ordinary Shares shall be taken into account to the nearest
one-thousandth (.001) of a share and shall be aggregated until they equal
one whole share.
(iv) If the Company shall take a record of the holders of its
Ordinary Shares for an action described in Sections 5 or 6 hereof, but
abandons its plan to take such action prior to effecting such action, then
no adjustment shall be required by reason of the taking of such record.
(v) Notwithstanding anything herein to the contrary, no adjustment
shall be made to the Aggregate Number or Exercise Price as a result of
adjustments to the Aggregate Number or Exercise Price as defined in any
Warrants issued to the Holder on the date hereof.
(vi) Upon the expiration or termination of any of the warrants or
other rights or options referred to in Section 6(b) above or the
Convertible Securities referred to in Section 6(b) or 6(c) above, the
Exercise Price after the expiration or termination of any such warrants,
rights, options or Convertible Securities without any exercise or
conversion thereof, the issuance of which caused an adjustment to the
Exercise Price, shall be readjusted to such Exercise Price prior to the
adjustment made upon the issuance of such warrants, rights, options or
Convertible Securities.
(vii) In case of the issuance at any time of any additional Ordinary
Shares or Convertible Securities in payment or satisfaction of any
dividend upon any class of stock other than Ordinary Shares, the Company
shall be deemed to have received for such
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<PAGE> 11
additional Ordinary Shares or Convertible Securities a consideration equal
to the amount of such dividend so paid or satisfied.
(viii) No adjustment to the Aggregate Number or Exercise Price shall
be made for issuances of (A) Options granted under the Company's No. 1
Executive Share Option Scheme or No. 2 Executive Share Option Scheme or
any other employee, non-executive director or consultant share option
scheme approved by the Company's directors, and Ordinary Shares issuable
or issued upon exercise of such options, (B) Ordinary Shares issued or
issuable upon (x) the exercise of options, warrants or rights to subscribe
for or purchase Ordinary Shares, or (y) the conversion or exchange of
securities convertible into or exchangeable for Ordinary Shares or
options, warrants or rights to subscribe for or purchase Ordinary Shares,
in each case only to the extent outstanding on the date of issuance of
this Warrant and (C) Ordinary Shares issued pursuant to a transaction
described in Section 5(a) or (b) hereof.
(ix) No adjustment of the Exercise Price shall be made in an amount
less than one cent per share, provided that any adjustments which are not
required to be made by reason of this sentence shall be carried forward
and shall be taken into account in any subsequent adjustment made.
(b) If any event occurs as to which the provisions of Section 5 or Section
6 are not strictly applicable but the lack of any provision for the exercise of
the rights of a holder or holders of Warrants would not fairly protect the
purchase rights of such holder or holders of Warrants in accordance with the
essential intent and principles of such provisions, then the Company shall
appoint a firm of independent certified public accountants in the United States
(which may be the regular outside auditors of the Company) of recognized
national standing in the United States satisfactory to the Holder, which shall
give its opinion as to the adjustments, if any, necessary to preserve, without
dilution, on a basis consistent with the essential intent and principles
established in the provisions of Section 5 or Section 6, the exercise rights of
the holders of Warrants. Upon receipt of such opinion, the Company shall
forthwith make the adjustments described therein.
(c) Within 45 days after the end of each fiscal quarter during which an
event occurred that resulted in an adjustment pursuant to Section 5 or Section
6, the Company shall cause to be promptly mailed to each holder of Warrants (and
upon the exercise of any Warrants to the exercising holder) by first-class mail,
postage prepaid, notice of each adjustment or adjustments to the Aggregate
Number or Exercise Price, as the case may be, effected since the date of the
last such notice and a certificate of the Company's Chief Financial Officer or,
in the case of any such notice delivered within 45 days after the end of a
fiscal year, a firm of independent public accountants in the United States
selected by the Company and acceptable to a majority in interest of the holders
of the Warrants (who may be the regular outside auditors employed by the
Company), in each case, setting forth the Aggregate Number or Exercise Price, as
the case may be, after such adjustment, a brief statement of the facts requiring
such adjustment and the computation by which such adjustment was made. The fees
and expenses of such accountants shall be paid by the Company.
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Section 8. Covenant to Reserve Shares of Ordinary Shares. The Company covenants
and agrees that it will at all times reserve and set apart and have, free from
preemptive rights, a number of shares of authorized but unissued Ordinary Shares
sufficient to enable it at any time to fulfill all its obligations hereunder.
The issuance of such shares has been duly and validly authorized, and when
issued and sold in accordance with the Warrants, such shares will be duly and
validly issued, fully paid and nonassessable.
Section 9. Call Rights. Provided that no Event of Default as described in
Section 9 of the Securities Purchase Agreement has occurred, upon ninety (90)
days prior written notice (the "Call Notice") to the holders of the Warrants,
the Company shall have the right to call and require such holders to sell to the
Company all of such holder's Warrants then outstanding at the termination of
such ninety (90) day period if: (i) the closing sale price of the Company's
American Depositary Shares on any national securities exchange or automatic
quotation system on which the Company's American Depositary Shares are then
listed or quoted, equals or exceeds $3.00 for twenty (20) consecutive trading
days; and (ii) the average daily trading volume of the Company's American
Depositary Shares for such twenty trading day period exceeds 100,000 shares per
day; and (iii) the American Depositary Shares representing 2,105,715 Warrant
Exercise Shares (as defined in the Settlement Agreement referred to in the
Securities Purchase Agreement) have been registered for resale pursuant to a
registration statement declared effective under the Securities Act of 1933, as
amended, by the United States Securities and Exchange Commission, and (iv)
during the 90 day period commencing on the date the holder of this Warrant
receives the Call Notice, the Company shall have complied with Section 1(a)
herein. Any such notice shall comply with Section 14 below and shall specify the
date for purchase of such Warrants. The purchase price for each called warrant
shall be the Exercise Price and shall be paid within two (2) Business Days of
the receipt by the Company of each Warrant. Notwithstanding anything else
contained in this Section 8, the holder of this Warrant shall be entitled to
exercise the Warrant and sell the underlying Warrant Shares during such ninety
(90) day period in accordance with the terms of this Warrant.
Section 10. Notices. In the event that:
(A) the Company proposes to pay any dividend payable in stock (of
any class or classes) or any obligations or stock convertible into or
exchangeable for shares of Ordinary Shares upon its Ordinary Shares or
make any distribution (other than ordinary cash dividends) to the holders
of its Ordinary Shares;
(B) the Company proposes to grant to the holders of its Ordinary
Shares generally any rights or warrants (excluding any warrants granted to
any employee, director, officer, contractor or consultant of the Company
pursuant to any plan approved by the Board of Directors of the Company);
(C) the Company proposes to effect any capital reorganization or
reclassification of capital stock of the Company;
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(D) the Company proposes to consolidate with, or merge into, any
other Company or to transfer its property as an entirety or substantially
as an entirety; or
(E) the Company proposes to effect the liquidation, dissolution or
winding up of the Company,
then the Company shall cause notice of any such intended action to be given to
the Holder of this Warrant not less than 30 days before the date on which the
transfer books of the Company shall close or a record shall be taken for such
stock dividend, distribution or granting of rights or Warrants, or the date when
such capital reorganization, reclassification, consolidation, merger, transfer,
liquidation, dissolution or winding up shall be effective, as the case may be.
Any notice or other document required or permitted to be given or
delivered to the Holder of this Warrant shall be delivered in accordance with
Section 15 herein.
Section 11. Limitation of Liability; Not Shareholders. No provision of this
Warrant shall be construed as conferring upon the Holder the right to vote or to
consent or to receive dividends or to receive notice as a shareholder in respect
of meetings of shareholders for the election of directors of the Company or any
other matter whatsoever as shareholders of the Company. No provision hereof, in
the absence of affirmative action by the Holder to purchase shares of Ordinary
Shares, and no mere enumeration herein of the rights or privileges of the
Holder, shall give rise to any liability of Holder for the purchase price or as
a shareholder of the Company, whether such liability is asserted by the Company,
creditors of the Company or others.
Section 12. Loss, Destruction of Warrant. Upon receipt of evidence satisfactory
to the Company of the loss, theft, mutilation or destruction of this Warrant,
and in the case of any such loss, theft or destruction upon delivery of a bond
of indemnity in such form and amount as shall be reasonably satisfactory to the
Company (the original Warrantholder's indemnity being satisfactory indemnity in
the event of loss, theft or destruction of any Warrant owned by such holder), or
in the event of such mutilation upon surrender and cancellation of this Warrant,
the Company will make and deliver a new Warrant, of like tenor and representing
the right to purchase the same Aggregate Number of Ordinary Shares, as adjusted
in Section 5, as provided for in such lost, stolen, destroyed or mutilated
Warrant, in lieu of such lost, stolen, destroyed or mutilated Warrant. Any
Warrant issued under the provisions of this Section 12 in lieu of any Warrant
alleged to be lost, destroyed or stolen, or of any mutilated Warrant, shall
constitute an original contractual obligation on the part of the Company.
Section 13. Amendments. Neither this Warrant nor any term hereof may be changed,
waived, discharged or terminated orally or in writing, provided that any term of
this Warrant may be amended or the observance of such term may be waived (either
generally or in a particular instance and either retroactively or prospectively)
with, but only with, the written consent of the Company and the Holders of the
Warrants that are exercisable for a number of Ordinary Shares that represent in
the aggregate at least a majority of the total number of Ordinary Shares for
which all of the Warrants are then exercisable (whether or not the Holder of
this Warrant consents).
13
<PAGE> 14
Section 14. Severability. If in any jurisdiction, any provision of this
Agreement or its application to any party or circumstance is restricted,
prohibited or unenforceable, such provision shall, as to such jurisdiction, be
ineffective only to the extent of such restriction, prohibition or
unenforceability without invalidating the remaining provisions hereof and
without affecting the validity or enforceability of such provision in any other
jurisdiction or its application to other parties or circumstances.
Section 15. Notice. Any notice or document required or permitted by this
Agreement to be given to a party hereto shall be in writing and is sufficiently
given if delivered personally, or if sent by prepaid certified mail, return
receipt requested, to such party addressed as follows:
(i) If to the Company: Senetek Plc
620 Airpark Road
Napa, California 94558
Attention: President
copy to: Latham & Watkins
505 Montgomery Street, Suite 1900
San Francisco, California 94111
Attention: Jeffrey T. Pero, Esq.
(v) If to the Holder: c/o Robert T. Tucker, Esq.
61 Purchase Street, Suite 2
Rye, New York 10580
copy to: Pryor Cashman Sherman & Flynn LLP
410 Park Avenue
New York, New York 10022
Attention: Selig D. Sacks, Esq.
Notice so mailed shall be deemed to have been given upon receipt if delivered
personally or on the fifth business day next following the date of the returned
receipt. Any notice delivered to the party to whom it is addressed shall be
deemed to have been given and received on the day it is delivered. Any party may
from time to time notify the others in the manner provided herein of any change
of address which thereafter, until changed by like notice, shall be the address
of such party for all purposes hereof.
Section 16. Governing Law; Choice Of Forum; Certain Consents; Waiver Of Jury
Trial, Counterclaim, Setoff.
THIS WARRANT SHALL BE DEEMED TO HAVE BEEN EXECUTED AND DELIVERED AT AND
SHALL BE DEEMED TO HAVE BEEN MADE IN NEW YORK, NEW YORK. THIS WARRANT, AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE
WITH AND BE
14
<PAGE> 15
GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT
TO ANY OF SUCH STATE'S CONFLICT OF LAWS RULES OR PRINCIPLES). ANY LEGAL ACTION
OR PROCEEDING WITH RESPECT HERETO AND THERETO SHALL ONLY BE BROUGHT IN ANY STATE
OR FEDERAL COURT IN THE BOROUGH OF MANHATTAN, NEW YORK CITY, NEW YORK, AND, BY
EXECUTION, ACCEPTANCE AND DELIVERY OF THIS WARRANT, THE COMPANY HEREBY
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS AND IRREVOCABLY WAIVES
ANY OBJECTION, DEFENSE OR CLAIM TO SUCH JURISDICTION WHICH MAY BE BASED,
DIRECTLY OR INDIRECTLY, ON THE GROUNDS OF FORUM NON CONVENIENS THAT IT MAY NOW
OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS WARRANT. IF ANY ACTION IS COMMENCED IN ANY OTHER
JURISDICTION, THE PARTIES HERETO HEREBY CONSENT TO THE REMOVAL OF SUCH ACTION TO
THE AFOREMENTIONED COURTS. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE COMPANY AT ITS ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE
30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE HOLDERS
OF ANY OF THE WARRANTS OR WARRANT SHARES TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE
COMPANY IN ANY OTHER JURISDICTION. THE COMPANY WAIVES IN EACH SUCH ACTION AND
OTHER LEGAL PROCEEDING THE RIGHT TO TRIAL BY JURY AND THE RIGHT TO ASSERT ANY
COUNTERCLAIM OR SETOFF.
[SIGNATURE PAGE FOLLOWS; REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
15
<PAGE> 16
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name by its duly authorized officer.
Dated: , 1999
--------------
SENETEK PLC
By:
-------------------------------------
Name:
Title:
16
<PAGE> 17
EXHIBIT 1
EXERCISE NOTICE
The undersigned Holder hereby elects to exercise purchase rights
represented by such Warrant for, and to purchase thereunder ________ Ordinary
Shares covered by such Warrant and herewith makes payment in full therefor of
$_________ cash and/or by cancellation of $__________ of indebtedness of the
Company to the Holder hereof and requests that, subject to the terms and
conditions of the Warrant, certificates for such shares (and any securities or
property deliverable upon such exercise) be issued in the name of and delivered
to ______________________ whose address is ______________________________, and
whose social security or employer identification number is ____________.
The undersigned agrees that, in the absence of an effective registration
statement with respect to Ordinary Shares issued upon this exercise, the
undersigned is acquiring such Ordinary Shares for the Holder's own account and
not as a nominee for any other party, for investment and not with a view to
distribution thereof and that the certificate or certificates representing such
Ordinary Shares may bear a legend substantially as follows:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO SUCH SECURITIES UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED.
In addition, the undersigned agrees that, in the absence of an effective
registration statement with respect to Ordinary Shares issued upon this
exercise, stop transfer instructions will be entered on the Company's stock
transfer records with respect to Ordinary Shares issued upon this exercise.
Dated:
-----------------------------------------
Signature guaranteed:
<PAGE> 18
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered Holder of the within Warrant
hereby sells, assigns, and transfers unto the Assignee(s) named below (including
the undersigned with respect to any Warrants constituting a part of the Warrants
evidenced by the within Warrant not being assigned hereby) all of the right of
the undersigned under the within Warrant, with respect to the number of Warrants
set forth below:
<TABLE>
<CAPTION>
Social security or
other identifying
number of
Name of Assignees Address Assignee(s) Number of Warrants
----------------- ------- ------------------ ------------------
<S> <C> <C> <C>
</TABLE>
and does hereby irrevocably constitute and appoint ______________ the
undersigned's attorney to make such transfer on the books of _____________
maintained for that purpose, with full power of substitution in the premises.
Dated:
----------------
(1)
----------------------------------------
(Signature of Owner)
----------------------------------------
(Street Address)
----------------------------------------
(City) (State) (Zip Code)
- ----------
(1) The signature must correspond with the name as written upon the face of
the within Warrant in every particular, without alteration or enlargement
or any change whatsoever.
18
<PAGE> 1
EXHIBIT 10.4
EXHIBIT J
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE HEREUNDER NOR ANY
AMERICAN DEPOSITARY SHARES REPRESENTING THE SECURITIES ISSUABLE HEREUNDER HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
NONE OF THEM MAY BE OFFERED, SOLD, TRANSFERRED, ASSIGNED NOR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH SECURITIES
UNDER THE ACT AND APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT
TO PURCHASE _______ ORDINARY SHARES OF
SENETEK PLC
Issued: April 14, 1999
Expires: April 14, 2009
Series B
NO. __
This Warrant certifies that __________________ or its registered and
permitted successors or assigns ("___________" or the "Holder"), is entitled to,
subject to the terms set forth below, purchase from SENETEK PLC, a corporation
organized under the laws of England (the "Company"), from time and time up to
_______________ (___________) duly authorized, validly issued, fully paid and
nonassessable Ordinary Shares (as such number may be adjusted pursuant to
Section 4(a) and Section 5 herein) which may be exchanged for American
Depositary Shares ("ADS") represented by American Depositary Receipts ("ADR")
(the Ordinary Shares of the Company, including any shares into which it may be
changed, reclassified, or converted, are herein referred to as the "Ordinary
Shares"). This Warrant is one of the Series B Warrants (the "Warrants") issued
pursuant to Section 2 of the Securities Purchase Agreement (the "Securities
Purchase Agreement"), dated as of April 14, 1999, by and between the Company,
Silver Creek Investments, Ltd., Bomoseen Investments, Ltd., Dandelion
Investments, Ltd. and Elstree Holdings, Ltd. The Ordinary Shares issuable upon
exercise of the Warrants (and any other or additional shares, securities or
property that may hereafter be issuable upon exercise of the Warrants) are
sometimes referred to herein as the "Warrant Shares," and the maximum number of
shares so issuable under this Warrant is sometimes referred to as the "Aggregate
Number" (as such number may be increased or decreased as more fully set forth
herein).
This Warrant is subject to the following provisions, terms and conditions:
Section 1. Exercise of Warrant.
(a) To exercise this Warrant in whole or in part, the Holder shall deliver
to the Company at its principal office located at 620 Airpark Road, Napa,
California 94558, (A) a
<PAGE> 2
written notice, in substantially the form of the Exercise Notice attached hereto
as Exhibit 1, of the Holder's election to exercise this Warrant, which notice
shall specify the number of Warrant Shares to be purchased, (B) (i) cash, money
order, certified check or wire transfer of immediately available funds payable
to the Company, in an amount equal to the Exercise Price (as defined below)
multiplied by the number of Warrant Shares being purchased, (ii) a copy of an
instrument representing outstanding principal amount of indebtedness of the
Company owed to the Holder, accompanied by a notice stating the Holder's intent
to exercise this Warrant, in whole or in part, by the reduction of the amount of
indebtedness stated in the notice and represented by the instrument in an amount
equal to the Exercise Price multiplied by the number of Warrant Shares being
purchased, or (iii) a notice stating the Holder's intent to effect the exchange
of this Warrant, in whole or in part, into such number of Warrant Shares as
shall equal (x) the number of Warrant Shares specified by the Holder in its
notice (the "Total Number") less (y) the number of Warrant Shares equal to the
quotient obtained by dividing (aa) the product of the Total Number and the
existing Exercise Price by (bb) the Fair Market Value of an Ordinary Share and
(C) this Warrant. The Company shall as promptly as practicable, and in any event
within ten (10) Business Days thereafter, execute and deliver or cause to be
executed and delivered, in accordance with such notice, a certificate or
certificates representing the aggregate number of Warrant Shares specified in
such notice. The stock certificate or certificates so delivered shall be in such
denominations as may be specified in such notice and shall be issued in the name
of the Holder or such other name as shall be designated in such notice. Such
certificate or certificates shall be deemed to have been issued and the Holder
or any other person so designated to be named therein shall be deemed for all
purposes to have become a Holder of record of such shares immediately prior to
the close of business on the date such notice is received by the Company as
aforesaid. If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of said stock certificate or certificates,
deliver to the Holder a new Warrant evidencing the rights of the Holder to
purchase the remaining Ordinary Shares called for by this Warrant, which new
Warrant shall in all other respects be identical to this Warrant, or, at the
request of the Holder, appropriate notation may be made on this Warrant and the
same returned to the Holder. The Company shall pay all expenses, taxes (except
United Kingdom stamp tax duties) and other charges payable in connection with
the preparation, issue and delivery of such certificates and new Warrants,
except that in case such stock certificates or new Warrants shall be registered
in a name or names other than the name of the Holder, funds sufficient to pay
all stock transfer taxes that are payable upon the issuance of such stock
certificates or new Warrants shall be paid by the Holder at the time of
delivering the notice of exercise mentioned above.
(b) All Ordinary Shares issued upon the exercise of this Warrant shall be
validly issued, fully paid and nonassessable and free from all preemptive rights
of any stockholder, and from all taxes, liens and charges with respect to the
issue thereof (other than United Kingdom stamp duty taxes and any other transfer
taxes and, if any Ordinary Shares are then listed on a national securities
exchange (as defined in the Securities Exchange Act of 1934, as amended) or
quoted on an automated quotation system, shall be listed or quoted thereon, as
the case may be, to the extent permissible under the rules of such exchange and
not prohibited by law, it being understood that such listing does not bear upon
the transferability of such shares under the Act and the other provisions of
this Agreement.
2
<PAGE> 3
(c) The Company shall not be required upon any exercise of this Warrant to
issue a certificate representing any fraction of an Ordinary Share, but, in lieu
thereof, shall pay to the Holder cash in an amount equal to a corresponding
fraction (calculated to the nearest 1/100 of a share) of the Fair Market Value
(as defined below) of one Ordinary Share on the Business Day immediately prior
to the date of receipt by the Company of notice of exercise of this Warrant.
(d) The Company shall pay all depositary fees payable to the depositary in
respect of the issuance of American Depositary Shares or American Depositary
Receipts in respect of Ordinary Shares issued upon exercise of the Warrant.
Section 2. Terms and Conditions of Warrants.
(a) Exercise. Warrants to purchase 675,287 (as adjusted in accordance with
the principles of Section 4(a) or Section 5 hereof) Ordinary Shares shall be
exercisable at any time, and from time to time, on or after the date hereof (the
"Exercise Date"), and shall expire at 11:59 p.m., New York City time, on April
14, 2009 (the "Expiration Date").
(b) Purchase Price. Subject to the provisions of Sections 5 and 6 hereof,
the purchase price per Ordinary Share shall be $1.50 (the "Exercise Price").
(c) Restrictions on Transfer and Registration Rights.
(i) Each certificate for any Warrant Shares issued upon the exercise
of this Warrant, and each certificate issued upon the transfer of any such
Warrant Shares and each American Depositary Receipt representing American
Depositary Shares (except as otherwise permitted by this Section 2(c)) shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH SECURITIES UNDER THE
ACT AND REGISTRATION OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES
LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION AND QUALIFICATION IS NOT REQUIRED.
(ii) The restrictions imposed by this Section 2(c) upon the
transferability of Warrants and Warrant Shares and related American Depositary
Shares shall cease and terminate as to any particular Warrants, Warrant Shares
or related American Depositary Shares, (a) when such securities shall have been
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering such securities, or (b) when in the
reasonable opinion of counsel for the Company such restrictions are no longer
required in order to comply with the Securities Act. Whenever such restrictions
shall terminate as to any Warrants, Warrant
3
<PAGE> 4
Shares or related American Depositary Shares, the Holder thereof shall be
entitled to receive from the Company, without expense, new certificates of like
tenor not bearing the restrictive legend set forth in Section 2(c)(i).
(d) Investment Representation. The Holder, by acceptance hereof,
represents as of the date hereof, as follows:
(i) The Warrant Shares issuable upon exercise of the Warrants
(collectively, the "Acquired Securities") will be acquired for investment for
the Holder's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part of the Acquired Securities in contravention
of applicable law, and that the Holder has no present intention of selling,
granting any participation in, or otherwise distributing the same. The Holder
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person in or with respect to any of the Acquired Securities.
(ii) The Holder is and upon the acquisition of Acquired Securities
upon exercise of the Warrants will be an "accredited investor" within the
meaning of Rule 501 of Regulation D of the Rules and Regulations of the
Securities and Exchange Commission under the Securities Act. The Holder has not
been organized for the purposes of acquiring the Acquired Securities.
(iii) The Holder understands that the Acquired Securities it may
acquire as contemplated by this Warrant are "restricted securities" within the
meaning of Rule 144 under the Securities Act ("Rule 144") inasmuch as they will
be acquired from the Company in a transaction not involving a public offering
and that under the federal securities laws and applicable regulations such
Acquired Securities may be resold without registration under the Securities Act
only in certain limited circumstances. In this connection, the Holder represents
that it is familiar with Rule 144 and understands the resale limitations imposed
thereby and by the Securities Act. The Holder acknowledges that its investment
in the Acquired Securities may be an illiquid investment requiring the Holder to
bear the economic risk of the investment for an indefinite period; and
(iv) Without in any way limiting the representations set forth in
this Section 2(d), the Holder agrees not to make any disposition of all or any
portion of the Acquired Securities unless and until the transferee has agreed in
writing for the benefit of the Company to be bound by the terms of this Warrant
(provided that such Holder is making such disposition in a transaction other
than pursuant to Rule 144 or under an effective registration statement under the
Securities Act and in accordance with any applicable state securities laws), and
(A) the Holder shall have notified the Company of the proposed disposition, and
(B) if requested by the Company, the Holder shall have furnished the Company
with an opinion of counsel, in form and substance reasonably satisfactory to the
Company, rendered by a law firm experienced in matters involving the sale of
securities under federal and state securities laws, that such disposition will
not require registration of the Acquired Securities under the Securities Act or
registration or qualification under any state securities or "blue sky" law.
4
<PAGE> 5
In the event certificates for Ordinary Shares are delivered upon the
exercise of this Warrant, the Company may cause a legend or legends to be placed
on such certificates to make appropriate reference to such foregoing
representations and to restrict transfer in the absence of compliance with
applicable federal or state securities laws.
Section 3. Transfer, Division and Combination. The Company agrees to maintain at
its offices in Napa, California, books for the registration and transfer of this
Warrant and, subject to the provisions of Section 2 hereof, this Warrant and all
rights hereunder are transferable, in whole or in part, on such books at such
office, upon surrender of this Warrant at such office, together with a written
assignment of this Warrant duly executed by the Holder or his agent or attorney
and funds sufficient to pay any stock transfer taxes payable upon the making of
such transfer. Upon such surrender and payment, the Company shall execute and
deliver a new Warrant or Warrants in the name of the assignee or assignees and
in the denominations specified in such instrument of assignment, and this
Warrant shall promptly be canceled. Notwithstanding the foregoing, a Warrant may
be exercised by a new Holder for the purchase of Ordinary Shares without having
a new Warrant issued if Holder shall otherwise have complied with the foregoing
provisions of this Section 3 and the applicable provisions of Section 2 hereof.
All of the provisions of this Section 3 are subject to the provisions of
Sections 2 above. This Warrant may be divided or combined with other Warrants
upon surrender hereof and of any Warrant or Warrants with which this Warrant is
to be combined, together with a written notice specifying the names and
denominations in which the new Warrant or Warrants are to be issued, signed by
the holders thereof or their respective duly authorized agents or attorneys. The
Company shall execute and deliver a new Warrant or Warrants exchangeable for the
Warrant or Warrants to be divided or combined in accordance with such notice.
Section 4. Successor; Taxes.
(a) Successor Company. The obligations of the Company under this Warrant
shall be binding upon any successor company or organization resulting from the
merger, consolidation or other reorganization of the Company, or upon any
successor company or organization succeeding to substantially all of the assets
and business of the Company. The Company agrees that it will make appropriate
provision for the preservation of Holder's rights under this Warrant in any
agreement or plan which it may enter into or adopt to effect any such merger,
consolidation, reorganization or transfer of assets.
(b) Taxes on Conversion. The issuance of certificates for Warrant Shares
upon the exercise of this Warrant shall be made without charge to the Holder
exercising this Warrant for any issue or stamp tax in respect of the issuance of
such certificates, and such certificates shall be issued in the respective names
of, or in such names as may be directed by, the holder; provided, however, 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 in
a name other than that of the Holder, 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
5
<PAGE> 6
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
(c) Withholding Taxes.
(i) Except to the extent otherwise required by law, the Company will
not withhold United States or United Kingdom withholding taxes from payments to
be made to holders of Warrants if such holders (a) are corporations organized
under the laws of a jurisdiction outside the United States or United Kingdom or
are otherwise persons not resident in the United States or United Kingdom for
U.S. federal income tax purposes or United Kingdom tax purposes, and (b) provide
the Company, upon the Company's reasonable request, with one or more of Internal
Revenue Service Form W-8, Form 4224 or other applicable form, certificate or
document prescribed by the Internal Revenue Service of the United States or
Inland Revenue of the United Kingdom certifying as to such holders' entitlement
to an exemption from any such withholding requirements.
(ii) Except to the extent otherwise required by law, the Company
will not withhold United States or United Kingdom withholding taxes from
payments to be made to holders of Warrants in excess of an applicable treaty
rate if such holders (a) are corporations organized under the laws of a
jurisdiction outside the United States or United Kingdom or are otherwise
persons not resident in the United States or United Kingdom for U.S. federal
income tax purposes or United Kingdom tax purposes, and (b) provide the Company
upon the Company's reasonable request, with one or more of certification of
their residence address, Internal Revenue Service Form 1001 or other applicable
form, certificates or documents certifying as to such holders' entitlement to a
reduced rate of withholding under any such withholding requirements.
(iii) Except to the extent otherwise required by law, neither
Section 4(c)(1) nor Section 4(c)(ii) hereof shall require the Company to apply
an exemption or reduced rate of withholding during any period when it shall have
received notice or has knowledge that (a) the residence or other information
previously provided on any applicable form, certificate or document is incorrect
and no corrected form, certificate or document as applicable has been provided
to the Company, or (b) of any other information which would render such
exemption or reduced rate inapplicable.
(iv) Notwithstanding the preceding Sections 4(c)(i) and 4(c)(ii), if
the Company is required by law to withhold from amounts otherwise payable to a
holder of Warrants, whether by reason of a change in law or applicable treaty,
or because the applicable treaty withholding rate is greater than zero or by
reason of the failure of a holder of Warrants to provide a valid certification
or form, the Company shall withhold the amounts required to be withheld. Amounts
so withheld with respect to a holder in accordance with this Section 4 shall be
treated as distributed to such holder for all purposes of this Warrant.
6
<PAGE> 7
Section 5. Adjustments to Aggregate Number. The Aggregate Number shall be
subject to adjustment from time to time as follows and thereafter as adjusted
shall be deemed to be the Aggregate Number hereunder.
(a) Reorganization, Reclassification, Consolidation, Merger or Sale. If
any capital reorganization or reclassification of the Company, or any
consolidation or merger of the Company with another person, or the sale,
transfer or lease of all or substantially all of its assets to another person
shall be effected in such a way that holders of Ordinary Shares shall be
entitled to receive stock, securities or assets with respect to or in exchange
for their shares, then provision shall be made, in accordance with this Section
5, whereby the Holder hereof shall thereafter have the right to purchase and
receive, upon the basis and upon the terms and conditions specified in this
Warrant and in addition to or in exchange for, as applicable, the Warrant Shares
subject to this Warrant immediately theretofore purchasable and receivable upon
the exercise of the rights represented hereby, such securities or assets as
would have been issued or payable with respect to or in exchange for the
Aggregate Number immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby if exercise of the Warrant has
occurred immediately prior to such reorganization, reclassification,
consolidation, merger or sale. The Company will not effect any such
consolidation, merger, sale, transfer or lease unless prior to the consummation
thereof the successor entity (if other than the Company) resulting from such
consolidation or merger or the entity purchasing or leasing such assets shall
assume by written instrument (1) the obligation to deliver to such Holder such
securities or assets as, in accordance with the foregoing provisions, such
Holder may be entitled to purchase, and (2) all other obligations of the Company
under this Warrant. The provisions of this Section 5(a) shall similarly apply to
successive consolidations, mergers, exchanges, sales, transfers or leases.
(b) Distributions. If at any time or from time to time the Company shall
take a record of the holders of its Ordinary Shares for the purpose of entitling
them to receive or pays any dividend or other distribution to holders of
Ordinary Shares (collectively, a "Distribution") of:
(i) cash,
(ii) any evidences of its indebtedness (other than securities
convertible into Ordinary Shares ("Convertible Securities")), any shares
of its capital stock (other than additional Ordinary Shares or Convertible
Securities) or any other securities or property of any nature whatsoever
(other than cash) , or
(iii) any options or warrants or other rights to subscribe for or
purchase any of the following: any evidences of its indebtedness (other
than Convertible Securities), any shares of its capital stock (other than
additional Ordinary Shares or Convertible Securities) or any other
securities or property of any nature whatsoever,
then the holder of this Warrant shall be entitled to receive upon the exercise
hereof at any time on or after the taking of such record the number of Ordinary
Shares to be received upon exercise of such Warrant determined as stated herein
and, in addition and without further payment, the cash, stock, securities, other
property, options, warrants and/or other rights to which such holder or
7
<PAGE> 8
holders would have been entitled by way of the Distribution and subsequent
dividends and distributions if such Holder (x) had exercised such Warrants
immediately prior to such Distribution, and (y) had retained the Distribution in
respect of the Ordinary Shares and all subsequent dividends and distributions of
any nature whatsoever in respect of any stock or securities paid as dividends
and distributions and originating directly or indirectly from such Ordinary
Shares. A reclassification of the Ordinary Shares into any other class of stock
shall be deemed a distribution by the Company to the holders of its Ordinary
Shares or such shares of such other class of stock within the meaning of
paragraph (c) of this Section 5 and, if the outstanding Ordinary Shares shall be
changed into a larger or smaller number of Ordinary Shares as a part of such
reclassification, such event shall be deemed a subdivision or combination, as
the case may be, of the outstanding Ordinary Shares within the meaning of
paragraph (c) of this Section 5. If the securities to be distributed by the
Company involve rights, warrants, options or any other form of Convertible
Securities and the right to exercise or convert such securities would expire in
accordance with its terms prior to the exercise of this Warrant, then the terms
of such securities shall provide that such exercise or convertibility right
shall remain in effect until 30 days after the date the Holder of this Warrant
receives such securities pursuant to the exercise hereof.
(c) In addition to those adjustments set forth in Sections 5(a) and 5(b),
but without duplication of the adjustments to be made under such Sections 5(a)
and 5(b) and Section 6, if the Company:
(i) takes a record of the holders of its Ordinary Shares for the
purpose of entitling them to receive or pays a dividend payable in, or
other distribution of, Ordinary Shares;
(ii) subdivides its outstanding shares of Ordinary Shares into a
greater number of Ordinary Shares;
(iii) combines its outstanding Ordinary Shares into a lesser number
of shares of Ordinary Shares; and/or
(iv) makes a distribution on its Ordinary Shares in shares of its
capital stock other than Ordinary Shares,
then (A) the Aggregate Number in effect immediately prior thereto shall be
adjusted so that the holder or holders of this Warrant shall thereafter be
entitled to receive, upon exercise hereof, the number of Ordinary Shares or
other securities of the Company (such other securities thereafter enjoying the
rights of Warrant Shares under this Warrant) that such Holder would have owned
or have been entitled to receive after the occurrence of such event had such
Warrants been exercised immediately prior to the occurrence of such event or the
record date with respect thereto, and (B) the Exercise Price shall (until
another such event) be adjusted to equal (calculated to the nearest full cent)
the quotient derived by dividing (x) the Aggregate Number in effect immediately
prior to such adjustment multiplied by the Exercise Price in effect immediately
prior to such
8
<PAGE> 9
adjustment, divided by (y) the Aggregate Number in effect after adjustment
pursuant to this Section 5(c).
Section 6. Adjustment to Exercise Price.
(a) If the Company shall issue or sell any Ordinary Shares at a price
which is less than the Exercise Price, then the Exercise Price in effect
immediately prior thereto shall be adjusted immediately so that the Exercise
Price thereafter shall equal the price per Ordinary Share at which such Ordinary
Shares described in this Section 6(a) were issued. The provisions of this
paragraph (a) shall not apply to any issuance of additional Ordinary Shares for
which an adjustment is provided under Sections 5(a), (b) or (c).
(b) If the Company shall take a record of the holders of its Ordinary
Shares for the purpose of entitling them to receive a distribution of, or shall
in any manner issue or sell, any warrants or other rights to subscribe for or
purchase (x) any shares of Ordinary Shares or (y) any Convertible Securities,
whether or not the rights to subscribe, purchase, exchange or convert thereunder
are immediately exercisable, at a purchase price per Ordinary Share which is
less than the Exercise Price, then the Exercise Price in effect immediately
prior thereto shall be adjusted immediately so that the Exercise Price
thereafter shall equal the consideration for which such Ordinary Shares or
Ordinary Shares subject to Convertible Securities described in this Section 6(b)
were issued. For purposes of this Section 6(b), the consideration for any
additional Ordinary Shares issuable pursuant to any warrants or other rights to
subscribe for or purchase the same or for any additional Ordinary Shares
issuable pursuant to Convertible Securities subject to any warrants or other
rights shall be the consideration received or receivable by the Company for
issuing such warrants or other rights, plus the additional consideration payable
to the Company upon the exercise of such warrants or other rights and upon the
exercise of the Convertible Securities, as the case may be.
(c) If the Company shall take a record of the holders of its Ordinary
Shares for the purpose of entitling them to receive a distribution of or shall
in any manner issue or sell Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, at a purchase price
per Ordinary Share which is less than the Exercise Price, then the Exercise
Price in effect immediately prior thereto shall be adjusted immediately so that
the Exercise Price thereafter shall equal the purchase price per Ordinary Share
issuable pursuant to the terms of any Convertible Securities. For purposes of
this Section 6(c), the purchase price per Ordinary Share issuable pursuant to
the terms of any Convertible Security shall be the consideration received or
receivable by the Company for issuing the Convertible Security, plus the
additional consideration, if any, payable to the Company upon the purchase of
the Ordinary Share pursuant to the Convertible Security.
9
<PAGE> 10
Section 7. General Provisions Regarding Adjustments to Aggregate Number or
Exercise Price.
(a) The following provisions shall be applicable to the making of
adjustments of (i) the Aggregate Number as provided in Section 5 or (ii) the
Exercise Price as provided in Section 6:
(i) The sale or other disposition of any issued Ordinary Shares
owned or held by or for the account of the Company shall be deemed an
issuance thereof for the purposes of Sections 5 and 6.
(ii) The adjustments required by Sections 5 and 6 shall be made
whenever and as often as any specified event requiring an adjustment shall
occur, except as expressly provided herein. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the
close of business on the date of its occurrence.
(iii) In computing adjustments under Sections 5 and 6, fractional
interests in Ordinary Shares shall be taken into account to the nearest
one-thousandth (.001) of a share and shall be aggregated until they equal
one whole share.
(iv) If the Company shall take a record of the holders of its
Ordinary Shares for an action described in Sections 5 or 6 hereof, but
abandons its plan to take such action prior to effecting such action, then
no adjustment shall be required by reason of the taking of such record.
(v) Notwithstanding anything herein to the contrary, no adjustment
shall be made to the Aggregate Number or Exercise Price as a result of
adjustments to the Aggregate Number or Exercise Price as defined in any
Warrants issued to the Holder on the date hereof.
(vi) Upon the expiration or termination of any of the warrants or
other rights or options referred to in Section 6(b) above or the
Convertible Securities referred to in Section 6(b) or 6(c) above, the
Exercise Price after the expiration or termination of any such warrants,
rights, options or Convertible Securities without any exercise or
conversion thereof, the issuance of which caused an adjustment to the
Exercise Price, shall be readjusted to such Exercise Price prior to the
adjustment made upon the issuance of such warrants, rights, options or
Convertible Securities.
(vii) In case of the issuance at any time of any additional Ordinary
Shares or Convertible Securities in payment or satisfaction of any
dividend upon any class of stock other than Ordinary Shares, the Company
shall be deemed to have received for such additional Ordinary Shares or
Convertible Securities a consideration equal to the amount of such
dividend so paid or satisfied.
(viii) No adjustment to the Aggregate Number or Exercise Price shall
be made for issuances of (A) Options granted under the Company's No. 1
Executive Share Option
10
<PAGE> 11
Scheme or No. 2 Executive Share Option Scheme or any other employee,
non-executive director or consultant share option scheme approved by the
Company's directors, and Ordinary Shares issuable or issued upon exercise
of such options, (B) Ordinary Shares issued or issuable upon (x) the
exercise of options, warrants or rights to subscribe for or purchase
Ordinary Shares, or (y) the conversion or exchange of securities
convertible into or exchangeable for Ordinary Shares or options, warrants
or rights to subscribe for or purchase Ordinary Shares, in each case only
to the extent outstanding on the date of issuance of this Warrant and (C)
Ordinary Shares issued pursuant to a transaction described in Section 5(a)
or (b) hereof.
(ix) No adjustment of the Exercise Price shall be made in an amount
less than one cent per share, provided that any adjustments which are not
required to be made by reason of this sentence shall be carried forward
and shall be taken into account in any subsequent adjustment made.
(b) If any event occurs as to which the provisions of Section 5 or Section
6 are not strictly applicable but the lack of any provision for the exercise of
the rights of a holder or holders of Warrants would not fairly protect the
purchase rights of such holder or holders of Warrants in accordance with the
essential intent and principles of such provisions, then the Company shall
appoint a firm of independent certified public accountants in the United States
(which may be the regular outside auditors of the Company) of recognized
national standing in the United States satisfactory to the Holder, which shall
give its opinion as to the adjustments, if any, necessary to preserve, without
dilution, on a basis consistent with the essential intent and principles
established in the provisions of Section 5 or Section 6, the exercise rights of
the holders of Warrants. Upon receipt of such opinion, the Company shall
forthwith make the adjustments described therein.
(c) Within 45 days after the end of each fiscal quarter during which an
event occurred that resulted in an adjustment pursuant to Section 5 or Section
6, the Company shall cause to be promptly mailed to each holder of Warrants (and
upon the exercise of any Warrants to the exercising holder) by first-class mail,
postage prepaid, notice of each adjustment or adjustments to the Aggregate
Number or Exercise Price, as the case may be, effected since the date of the
last such notice and a certificate of the Company's Chief Financial Officer or,
in the case of any such notice delivered within 45 days after the end of a
fiscal year, a firm of independent public accountants in the United States
selected by the Company and acceptable to a majority in interest of the holders
of the Warrants (who may be the regular outside auditors employed by the
Company), in each case, setting forth the Aggregate Number or Exercise Price, as
the case may be, after such adjustment, a brief statement of the facts requiring
such adjustment and the computation by which such adjustment was made. The fees
and expenses of such accountants shall be paid by the Company.
Section 8. Covenant to Reserve Shares of Ordinary Shares. The Company covenants
and agrees that it will at all times reserve and set apart and have, free from
preemptive rights, a number of shares of authorized but unissued Ordinary Shares
sufficient to enable it at any time to fulfill all its obligations hereunder.
The issuance of such shares has been duly and validly
11
<PAGE> 12
authorized, and when issued and sold in accordance with the Warrants, such
shares will be duly and validly issued, fully paid and nonassessable.
Section 9. Reduction in Number of Warrant Shares. This Warrant is one of a
number of Series B Warrants to purchase an aggregate of 3,333,333 Ordinary
Shares issued pursuant to the terms of the Securities Purchase Agreement in
connection with the concurrent issuance by the Company of Investment Notes (as
defined in the Securities Purchase Agreement) in the aggregate principal amount
of $5,000,000 of which a Note for $1,012,931 was issued to the Holder (the
"Note"). In the event of the repayment of any portion of the principal amount of
the Note by the Company (a "Repayment"), the number of Warrant Shares covered by
this Warrant shall be reduced, effective concurrently with the Repayment, to a
number determined by multiplying the number of Warrant Shares covered by this
Warrant immediately prior to the Repayment by a fraction, the numerator of which
shall be the principal amount of the Notes outstanding immediately following the
Repayment and the denominator of which shall be the principal amount of the
Notes outstanding immediately prior to the Repayment. In the event of a
Repayment of the entire principal amount of the Note, this Warrant shall be
cancelled immediately upon such Repayment. Notwithstanding anything above, in
the event the Repayment is a prepayment pursuant to Section 6.2 of the
Securities Purchase Agreement, the notice provided for in Section 6.3 of the
Securities Purchase Agreement shall apply, and during such notice period, the
Holder shall be entitled to exercise this Warrant in accordance with the terms
hereof.
Section 10. Notices. In the event that:
(A) the Company proposes to pay any dividend payable in stock (of
any class or classes) or any obligations or stock convertible into or
exchangeable for shares of Ordinary Shares upon its Ordinary Shares or
make any distribution (other than ordinary cash dividends) to the holders
of its Ordinary Shares;
(B) the Company proposes to grant to the holders of its Ordinary
Shares generally any rights or warrants (excluding any warrants granted to
any employee, director, officer, contractor or consultant of the Company
pursuant to any plan approved by the Board of Directors of the Company);
(C) the Company proposes to effect any capital reorganization or
reclassification of capital stock of the Company;
(D) the Company proposes to consolidate with, or merge into, any
other Company or to transfer its property as an entirety or substantially
as an entirety; or
(E) the Company proposes to effect the liquidation, dissolution or
winding up of the Company,
12
<PAGE> 13
then the Company shall cause notice of any such intended action to be given to
the Holder of this Warrant not less than 30 days before the date on which the
transfer books of the Company shall close or a record shall be taken for such
stock dividend, distribution or granting of rights or Warrants, or the date when
such capital reorganization, reclassification, consolidation, merger, transfer,
liquidation, dissolution or winding up shall be effective, as the case may be.
Any notice or other document required or permitted to be given or
delivered to the Holder of this Warrant shall be delivered in accordance with
Section 15 herein.
Section 11. Limitation of Liability; Not Shareholders. No provision of this
Warrant shall be construed as conferring upon the Holder the right to vote or to
consent or to receive dividends or to receive notice as a shareholder in respect
of meetings of shareholders for the election of directors of the Company or any
other matter whatsoever as shareholders of the Company. No provision hereof, in
the absence of affirmative action by the Holder to purchase shares of Ordinary
Shares, and no mere enumeration herein of the rights or privileges of the
Holder, shall give rise to any liability of Holder for the purchase price or as
a shareholder of the Company, whether such liability is asserted by the Company,
creditors of the Company or others.
Section 12. Loss, Destruction of Warrant. Upon receipt of evidence satisfactory
to the Company of the loss, theft, mutilation or destruction of this Warrant,
and in the case of any such loss, theft or destruction upon delivery of a bond
of indemnity in such form and amount as shall be reasonably satisfactory to the
Company (the original Warrantholder's indemnity being satisfactory indemnity in
the event of loss, theft or destruction of any Warrant owned by such holder), or
in the event of such mutilation upon surrender and cancellation of this Warrant,
the Company will make and deliver a new Warrant, of like tenor and representing
the right to purchase the same Aggregate Number of Ordinary Shares, as adjusted
in Section 5, as provided for in such lost, stolen, destroyed or mutilated
Warrant, in lieu of such lost, stolen, destroyed or mutilated Warrant. Any
Warrant issued under the provisions of this Section 12 in lieu of any Warrant
alleged to be lost, destroyed or stolen, or of any mutilated Warrant, shall
constitute an original contractual obligation on the part of the Company.
Section 13. Amendments. Neither this Warrant nor any term hereof may be changed,
waived, discharged or terminated orally or in writing, provided that any term of
this Warrant may be amended or the observance of such term may be waived (either
generally or in a particular instance and either retroactively or prospectively)
with, but only with, the written consent of the Company and the Holders of the
Warrants that are exercisable for a number of Ordinary Shares that represent in
the aggregate at least a majority of the total number of Ordinary Shares for
which all of the Warrants are then exercisable (whether or not the Holder of
this Warrant consents).
Section 14. Severability. If in any jurisdiction, any provision of this
Agreement or its application to any party or circumstance is restricted,
prohibited or unenforceable, such provision shall, as to such jurisdiction, be
ineffective only to the extent of such restriction, prohibition or
unenforceability without invalidating the remaining provisions hereof and
without affecting the
13
<PAGE> 14
validity or enforceability of such provision in any other jurisdiction or its
application to other parties or circumstances.
Section 15. Notice. Any notice or document required or permitted by this
Agreement to be given to a party hereto shall be in writing and is sufficiently
given if delivered personally, or if sent by prepaid certified mail, return
receipt requested, to such party addressed as follows:
(i) If to the Company: Senetek Plc
620 Airpark Road
Napa, California 94558
Attention: President
copy to: Latham & Watkins
505 Montgomery Street, Suite 1900
San Francisco, California 94111
Attention: Jeffrey T. Pero, Esq.
(v) If to the Holder: c/o Robert T. Tucker, Esq.
61 Purchase Street, Suite 2
Rye, New York 10580
copy to: Pryor Cashman Sherman & Flynn LLP
410 Park Avenue
New York, New York 10022
Attention: Selig D. Sacks, Esq.
Notice so mailed shall be deemed to have been given upon receipt if delivered
personally or on the fifth business day next following the date of the returned
receipt. Any notice delivered to the party to whom it is addressed shall be
deemed to have been given and received on the day it is delivered. Any party may
from time to time notify the others in the manner provided herein of any change
of address which thereafter, until changed by like notice, shall be the address
of such party for all purposes hereof.
Section 16. Reduction in Number of Warrant Shares. This Warrant is one of a
number of Series B Warrants to purchase an aggregate of 3,333,333 Ordinary
Shares issued pursuant to the terms of the Securities Purchase Agreement in
connection with the concurrent issuance by the Company of Investment Notes (as
defined in the Securities Purchase Agreement) in the aggregate principal amount
of $5,000,000 of which a Note for $______ was issued to the Holder (the "Note").
In the event of the repayment of any portion of the principal amount of the Note
by the Company (a "Repayment"), the number of Warrant Shares covered by this
Warrant shall be reduced, effective concurrently with the Repayment, to a number
determined by multiplying the number of Warrant Shares covered by this Warrant
immediately prior to the Repayment by a fraction, the numerator of which shall
be the principal amount of the Notes outstanding immediately following the
Repayment and the denominator of which shall be the principal amount of the
Notes outstanding immediately prior to the Repayment. In the event of a
14
<PAGE> 15
Repayment of the entire principal amount of the Note, this Warrant shall be
cancelled immediately upon such Repayment. Notwithstanding anything above, in
the event the Repayment is a prepayment pursuant to Section 6.2 of the
Securities Purchase Agreement, the notice provided for in Section 6.3 of the
Securities Purchase Agreement shall apply, and during such notice period, the
Holder shall be entitled to exercise this Warrant in accordance with the terms
hereof.
Section 17. Governing Law; Choice Of Forum; Certain Consents; Waiver Of Jury
Trial, Counterclaim, Setoff.
THIS WARRANT SHALL BE DEEMED TO HAVE BEEN EXECUTED AND DELIVERED AT AND
SHALL BE DEEMED TO HAVE BEEN MADE IN NEW YORK, NEW YORK. THIS WARRANT, AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE
WITH AND BE GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO ANY OF SUCH STATE'S CONFLICT OF LAWS RULES OR PRINCIPLES). ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT HERETO AND THERETO SHALL ONLY BE BROUGHT
IN ANY STATE OR FEDERAL COURT IN THE BOROUGH OF MANHATTAN, NEW YORK CITY, NEW
YORK, AND, BY EXECUTION, ACCEPTANCE AND DELIVERY OF THIS WARRANT, THE COMPANY
HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY
AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS AND IRREVOCABLY
WAIVES ANY OBJECTION, DEFENSE OR CLAIM TO SUCH JURISDICTION WHICH MAY BE BASED,
DIRECTLY OR INDIRECTLY, ON THE GROUNDS OF FORUM NON CONVENIENS THAT IT MAY NOW
OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS WARRANT. IF ANY ACTION IS COMMENCED IN ANY OTHER
JURISDICTION, THE PARTIES HERETO HEREBY CONSENT TO THE REMOVAL OF SUCH ACTION TO
THE AFOREMENTIONED COURTS. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE COMPANY AT ITS ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE
30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE HOLDERS
OF ANY OF THE WARRANTS OR WARRANT SHARES TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE
COMPANY IN ANY OTHER JURISDICTION. THE COMPANY WAIVES IN EACH SUCH ACTION AND
OTHER LEGAL PROCEEDING THE RIGHT TO TRIAL BY JURY AND THE RIGHT TO ASSERT ANY
COUNTERCLAIM OR SETOFF.
[SIGNATURE PAGE FOLLOWS; REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
15
<PAGE> 16
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name by its duly authorized officer.
Dated: , 1999
--------------
SENETEK PLC
By:
-------------------------------------
Name:
Title:
16
<PAGE> 17
EXHIBIT 1
EXERCISE NOTICE
The undersigned Holder hereby elects to exercise purchase rights
represented by such Warrant for, and to purchase thereunder ________ Ordinary
Shares covered by such Warrant and herewith makes payment in full therefor of
$_________ cash and/or by cancellation of $__________ of indebtedness of the
Company to the Holder hereof and requests that, subject to the terms and
conditions of the Warrant, certificates for such shares (and any securities or
property deliverable upon such exercise) be issued in the name of and delivered
to ______________________ whose address is
_______________________________________, and whose social security or employer
identification number is ____________.
The undersigned agrees that, in the absence of an effective registration
statement with respect to Ordinary Shares issued upon this exercise, the
undersigned is acquiring such Ordinary Shares for the Holder's own account and
not as a nominee for any other party, for investment and not with a view to
distribution thereof and that the certificate or certificates representing such
Ordinary Shares may bear a legend substantially as follows:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO SUCH SECURITIES UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED.
In addition, the undersigned agrees that, in the absence of an effective
registration statement with respect to Ordinary Shares issued upon this
exercise, stop transfer instructions will be entered on the Company's stock
transfer records with respect to Ordinary Shares issued upon this exercise.
Dated:
-----------------------------------------
Signature guaranteed:
<PAGE> 18
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered Holder of the within Warrant
hereby sells, assigns, and transfers unto the Assignee(s) named below (including
the undersigned with respect to any Warrants constituting a part of the Warrants
evidenced by the within Warrant not being assigned hereby) all of the right of
the undersigned under the within Warrant, with respect to the number of Warrants
set forth below:
<TABLE>
<CAPTION>
Social security or
other identifying
number of
Name of Assignees Address Assignee(s) Number of Warrants
----------------- ------- ------------------ ------------------
<S> <C> <C> <C>
</TABLE>
and does hereby irrevocably constitute and appoint _______________the
undersigned's attorney to make such transfer on the books of _____________
maintained for that purpose, with full power of substitution in the premises.
Dated:
----------------
(1)
----------------------------------------
(Signature of Owner)
----------------------------------------
(Street Address)
----------------------------------------
(City) (State) (Zip Code)
- ----------
(1) The signature must correspond with the name as written upon the face of
the within Warrant in every particular, without alteration or enlargement
or any change whatsoever.
18
<PAGE> 1
EXHIBIT 10.5
EXHIBIT K
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE HEREUNDER NOR ANY
AMERICAN DEPOSITARY SHARES REPRESENTING THE SECURITIES ISSUABLE HEREUNDER HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
NONE OF THEM MAY BE OFFERED, SOLD, TRANSFERRED, ASSIGNED NOR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH SECURITIES
UNDER THE ACT AND APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT
TO PURCHASE ___________ ORDINARY SHARES OF
SENETEK PLC
Issued: April 14, 1999
Series C Expires: April 14, 2009
NO. __
This Warrant certifies that _______________ or its registered and
permitted successors or assigns ("_______________" or the "Holder"), is entitled
to, subject to the terms set forth below, purchase from SENETEK PLC, a
corporation organized under the laws of England (the "Company"), from time and
time up to ________________ (_____________) duly authorized, validly issued,
fully paid and nonassessable Ordinary Shares (as such number may be adjusted
pursuant to Section 4(a) and Section 5 herein) which may be exchanged for
American Depositary Shares ("ADS") represented by American Depositary Receipts
("ADR") (the Ordinary Shares of the Company, including any shares into which it
may be changed, reclassified, or converted, are herein referred to as the
"Ordinary Shares"). This Warrant is one of the Series C Warrants (the
"Warrants") issued pursuant to Section 2 of the Securities Purchase Agreement
(the "Securities Purchase Agreement"), dated as of April 14, 1999, by and
between the Company, Silver Creek Investments, Ltd., Bomoseen Investments, Ltd.,
Dandelion Investments, Ltd. and Elstree Holdings, Ltd. The Ordinary Shares
issuable upon exercise of the Warrants (and any other or additional shares,
securities or property that may hereafter be issuable upon exercise of the
Warrants) are sometimes referred to herein as the "Warrant Shares," and the
maximum number of shares so issuable under this Warrant is sometimes referred to
as the "Aggregate Number" (as such number may be increased or decreased as more
fully set forth herein).
This Warrant is subject to the following provisions, terms and
conditions:
Section 1. Exercise of Warrant.
(a) To exercise this Warrant in whole or in part, the Holder shall
deliver to the Company at its principal office located at 620 Airpark Road,
Napa, California 94558, (A) a
<PAGE> 2
written notice, in substantially the form of the Exercise Notice attached hereto
as Exhibit 1, of the Holder's election to exercise this Warrant, which notice
shall specify the number of Warrant Shares to be purchased, (B) (i) cash, money
order, certified check or wire transfer of immediately available funds payable
to the Company, in an amount equal to the Exercise Price (as defined below)
multiplied by the number of Warrant Shares being purchased, (ii) a copy of an
instrument representing outstanding principal amount of indebtedness of the
Company owed to the Holder, accompanied by a notice stating the Holder's intent
to exercise this Warrant, in whole or in part, by the reduction of the amount of
indebtedness stated in the notice and represented by the instrument in an amount
equal to the Exercise Price multiplied by the number of Warrant Shares being
purchased, or (iii) a notice stating the Holder's intent to effect the exchange
of this Warrant, in whole or in part, into such number of Warrant Shares as
shall equal (x) the number of Warrant Shares specified by the Holder in its
notice (the "Total Number") less (y) the number of Warrant Shares equal to the
quotient obtained by dividing (aa) the product of the Total Number and the
existing Exercise Price by (bb) the Fair Market Value of an Ordinary Share and
(C) this Warrant. The Company shall as promptly as practicable, and in any event
within ten (10) Business Days thereafter, execute and deliver or cause to be
executed and delivered, in accordance with such notice, a certificate or
certificates representing the aggregate number of Warrant Shares specified in
such notice. The stock certificate or certificates so delivered shall be in such
denominations as may be specified in such notice and shall be issued in the name
of the Holder or such other name as shall be designated in such notice. Such
certificate or certificates shall be deemed to have been issued and the Holder
or any other person so designated to be named therein shall be deemed for all
purposes to have become a Holder of record of such shares immediately prior to
the close of business on the date such notice is received by the Company as
aforesaid. If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of said stock certificate or certificates,
deliver to the Holder a new Warrant evidencing the rights of the Holder to
purchase the remaining Ordinary Shares called for by this Warrant, which new
Warrant shall in all other respects be identical to this Warrant, or, at the
request of the Holder, appropriate notation may be made on this Warrant and the
same returned to the Holder. The Company shall pay all expenses, taxes (except
United Kingdom stamp tax duties) and other charges payable in connection with
the preparation, issue and delivery of such certificates and new Warrants,
except that in case such stock certificates or new Warrants shall be registered
in a name or names other than the name of the Holder, funds sufficient to pay
all stock transfer taxes that are payable upon the issuance of such stock
certificates or new Warrants shall be paid by the Holder at the time of
delivering the notice of exercise mentioned above.
(b) All Ordinary Shares issued upon the exercise of this Warrant shall
be validly issued, fully paid and nonassessable and free from all preemptive
rights of any stockholder, and from all taxes, liens and charges with respect to
the issue thereof (other than United Kingdom stamp duty taxes and any other
transfer taxes and, if any Ordinary Shares are then listed on a national
securities exchange (as defined in the Securities Exchange Act of 1934, as
amended) or quoted on an automated quotation system, shall be listed or quoted
thereon, as the case may be, to the extent permissible under the rules of such
exchange and not prohibited by law, it being understood that such listing does
not bear upon the transferability of such shares under the Act and the other
provisions of this Agreement.
2
<PAGE> 3
(c) The Company shall not be required upon any exercise of this Warrant
to issue a certificate representing any fraction of an Ordinary Share, but, in
lieu thereof, shall pay to the Holder cash in an amount equal to a corresponding
fraction (calculated to the nearest 1/100 of a share) of the Fair Market Value
(as defined below) of one Ordinary Share on the Business Day immediately prior
to the date of receipt by the Company of notice of exercise of this Warrant.
(d) The Company shall pay all depositary fees payable to the depositary
in respect of the issuance of American Depositary Shares or American Depositary
Receipts in respect of Ordinary Shares issued upon exercise of the Warrant.
Section 2. Terms and Conditions of Warrants.
(a) Exercise. Warrants to purchase 241,946 (as adjusted in accordance
with the principles of Section 4(a) or Section 5 hereof) Ordinary Shares shall
be exercisable at any time, and from time to time, on or after the date hereof
(the "Exercise Date"), and shall expire at 11:59 p.m., New York City time, on
April 14, 2009 (the "Expiration Date").
(b) Purchase Price. Subject to the provisions of Sections 5 and 6
hereof, the purchase price per Ordinary Share shall be $2.00 (the "Exercise
Price").
(c) Restrictions on Transfer and Registration Rights.
(i) Each certificate for any Warrant Shares issued upon the
exercise of this Warrant, and each certificate issued upon the transfer of any
such Warrant Shares and each American Depositary Receipt representing American
Depositary Shares (except as otherwise permitted by this Section 2(c)) shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH SECURITIES UNDER
THE ACT AND REGISTRATION OR QUALIFICATION UNDER APPLICABLE STATE
SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION AND QUALIFICATION IS NOT REQUIRED.
(ii) The restrictions imposed by this Section 2(c) upon the
transferability of Warrants and Warrant Shares and related American Depositary
Shares shall cease and terminate as to any particular Warrants, Warrant Shares
or related American Depositary Shares, (a) when such securities shall have been
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering such securities, or (b) when in the
reasonable opinion of counsel for the Company such restrictions are no longer
required in order to comply with the Securities Act. Whenever such restrictions
shall terminate as to any Warrants, Warrant
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Shares or related American Depositary Shares, the Holder thereof shall be
entitled to receive from the Company, without expense, new certificates of like
tenor not bearing the restrictive legend set forth in Section 2(c)(i).
(d) Investment Representation. The Holder, by acceptance hereof,
represents as of the date hereof, as follows:
(i) The Warrant Shares issuable upon exercise of the Warrants
(collectively, the "Acquired Securities") will be acquired for investment for
the Holder's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part of the Acquired Securities in contravention
of applicable law, and that the Holder has no present intention of selling,
granting any participation in, or otherwise distributing the same. The Holder
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person in or with respect to any of the Acquired Securities.
(ii) The Holder is and upon the acquisition of Acquired
Securities upon exercise of the Warrants will be an "accredited investor" within
the meaning of Rule 501 of Regulation D of the Rules and Regulations of the
Securities and Exchange Commission under the Securities Act. The Holder has not
been organized for the purposes of acquiring the Acquired Securities.
(iii) The Holder understands that the Acquired Securities it may
acquire as contemplated by this Warrant are "restricted securities" within the
meaning of Rule 144 under the Securities Act ("Rule 144") inasmuch as they will
be acquired from the Company in a transaction not involving a public offering
and that under the federal securities laws and applicable regulations such
Acquired Securities may be resold without registration under the Securities Act
only in certain limited circumstances. In this connection, the Holder represents
that it is familiar with Rule 144 and understands the resale limitations imposed
thereby and by the Securities Act. The Holder acknowledges that its investment
in the Acquired Securities may be an illiquid investment requiring the Holder to
bear the economic risk of the investment for an indefinite period; and
(iv) Without in any way limiting the representations set forth in
this Section 2(d), the Holder agrees not to make any disposition of all or any
portion of the Acquired Securities unless and until the transferee has agreed in
writing for the benefit of the Company to be bound by the terms of this Warrant
(provided that such Holder is making such disposition in a transaction other
than pursuant to Rule 144 or under an effective registration statement under the
Securities Act and in accordance with any applicable state securities laws), and
(A) the Holder shall have notified the Company of the proposed disposition, and
(B) if requested by the Company, the Holder shall have furnished the Company
with an opinion of counsel, in form and substance reasonably satisfactory to the
Company, rendered by a law firm experienced in matters involving the sale of
securities under federal and state securities laws, that such disposition will
not require registration of the Acquired Securities under the Securities Act or
registration or qualification under any state securities or "blue sky" law.
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In the event certificates for Ordinary Shares are delivered upon the
exercise of this Warrant, the Company may cause a legend or legends to be placed
on such certificates to make appropriate reference to such foregoing
representations and to restrict transfer in the absence of compliance with
applicable federal or state securities laws.
Section 3. Transfer, Division and Combination. The Company agrees to maintain at
its offices in Napa, California, books for the registration and transfer of this
Warrant and, subject to the provisions of Section 2 hereof, this Warrant and all
rights hereunder are transferable, in whole or in part, on such books at such
office, upon surrender of this Warrant at such office, together with a written
assignment of this Warrant duly executed by the Holder or his agent or attorney
and funds sufficient to pay any stock transfer taxes payable upon the making of
such transfer. Upon such surrender and payment, the Company shall execute and
deliver a new Warrant or Warrants in the name of the assignee or assignees and
in the denominations specified in such instrument of assignment, and this
Warrant shall promptly be canceled. Notwithstanding the foregoing, a Warrant may
be exercised by a new Holder for the purchase of Ordinary Shares without having
a new Warrant issued if Holder shall otherwise have complied with the foregoing
provisions of this Section 3 and the applicable provisions of Section 2 hereof.
All of the provisions of this Section 3 are subject to the provisions of
Sections 2 above. This Warrant may be divided or combined with other Warrants
upon surrender hereof and of any Warrant or Warrants with which this Warrant is
to be combined, together with a written notice specifying the names and
denominations in which the new Warrant or Warrants are to be issued, signed by
the holders thereof or their respective duly authorized agents or attorneys. The
Company shall execute and deliver a new Warrant or Warrants exchangeable for the
Warrant or Warrants to be divided or combined in accordance with such notice.
Section 4. Successor; Taxes.
(a) Successor Company. The obligations of the Company under this Warrant
shall be binding upon any successor company or organization resulting from the
merger, consolidation or other reorganization of the Company, or upon any
successor company or organization succeeding to substantially all of the assets
and business of the Company. The Company agrees that it will make appropriate
provision for the preservation of Holder's rights under this Warrant in any
agreement or plan which it may enter into or adopt to effect any such merger,
consolidation, reorganization or transfer of assets.
(b) Taxes on Conversion. The issuance of certificates for Warrant Shares
upon the exercise of this Warrant shall be made without charge to the Holder
exercising this Warrant for any issue or stamp tax in respect of the issuance of
such certificates, and such certificates shall be issued in the respective names
of, or in such names as may be directed by, the holder; provided, however, 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 in
a name other than that of the Holder, 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
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<PAGE> 6
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
(c) Withholding Taxes.
(i) Except to the extent otherwise required by law, the Company
will not withhold United States or United Kingdom withholding taxes from
payments to be made to holders of Warrants if such holders (a) are corporations
organized under the laws of a jurisdiction outside the United States or United
Kingdom or are otherwise persons not resident in the United States or United
Kingdom for U.S. federal income tax purposes or United Kingdom tax purposes, and
(b) provide the Company, upon the Company's reasonable request, with one or more
of Internal Revenue Service Form W-8, Form 4224 or other applicable form,
certificate or document prescribed by the Internal Revenue Service of the United
States or Inland Revenue of the United Kingdom certifying as to such holders'
entitlement to an exemption from any such withholding requirements.
(ii) Except to the extent otherwise required by law, the Company
will not withhold United States or United Kingdom withholding taxes from
payments to be made to holders of Warrants in excess of an applicable treaty
rate if such holders (a) are corporations organized under the laws of a
jurisdiction outside the United States or United Kingdom or are otherwise
persons not resident in the United States or United Kingdom for U.S. federal
income tax purposes or United Kingdom tax purposes, and (b) provide the Company
upon the Company's reasonable request, with one or more of certification of
their residence address, Internal Revenue Service Form 1001 or other applicable
form, certificates or documents certifying as to such holders' entitlement to a
reduced rate of withholding under any such withholding requirements.
(iii) Except to the extent otherwise required by law, neither
Section 4(c)(1) nor Section 4(c)(ii) hereof shall require the Company to apply
an exemption or reduced rate of withholding during any period when it shall have
received notice or has knowledge that (a) the residence or other information
previously provided on any applicable form, certificate or document is incorrect
and no corrected form, certificate or document as applicable has been provided
to the Company, or (b) of any other information which would render such
exemption or reduced rate inapplicable.
(iv) Notwithstanding the preceding Sections 4(c)(i) and 4(c)(ii),
if the Company is required by law to withhold from amounts otherwise payable to
a holder of Warrants, whether by reason of a change in law or applicable treaty,
or because the applicable treaty withholding rate is greater than zero or by
reason of the failure of a holder of Warrants to provide a valid certification
or form, the Company shall withhold the amounts required to be withheld. Amounts
so withheld with respect to a holder in accordance with this Section 4 shall be
treated as distributed to such holder for all purposes of this Warrant.
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Section 5. Adjustments to Aggregate Number. The Aggregate Number shall be
subject to adjustment from time to time as follows and thereafter as adjusted
shall be deemed to be the Aggregate Number hereunder.
(a) Reorganization, Reclassification, Consolidation, Merger or Sale. If
any capital reorganization or reclassification of the Company, or any
consolidation or merger of the Company with another person, or the sale,
transfer or lease of all or substantially all of its assets to another person
shall be effected in such a way that holders of Ordinary Shares shall be
entitled to receive stock, securities or assets with respect to or in exchange
for their shares, then provision shall be made, in accordance with this Section
5, whereby the Holder hereof shall thereafter have the right to purchase and
receive, upon the basis and upon the terms and conditions specified in this
Warrant and in addition to or in exchange for, as applicable, the Warrant Shares
subject to this Warrant immediately theretofore purchasable and receivable upon
the exercise of the rights represented hereby, such securities or assets as
would have been issued or payable with respect to or in exchange for the
Aggregate Number immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby if exercise of the Warrant has
occurred immediately prior to such reorganization, reclassification,
consolidation, merger or sale. The Company will not effect any such
consolidation, merger, sale, transfer or lease unless prior to the consummation
thereof the successor entity (if other than the Company) resulting from such
consolidation or merger or the entity purchasing or leasing such assets shall
assume by written instrument (1) the obligation to deliver to such Holder such
securities or assets as, in accordance with the foregoing provisions, such
Holder may be entitled to purchase, and (2) all other obligations of the Company
under this Warrant. The provisions of this Section 5(a) shall similarly apply to
successive consolidations, mergers, exchanges, sales, transfers or leases.
(b) Distributions. If at any time or from time to time the Company shall
take a record of the holders of its Ordinary Shares for the purpose of entitling
them to receive or pays any dividend or other distribution to holders of
Ordinary Shares (collectively, a "Distribution") of:
(i) cash,
(ii) any evidences of its indebtedness (other than securities
convertible into Ordinary Shares ("Convertible Securities")), any shares
of its capital stock (other than additional Ordinary Shares or
Convertible Securities) or any other securities or property of any
nature whatsoever (other than cash), or
(iii) any options or warrants or other rights to subscribe for or
purchase any of the following: any evidences of its indebtedness (other
than Convertible Securities), any shares of its capital stock (other
than additional Ordinary Shares or Convertible Securities) or any other
securities or property of any nature whatsoever,
then the holder of this Warrant shall be entitled to receive upon the exercise
hereof at any time on or after the taking of such record the number of Ordinary
Shares to be received upon exercise of such Warrant determined as stated herein
and, in addition and without further payment, the cash, stock, securities, other
property, options, warrants and/or other rights to which such holder or
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<PAGE> 8
holders would have been entitled by way of the Distribution and subsequent
dividends and distributions if such Holder (x) had exercised such Warrants
immediately prior to such Distribution, and (y) had retained the Distribution in
respect of the Ordinary Shares and all subsequent dividends and distributions of
any nature whatsoever in respect of any stock or securities paid as dividends
and distributions and originating directly or indirectly from such Ordinary
Shares. A reclassification of the Ordinary Shares into any other class of stock
shall be deemed a distribution by the Company to the holders of its Ordinary
Shares or such shares of such other class of stock within the meaning of
paragraph (c) of this Section 5 and, if the outstanding Ordinary Shares shall be
changed into a larger or smaller number of Ordinary Shares as a part of such
reclassification, such event shall be deemed a subdivision or combination, as
the case may be, of the outstanding Ordinary Shares within the meaning of
paragraph (c) of this Section 5. If the securities to be distributed by the
Company involve rights, warrants, options or any other form of Convertible
Securities and the right to exercise or convert such securities would expire in
accordance with its terms prior to the exercise of this Warrant, then the terms
of such securities shall provide that such exercise or convertibility right
shall remain in effect until 30 days after the date the Holder of this Warrant
receives such securities pursuant to the exercise hereof.
(c) In addition to those adjustments set forth in Sections 5(a) and
5(b), but without duplication of the adjustments to be made under such Sections
5(a) and 5(b) and Section 6, if the Company:
(i) takes a record of the holders of its Ordinary Shares for the
purpose of entitling them to receive or pays a dividend payable in, or
other distribution of, Ordinary Shares;
(ii) subdivides its outstanding shares of Ordinary Shares into a
greater number of Ordinary Shares;
(iii) combines its outstanding Ordinary Shares into a lesser
number of shares of Ordinary Shares; and/or
(iv) makes a distribution on its Ordinary Shares in shares of its
capital stock other than Ordinary Shares,
then (A) the Aggregate Number in effect immediately prior thereto shall be
adjusted so that the holder or holders of this Warrant shall thereafter be
entitled to receive, upon exercise hereof, the number of Ordinary Shares or
other securities of the Company (such other securities thereafter enjoying the
rights of Warrant Shares under this Warrant) that such Holder would have owned
or have been entitled to receive after the occurrence of such event had such
Warrants been exercised immediately prior to the occurrence of such event or the
record date with respect thereto, and (B) the Exercise Price shall (until
another such event) be adjusted to equal (calculated to the nearest full cent)
the quotient derived by dividing (x) the Aggregate Number in effect immediately
prior to such adjustment multiplied by the Exercise Price in effect immediately
prior to such
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adjustment, divided by (y) the Aggregate Number in effect after adjustment
pursuant to this Section 5(c).
Section 6. Adjustment to Exercise Price.
(a) If the Company shall issue or sell any Ordinary Shares at a price
which is less than the Exercise Price, then the Exercise Price in effect
immediately prior thereto shall be adjusted immediately so that the Exercise
Price thereafter shall equal the price per Ordinary Share at which such Ordinary
Shares described in this Section 6(a) were issued. The provisions of this
paragraph (a) shall not apply to any issuance of additional Ordinary Shares for
which an adjustment is provided under Sections 5(a), (b) or (c).
(b) If the Company shall take a record of the holders of its Ordinary
Shares for the purpose of entitling them to receive a distribution of, or shall
in any manner issue or sell, any warrants or other rights to subscribe for or
purchase (x) any shares of Ordinary Shares or (y) any Convertible Securities,
whether or not the rights to subscribe, purchase, exchange or convert thereunder
are immediately exercisable, at a purchase price per Ordinary Share which is
less than the Exercise Price, then the Exercise Price in effect immediately
prior thereto shall be adjusted immediately so that the Exercise Price
thereafter shall equal the consideration for which such Ordinary Shares or
Ordinary Shares subject to Convertible Securities described in this Section 6(b)
were issued. For purposes of this Section 6(b), the consideration for any
additional Ordinary Shares issuable pursuant to any warrants or other rights to
subscribe for or purchase the same or for any additional Ordinary Shares
issuable pursuant to Convertible Securities subject to any warrants or other
rights shall be the consideration received or receivable by the Company for
issuing such warrants or other rights, plus the additional consideration payable
to the Company upon the exercise of such warrants or other rights and upon the
exercise of the Convertible Securities, as the case may be.
(c) If the Company shall take a record of the holders of its Ordinary
Shares for the purpose of entitling them to receive a distribution of or shall
in any manner issue or sell Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, at a purchase price
per Ordinary Share which is less than the Exercise Price, then the Exercise
Price in effect immediately prior thereto shall be adjusted immediately so that
the Exercise Price thereafter shall equal the purchase price per Ordinary Share
issuable pursuant to the terms of any Convertible Securities. For purposes of
this Section 6(c), the purchase price per Ordinary Share issuable pursuant to
the terms of any Convertible Security shall be the consideration received or
receivable by the Company for issuing the Convertible Security, plus the
additional consideration, if any, payable to the Company upon the purchase of
the Ordinary Share pursuant to the Convertible Security.
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Section 7. General Provisions Regarding Adjustments to Aggregate Number or
Exercise Price.
(a) The following provisions shall be applicable to the making of
adjustments of (i) the Aggregate Number as provided in Section 5 or (ii) the
Exercise Price as provided in Section 6:
(i) The sale or other disposition of any issued Ordinary Shares
owned or held by or for the account of the Company shall be deemed an
issuance thereof for the purposes of Sections 5 and 6.
(ii) The adjustments required by Sections 5 and 6 shall be made
whenever and as often as any specified event requiring an adjustment
shall occur, except as expressly provided herein. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the
close of business on the date of its occurrence.
(iii) In computing adjustments under Sections 5 and 6, fractional
interests in Ordinary Shares shall be taken into account to the nearest
one-thousandth (.001) of a share and shall be aggregated until they
equal one whole share.
(iv) If the Company shall take a record of the holders of its
Ordinary Shares for an action described in Sections 5 or 6 hereof, but
abandons its plan to take such action prior to effecting such action,
then no adjustment shall be required by reason of the taking of such
record.
(v) Notwithstanding anything herein to the contrary, no
adjustment shall be made to the Aggregate Number or Exercise Price as a
result of adjustments to the Aggregate Number or Exercise Price as
defined in any Warrants issued to the Holder on the date hereof.
(vi) Upon the expiration or termination of any of the warrants or
other rights or options referred to in Section 6(b) above or the
Convertible Securities referred to in Section 6(b) or 6(c) above, the
Exercise Price after the expiration or termination of any such warrants,
rights, options or Convertible Securities without any exercise or
conversion thereof, the issuance of which caused an adjustment to the
Exercise Price, shall be readjusted to such Exercise Price prior to the
adjustment made upon the issuance of such warrants, rights, options or
Convertible Securities.
(vii) In case of the issuance at any time of any additional
Ordinary Shares or Convertible Securities in payment or satisfaction of
any dividend upon any class of stock other than Ordinary Shares, the
Company shall be deemed to have received for such additional Ordinary
Shares or Convertible Securities a consideration equal to the amount of
such dividend so paid or satisfied.
(viii) No adjustment to the Aggregate Number or Exercise Price
shall be made for issuances of (A) Options granted under the Company's
No. 1 Executive Share Option
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Scheme or No. 2 Executive Share Option Scheme or any other employee,
non-executive director or consultant share option scheme approved by the
Company's directors, and Ordinary Shares issuable or issued upon
exercise of such options, (B) Ordinary Shares issued or issuable upon
(x) the exercise of options, warrants or rights to subscribe for or
purchase Ordinary Shares, or (y) the conversion or exchange of
securities convertible into or exchangeable for Ordinary Shares or
options, warrants or rights to subscribe for or purchase Ordinary
Shares, in each case only to the extent outstanding on the date of
issuance of this Warrant and (C) Ordinary Shares issued pursuant to a
transaction described in Section 5(a) or (b) hereof.
(ix) No adjustment of the Exercise Price shall be made in an
amount less than one cent per share, provided that any adjustments which
are not required to be made by reason of this sentence shall be carried
forward and shall be taken into account in any subsequent adjustment
made.
(b) If any event occurs as to which the provisions of Section 5 or
Section 6 are not strictly applicable but the lack of any provision for the
exercise of the rights of a holder or holders of Warrants would not fairly
protect the purchase rights of such holder or holders of Warrants in accordance
with the essential intent and principles of such provisions, then the Company
shall appoint a firm of independent certified public accountants in the United
States (which may be the regular outside auditors of the Company) of recognized
national standing in the United States satisfactory to the Holder, which shall
give its opinion as to the adjustments, if any, necessary to preserve, without
dilution, on a basis consistent with the essential intent and principles
established in the provisions of Section 5 or Section 6, the exercise rights of
the holders of Warrants. Upon receipt of such opinion, the Company shall
forthwith make the adjustments described therein.
(c) Within 45 days after the end of each fiscal quarter during which an
event occurred that resulted in an adjustment pursuant to Section 5 or Section
6, the Company shall cause to be promptly mailed to each holder of Warrants (and
upon the exercise of any Warrants to the exercising holder) by first-class mail,
postage prepaid, notice of each adjustment or adjustments to the Aggregate
Number or Exercise Price, as the case may be, effected since the date of the
last such notice and a certificate of the Company's Chief Financial Officer or,
in the case of any such notice delivered within 45 days after the end of a
fiscal year, a firm of independent public accountants in the United States
selected by the Company and acceptable to a majority in interest of the holders
of the Warrants (who may be the regular outside auditors employed by the
Company), in each case, setting forth the Aggregate Number or Exercise Price, as
the case may be, after such adjustment, a brief statement of the facts requiring
such adjustment and the computation by which such adjustment was made. The fees
and expenses of such accountants shall be paid by the Company.
Section 8. Covenant to Reserve Shares of Ordinary Shares. The Company covenants
and agrees that it will at all times reserve and set apart and have, free from
preemptive rights, a number of shares of authorized but unissued Ordinary Shares
sufficient to enable it at any time to fulfill all its obligations hereunder.
The issuance of such shares has been duly and validly
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authorized, and when issued and sold in accordance with the Warrants, such
shares will be duly and validly issued, fully paid and nonassessable.
Section 9. Call Rights. Provided that no Event of Default as described in
Section 9 of the Securities Purchase Agreement has occurred, upon ninety (90)
days prior written notice (the "Call Notice") to the holders of the Warrants,
the Company shall have the right to call and require such holders to sell to the
Company all of such holder's Warrants then outstanding at the termination of
such ninety (90) day period if: (i) the closing sale price of the Company's
American Depositary Shares on any national securities exchange or automatic
quotation system on which the Company's American Depositary Shares are then
listed or quoted, equals or exceeds $3.00 for twenty (20) consecutive trading
days; and (ii) the average daily trading volume of the Company's American
Depositary Shares for such twenty trading day period exceeds 100,000 shares per
day; and (iii) the American Depositary Shares representing 2,105,715 Warrant
Exercise Shares (as defined in the Settlement Agreement referred to in the
Securities Purchase Agreement) have been registered for resale pursuant to a
registration statement declared effective under the Securities Act of 1993, as
amended, by the United States Securities and Exchange Commission, and (iv)
during the 90 day period commencing on the date the holder of this Warrant
receives the Call Notice, the Company shall have complied with Section 1(a)
herein. Any such notice shall comply with Section 14 below and shall specify the
date for purchase of such Warrants. The purchase price for each called warrant
shall be the Exercise Price and shall be paid within two (2) Business Days of
the receipt by the Company of each Warrant. Notwithstanding anything else
contained in this Section 8, the holder of this Warrant shall be entitled to
exercise the Warrant and sell the underlying Warrant Shares during such ninety
(90) day period in accordance with the terms of this Warrant.
Section 10. Notices. In the event that:
(A) the Company proposes to pay any dividend payable in stock (of
any class or classes) or any obligations or stock convertible into or
exchangeable for shares of Ordinary Shares upon its Ordinary Shares or
make any distribution (other than ordinary cash dividends) to the
holders of its Ordinary Shares;
(B) the Company proposes to grant to the holders of its Ordinary
Shares generally any rights or warrants (excluding any warrants granted
to any employee, director, officer, contractor or consultant of the
Company pursuant to any plan approved by the Board of Directors of the
Company);
(C) the Company proposes to effect any capital reorganization or
reclassification of capital stock of the Company;
(D) the Company proposes to consolidate with, or merge into, any
other Company or to transfer its property as an entirety or
substantially as an entirety; or
(E) the Company proposes to effect the liquidation, dissolution
or winding up of the Company,
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then the Company shall cause notice of any such intended action to be given to
the Holder of this Warrant not less than 30 days before the date on which the
transfer books of the Company shall close or a record shall be taken for such
stock dividend, distribution or granting of rights or Warrants, or the date when
such capital reorganization, reclassification, consolidation, merger, transfer,
liquidation, dissolution or winding up shall be effective, as the case may be.
Any notice or other document required or permitted to be given or
delivered to the Holder of this Warrant shall be delivered in accordance with
Section 15 herein.
Section 11. Limitation of Liability; Not Shareholders. No provision of this
Warrant shall be construed as conferring upon the Holder the right to vote or to
consent or to receive dividends or to receive notice as a shareholder in respect
of meetings of shareholders for the election of directors of the Company or any
other matter whatsoever as shareholders of the Company. No provision hereof, in
the absence of affirmative action by the Holder to purchase shares of Ordinary
Shares, and no mere enumeration herein of the rights or privileges of the
Holder, shall give rise to any liability of Holder for the purchase price or as
a shareholder of the Company, whether such liability is asserted by the Company,
creditors of the Company or others.
Section 12. Loss, Destruction of Warrant. Upon receipt of evidence satisfactory
to the Company of the loss, theft, mutilation or destruction of this Warrant,
and in the case of any such loss, theft or destruction upon delivery of a bond
of indemnity in such form and amount as shall be reasonably satisfactory to the
Company (the original Warrantholder's indemnity being satisfactory indemnity in
the event of loss, theft or destruction of any Warrant owned by such holder), or
in the event of such mutilation upon surrender and cancellation of this Warrant,
the Company will make and deliver a new Warrant, of like tenor and representing
the right to purchase the same Aggregate Number of Ordinary Shares, as adjusted
in Section 5, as provided for in such lost, stolen, destroyed or mutilated
Warrant, in lieu of such lost, stolen, destroyed or mutilated Warrant. Any
Warrant issued under the provisions of this Section 12 in lieu of any Warrant
alleged to be lost, destroyed or stolen, or of any mutilated Warrant, shall
constitute an original contractual obligation on the part of the Company.
Section 13. Amendments. Neither this Warrant nor any term hereof may be changed,
waived, discharged or terminated orally or in writing, provided that any term of
this Warrant may be amended or the observance of such term may be waived (either
generally or in a particular instance and either retroactively or prospectively)
with, but only with, the written consent of the Company and the Holders of the
Warrants that are exercisable for a number of Ordinary Shares that represent in
the aggregate at least a majority of the total number of Ordinary Shares for
which all of the Warrants are then exercisable (whether or not the Holder of
this Warrant consents).
Section 14. Severability. If in any jurisdiction, any provision of this
Agreement or its application to any party or circumstance is restricted,
prohibited or unenforceable, such provision shall, as to such jurisdiction, be
ineffective only to the extent of such restriction, prohibition or
unenforceability without invalidating the remaining provisions hereof and
without affecting the
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validity or enforceability of such provision in any other jurisdiction or its
application to other parties or circumstances.
Section 15. Notice. Any notice or document required or permitted by this
Agreement to be given to a party hereto shall be in writing and is sufficiently
given if delivered personally, or if sent by prepaid certified mail, return
receipt requested, to such party addressed as follows:
(i) If to the Company: Senetek Plc
620 Airpark Road
Napa, California 94558
Attention: President
copy to: Latham & Watkins
505 Montgomery Street, Suite 1900
San Francisco, California 94111
Attention: Jeffrey T. Pero, Esq.
(v) If to the Holder: c/o Robert T. Tucker, Esq.
61 Purchase Street, Suite 2
Rye, New York 10580
copy to: Pryor Cashman Sherman & Flynn LLP
410 Park Avenue
New York, New York 10022
Attention: Selig D. Sacks, Esq.
Notice so mailed shall be deemed to have been given upon receipt if delivered
personally or on the fifth business day next following the date of the returned
receipt. Any notice delivered to the party to whom it is addressed shall be
deemed to have been given and received on the day it is delivered. Any party may
from time to time notify the others in the manner provided herein of any change
of address which thereafter, until changed by like notice, shall be the address
of such party for all purposes hereof.
Section 16. Reduction in Number of Warrant Shares. This Warrant is one of a
number of Series C Warrants to purchase an aggregate of Ordinary Shares issued
pursuant to the terms of the Settlement Agreement (as defined in the Securities
Purchase Agreement) in connection with the concurrent issuance by the Company of
Settlement Notes (as defined in the Securities Purchase Agreement) in the
aggregate principal amount of $2,388,750 of which a Note for $____ was issued to
the Holder (the "Note"). In the event of the repayment of any portion of the
principal amount of the Note by the Company (a "Repayment"), the number of
Warrant Shares covered by this Warrant shall be reduced, effective concurrently
with the Repayment, to a number determined by multiplying the number of Warrant
Shares covered by this Warrant immediately prior to the Repayment by a fraction,
the numerator of which shall be the principal amount of the Notes outstanding
immediately following the Repayment and the denominator of which shall be the
principal amount of the Notes outstanding immediately prior to the
14
<PAGE> 15
Repayment. In the event of a Repayment of the entire principal amount of the
Note, this Warrant shall be cancelled immediately upon such Repayment.
Notwithstanding anything above, in the event the Repayment is a prepayment
pursuant to Section 6.2 of the Securities Purchase Agreement, the notice
provided for in Section 6.3 of the Securities Purchase Agreement shall apply,
and during such notice period, the Holder shall be entitled to exercise this
Warrant in accordance with the terms hereof.
Section 17. Governing Law; Choice Of Forum; Certain Consents; Waiver Of Jury
Trial, Counterclaim, Setoff.
THIS WARRANT SHALL BE DEEMED TO HAVE BEEN EXECUTED AND DELIVERED AT AND
SHALL BE DEEMED TO HAVE BEEN MADE IN NEW YORK, NEW YORK. THIS WARRANT, AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE
WITH AND BE GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO ANY OF SUCH STATE'S CONFLICT OF LAWS RULES OR PRINCIPLES). ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT HERETO AND THERETO SHALL ONLY BE BROUGHT
IN ANY STATE OR FEDERAL COURT IN THE BOROUGH OF MANHATTAN, NEW YORK CITY, NEW
YORK, AND, BY EXECUTION, ACCEPTANCE AND DELIVERY OF THIS WARRANT, THE COMPANY
HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY
AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS AND IRREVOCABLY
WAIVES ANY OBJECTION, DEFENSE OR CLAIM TO SUCH JURISDICTION WHICH MAY BE BASED,
DIRECTLY OR INDIRECTLY, ON THE GROUNDS OF FORUM NON CONVENIENS THAT IT MAY NOW
OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS WARRANT. IF ANY ACTION IS COMMENCED IN ANY OTHER
JURISDICTION, THE PARTIES HERETO HEREBY CONSENT TO THE REMOVAL OF SUCH ACTION TO
THE AFOREMENTIONED COURTS. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE COMPANY AT ITS ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE
30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE HOLDERS
OF ANY OF THE WARRANTS OR WARRANT SHARES TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE
COMPANY IN ANY OTHER JURISDICTION. THE COMPANY WAIVES IN EACH SUCH ACTION AND
OTHER LEGAL PROCEEDING THE RIGHT TO TRIAL BY JURY AND THE RIGHT TO ASSERT ANY
COUNTERCLAIM OR SETOFF.
[SIGNATURE PAGE FOLLOWS; REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
15
<PAGE> 16
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name by its duly authorized officer.
Dated: _________________, 1999
SENETEK PLC
By:
--------------------------------------
Name:
Title:
16
<PAGE> 17
EXHIBIT 1
EXERCISE NOTICE
The undersigned Holder hereby elects to exercise purchase rights
represented by such Warrant for, and to purchase thereunder ________ Ordinary
Shares covered by such Warrant and herewith makes payment in full therefor of
$_________ cash and/or by cancellation of $__________ of indebtedness of the
Company to the Holder hereof and requests that, subject to the terms and
conditions of the Warrant, certificates for such shares (and any securities or
property deliverable upon such exercise) be issued in the name of and delivered
to ______________________ whose address is
_______________________________________, and whose social security or employer
identification number is ____________.
The undersigned agrees that, in the absence of an effective registration
statement with respect to Ordinary Shares issued upon this exercise, the
undersigned is acquiring such Ordinary Shares for the Holder's own account and
not as a nominee for any other party, for investment and not with a view to
distribution thereof and that the certificate or certificates representing such
Ordinary Shares may bear a legend substantially as follows:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO SUCH SECURITIES UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED.
In addition, the undersigned agrees that, in the absence of an effective
registration statement with respect to Ordinary Shares issued upon this
exercise, stop transfer instructions will be entered on the Company's stock
transfer records with respect to Ordinary Shares issued upon this exercise.
Dated: ------------------------------------
Signature guaranteed:
<PAGE> 18
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered Holder of the within
Warrant hereby sells, assigns, and transfers unto the Assignee(s) named below
(including the undersigned with respect to any Warrants constituting a part of
the Warrants evidenced by the within Warrant not being assigned hereby) all of
the right of the undersigned under the within Warrant, with respect to the
number of Warrants set forth below:
<TABLE>
<CAPTION>
Social security or
other identifying
Name of Assignees Address number of Assignee(s) Number of Warrants
----------------- ------- --------------------- ------------------
<S> <C> <C> <C>
</TABLE>
and does hereby irrevocably constitute and appoint ____________ the
undersigned's attorney to make such transfer on the books of _____________
maintained for that purpose, with full power of substitution in the premises.
Dated:
------------ (1)
----------------------------------
(Signature of Owner)
----------------------------------
(Street Address)
----------------------------------
(City) (State) (Zip Code)
- ------------
(1) The signature must correspond with the name as written upon the face of
the within Warrant in every particular, without alteration or
enlargement or any change whatsoever.
18
<PAGE> 1
EXHIBIT 10.6
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of April 14, 1999, among Senetek
P.L.C., a corporation organized under the laws of England (the "Company"), and
SILVER CREEK INVESTMENTS, LTD., a British Virgin Islands company ("Silver
Creek"), BOMOSEEN INVESTMENTS, LTD., a British Virgin Islands company
("Bomoseen"), ELSTREE HOLDINGS, LTD., a British Virgin Islands company
("Elstree") and DANDELION INVESTMENTS, LTD., a British Virgin Islands company
("Dandelion").
W I T N E S S E T H:
WHEREAS, on the date hereof, Silver Creek, Bomoseen, Elstree and
Dandelion have been issued (i) Senior Notes due 2002 in an aggregate principal
amount of $7,388,570 (collectively, the "Notes") and (ii) Warrants (as defined
herein);
WHEREAS, as a condition to the issuance of the Securities (as
hereinafter defined) to Silver Creek, Bomoseen, Elstree and Dandelion, the
Company has agreed to provide certain registration rights pursuant to the terms
of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Definitions. For purposes of this Agreement, capitalized terms used
herein shall have the meanings set forth in the preambles hereto and in this
Section 1.
1.1 "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
1.2 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar federal statute enacted hereafter, and the
rules and regulations of the Commission thereunder, all as the same shall be in
effect from time to time.
1.3 "Form S-3" means such form under the Securities Act as in
effect on the date hereof or any registration form under the Securities Act
subsequently adopted by the Commission which permits inclusion or incorporation
of substantial information by reference to other documents filed by the Company
with the Commission.
1.4 "Holder" shall mean any holder of Registrable Securities;
provided, however, that any Person who acquires any of the Registrable
Securities in a distribution pursuant to a registration statement filed by the
Company under the Securities Act or pursuant to a sale under Rule 144 under the
Securities Act shall not be considered a Holder.
<PAGE> 2
1.5 "Initiating Holders" shall mean Holders representing (on a
fully diluted basis) at least twenty percent (20%) of the total number of
Registrable Securities.
1.6 "Ordinary Shares" shall mean the ordinary shares, par value
(5p) per share, of the Company which may be represented by American Depository
Shares represented by American Depository Receipts, or, in the case of a
conversion, reclassification or exchange of such shares of such Ordinary Shares,
shares of the stock into or for which such shares of Ordinary Shares shall be
converted, reclassified or exchanged, and all provisions of this Agreement shall
be applied appropriately thereto and to any stock resulting from any subsequent
conversion, reclassification or exchange therefor.
1.7 "Person" shall mean any individual, firm, corporation,
partnership, trust, incorporated or unincorporated association, joint venture,
joint stock company, government (or an agency or political subdivision thereof)
or other entity of any kind.
1.8 "Register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement with the
Commission in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement by the Commission.
1.9 "Registrable Securities" shall mean (i) the Warrant Shares
and (ii) all Ordinary Shares now owned or issued (or committed by the Company to
be issued) on the date hereof to the Holders; provided, however, that the
Ordinary Shares shall only be treated as Registrable Securities hereunder if and
so long as they have not been sold pursuant to a registration statement under
the Securities Act or those shares shall not have been sold pursuant to Rule 144
under the Securities Act or any similar or successor rule and provided, further,
that the Company shall not be required to register Warrants. Registrable
Securities shall not include any of the foregoing securities held by any Holder
who is not an affiliate of the Company within the meaning of Rule 144 under the
Securities Act and that may be sold pursuant to Rule 144(k) under the Securities
Act.
1.10 "Registration Expenses" shall mean all expenses incurred by
the Company in compliance herewith, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, and, in connection with a registration pursuant to
Section 2 hereof, the reasonable fees and expenses (subject to documentation
thereof) of one counsel for all Holders, blue sky fees and expenses, and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company, which shall
be paid in any event by the Company).
1.11 "Securities" shall mean the Warrants.
1.12 "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute enacted hereafter, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
from time to time.
2
<PAGE> 3
1.13 "Securities Purchase Agreement" shall mean that certain
Securities Purchase Agreement, dated as of the date hereof, among the Company
and Silver Creek, Bomoseen, Elstree and Dandelion, as amended from time to time.
1.14 "Selling Expenses" shall mean all underwriting discounts and
commissions applicable to the sale of Registrable Securities.
1.15 "Warrants" shall mean all the warrants issued pursuant to
the Securities Purchase Agreement.
1.16 "Warrant Shares" shall mean the Ordinary Shares issued or
issuable upon exercise of the Warrants, as such number of shares may be adjusted
in accordance with the terms of the Warrants.
2. Requested Registration.
2.1 Request for Registration. At any time from and after the date
hereof if the Company shall receive from Initiating Holders a written request
that the Company effect a registration with respect to Registrable Securities
the Company will:
(a) promptly give written notice of the proposed
registration to all other Holders; and
(b) as soon as practicable, use its best efforts to
effect such registration (including, without limitation, the execution
of an undertaking to file post-effective amendments, appropriate
qualification under the blue sky or other state securities laws
requested by Initiating Holders and appropriate compliance with
applicable regulations issued under the Securities Act) as may be so
requested and as would permit or facilitate the sale and distribution of
all or such portion of such Registrable Securities as are specified in
such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are
specified in a written request given within twenty-one (21) days after
receipt of such written notice from the Company; provided, that the
Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 2 after the first
such registration pursuant to this Section 2.1 has been declared or
ordered effective.
2.2 Additional Shares to be Included. The registration statement
filed pursuant to the request of the Initiating Holders may, subject to the
provisions of Section 2.4 below, include (a) other securities of the Company
(the "Additional Shares") which are held by (i) officers or directors of the
Company who, by virtue of agreements with the Company, are entitled to include
their securities in any such registration or (ii) other persons who, by virtue
of agreements with the Company, are entitled to include their securities in any
such registration (the "Other Stockholders"), and (b) securities of the Company
being sold for the account of the Company.
3
<PAGE> 4
2.3 Underwriting.
(a) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2 and the Company shall include such information in the written
notice to other Holders referred to in Section 2.1 above. The right of any
Holder to registration pursuant to this Section 2 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein and
subject to the limitations provided herein. A Holder may elect to include in
such underwriting all or a part of the Registrable Securities he holds.
(b) The Company shall (together with all Holders,
officers, directors and Other Stockholders proposing to distribute their
securities through such underwriting) negotiate and enter into an underwriting
agreement in customary form with the representative of the underwriter or
underwriters selected for such underwriting by a majority in interest of the
Initiating Holders, which underwriter(s) shall be reasonably acceptable to the
Company.
2.4 Limitations on Shares to be Included. Notwithstanding any
other provision of this Section 2, if the representative of the underwriters
advises the Initiating Holders in writing that marketing factors require a
limitation on the number of shares to be underwritten in the registration
requested pursuant to Section 2.1 hereof, first the Additional Shares shall be
excluded from such registration to the extent so required by such limitation,
second securities being sold for the account of the Company shall be excluded
from such registration thereafter, and if a limitation on the number of shares
is still required, the number of shares that may be included in the registration
and underwriting shall be allocated among all Holders, including Initiating
Holders, in proportion, as nearly practicable, to the respective amounts of
Registrable Securities which they have requested to be included in such
registration statement. If the Company or any Holder, officer, director or Other
Stockholder who has requested inclusion in such registration as provided above
disapproves of the terms of any such underwriting, such person may elect to
withdraw such person's Registrable Securities or Additional Shares therefrom by
written notice to the Company and the underwriter and the Initiating Holders.
Any Registrable Securities or other securities excluded shall also be withdrawn
from such registration. No Registrable Securities or Additional Shares excluded
from such registration by reason of such underwriters' marketing limitation
shall be included in such registration. To facilitate the allocation of shares
in accordance with this Section 2.4, the Company or underwriter or underwriters
selected as provided above may round the number of Registrable Securities of any
Holder which may be included in such registration to the nearest 100 shares.
3. Company Registration.
3.1 Piggy-Back Rights. If the Company shall determine to register
under the Securities Act any of its equity securities or securities convertible
into equity securities either for its own account or the account of a security
holder or holders exercising any demand registration rights, other than a
registration relating
4
<PAGE> 5
solely to employee benefit plans, or a registration relating solely to a
Commission Rule 145 transaction, or a registration on Form S-4 or S-8 (or any
successor forms thereto), the Company will:
(a) promptly give to each Holder written notice thereof
(which shall include a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under the applicable blue
sky or other state securities laws); and
(b) include in such registration (and, subject to Section
6.3(a), any related qualification under blue sky laws), and in any
underwriting involved therein, all the Registrable Securities specified
in a written request or request, made by any Holder within twenty-one
(21) days after receipt of the written notice from the Company described
in clause (a) above, except as set forth in Section 3.3 below. Such
written request may specify all or a part of a Holder's Registrable
Securities.
3.2 Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 3.1(a). The right of any Holder to registration pursuant to
this Section 3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company and
any officers, directors or Other Stockholders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected by the
Company.
3.3 Limitations on Shares to be Included. Notwithstanding any
other provision of this Section 3, if the representative of the underwriters
advises the Company in writing that marketing factors require a limitation or
elimination on the number of shares to be underwritten, the Company may (subject
to the allocation priority set forth below) limit the number of or eliminate the
Registrable Securities to be included in the registration and underwriting. The
Company shall so advise all holders of securities requesting registration, and
the number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated as follows: first, to the
Company for securities being sold for its own account; second, the Registrable
Securities which have been requested to be included by the Holders, pro rata
based upon the aggregate number of Registrable Securities held by the respective
Holders; and thereafter, the number of shares that may be included in the
registration statement and underwriting shall be allocated among all officers,
directors or Other Stockholders in each case in proportion, as nearly as
practicable, to the respective amounts of Additional Shares which they had
requested to be included in such registration at the time of filing the
registration statement. If any Holder of Registrable Securities or any officer,
director or Other Stockholder disapproves of the terms of any such underwriting,
he may elect to withdraw therefrom by written notice to the Company and the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall also be withdrawn from such registration.
The Company shall have the right to terminate or withdraw any registration
initiated by it under this
5
<PAGE> 6
Section 3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
4. Registration on Form S-3. In addition to their rights set forth in
Sections 2 and 3 above, if at any time (i) Initiating Holders request that the
Company file a registration statement on Form S-3 (or any successor form
thereto) for a public offering of all or any portion of the Registrable
Securities held by such Initiating Holder or Holders (such request shall be in
writing and shall state the number of Registrable Securities to be disposed of
and, to the extent practicable, the intended methods of disposition of the
Registrable Securities by such Initiating Holder or Holders), and (ii) the
Company is a registrant entitled to use Form S-3 (or any successor form thereto)
to register such securities, then the Company shall use its best efforts to
register (including by means of a shelf registration pursuant to Rule 415 under
the Securities Act if so requested in such request) under the Securities Act on
Form S-3 (or any successor form thereto), for public sale in accordance with the
method of disposition specified in such notice, the number of shares of
Registrable Securities specified in such notice. Registrations effected pursuant
to this Section 4 shall not be counted as demands for registration or
registrations effected pursuant to Section 2 or 3, respectively.
5. Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 2, 3 or 4 of this Agreement shall be borne by the Company. Selling
Expenses shall be borne pro rata by each Holder in accordance with the number of
shares sold.
6. Registration Procedures.
6.1 Procedure. In the case of each registration effected by the
Company pursuant to this Agreement, the Company will keep each Holder advised in
writing as to the initiation of each registration and as to the completion
thereof and will, at its expense:
(a) use its best efforts to keep such registration
effective for a period of 180 days or until the Holder or Holders have completed
the distribution described in the registration statement relating thereto,
whichever first occurs; and provided, that in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 180-day period shall, at the cost and expense
of the Company, be extended, if necessary, to keep the registration statement
effective until all such Registrable Securities are sold, provided that Rule
415, or any successor rule under the Securities Act, permits an offering on a
continuous or delayed basis, and provided, further, that applicable rules and
regulations under the Securities Act governing the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective amendment
which (y) includes any prospectus required by Section 10(a)(3) of the Securities
Act or (z) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement, the
incorporation by reference of information otherwise required to be included in
such post-effective amendment covered by (y) and (z) above to be contained in
periodic reports filed pursuant to Section 13 or 15(d) of the Exchange Act in
the registration statement;
6
<PAGE> 7
(b) Subject to the limitations set forth in Section
6.1(a) hereof, prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) Furnish such number of prospectuses and other
documents incident thereto, including any amendment of or supplement to the
prospectus, as a Holder from time to time may reasonably request;
(d) Notify each seller of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing (in which case each person entitled to sell under
such registration statement will immediately suspend use of such registration
statement until it is supplemented or amended as provided herein), and at the
request of any such seller, prepare and furnish to such seller a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such shares,
such prospectus shall not include 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 not misleading or incomplete in the light of the
circumstances then existing;
(e) List all such Registrable Securities registered in
such registration on each securities exchange or automated quotation system on
which the Ordinary Shares of the Company are then listed;
(f) Provide a transfer agent and registrar for all
Registrable Securities and a CUSIP number for all such Registrable Securities,
in each case not later than the effective date of such registration;
(g) The Company will give the Holders on whose behalf
such Registrable Securities are to be registered and their underwriters, if any,
and their respective counsel and accountants, the opportunity to review such
registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
such Holder such access to the Company's books, financial and other records,
pertinent corporate documents and such opportunities to discuss the business of
the Company with its officers, its counsel and the independent public
accountants who have certified the Company's financial statements, as shall be
necessary, in the opinion of such Holders or such underwriters or their
respective counsel, in order to conduct a reasonable and diligent investigation
within the meaning of the Securities Act, provided that such seller,
underwriter, attorney or accountant shall agree to hold in confidence and trust
all information so provided;
7
<PAGE> 8
(h) Furnish to each selling Holder upon request a signed
counterpart, addressed to each such selling Holder, of
(i) an opinion of counsel for the Company, dated
the effective date of the registration statement in form reasonably
acceptable to the Company and such counsel, and
(ii) "comfort" letters signed by the Company's
independent public accountants who have examined and reported on the
Company's financial statements included in the registration statement,
to the extent permitted by the standards of the American Institute of
Certified Public Accountants or other relevant authorities,
covering such matters as are customarily covered in opinions of issuer's counsel
and accountants' "comfort" letters delivered to underwriters in underwritten
public offerings of securities;
(i) Furnish to each selling Holder upon request a copy of
all documents filed with and all correspondence from or to the Commission in
connection with any such offering; and
(j) Make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at least
twelve months, but not more than eighteen months, beginning with the first month
after the effective date of the Registration Statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act.
6.2 Holder Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement that
the Holders proposing to register Registrable Securities shall furnish to the
Company such information regarding themselves, the Registrable Securities held
by them, and their intended method of distribution of such Registrable
Securities as the Company shall reasonably request and as shall be required in
connection with the action to be taken by the Company.
6.3 Limitations on Obligations of the Company. Notwithstanding
any other provision in this Agreement to the contrary, the Company shall not be
obligated to take any action:
(a) pursuant to Sections 2, 3 or 4 of this
Agreement (A) in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process unless the Company
is already subject to service in such jurisdiction, (B) in any non-U.S.
jurisdiction in which the Company would be required to qualify as a foreign
corporation eligible to do business in such jurisdiction, if the Company shall
not then be so qualified in that jurisdiction or (C) in any non-U.S.
jurisdiction that would subject the Company to taxation where it would not
otherwise be subject to tax;
8
<PAGE> 9
(b) pursuant to Section 2 or 4 of this Agreement if the
Company, within ten (10) days of the receipt of the request of the Initiating
Holders, gives notice of its bona fide intention to file a registration
statement with the Commission within sixty (60) days of receipt of such request
(other than a registration statement on Form S-8);
(c) pursuant to Section 2 or 4 of this Agreement with
respect to any request for registration made by Initiating Holders during the
period starting with the date of filing of, and ending on the date ninety (90)
days immediately following the effective date of, any registration statement
pertaining to equity securities of the Company (other than a registration
statement on Form S-8);
(d) pursuant to Section 2 or 4 of this Agreement if the
Company shall furnish to Holders requesting registration a certificate signed by
the President or Chief Executive Officer of the Company (the "Certificate")
stating that the negotiation or consummation of a transaction by the Company is
pending or an event has occurred, which negotiation, consummation or event would
require additional disclosure by the Company in the registration statement of
material information which the Company (in the good faith judgment of its Board
of Directors) has a bona fide business purpose for keeping confidential and the
nondisclosure of which in the registration statement would cause the
registration statement to fail to comply with applicable disclosure
requirements, in which case the Company's obligation hereunder to file a
registration statement, pursue its effectiveness or maintain its effectiveness,
shall be deferred for a period or periods not to exceed one hundred and eighty
(180) consecutive days in any 12-month period; and the Company may suspend after
providing a Certificate the use of any effective registration statement filed
pursuant to Section 2, 3 or 4 of this Agreement during any period the Company's
obligation to file a registration statement or to pursue or maintain its
effectiveness would be deferred as provided herein; or
(e) pursuant to Section 2 or 4 of this Agreement if the
Holder requires an audit of the Company's financial statements in connection
with the registration of the Registrable Securities other than any audit
required by the Securities Act or any rules or regulations thereunder.
7. Indemnification.
7.1 Indemnification by the Company. The Company will indemnify
each Holder, each of its officers, directors and partners, and each person
controlling such Holder, with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, and each underwriter,
if any, and each person who controls any underwriter, against all claims,
losses, damages and liabilities (or actions, proceedings or settlements in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each such Holder, each of its
officers, directors and partners, and each person
9
<PAGE> 10
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending or settling any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission (or alleged untrue
statement or omission) made in reliance upon and based upon written information
furnished to the Company by such Holder or underwriter and stated to be
specifically for use therein.
7.2 Indemnification by the Holders. Each Holder will, if
Registrable Securities held by him are included in the securities as to which
such registration, qualification or compliance is being effected, indemnify the
Company, each of its directors and officers and each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company (other than such Holder) or such underwriter within the
meaning of the Securities Act and the rules and regulations thereunder, each
other such Holder and each of their officers, directors and partners, and each
person controlling such Holder or other stockholder, against all claims, losses,
damages, expenses and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company, each of its directors
and officers, each underwriter and control person, each other Holder and each of
their officers, directors and partners and each person controlling such Holder
or other stockholder for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder and stated to be specifically for use
therein.
7.3 Notices of Claims, Procedures, etc. Each party entitled to
indemnification under this Section 7 (the "Indemnified Party") shall give notice
to the party required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any claim as to
which indemnity may be sought, and shall permit the Indemnifying Party to assume
the defense of any such claim or any litigation resulting therefrom, provided
that counsel for the Indemnifying Party, who shall conduct the defense of such
claim or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not be unreasonably withheld), and the
Indemnified Party may participate in such defense at the Indemnified Party's
sole expense, and provided further that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 7 unless such failure is prejudicial to the
ability of Indemnifying Party to defend such claim or action. Notwithstanding
the foregoing, such Indemnified Party shall have the right to employ its own
counsel in any such litigation, proceeding or other action if (i) the employment
of such counsel has been authorized by the Indemnifying Party, in its sole and
absolute discretion, or (ii) the named parties in any such claims (including any
impleaded parties) include
10
<PAGE> 11
any such Indemnified Party and the Indemnified Party and the Indemnifying Party
shall have been advised in writing (in suitable detail) by counsel to the
Indemnified Party either (A) that there may be one or more legal defenses
available to such Indemnified Party which are different from or additional to
those available to the Indemnifying Party, or (B) that there is a conflict of
interest by virtue of the Indemnified Party and the Indemnifying Parties having
common counsel, in any of which events, the legal fees and expenses of a single
counsel for all Indemnified Parties with respect to each such claim, defense
thereof, or counterclaims thereto shall be borne by Indemnifying Party. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation. Each
Indemnified Party shall cooperate to the extent reasonably required and furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
8. Information by Holder. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement and shall promptly
advise the Company in writing of any material changes to such information while
the registration is in effect.
9. Transfer or Assignment of Registration Rights. The rights to cause
the Company to register securities granted by the Company under this Agreement
may be transferred or assigned by a Holder to a transferee or assignee of any
Registrable Securities, provided that the Company is given written notice at or
prior to the time of said transfer or assignment, stating the name and address
of said transferee or assignee and identifying the securities with respect to
which such registration rights are being transferred or assigned, and provided
further that the transferee or assignee of such rights assumes in writing the
obligations of a Holder under this Agreement to the Company and other Holders in
effect at the time of transfer under all effective agreements.
10. Exchange Act Compliance. The Company shall file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the Commission thereunder, to enable holders of
Registrable Securities to sell such securities without registration under the
Securities Act within the limitation of the provisions of (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rules or regulations hereunder adopted by the Commission. Upon the
request of any holder of Registrable Securities, the Company will deliver to
such holder a written statement as to whether it has complied with such
requirements.
11. Exercise of Warrants.
(a) Notwithstanding anything in this Agreement to the
contrary, no
11
<PAGE> 12
Holder shall be required to exercise its Warrant prior to the closing date of a
registration in order for the Warrant Shares to be included in such
registration.
(b) The Company agrees to make promptly upon request, and
at its expense, such state "blue sky" filings as it deems necessary or
appropriate to effectuate the exercise of the Warrants. No exercise shall be
effectuated until the necessary "blue sky" filings have been made; provided,
however, that no Holder of a Warrant shall be deprived of any of its rights
under this Agreement due to the Company's failure to timely make its "blue sky"
filings and such Holder's rights to participate in any registration under this
Agreement shall be deemed to be perfected from the date such Holder notifies the
Company of its intention to exercise or convert all or a portion of its Warrants
or Notes and to participate in such registration.
12. Liquidated Damages.
(a) In the event that the Company fails to use best
efforts to comply with any provision of Section 2, 3 or 4 hereof upon written
request of a Holder, the Company shall within 45 days after the date of receipt
by the Company of a demand from such Holder for payment (the "Payment Demand"),
pay to such Holder as liquidated damages for its noncompliance an amount equal
to the Current Market Price (as defined in subparagraph (b) below) multiplied by
(x) the number of Ordinary Shares proposed to be sold pursuant to the
registration or qualification in question or (y) in the case of a request in
accordance with Section 4 hereof for a shelf registration pursuant to Rule 415
under the Securities Act, such lesser number of Ordinary Shares as may be
specified by the Initiating Holder(s) in such demand for payment; provided,
however, that the election of the Initiating Holder(s) to demand payment of
liquidated damages hereunder with respect to less than all of the Ordinary
Shares proposed to be sold pursuant to such shelf registration shall not prevent
the Initiating Holder(s) from any subsequent exercise of registration rights
under this Agreement with respect to the shares of Ordinary Shares for which
payment was not demanded. Payment of such amount shall be made in immediately
available funds. Upon payment to such Holder of such liquidated damages, such
Holder shall assign to the Company the Registrable Securities proposed to be
sold pursuant to the registration or qualification (or such lesser number of
Ordinary Shares as specified in the Payment Demand) in question without any
representation or warranty (other than that the Holder owns all of the right,
title and interest in the Registrable Securities and has not taken any action
which would impair its ownership of or right to transfer to the Company the
Registrable Securities). If such liquidated damages are to be paid with respect
to less than all of the Ordinary Shares issuable upon the exercise of a Warrant,
the Company shall cancel the Warrants and issue in the name of, and deliver to,
the Holder, pursuant to the terms of the Warrants, a new Warrant for the
Ordinary Shares issuable upon the exercise of a Warrant, not required to be
assigned to the Company pursuant to the provisions of the preceding sentence.
The Company agrees that the amount of actual damages that would be sustained by
the Holder of Warrants and/or the Ordinary Shares issuable upon the exercise
thereof as a result of the failure of the Company to use its best efforts to
comply with any provisions of Section 2, 3 or 4 hereof is not capable of
ascertainment on any other basis.
12
<PAGE> 13
(b) "Current Market Price" shall mean (i) the average
closing price per share of Ordinary Shares represented by American Depository
Shares for the forty-five (45) consecutive trading days beginning on the
Determination Date. "Determination Date" shall mean, with respect to a requested
registration pursuant to Section 2 or 3 of this Agreement, the date which is
forty-five (45) days after the date of such request, and with respect to a
requested registration pursuant to Section 4 of this Agreement, the date which
is thirty (30) days after the date of such request. The closing price for each
day shall be as reported in The Wall Street Journal or, if not reported therein,
as reported in another newspaper of national circulation chosen by the Board of
Directors of the Company, the average of the last reported sales price for such
shares in the over-the-counter market, as reported on the National Association
of Securities Dealers Automated Quotation System, or, if such sales prices shall
not be reported thereon, the average of the closing bid and asked prices so
reported, or, if such bid and asked prices shall not be reported thereon, as the
same shall be reported by the National Quotation Bureau Incorporated, or, if
such firm at the time is not engaged in the business of reporting such prices,
as furnished by any similar firm then engaged in such business and selected by
the Company or, if there is no such firm, as furnished by any member of the
National Association of Securities Dealers, Inc., selected by the Company or
(ii) if the Company shall no longer have a class of equity securities registered
under the Securities Exchange Act of 1934, as amended, "Current Market Price"
shall be determined as follows: first, by a nationally recognized investment
banking firm selected by the holders of a majority of the Registrable Securities
requested to be included in such registration, which determination shall be made
within thirty (30) days after the delivery of the demand for payment, second, if
such determination shall not be satisfactory to the Company, as evidenced by a
written objection by the Company to the holders of the Registrable Securities
requested to be included in such registration, within ten (10) days of receipt
by the Company of such determination, the Company shall be entitled to select a
nationally recognized investment banking firm which shall make its own
determination within thirty (30) days of its appointment, and if such
determination shall differ by less than 10% from the determination of the
nationally recognized investment banking firm selected by the holders of a
majority of the Registrable Securities requested to be included in such
registration, the Current Market Price shall be the average of such
determinations and third, if such determinations shall differ by 10% or more,
such investment banking firms shall appoint a third nationally recognized
investment banking firm which shall make its own determination within two weeks
of its appointment, which determination shall be binding upon the Company and
the holders of the Registrable Securities requested to be included in such
registration. Any and all determinations made pursuant to this Section 12(b)(ii)
shall be performed by an investment banking firm experienced in the conduct of
corporate valuations and shall be based upon the fair market value of 100% of
the Company on a consolidated basis if sold as a going concern, without giving
effect to any discount for lack of liquidity of the Ordinary Shares or to the
fact that the Ordinary Shares are privately held or that the Company has no
class of equity securities registered under the Securities Exchange Act of 1934,
as amended, or to any discount relating to, the right of any stockholder or
warrant holder of the Company to receive payment pursuant to this Section 12. In
addition, in making such determination, the investment banking firm shall take
into account the valuations associated with recent public offerings of Ordinary
Shares by companies engaged in businesses and with capital structures similar to
the Company and such other matters as are relevant to the valuation of the
Company.
13
<PAGE> 14
13. No Conflict of Rights.
(a) The Company will not hereafter enter into any
agreement with respect to its securities which is inconsistent with the rights
(including, but not limited to, priority rights) granted to the Holders in this
Agreement. Without limiting the generality of the foregoing, the Company will
not hereafter enter into any agreement with respect to its securities which
grants or modifies any existing agreement with respect to its securities to
grant to the holder of its securities in connection with an incidental
registration of such securities equal or higher priority to the rights granted
to the Holders under Sections 2, 3 and 4 of this Agreement.
(b) In addition, the Company hereby covenants and agrees
to cause all of its stockholders to which it grants registration rights after
the date hereof to acknowledge in writing the priorities and limitations of
inclusion of securities set forth in this Agreement.
14. Benefits of Agreement; Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns, legal representatives and heirs. This
Agreement does not create, and shall not be construed as creating any rights
enforceable by any other Person.
15. Complete Agreement. This Agreement constitutes the complete
understanding among the parties with respect to its subject matter and
supersedes all existing agreements and understandings, whether oral or written,
among them. No alteration or modification of any provisions of this Agreement
shall be valid unless made in writing and signed, on the one hand, by the
Holders of a majority of the Registrable Securities then outstanding and, on the
other, by the Company.
16. Section Headings. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
17. Notices. (a) All notices, offers, acceptances and other
communications required or permitted to be given or to otherwise be made to any
party to this Agreement shall be deemed to be sufficient if contained in a
written instrument delivered by hand, first class mail (registered or certified,
return receipt requested), telex, telecopier or overnight air courier
guaranteeing next day delivery, if to the Company, at 620 Airport Road, Napa,
California, Attention: Chief Executive Officer, and if to any Holder, at the
address of such Holder as set forth in the stock transfer books of the
Corporation.
(b) All such notices and communications shall be deemed to
have been duly given: at the time delivered by hand, if personally delivered;
five business days after being deposited in the mail, postage prepaid, if
mailed; when answered back, if telexed; when receipt acknowledged, if
telecopied; and the next business day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery. Any party may
change the address to
14
<PAGE> 15
which each such notice or communication shall be sent by giving written notice
to the other parties of such new address in the manner provided herein for
giving notice.
18. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York without
giving effect to the provisions, policies or principles thereof respecting
conflict or choice of laws.
19. Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed an original but all of which taken
together shall constitute one and the same agreement.
20. Severability. Any provision of this Agreement which is determined to
be illegal, prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such illegality, prohibition or
unenforceability without invalidating the remaining provisions hereof which
shall be severable and enforceable according to their terms and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
15
<PAGE> 16
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date first set forth above.
SENETEK PLC
By: /s/ FRANK MASSINO
------------------------------
Frank J. Massino
President
PURCHASERS:
SILVER CREEK INVESTMENTS, LTD.
By:
------------------------------
Name:
Title:
BOMOSEEN INVESTMENTS, LTD.
By:
------------------------------
Name:
Title:
ELSTREE HOLDINGS, LTD.
By:
------------------------------
Name:
Title:
DANDELION INVESTMENTS, LTD.
By:
------------------------------
Name:
Title:
(Signature page to Registration Rights Agreement)
<PAGE> 17
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date first set forth above.
SENETEK PLC
By: /s/
------------------------------
Frank J. Massino
President
PURCHASERS:
SILVER CREEK INVESTMENTS, LTD.
By: /s/ ROBERT T. TUCKER
------------------------------
Name: Robert T. Tucker
Title: Director
BOMOSEEN INVESTMENTS, LTD.
By: /s/ ROBERT T. TUCKER
------------------------------
Name: Robert T. Tucker
Title: Director
ELSTREE HOLDINGS, LTD.
By: /s/ ROBERT T. TUCKER
------------------------------
Name: Robert T. Tucker
Title: Attorney-in-fact
DANDELION INVESTMENTS, LTD.
By: /s/ ROBERT T. TUCKER
------------------------------
Name: Robert T. Tucker
Title: Attorney-in-fact
(Signature page to Registration Rights Agreement)
<PAGE> 1
EXHIBIT 10.7
[STAMP]
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made and entered into as of
April 14, 1999 by SENETEK PLC, a corporation organized under the laws of England
(the "Company"), and each of the undersigned (each a "Guarantor", and
collectively with the Company, the "Grantors") and SILVER CREEK INVESTMENTS,
Ltd., a British Virgin Islands company, as Collateral Agent for the benefit of
the Purchasers under the Purchase Agreement (as defined below) (the "Collateral
Agent"). All capitalized terms used but not otherwise defined herein shall have
the respective meanings assigned thereto in the Purchase Agreement;
WITNESSETH:
WHEREAS, the Company has entered into the Securities Purchase Agreement
dated as of the date hereof between the Company and the Purchasers (as from time
to time amended, revised, modified, supplemented or amended and restated, the
"Purchase Agreement"); and
WHEREAS, as collateral security for payment and performance of its
Obligations, the Company is willing to grant to the Purchasers a security
interest in certain of its personal property and assets pursuant to the terms of
this Agreement; and
WHEREAS, each Guarantor will materially benefit from purchase of the
Securities by the Purchasers pursuant to the Purchase Agreement and each
Guarantor is a party to that certain Guaranty Agreement (the "Guaranty"), dated
as of the date hereof, pursuant to which each Guarantor guaranteed the
Obligations of the Company; and
WHEREAS, as collateral security for payment and performance of its
Obligations (as defined in the Guaranty) under the Guaranty, each Guarantor is
willing to grant to the Collateral Agent for the benefit of the Purchasers a
security interest in certain of its personal property and assets; and
WHEREAS, the Purchasers are unwilling to enter into the Purchase Agreement
unless the Company and the Collateral Agent on behalf of the Purchasers enter
into this Agreement;
NOW, THEREFORE, in order to induce the Purchasers to enter into the
Purchase Agreement, and in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration the
receipt of which is hereby acknowledged, the parties hereto agree as follows.
1. Grant of Security Interest. As collateral security for the payment,
performance, and satisfaction of all the Guarantors' Obligations (as defined in
the Guaranty) and all of the
<PAGE> 2
Company's Obligations under the Purchase Agreement (collectively, the "Secured
Obligations"), each Grantor hereby affirms, grants, pledges and assigns to the
Collateral Agent for the benefit of the Purchasers and grants to the Collateral
Agent for the benefit of the Purchasers a continuing FIRST priority security
interest in and to all of the property of such Grantor, subject to Permitted
Liens, whether now owned or existing or hereafter acquired or arising and
wheresoever located, including without limitation the following:
(a) All accounts, accounts receivable, contracts, notes, bills,
acceptances, choses in action, chattel paper, instruments, documents and other
forms of obligations (other than those generated solely by Receivable Financing
and by the assets set forth on Annex 1 hereto (the "Product Line Assets") at any
time owing to each Grantor arising out of goods sold or leased or for services
rendered by such Grantor, including without limitation accounts receivable and
contract rights arising under agreements to which the Grantor is a party, the
proceeds thereof and all of such Grantor's rights with respect to any goods
represented thereby, whether or not delivered, goods returned by customers and
all rights as an unpaid vendor or lienor, including rights of stoppage in
transit and of recovering possession by proceedings including repletion and
reclamation, together with all customer lists, books and records, ledger and
account cards, computer tapes, software, disks, printouts and records, whether
now in existence or hereafter created, relating thereto (collectively referred
to hereinafter as "Accounts");
(b) All inventory (other than inventory financed by Inventory
Financing and Product Line Assets) of each Grantor wherever located in the
United States of America and any state, district, territory or other political
subdivision thereof or the United Kingdom or in any other foreign country,
including without limitation, all goods manufactured or acquired for sale or
lease, and any piece goods, raw materials, work in process and finished
merchandise, findings or component materials, and all supplies, goods,
incidentals, office supplies, packaging materials and any and all items used or
consumed in the operation of the business of such Grantor or which may
contribute to the finished product or to the sale, promotion and shipment
thereof, in which such Grantor now or at any time hereafter may have an
interest, whether or not the same is in transit or in the constructive, actual
or exclusive occupancy or possession of such Grantor or is held by such Grantor
or by others for such Grantor's account (collectively referred to hereinafter as
"Inventory");
(c) All goods of each Grantor, including without limitation, all
machinery, equipment (except equipment set forth on Schedule 8.8 of the Purchase
Agreement and Product Line Assets), parts, supplies, apparatus, appliances,
tools, patterns, molds, dies, blueprints, fittings, furniture, finishings,
fixtures and articles of tangible personal property of every description now or
hereafter owned by such Grantor or in which such Grantor may have or may
hereafter acquire any interest, at any location (collectively referred to
hereinafter as "Equipment");
(d) All general intangibles (other than Product Line Assets) of each
Grantor in which a Grantor now has or hereafter acquires any rights, including
but not limited to, causes of action, corporate or business records, inventions,
designs, goodwill, trade names, trade secrets, trade processes, patents,
licenses, permits, franchises, customer lists, computer programs, all
2
<PAGE> 3
claims under guaranties, tax refund claims, rights and claims against carriers
and shippers, leases, claims under insurance policies, all rights to
indemnification and all other intangible personal property and intellectual
property of every kind and nature (collectively referred to hereinafter as
"Intangibles");
(e) All rights now or hereafter accruing to each Grantor under
contracts, leases, agreements or other instruments to performing services, to
hold and use land and facilities, and to enforce all rights thereunder
(collectively referred to hereinafter as "Contract Rights");
(f) All books and records relating to any of the Collateral (as
hereinafter defined) (including, without limitation, customer data, credit
files, computer programs, printouts, and other computer materials and records of
each Grantor pertaining to any of the foregoing); and
(g) All accessions to, substitutions for and all replacements,
products and proceeds of the foregoing, including without limitation proceeds of
insurance policies insuring the Collateral (as hereinafter defined).
All of the property and interests in property described in
subsections (a) through (g) and all other property and interests in personal
property which shall, from time to time, secure the Secured Obligations are
herein collectively referred to as the "Collateral."
2. Financing Statements. At the time of execution of this Agreement, each
Grantor shall have furnished the Collateral Agent for the benefit of the
Purchasers with properly executed financing statements, registrar's
certificates, amendments and assignments as prescribed by the Uniform Commercial
Code as presently in effect in the states where the Collateral is located,
prepared and approved by the Collateral Agent for the benefit of the Purchasers
in form and number sufficient for filing in each jurisdiction set forth on
Schedule 1 hereto, in order that the Collateral Agent for the benefit of the
Purchasers shall have a duly perfected first priority security interest of
record in the Collateral, to the extent a security interest in such Collateral
can be perfected by filing a financing statement, following the filing of such
financing statements with the appropriate local and state governmental
authorities, subject to no prior Lien or encumbrance or restriction on transfer
(other than as imposed by applicable securities laws) other than Permitted
Liens. Each Grantor shall execute as reasonably required by the Collateral Agent
for the benefit of the Purchasers any additional financing statements or other
documents to effect the same, together with any necessary continuation
statements so long as this Agreement remains in effect.
3. Maintenance of Security Interest. Each Grantor will, from time to time,
upon the request of the Collateral Agent for the benefit of the Purchasers,
deliver specific assignments of Collateral, together with such other instruments
and documents, financing statements, amendments thereto, assignments or other
writings as the Collateral Agent for the benefit of the Purchasers may request
to carry out the terms of this Agreement or to protect or enforce the security
interest of the Collateral Agent for the benefit of the Purchasers in the
Collateral.
3
<PAGE> 4
With respect to any and all Collateral to be secured and conveyed under
this Agreement, each Grantor agrees to do and cause to be done all things
necessary to perfect and keep in full force the security interest granted in
favor of the Collateral Agent for the benefit of the Purchasers, including, but
not limited to, the prompt payment of all fees and expenses incurred in
connection with any filings made to perfect or continue a security interest in
the Collateral in favor of the Collateral Agent for the benefit of the
Purchasers.
Each Grantor agrees to make appropriate entries upon its financial
statements and books and records disclosing the security interest granted
hereunder to the Collateral Agent for the benefit of the Purchasers.
4. Receipt of Payment. If an Event of Default shall occur and be
continuing and a Grantor (or any of its affiliates, subsidiaries, stockholders,
directors, officers, employees or agents on behalf of such Grantor) shall
receive any proceeds of Collateral, including without limitation monies, checks,
notes, drafts or any other items of payment, such Grantor shall hold all such
items of payment in trust for the Collateral Agent for the benefit of the
Purchasers and as the property of the Collateral Agent for the benefit of the
Purchasers, separate from the funds of such Grantor, and no later than the
second Business Day following the receipt thereof, at the election of the
Collateral Agent for the benefit of the Purchasers, such Grantor shall cause the
same to be forwarded to the Collateral Agent for the benefit of the Purchasers
for its custody and possession as additional Collateral.
5. Covenants. Each Grantor covenants with the Collateral Agent for the
benefit of the Purchasers that from and after the date of this Agreement until
termination hereof in accordance with Section 28 hereof:
(a) Inspection. The Collateral Agent for the benefit of the
Purchasers (by any of its officers, employees and agents) shall have the right
upon reasonable prior notice to an executive officer of such Grantor, and at any
reasonable times during such Grantor's usual business hours, to inspect the
Collateral, all records related thereto (and to make extracts or copies from
such records), and the premises upon which any of the Collateral is located, so
long as no Event of Default has occurred and is continuing, with the prior
consent of the Grantors (which consent shall not be unreasonably withheld), (a)
to discuss such Grantor's affairs and finances with any Person (other than any
Person obligated to repay, or otherwise liable under any document or instrument
which constitutes, any Account (an "Account Debtor" and, collectively, "Account
Debtors")) and (b) to verify with any Person (other than Account Debtors) the
amount, quality, quantity, value and condition of, or any other matter relating
to, the Collateral and, if an Event of Default has occurred and is continuing,
to discuss such Grantor's affairs and finances with such Grantor's Account
Debtors and to verify the amount, quality, value and condition of, or any other
matter relating to, the Collateral and such Account Debtors. Upon or after the
occurrence and during the continuation of an Event of Default, the Collateral
Agent for the benefit of the Purchasers may at any time and from time to time
employ and maintain on such Grantor's premises a custodian selected by the
Collateral Agent for the benefit of the Purchasers who shall have full authority
to do all acts necessary to protect the interest of the Collateral
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Agent for the benefit of the Purchasers. All expenses incurred by the Collateral
Agent for the benefit of the Purchasers by reason of the employment of such
custodian shall be paid by such Grantor, added to the Secured Obligations and
secured by the Collateral.
(b) Assignments, Records and Schedules of Accounts. Each Grantor
shall keep accurate and complete records of its Accounts ("Account Records") and
from time to time at intervals designated by the Collateral Agent for the
benefit of the Purchasers such Grantor shall provide the Collateral Agent for
the benefit of the Purchasers with a schedule of Accounts in form and substance
reasonably acceptable to the Collateral Agent for the benefit of the Purchasers
describing all Accounts created or acquired by such Grantor ("Schedule of
Accounts"); provided, however, that such Grantor's failure to execute and
deliver any such Schedule of Accounts shall not affect or limit the security
interest or other rights in and to any Accounts of the Collateral Agent for the
benefit of the Purchasers. If requested by the Collateral Agent for the benefit
of the Purchasers, each Grantor shall furnish the Collateral Agent for the
benefit of the Purchasers with copies of proof of delivery and other documents
relating to the Accounts so scheduled, including without limitation repayment
histories and present status reports (collectively, "Account Documents") and
such other matter and information relating to the status of then existing
Accounts as the Collateral Agent for the benefit of the Purchasers shall
reasonably request. No Grantor shall remove any Account Records or Account
Documents or change its chief executive offices from the locations set forth in
Exhibit A hereto without 30 days' prior written notice to the Collateral Agent
for the benefit of the Purchasers as provided in Section 29 hereof and delivery
to the Collateral Agent for the benefit of the Purchasers by the applicable
Grantor prior to such removal of executed financing statements, amendments and
other documents necessary in the determination of the Collateral Agent for the
benefit of the Purchasers to maintain the security interests granted hereunder.
(c) Notice Regarding Disputed Accounts. In the event any amounts due
and owing in excess of $50,000 individually, or $100,000 in the aggregate
amount, are in dispute between any Account Debtor and a Grantor (which shall
include without limitation any dispute in which an offset claim or counterclaim
may result), such Grantor shall provide the Collateral Agent for the benefit of
the Purchasers with written notice thereof as soon as practicable, explaining in
detail the reason for the dispute, all claims related thereto and the amount in
controversy.
(d) Verification of Accounts. If an Event of Default has occurred
and is continuing, any of the Collateral Agent's officers, employees or agents
shall have the right, at any reasonable time or times hereafter, to verify with
Account Debtors the validity, amount or any other matter relating to any
Accounts and, whether or not a Default or Event of Default has occurred, any of
the Collateral Agent's officers, employees or agents shall have the right to
verify the same with any Grantor.
(e) Change of Trade Styles. No Grantor shall change, amend, alter,
terminate, or cease using its material trade names or styles under which it
sells Inventory as of the date of this Agreement ("Trade Styles"), or use
additional Trade Styles, without giving the Collateral Agent at least 30 days'
prior written notice and delivery to the Collateral Agent for the benefit of
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the Purchasers by the applicable Grantor prior to such removal, change,
amendment, alteration, or use, of executed financing statements, amendments and
other documents necessary in the determination of the Collateral Agent for the
benefit of the Purchasers to maintain the security interests granted hereunder.
(f) Safekeeping of Inventory. Each Grantor shall be responsible for
the safekeeping of its Inventory, and in no event shall the Collateral Agent
have any responsibility for the following (unless any of the following results
directly and primarily from the Collateral Agent's gross negligence or willful
misconduct):
(i) Any loss or damage to Inventory or destruction thereof
occurring or arising in any manner or fashion from any cause;
(ii) Any diminution in the value of Inventory; or
(iii) Any act or default of any carrier, warehouseman, bailee
or forwarding agency thereof or other Person in any way dealing with
or handling Inventory.
(g) Location, Records and Schedules of Inventory. Each Grantor shall
keep correct and accurate records itemizing and describing the kind, type,
location and quantity of Inventory, its cost therefor and the selling price of
Inventory held for sale, and the daily withdrawals therefrom and additions
thereto, and shall furnish to the Collateral Agent for the benefit of the
Purchasers from time to time at reasonable intervals designated by the
Collateral Agent for the benefit of the Purchasers, a current schedule of
Inventory ("Schedule of Inventory") based upon its most recent physical
inventory and its daily inventory records. Each Grantor shall conduct a physical
inventory, no less than annually, and shall furnish to the Collateral Agent for
the benefit of the Purchasers such other documents and reports thereof as the
Collateral Agent for the benefit of the Purchasers shall reasonably request with
respect to the Inventory. Subject to compliance at all times with Sections 8(c),
(d) and (e), no Grantor shall, other than in the ordinary course of business in
connection with its sale, remove any material amount of Inventory from the
locations set forth on Exhibit B hereto to a location not also set forth on
Exhibit B hereto, each of such locations being owned by a Grantor unless
otherwise indicated, without 30 days' prior written notice to the Collateral
Agent for the benefit of the Purchasers as provided in Section 29 hereof and
delivery to the Collateral Agent for the benefit of the Purchasers by the
applicable Grantor prior to such removal of executed financing statements,
amendments and other documents necessary in the determination of the Collateral
Agent for the benefit of the Purchasers to maintain the security interests
granted hereunder.
(h) Returns of Inventory. If any Account Debtor returns any
Inventory to a Grantor after shipment thereof, and such return generates a
credit in excess of $50,000 on any individual Account or $100,000 in the
aggregate on any Accounts of such Account Debtor, such Grantor shall notify the
Collateral Agent for the benefit of the Purchasers in writing of the same as
soon as practicable.
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(i) Evidence of Ownership of Equipment. The Grantors, as soon as
practicable following a reasonable request therefor by the Collateral Agent for
the benefit of the Purchasers, shall deliver to the Collateral Agent for the
benefit of the Purchasers any and all evidence of ownership of any of the
Equipment (including without limitation certificates of title and applications
for title).
(j) Location Records and Schedules of Equipment. The Grantors shall
maintain accurate, itemized records itemizing and describing the kind, type,
quality, quantity and value of its Equipment and shall furnish the Collateral
Agent for the benefit of the Purchasers upon request with a current schedule
containing the foregoing information, but, other than during the continuance of
an Event of Default, not more often than once per fiscal quarter. No Grantor
shall remove any material portion of the Equipment from the locations set forth
in Exhibit C hereto to a location not also set forth on Exhibit C hereto without
at least 30 days' prior written notice to the Collateral Agent for the benefit
of the Purchasers as provided in Section 29 hereof and delivery to the
Collateral Agent for the benefit of the Purchasers by the applicable Grantor
prior to such removal of executed financing statements, amendments and other
documents necessary to maintain the security interests granted hereunder.
(k) Sale or Mortgage of Equipment. Other than in the ordinary course
of business with respect to disposition of obsolescent Equipment or replacement
of Equipment with other Equipment performing similar functions and having
similar or better utility and value, no Grantor shall sell, exchange, lease,
mortgage, encumber, pledge or otherwise dispose of or transfer any of the
Equipment or any part thereof without the prior written consent of the
Collateral Agent for the benefit of the Purchasers.
(1) Maintenance of Equipment. Each Grantor shall keep and maintain
its Equipment in good operating condition and repair, ordinary wear and tear
excepted. No Grantor shall permit any such items to become a fixture to real
property (unless such Grantor has granted the Collateral Agent for the benefit
of the Purchasers a lien on such real property) or accessions to other personal
property.
(m) Transfers and Other Liens. Each Grantor shall not (i) sell,
assign (by operation of law or otherwise) or otherwise dispose of any of, or
grant any option with respect to, the Collateral, except for dispositions
permitted under Sections 5(g) and 5(k) hereof, (ii) create or suffer to exist
any Lien, security interest or other charge or encumbrance upon or with respect
to any of the Collateral except for the security interests created by this
Agreement or other Permitted Liens under the Purchase Agreement, or (iii) take
any other action in connection with any of the Collateral that would materially
impair the value of the interest or rights of such Grantor in the Collateral
taken as a whole or that would materially impair the interest or rights of the
Collateral Agent for the benefit of the Purchasers.
6. Warranties and Representations Regarding Collateral Generally. Each
Grantor warrants and represents that:
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(a) It is and, except as permitted by the Purchase Agreement and
Section 5(m) hereof, will continue to be the owner of the Collateral hereunder,
now owned and upon the acquisition of the same, free and clear of all Liens,
claims, encumbrances and security interests other than the security interest in
favor of the Collateral Agent for the benefit of the Purchasers hereunder and
Permitted Liens, and that it will defend such Collateral and any products and
proceeds thereof against all material claims and demands of all Persons (other
than holders of Permitted Liens) at any time claiming the same or any interest
therein adverse to the Collateral Agent for the benefit of the Purchasers.
(b) It has the unqualified right to enter into this Agreement and to
perform its terms.
(c) No authorization, consent, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body or any
other Person is required either (i) for the grant by such Grantor of the
security interests granted hereby or for the execution, delivery or performance
of this Agreement by such Grantor, or (ii) for the perfection of or the exercise
by the Collateral Agent for the benefit of the Purchasers of its rights and
remedies hereunder, except for the filings required by the Uniform Commercial
Code.
(d) No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral purported to be granted by
such Grantor hereunder is on file in any recording office, except such as may
have been filed in favor of the Collateral Agent for the benefit of the
Purchasers and Permitted Liens.
7. Account Warranties and Representations. With respect to its Accounts,
each Grantor warrants and represents to the Collateral Agent for the benefit of
the Purchasers that the Collateral Agent for the benefit of the Purchasers may
rely on the following representations made by such Grantor and on
representations made on any Schedule of Accounts prepared and delivered by it:
(a) All Account Records and Account Documents are located only at
such Grantor's locations as set forth on Exhibit A attached hereto and
incorporated herein by reference or at such other locations as to which the
Grantor has notified the Collateral Agent for the benefit of the Purchasers in
writing not less than 30 days prior to such relocation;
(b) The Accounts are genuine, are in all material respects what they
purport to be, are not evidenced by an instrument or document or, if evidenced
by an instrument or document, are only evidenced by one original instrument or
document;
(c) The Accounts cover bona fide sales and deliveries of Inventory
usually dealt in by such Grantor, or the rendition by such Grantor of services,
to an Account Debtor in the ordinary course of business;
(d) The amounts of the face value shown on any Schedule of Accounts
or invoice statement delivered to the Collateral Agent for the benefit of the
Purchasers with respect
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to any Account, are actually owing to such Grantor and are not contingent for
any reason; and there are no setoffs, discounts, allowances, claims,
counterclaims or disputes of any kind or description in an amount greater than
$60,000 in the aggregate, or greater than $30,000 individually, existing or
asserted with respect thereto and such Grantor has not made any agreement with
any Account Debtor thereunder for any deduction therefrom, except as may be
stated in the Schedule of Accounts and reflected in the calculation of the face
value of each respective invoice related thereto;
(e) Except for conditions generally applicable to such Grantor's
industry and markets, there are no facts, events, or occurrences currently known
to such Grantor pertaining particularly to any Accounts which are reasonably
expected to materially impair in any way the validity, collectibility or
enforcement of Accounts that would reasonably be likely, in the aggregate, to be
of material economic value to the Grantors taken as a whole, or in the aggregate
materially reduce the amount payable under all Accounts of the Grantors taken as
whole;
(f) The goods or services giving rise thereto are not, and were not
at the time of the sale or performance thereof, subject to any Lien, claim,
encumbrance or security interest, except those of the Collateral Agent for the
benefit of the Purchasers and Permitted Liens;
(g) The Accounts have not been pledged to any Person other than to
the Collateral Agent for the benefit of the Purchasers under this Agreement and
will be owned by such Grantor free and clear of any Liens, claims, encumbrances
or security interests except Permitted Liens;
(h) The security interest of the Collateral Agent for the benefit of
the Purchasers therein will not be subject to any offset, deduction,
counterclaim, Lien or other adverse condition, other than Permitted Liens; and
(i) The location of its chief executive office and any state in
which it (i) has a place of business in only one county of such state or (ii)
resides in such state (within the meaning of the applicable Uniform Commercial
Code) but does not have any place of business in such state, is set forth on
Exhibit A attached hereto and incorporated herein by reference and each Grantor
shall deliver to the Collateral Agent not less than 30 days' written notice
prior to any change of such location or status of places of business or
residency
8. Inventory Warranties and Representations. With respect to its
Inventory, each Grantor warrants and represents to the Collateral Agent for the
benefit of the Purchasers that the Collateral Agent for the benefit of the
Purchasers may rely on the following representations made by such Grantor on or
with respect to any Inventory:
(a) All Inventory, other than Inventory having a value of less than
$30,000 in each location, is located only at such Grantor's locations as set
forth on Exhibit B attached hereto and incorporated herein by reference;
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(b) None of its Inventory is or will be subject to any Lien, claim,
encumbrance or security interest whatsoever, except for the security interest of
the Collateral Agent for the benefit of the Purchasers hereunder and Permitted
Liens;
(c) No Inventory of such Grantor that would reasonably be likely, in
the aggregate with the Inventory of all Grantors, to be of value in excess of
$30,000 is, and shall not at any time or times hereafter be, stored with a
bailee, warehouseman, or similar party without the Collateral Agent's prior
written consent which consent shall not be unreasonably withheld and, if the
Collateral Agent gives such consent, such Grantor will concurrently therewith
cause any such bailee, warehouseman, or similar party to issue and deliver to
the Collateral Agent for the benefit of the Purchasers upon its request
therefor, in form and substance reasonably acceptable to the Collateral Agent
for the benefit of the Purchasers, warehouse receipts therefor in the name of
the Collateral Agent for the benefit of the Purchasers and take such other
action and be party to such document as deemed necessary or prudent by the
Collateral Agent for the benefit of the Purchasers to maintain the security
interest of the Collateral Agent for the benefit of the Purchasers in such
Inventory;
(d) No Inventory is, and shall not at any time or times hereafter
be, under consignment to any Person, the value of which, when aggregated with
all other Inventory under consignment of such Grantor and all Grantors, would
exceed $30,000; and
(e) No Inventory, without the prior written consent of the
Collateral Agent upon 30 days' prior notice to the Collateral Agent, is at or
shall be kept at any location that is leased by such Grantor from any other
Person, the value of which, when aggregated with all other Inventory kept at any
location which is leased by all Grantors, would exceed $30,000, unless such
location and lessee is set forth on Exhibit B hereto and the Grantor has used
its best efforts to have the lessor waive its rights with respect to such
Inventory in form and substance acceptable to the Collateral Agent for the
benefit of the Purchasers and delivered in writing to the Collateral Agent for
the benefit of the Purchasers prior to such amount of Inventory being at such
one or more locations.
9. Equipment Representations and Warranties. With respect to its
Equipment, each Grantor warrants and represents to the Collateral Agent for the
benefit of the Purchasers that the Collateral Agent for the benefit of the
Purchasers may rely on the following representations made by such Grantor on or
with respect to any Equipment:
(a) All Equipment is located only at such Grantor's locations set
forth in Exhibit C hereto or at such other locations as to which such Grantor
has notified the Collateral Agent in writing not less than 30 days prior to such
relocation and has provided to the Collateral Agent for the benefit of the
Purchasers executed financing statements for such location satisfying the
requirements of Section 2 hereof,
(b) None of its Equipment is or will be subject to any Lien, claim,
encumbrance or security interest whatsoever, except for the security interest of
the Collateral Agent for the benefit of the Purchasers hereunder and Permitted
Liens;
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(c) No Equipment, without the prior written consent of the
Collateral Agent upon 30 days' prior notice to the Collateral Agent, of such
Grantor is at or shall be kept at any location that is leased by such Grantor
from any other Person unless such location and lessee is set forth on Exhibit C
hereto and the lessor waives its rights with respect to such Equipment in form
and substance acceptable to the Collateral Agent for the benefit of the
Purchasers; provided, however, the provisions of this Section 9(c) shall not
apply to any Equipment listed on Schedule 8.8 of the Purchase Agreement.
10. Casualty and Liability Insurance Required.
(a) Each Grantor will keep the Collateral continuously insured
against such risks as are customarily insured against by businesses of like size
and type engaged in the same or similar operations including, without limiting
the generality of any other covenant herein contained:
(i) casualty insurance on the Inventory and the Equipment in
an amount not less than the full insurable value thereof, against loss or
damage by theft, fire and lightning and other hazards ordinarily included
under uniform broad form standard extended coverage policies, limited only
as may be provided in the standard broad form of extended coverage
endorsement at the time in use in the states in which the Collateral is
located;
(ii) comprehensive general liability insurance against claims
for bodily injury, death or property damage occurring with or about such
Collateral (such coverage to include provisions waiving subrogation
against the Collateral Agent for the benefit of the Purchasers), with
Collateral Agent for the benefit of the Purchasers as additional insured
parties, in amounts as shall be reasonably satisfactory to Collateral
Agent for the benefit of the Purchasers;
(iii) liability insurance with respect to the operation of its
facilities under the workers' compensation laws of the states in which
such Collateral is located; and
(iv) business interruption insurance.
(b) Each insurance policy obtained in satisfaction of the
requirements of Section 10(a) hereof:
(i) may be provided by blanket policies now or hereafter
maintained by each Grantor or the Company for itself and all Subsidiaries;
(ii) shall be issued by such insurer (or insurers) as shall be
financially responsible, of recognized standing and reasonably acceptable
to the Collateral Agent for the benefit of the Purchasers;
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(iii) shall be in such form and have such provisions
(including without limitation the loss payable clause, the waiver of
subrogation clause, the deductible amount, if any, and the standard
mortgagee endorsement clause), as are generally considered standard
provisions for the type of insurance involved and are reasonably
acceptable in all respects to the Collateral Agent for the benefit of the
Purchasers;
(iv) shall prohibit cancellation or substantial modification,
termination or lapse in coverage by the insurer without at least 30 days'
prior written notice to the Collateral Agent, except for non-payment of
premium, in which case such policies shall provide thirty (30) days' prior
written notice; and
(v) without limiting the generality of the foregoing, all
insurance policies where applicable under Section 10(a)(i) carried on the
Collateral shall name the Collateral Agent for the benefit of the
Purchasers as additional loss payee and the Collateral Agent for the
benefit of the Purchasers as additional party insured thereunder in
respect of any claim for payment.
(c) Prior to expiration of any such policy, such Grantor shall
furnish the Collateral Agent for the benefit of the Purchasers with evidence
satisfactory to the Collateral Agent for the benefit of the Purchasers that the
policy or certificate has been renewed or replaced or is no longer required by
this Agreement.
(d) Each Grantor hereby irrevocably makes, constitutes and appoints
the Collateral Agent for the benefit of the Purchasers (and all officers,
employees or agents designated by the Collateral Agent for the benefit of the
Purchasers), effective upon the occurrence and during the continuance of an
Event of Default, as such Grantor's true and lawful agent (and attorney-in-fact)
for the purpose of making, settling and adjusting claims under such policies of
insurance, endorsing the name of such Grantor on any check, draft, instrument or
other item or payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect to such policies of
insurance. The power of attorney granted in this Section 10(d) shall terminate
upon the termination of this Agreement as set forth in Section 28 hereof.
(e) In the event such Grantor shall fail to maintain, or fail to
cause to be maintained, the full insurance coverage required hereunder or shall
fail to keep any of its Collateral in good repair and good operating condition
subject to ordinary wear and tear, the Collateral Agent for the benefit of the
Purchasers may (but shall be under no obligation to), without waiving or
releasing any Secured Obligation or Event of Default by such Grantor hereunder,
contract for the required policies of insurance and pay the premiums on the same
or make any required repairs, renewals and replacements; and all sums so
disbursed by Collateral Agent for the benefit of the Purchasers, including
reasonable attorneys' fees, court costs, expenses and other charges related
thereto, shall be payable on demand by such Grantor to the Collateral Agent for
the benefit of the Purchasers and shall be additional Secured Obligations
secured by the Collateral.
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(f) Each Grantor agrees that to the extent that it shall not carry
insurance required by Section 10(a) hereof, it shall in the event of any loss or
casualty pay promptly to the Collateral Agent for the benefit of the Purchasers
for application in accordance with the provisions of Section 10(h) hereof, such
amount as would have been received as Net Proceeds (as hereinafter defined) by
the Collateral Agent for the benefit of the Purchasers under the provisions of
Section 10(h) hereof had such insurance been carried to the extent required.
(g) The Net Proceeds of the insurance carried pursuant to the
provisions of Sections 10(a)(ii) and 10(a)(iii) hereof shall be applied by such
Grantor toward extinguishment of the defect or claim or satisfaction of the
liability with respect to which such insurance proceeds may be paid.
(h) The Net Proceeds of the insurance carried with respect to the
Collateral pursuant to the provisions of Section 10(a)(i) hereof shall be paid
to such Grantor and held by such Grantor in a separate account and applied as
follows: (i) as long as no Event of Default shall have occurred and be
continuing, after any loss under any such insurance and payment of the proceeds
of such insurance, each Grantor shall have a period of 30 days after payment of
the insurance proceeds with respect to such loss to elect to either (x) repair
or replace the Collateral so damaged, (y) deliver such Net Proceeds to the
Collateral Agent for the benefit of the Purchasers as additional Collateral or
(z) apply such Net Proceeds to the acquisition of tangible assets used or useful
in the conduct of the business of such Grantor, subject to the provisions of
this Agreement. If such Grantor elects to repair or replace the Collateral so
damaged, such Grantor agrees the Collateral shall be repaired to a condition
substantially similar to its condition prior to damage or replaced with
Collateral in a condition substantially similar to the condition of the
Collateral so replaced prior to damage; and (ii) at all times during which an
Event of Default shall have occurred and be continuing, after any loss under
such insurance and payment of the proceeds of such insurance, such Grantor shall
immediately deliver such Net Proceeds to the Collateral Agent for the benefit of
the Purchasers as additional Collateral.
(i) "Net Proceeds" when used with respect to any insurance proceeds
shall mean the gross proceeds from such proceeds less all taxes, fees and
expenses (including attorneys' fees and disbursements) incurred in the
realization thereof.
(j) In case of any material damage to or destruction of all or any
part of the Collateral pledged hereunder by a Grantor, such Grantor shall give
prompt notice thereof to the Collateral Agent. Each such notice shall describe
generally the nature and extent of such damage, destruction, taking, loss,
proceeding or negotiations. Each Grantor is hereby authorized and empowered to
adjust or compromise any loss under any such insurance.
11. Rights and Remedies Upon Event of Default. Upon and during the
continuance of an Event of Default, the Collateral Agent for the benefit of the
Purchasers shall have the following rights and remedies in addition to any
rights and remedies set forth elsewhere in this Agreement, all of which may be
exercised with or, if allowed by law, without notice to a Grantor:
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(a) All of the rights and remedies of a secured party under the
Uniform Commercial Code of the state where such rights and remedies are
asserted, or under other applicable law, all of which rights and remedies shall
be cumulative, and none of which shall be exclusive, to the extent permitted by
law, in addition to any other rights and remedies contained in this Agreement,
the Guaranty, the Purchase Agreement or any other Transaction Document;
(b) The right to foreclose the Liens and security interests created
under this Agreement by any available judicial procedure or without judicial
process;
(c) The right to (i) enter upon the premises of a Grantor through
self-help and without judicial process, without first obtaining a final judgment
or giving such Grantor notice and opportunity for a hearing on the validity of
the Collateral Agent for the benefit of the Purchasers's claim and without any
obligation to pay rent to such Grantor, or any other place or places where any
Collateral is located and kept, and remove the Collateral therefrom to the
premises of the Collateral Agent for the benefit of the Purchasers or any agent
of the Collateral Agent for the benefit of the Purchasers, for such time as the
Collateral Agent for the benefit of the Purchasers may desire, in order
effectively to collect or liquidate the Collateral, and (ii) require such
Grantor to assemble the Collateral and make it available to the Collateral Agent
for the benefit of the Purchasers at a place to be designated by the Collateral
Agent for the benefit of the Purchasers that is reasonably convenient to both
parties;
(d) The right to (i) demand payment of the Accounts; (ii) enforce
payment of the Accounts, by legal proceedings or otherwise; (iii) exercise all
of a Grantor's rights and remedies with respect to the collection of the
Accounts and General Intangibles; (iv) settle, adjust, compromise, extend or
renew the Accounts, General Intangibles and Contract Rights; (v) settle, adjust
or compromise any legal proceedings brought to collect the Accounts; (vi) if
permitted by applicable law, sell or assign the Accounts, General Intangibles
and Contract Rights upon such terms, for such amounts and at such time or times
as the Collateral Agent for the benefit of the Purchasers deems advisable; (vii)
discharge and release the Accounts; (viii) take control, in any manner, of any
item of payment or proceeds referred to in Section 4 above; (ix) prepare, file
and sign a Grantor's name on a Proof of Claim in bankruptcy or similar document
against any Account Debtor; (x) prepare, file and sign a Grantor's name on any
notice of Lien, assignment or satisfaction of Lien or similar document in
connection with the Accounts; (xi) endorse the name of a Grantor upon any
chattel paper, document, instrument, invoice, freight bill, bill of lading or
similar document or agreement relating to the Accounts, Inventory or Equipment;
(xii) use the information recorded on or contained in any data processing
equipment and computer hardware and software relating to any Collateral to which
a Grantor has access; (xiii) to open such Grantor's mail and collect any and all
amounts due to such Grantor from Account Debtors; (xiv) to take over such
Grantor's post office boxes or make other arrangements as the Collateral Agent
for the benefit of the Purchasers deems necessary to receive such Grantor's
mail, including notifying the post office authorities to change the address for
delivery of such Grantor's mail to such address as the Collateral Agent for the
benefit of the Purchasers may designate; and (xv) to notify any or all Account
Debtors that the Accounts have been assigned to the Collateral Agent for the
benefit of the Purchasers and that Collateral Agent for
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the benefit of the Purchasers has a security interest therein (provided that the
Collateral Agent for the benefit of the Purchasers may at any time give such
notice to an Account Debtor that is a department, agency or authority of the
United States government); each Grantor hereby agrees that any such notice, in
the sole discretion of the Collateral Agent for the benefit of the Purchasers,
may be sent on such Grantor's stationery, in which event such Grantor shall
cosign such notice with the Collateral Agent for the benefit of the Purchasers;
and (xvi) do all acts and things and execute all documents necessary, in the
sole discretion of the Collateral Agent for the benefit of the Purchasers, to
collect the Accounts and General Intangibles; and
(e) The right to sell, assign, lease or to otherwise dispose of all
or any Collateral in its then existing condition, or after any further
manufacturing or processing thereof, at public or private sale or sales, with
such notice as may be required by law, in lots or in bulk, for cash or on
credit, with or without representations and warranties, all as the Collateral
Agent for the benefit of the Purchasers, in its sole discretion, may deem
advisable. The Collateral Agent for the benefit of the Purchasers shall have the
right to conduct such sales on a Grantor's premises or elsewhere and shall have
the right to use a Grantor's premises without charge for such sales for such
time or times as the Collateral Agent for the benefit of the Purchasers may see
fit. The Collateral Agent for the benefit of the Purchasers may, if it deems it
reasonable, postpone or adjourn any sale of the Collateral from time to time by
an announcement at the time and place of such postponed or adjourned sale, and
such sale may, without further notice, be made at the time and place to which it
was so adjourned. Each Grantor agrees that the Collateral Agent for the benefit
of the Purchasers has no obligation to preserve rights to the Collateral against
prior parties or to marshall any Collateral for the benefit of any Person. The
Collateral Agent for the benefit of the Purchasers is hereby granted a license
or other right to use, without charge, each of Grantor's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names, trademarks
and advertising matter, or any property of a similar nature, as it pertains to
the Collateral, in completing production of, advertising for sale and selling
any Collateral and a Grantor's rights under any license and any franchise
agreement shall inure to the benefit of the Collateral Agent for the benefit of
the Purchasers. If any of the Collateral shall require repairs, maintenance,
preparation or the like, or is in process or other unfinished state, the
Collateral Agent for the benefit of the Purchasers shall have the right, but
shall not be obligated, to perform such repairs, maintenance, preparation,
processing or completion of manufacturing for the purpose of putting the same in
such salable form as the Collateral Agent for the benefit of the Purchasers
shall deem appropriate, but the Collateral Agent for the benefit of the
Purchasers shall have the right to sell or dispose of the Collateral without
such processing and no Grantor shall have any claim against the Collateral Agent
for the benefit of the Purchasers for the value that may have been added to such
Collateral with such processing. In addition, each Grantor agrees that in the
event notice is necessary under applicable law, written notice mailed to such
Grantor in the manner specified herein ten (10) days prior to the date of public
sale of any of the Collateral or prior to the date after which any private sale
or other disposition of the Collateral will be made shall constitute
commercially reasonable notice to such Grantor. All notice is hereby waived with
respect to any of the Collateral which threatens to decline speedily in value or
is of a type customarily sold on a recognized market. The Collateral Agent for
the benefit of the Purchasers may purchase all or any part of the Collateral at
public or, if permitted by law, private sale, free from any right of redemption
which is hereby expressly waived by such Grantor
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<PAGE> 16
and, in lieu of actual payment of such purchase price, may set off the amount of
such price against the Secured Obligations. The net cash proceeds resulting from
the collection, liquidation, sale, lease or other disposition of the Collateral
shall be applied first to the expenses (including all attorneys' fees and
disbursements) of retaking, holding, storing, processing and preparing for sale,
selling, collecting, liquidating and the like; and then to the satisfaction of
all Secured Obligations as determined by the Collateral Agent for the benefit of
the Purchasers. Any sale or other disposition of the Collateral and the
possession thereof by the Collateral Agent for the benefit of the Purchasers
shall be in compliance with all provisions of applicable law (including
applicable provisions of the Uniform Commercial Code). Each Grantor shall be
liable to the Collateral Agent for the benefit of the Purchasers and shall pay
to the Collateral Agent for the benefit of the Purchasers on demand any
deficiency which may remain after such sale, disposition, collection or
liquidation of the Collateral.
12. Anti-Marshalling Provisions. The right is hereby given by each Grantor
to the Collateral Agent for the benefit of the Purchasers to make releases
(whether in whole or in part) of all or any part of the Collateral agreeable to
the Collateral Agent for the benefit of the Purchasers without notice to, or the
consent, approval or agreement of other parties and interests, including junior
lienors, which releases shall not impair in any manner the validity of or
priority of the Liens and security interests in the remaining Collateral
conferred under such documents, nor release such Grantor from liability for the
Secured Obligations hereby secured. Notwithstanding the existence of any other
security interest in the Collateral held by the Collateral Agent for the benefit
of the Purchasers, the Collateral Agent for the benefit of the Purchasers shall
have the right to determine the order in which any or all of the Collateral
shall be subjected to the remedies provided in this Agreement. The proceeds
realized upon the exercise of the remedies provided herein shall be applied by
the Collateral Agent for the benefit of the Purchasers in the manner set forth
herein. Each Grantor hereby waives any and all right to require the marshalling
of assets in connection with the exercise of any of the remedies permitted by
applicable law or provided herein.
13. Indemnity and Expenses.
(a) Each Grantor agrees to indemnifY the Collateral Agent for the
benefit of the Purchasers and each of the Purchasers from and against any and
all claims, losses and liabilities (other than Excluded Expenses (as such term
is defined in Section 1(d) of the Pledge Agreement) growing out of or resulting
from this Agreement that are incurred by the Collateral Agent for the benefit of
the Purchasers on behalf of the Purchasers (including without limitation
enforcement of this Agreement), except claims, losses or liabilities directly
resulting from the gross negligence or willful misconduct of the Collateral
Agent or any Purchaser.
(b) Each Grantor will upon demand pay to the Collateral Agent for
the benefit of the Purchasers the amount of any and all reasonable expenses,
including the reasonable fees and disbursements of its counsel and of any
experts and agents (other than Excluded Expenses (as such term is defined in
Section 1(d) of the Pledge Agreement, that the Collateral Agent for the benefit
of the Purchasers may incur in connection with (i) the administration or
amendment of this Agreement, (ii) the custody, preservation, use or operation
of, or the sale of, collection
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<PAGE> 17
from or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Collateral Agent for the benefit of the
Purchasers, or (iv) the failure by such Grantor to perform or observe any of the
provisions hereof.
14. Appointment of Agent as Grantor's Lawful Attorney. Without limitation
of any other provision of this Agreement, each Grantor irrevocably designates,
makes, constitutes and appoints the Collateral Agent for the benefit of the
Purchasers (and all Persons designated by the Collateral Agent for the benefit
of the Purchasers) as the Grantor's true and lawful agent (and attorney-in-fact)
at all times upon the occurrence and during the continuation of an Event of
Default, to take all actions and to do all things required to be taken or done
by the Grantor under this Agreement, including without limitation:
(a) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clause (a) above;
(c) to endorse such Grantor's name on any checks, notes, drafts or
any other payment relating to or constituting proceeds of the Collateral which
comes into the possession or control of the Collateral Agent for the benefit of
the Purchasers, and deposit the same to the account of the Collateral Agent for
the benefit of the Purchasers on account and for payment of the Secured
Obligations;
(d) to file any claims or take any action or institute any
proceedings that the Collateral Agent for the benefit of the Purchasers may deem
necessary or desirable for the collection of any of the Collateral or otherwise
to enforce the rights of the Collateral Agent for the benefit of the Purchasers
with respect to any of the Collateral; and
(e) to execute, in connection with the sale provided for in Section
11, any endorsement, assignments, or other instruments of conveyance or transfer
with respect to the Collateral.
All acts of the Collateral Agent for the benefit of the Purchasers or its
designee taken pursuant to this Section 14 are hereby ratified and confirmed by
each Grantor and the Collateral Agent for the benefit of the Purchasers or its
designee shall not be liable for any acts of omission or commission nor for any
error of judgment or mistake of fact or law, other than as a result of its gross
negligence or willful misconduct. This power, being coupled with an interest, is
irrevocable by such Grantor until this Agreement has been terminated. The power
of attorney granted in this Section 14 shall terminate upon the termination of
this Agreement as set forth in Section 28 hereof.
15. Supplemental Documentation. At the request of the Collateral Agent for
the benefit of the Purchasers, each Grantor shall execute and deliver to the
Collateral Agent for the
17
<PAGE> 18
benefit of the Purchasers, at any time or times hereafter, all documents,
instruments and other written matter that the Collateral Agent for the benefit
of the Purchasers may request to perfect and maintain perfected the security
interest of the Collateral Agent for the benefit of the Purchasers in the
Collateral, in form and substance acceptable to the Collateral Agent for the
benefit of the Purchasers, and pay all charges, expenses and fees the Collateral
Agent for the benefit of the Purchasers may reasonably incur in filing any of
such documents, and all taxes relating thereto. Each Grantor agrees that a
carbon, photographic, photostatic, or other reproduction of this Agreement or a
financing statement is sufficient as a financing statement and may be filed by
the Collateral Agent for the benefit of the Purchasers in any filing office.
16. Waivers. In addition to the other waivers contained herein, each
Grantor hereby expressly waives, to the extent permitted by law: presentment for
payment, demand, protest, notice of demand, notice of protest, notice of default
or dishonor, notice of payments and nonpayments and all other notices and
consents to any action taken by the Collateral Agent for the benefit of the
Purchasers unless expressly required by this Agreement.
17. Trade Names. Each Grantor represents that the only Trade Names and
Trade Styles used by such Grantor are as set forth on Exhibit D, next to the
name of such Grantor.
18. Absolute Rights and Obligations. All rights of the Collateral Agent
for the benefit of the Purchasers granted hereunder, and each of the Secured
Obligations, shall be absolute and unconditional irrespective of:
(a) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other amendment or
waiver of or any consent to departure from, the Purchase Agreement or any other
Transaction Document, including, but not limited to, (i) an increase or decrease
in the Secured Obligations and (ii) an amendment of any Transaction Document to
permit the Collateral Agent for the benefit of the Purchasers or any one or more
of them to extend further or additional credit to the Company in any form
including credit by way of loan, purchase of assets, guarantee or otherwise,
which credit shall thereupon be and become subject to the Purchase Agreement and
the other Transaction Documents as a Secured Obligation;
(b) any taking and holding of collateral or guarantees for all or
any of the Secured Obligations; or any amendment, alteration, exchange,
substitution, transfer, enforcement, waiver, subordination, termination or
release of any such collateral or guarantees, or any non-perfection of any such
collateral, or any consent to departure from any such guaranty;
(c) any manner of application of collateral, or proceeds thereof,
securing payment or enforcement of all or any of the Secured Obligations, or the
manner of sale of any such collateral;
(d) any consent by the Purchasers to the change, restructure or
termination of the corporate structure or existence of the Company or any
Grantor and any corresponding
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<PAGE> 19
restructure of the Secured Obligations, or any other restructure or refinancing
of the Secured Obligations or any portion thereof,
(e) any modification, compromise, settlement or release by the
Purchasers, by operation of law or otherwise, collection or other liquidation of
the Secured Obligations or the liability of any Grantor (other than the Grantor
against which this Agreement is to be enforced), or of any collateral for the
Secured Obligation (including without limitation any collateral pledged as
security for the Secured Obligations under the other Transaction Documents), in
whole or in part, and any refusal of payment by the Collateral Agent for the
benefit of the Purchasers in whole or in part, from any Grantor (other than the
Grantor against which this Agreement is sought to be enforced) in connection
with any of the Secured Obligations, whether or not with notice to, or further
assent by, or any reservation of rights against, any Grantor; or
(f) any other circumstance (including without limitation any statute
of limitations) that might otherwise constitute a defense available to, or a
discharge of, any Grantor.
The granting of a security interest in the Collateral shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Secured Obligations is rescinded or must otherwise be returned by the
Collateral Agent for the benefit of the Purchasers, upon the insolvency,
bankruptcy or reorganization of the Company or any Grantor or otherwise, all as
though such payment had not been made
19. Definitions. All terms used herein which are not defined herein or in
the Purchase Agreement shall be defined in accordance with the appropriate
definitions appearing in the Uniform Commercial Code as in effect in New York,
and such definitions are hereby incorporated herein by reference and made a part
hereof.
20. Entire Agreement. This Agreement, together with the Purchase
Agreement, the Guaranty and other Transaction Documents, constitutes and
expresses the entire understanding between the parties hereto with respect to
the subject matter hereof, and supersedes all prior agreements and
understandings, inducements, commitments or conditions, express or implied, oral
or written, except as herein contained. The express terms hereof control and
supersede any course of performance or usage of the trade inconsistent with any
of the terms hereof. Neither this Agreement nor any portion or provision hereof
may be changed, altered, modified, supplemented, discharged, canceled,
terminated, or amended orally or in any manner other than by an agreement, in
writing signed by the parties hereto.
21. Further Assurances. Each Grantor agrees at its own expense to do such
further acts and things, and to execute and deliver such additional conveyances,
assignments, financing statements, agreements and instruments, as the Collateral
Agent for the benefit of the Purchasers may at any time reasonably request in
connection with the administration or enforcement of this Agreement or related
to the Collateral or any part thereof or in order better to assure and confirm
unto the Collateral Agent for the benefit of the Purchasers its rights, powers
and remedies hereunder. Each Grantor hereby consents and agrees that the issuers
of or obligors in respect of the Collateral shall be entitled to accept the
provisions hereof as conclusive evidence of the right
19
<PAGE> 20
of the Collateral Agent for the benefit of the Purchasers to exercise its rights
hereunder with respect to the Collateral, notwithstanding any other notice or
direction to the contrary heretofore or hereafter given by any Grantor or any
other Person to any of such issuers or obligors.
22. Intentionally Omitted.
23. Intentionally Omitted.
24. Severability. The provisions of this Agreement are independent of and
separable from each other. If any provision hereof shall for any reason be held
invalid or unenforceable, such invalidity or unenforceability shall not affect
the validity or enforceability of any other provision hereof, but this Agreement
shall be construed as if such invalid or unenforceable provision had never been
contained herein.
25. Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of each Grantor, and the right, remedies, powers, and
privileges of the Collateral Agent for the benefit of the Purchasers on behalf
of the Purchasers hereunder shall inure to the benefit of the successors and
assigns of the Collateral Agent on behalf of the Purchasers; provided, however,
that no Grantor shall make any assignment hereof without the prior written
consent of the Collateral Agent for the benefit of the Purchasers.
26. Counterparts. This Agreement may be executed in any number of
counterparts and all the counterparts taken together shall be deemed to
constitute one and the same instrument.
27. Remedies Cumulative. All remedies hereunder are cumulative and are not
exclusive of any other rights and remedies of the Collateral Agent for the
benefit of the Purchasers provided by law or under the Purchase Agreement, the
other Transaction Documents, or other applicable agreements or instruments. The
purchase of the Notes by the Purchasers pursuant to the Purchase Agreement shall
be conclusively presumed to have been made or extended, respectively, in
reliance upon each Grantor's execution and delivery hereof.
28. Termination. This Agreement and all obligations of each Grantor
hereunder shall terminate on the payment in full of the Notes, at which time the
Liens and rights granted to the Collateral Agent for the benefit of the
Purchasers hereunder shall automatically terminate and no longer be in effect,
and the Collateral shall automatically be released from the Liens created
hereby. Upon such termination of this Agreement, the Collateral Agent for the
benefit of the Purchasers shall, at the sole expense of the Grantors, reassign
and redeliver to each applicable Grantor such Collateral then held by or for the
Collateral Agent for the benefit of the Purchasers and execute and deliver to
such Grantor such documents as such Grantor shall reasonably request and take
such further actions as may be reasonably necessary to effect the same.
29. Notices. Any notice required or permitted hereunder shall be given,
(a) with respect to the Company or any Grantor, at the Company's address
indicated in Section 12.9 of the Purchase Agreement and (b) with respect to the
Collateral Agent for the Purchasers, at the
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<PAGE> 21
Collateral Agent for the benefit of the Purchasers's address indicated in
Section 12.9 of the Purchase Agreement. All such notices shall be given and
shall be effective as provided in Section 12.9 of the Purchase Agreement.
30. Governing Law; Service of Process.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO
BE FULLY PERFORMED, IN SUCH STATE NOTWITHSTANDING ITS EXECUTION AND DELIVERY
OUTSIDE SUCH STATE.
(b) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PARTY TO THIS
AGREEMENT WITH RESPECT TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT MAY
BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE
OF NEW YORK AND, BY ITS EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY TO
THIS AGREEMENT ACCEPTS, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT FROM
WHICH NO APPEAL HAS BEEN TAKEN OR IS AVAILABLE. EACH PARTY TO THIS AGREEMENT
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS NOTICE ADDRESS SPECIFIED
IN SECTION 29 HEREOF, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH
MAILING. EACH PARTY TO THIS AGREEMENT HEREBY KNOWINGLY, INTENTIONALLY AND
IRREVOCABLY WAIVE (A) TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, AND (B) ANY OBJECTION
(INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER TRANSACTION DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN
SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
(c) EACH PARTY TO THIS AGREEMENT AGREES THAT SERVICE OF PROCESS MAY
BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER
LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY ANY OTHER METHOD OF
SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW
YORK.
[Signature pages following]
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<PAGE> 22
IN WITNESS WHEREOF, the parties have duly executed this Security
Agreement the day and year first written above.
GRANTORS:
SENETEK PLC
By: /s/ FRANK MASSINO
-----------------------------------
Name:
Title:
SENETEK DRUG DELIVERY
TECHNOLOGIES, INC.
By: /s/ FRANK MASSINO
-----------------------------------
Name:
Title:
CARME' COSMECEUTICAL
SCIENCES, INC.
By: /s/ FRANK MASSINO
-----------------------------------
Name:
Title:
SECURED PARTY:
SILVER CREEK INVESTMENTS, LTD.
as Collateral Agent for the benefit of
the Purchasers
By:
-----------------------------------
Name:
Title:
[Signature page to Security Agreement]
<PAGE> 1
EXHIBIT 10.8
[STAMP]
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (the "Agreement") is made and entered into as of
this 14th day of April, 1999 by and between SENETEK PLC, a corporation organized
under the laws of England (the "Pledgor"), and Silver Creek Investments, Ltd., a
British Virgin Islands company (the "Secured Party"), in its capacity as
Collateral Agent under that certain Collateral Agency Agreement dated as of
April 14, 1999 by and among the Secured Party, Bomoseen Investments, Ltd., a
British Virgin Islands company ("Bomoseen"), Dandelion Investments, Ltd., a
British Virgin Islands company ("Dandelion"), and Elstree Holdings, Ltd., a
British Virgin Islands company ("Elstree" and together with the Secured Party,
Bomoseen and Dandelion, the "Purchasers"). All capitalized terms used but not
otherwise defined herein shall have the respective meanings assigned thereto in
the Purchase Agreement (as defined below).
W I T N E S S E T H:
WHEREAS, the Pledgor has entered into the Securities Purchase Agreement
dated as of the date hereof between the Pledgor and the Purchasers (as from time
to time amended, revised, modified, supplemented or amended and restated, the
"Purchase Agreement"); and
WHEREAS, as collateral security for the payment and performance of its
Obligations, the Pledgor is willing to pledge and grant to the Secured Party for
the ratable benefit of the Purchasers a security interest in all of the issued
and outstanding shares of capital stock, whether now owned or hereafter
acquired, of each of its Subsidiaries, whether now in existence or hereafter
formed (the "Pledged Stock"), including without limitation the Pledged Stock in
such Subsidiaries more particularly described on Schedule 1 hereto (such
Subsidiaries, together with all other Subsidiaries whose capital stock may be
required to be subject to this Agreement from time to time, are hereinafter
referred to collectively as the "Pledged Subsidiaries"); and
WHEREAS, the Secured Party is unwilling to enter into the Transaction
Documents unless the Pledgor enters into this Agreement;
NOW, THEREFORE, in order to induce the Secured Party to enter into the
Transaction Documents and to purchase the Securities under the Purchase
Agreement and in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. Pledge of Stock: Other Collateral.
(a) As collateral security for the payment and performance by the
Pledgor of its now or hereafter existing Obligations (the "Secured
Obligations"), the Pledgor hereby pledges and collaterally assigns to the
Secured Party, and grants to the Secured Party a FIRST priority lien and
security interest in, the Pledged Stock and all of the following, subject only
to Permitted Liens:
<PAGE> 2
(i) all cash, securities, dividends, rights, and other
property at any time and from time to time declared or distributed in
respect of or in exchange for any or all of the Pledged Stock, other than
cash dividends permitted to be retained by the Pledgor under Section 9
hereof;
(ii) all other property hereafter delivered to the Secured
Party in substitution for or in addition to any of the foregoing, all
certificates and instruments representing or evidencing such property and
all cash, securities, interest, dividends, rights, and other property at
any time and from time to time declared or distributed in respect of or in
exchange for any or all of the Pledged Stock; and
(iii) all proceeds of any of the foregoing.
All such Pledged Stock, certificates, instruments, cash, securities,
interest, dividends, rights and other property referred to in this Section 1,
other than cash dividends issued in respect of such Pledged Stock that are
permitted to be retained by the Pledgor under Section 9 hereof, are herein
collectively referred to as the "Collateral." All of the Pledged Stock described
on Schedule 1 is currently owned by the Pledgor and represented by the stock
certificates listed on Schedule 1 hereto. Certificates evidencing all the
Pledged Stock on the Closing Date, together with stock powers duly executed in
blank by the Pledgor, have been delivered to the Secured Party or its designee.
(b) The Pledgor agrees to deliver all the Collateral to the Secured
Party or its designee at such location or locations as the Secured Party shall
from time to time designate by written notice pursuant to Section 24 hereof for
its custody at all times until termination of this Agreement, together with such
instruments of assignment and transfer as requested by the Secured Party.
(c) The Pledgor agrees to deliver all share certificates, documents,
agreements, financing statements, amendments thereto, assignments or other
writings as the Secured Party may request to carry out the terms of this
Agreement or to protect or enforce the lien and security interest in the
Collateral, granted or as evidenced thereby to the Secured Party and further
agrees to do and cause to be done all things determined by the Secured Party to
be necessary to perfect and keep in full force the Lien in the Collateral, as
evidenced thereby in favor of the Secured Party, including, but not limited to,
the prompt payment of all documented out-of-pocket fees and expenses incurred in
connection with any filings made to perfect or continue the Lien and security
interest in the Collateral, as evidenced thereby in favor of the Secured Party.
The Pledgor agrees to, and to cause each of the Pledged Subsidiaries to, make
appropriate entries upon its books and records (including without limitation its
respective stock record and transfer books) disclosing the Liens in the
Collateral, as evidenced thereby to the Secured Party hereunder.
(d) All advances, charges, costs and expenses, including reasonable
attorneys' fees, other than Excluded Expenses (as defined below) incurred or
paid by the Secured Party in
2
<PAGE> 3
exercising any right, power or remedy conferred by this Agreement, or in the
enforcement thereof ("Specified Fees and Expenses"), shall become a part of the
Secured Obligations and shall be paid to the Secured Party by the Pledgor
immediately upon demand therefor, with interest thereon until paid in full at a
rate of interest equal to 12 percent (12%) per annum; provided, however, that
such interest shall not begin to accrue until three (3) days following the
Secured Party's demand for the Specified Fees and Expenses. Upon the Pledgor's
reasonable request, the Secured Party shall provide evidence of such Specified
Fees and Expenses in form and substance reasonably satisfactory to the Pledgor
provided, however, that the Secured Party's right to demand such amounts shall
remain unrestricted and unconditional. For purposes of this Agreement and
certain other Transaction Documents, as appropriate, the term "Excluded
Expenses" shall mean any costs and expenses, or claims, losses or liabilities,
as the case may be, resulting from, arising out of, or related to, any claim,
dispute, controversy or proceeding solely and exclusively among the Purchasers,
or any of them, with respect to the transactions contemplated by the Transaction
Documents, including without limitation, any claim, dispute, controversy or
proceeding resulting from, arising out of, or related to the Collateral Agent
Agreement dated as of April 14, 1999 among the Collateral Agent and the
Purchasers, including, expressly, Sections 5, 7 and 9 thereof.
2. Status of Pledged Stock. The Pledgor hereby represents and warrants to
the Secured Party that (i) all of the shares of Pledged Stock are validly issued
and outstanding, fully paid and nonassessable and constitute all the authorized,
issued and outstanding shares of common stock of each of the Pledged
Subsidiaries, (ii) the Pledgor is the registered and record and beneficial owner
of such Pledged Stock, free and clear of all Liens, charges, equities,
encumbrances and restrictions on pledge or transfer, other than the Liens
created under the Transaction Documents and restrictions imposed by applicable
law, (iii) the Pledgor has full corporate power, legal right and lawful
authority to execute this Agreement and to pledge, assign and transfer such
Pledged Stock in the manner and form hereof, and (iv) the pledge, assignment and
delivery of such Pledged Stock by the Pledgor to the Secured Party or its
designee pursuant to this Agreement creates, together with the delivery of the
certificates evidencing such Pledged Stock, which delivery has heretofore been
accomplished, a valid and perfected FIRST priority security interest in such
Pledged Stock in favor of the Secured Party, securing the payment of the Secured
Obligations. None of the Pledged Stock (nor any interest therein or thereto)
shall be sold, transferred or assigned, nor any Lien (subject only to Liens
permitted by clause (viii) of the definition of Permitted Liens in the Purchase
Agreement) created therein, without the Secured Party's prior written consent,
which may be withheld for any reason. The Pledgor covenants with the Secured
Party that it shall at all times cause the Pledged Stock to be represented by
the certificates now and hereafter delivered to the Secured Party in accordance
with Section 1 hereof and that it shall not cause, suffer or permit any of the
Pledged Subsidiaries to issue any capital stock, or securities convertible into,
or exercisable or exchangeable for, capital stock, at any time during the term
of this Agreement, other than to the Pledgor and subject to this Agreement
pursuant to Section 22 hereof.
3. Preservation and Protection of Collateral.
3
<PAGE> 4
(a) The Secured Party shall be under no duty or liability with
respect to the collection, protection or preservation of the Collateral, or
otherwise, other than the obligation to deal with the Collateral while in its
possession in the same manner as the Secured Party deals with similar securities
or property for its own account.
(b) The Pledgor agrees to pay when due all taxes, charges, Liens and
assessments against the Collateral, unless being contested in good faith by
appropriate proceedings diligently conducted and against which adequate reserves
have been established in accordance with GAAP and as set forth in the Secured
Party's financial statements and provided further that all enforcement
proceedings in the nature of levy or foreclosure are effectively stayed. Upon
the failure of the Pledgor to so pay or contest such taxes, charges, Liens or
assessments, the Secured Party at its option may pay or contest any of them (the
Secured Party having the sole right to determine the legality or validity and
the amount necessary to discharge such taxes, charges, Liens or assessments).
4. Rights and Remedies Upon Default. Upon the occurrence and during the
continuance of any Event of Default, the Secured Party is given full power and
authority, then or at any time thereafter, to sell, assign and deliver or
collect the whole or any part of the Collateral, or any substitute therefor or
any addition thereto, in one or more sales, with or without any previous demands
or demand of performance or, to the extent permitted by law, notice or
advertisement, in such order as the Secured Party may elect; any such sale may
be made either at public or private sale at the Secured Party's place of
business or elsewhere, either for cash or upon credit or for future delivery, at
such price as the Secured Party may reasonably deem fair; and the Secured Party
may be the purchaser of any or all Collateral so sold and hold the same
thereafter in its own right free from any claim of the Pledgor or right of
redemption. Demands of performance, advertisements and presence of property and
sale and notice of sale are hereby waived to the extent permitted by law. Any
sale hereunder may be conducted by an auctioneer or any officer or agent of the
Secured Party. The Pledgor recognizes that the Secured Party may be unable to
effect a public sale of the Collateral by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the "Securities Act"), and
applicable law, and may be otherwise delayed or adversely affected in effecting
any sale by reason of present or future restrictions thereon imposed by
governmental authorities, and that as a consequence of such prohibitions and
restrictions the Secured Party may be compelled (i) to resort to one or more
private sales to a restricted group of purchasers who will be obliged to agree,
among other things, to acquire the stock for their own account, for investment
and not with a view to the distribution or resale thereof, or (ii) to seek
regulatory approval of any proposed sale or sales, or (iii) to limit the amount
of Collateral sold to any Person or group. The Pledgor agrees and acknowledges
that private sales so made may be at prices and upon terms less favorable to the
Pledgor than if such Collateral was sold either at public sales or at private
sales not subject to other regulatory restrictions, and that the Secured Party
has no obligation to delay the sale of any of the Collateral for the period of
time necessary to permit the issuer of such Collateral to register or otherwise
qualify the Pledged Stock, even if such issuer would agree to register or
otherwise qualify the Pledged Stock for public sale under the Securities Act or
applicable state law. The Pledgor agrees that private sales made under the
foregoing circumstances will be deemed to have been made in a manner which is
commercially reasonable. The Pledgor hereby acknowledges that a
4
<PAGE> 5
ready market may not exist for the Pledged Stock since it is not traded on a
national securities exchange or quoted on an automated quotation system and
agrees and acknowledges that in such event the Pledged Stock may be sold for an
amount less than a pro rata share of the fair market value of the issuer's
assets minus its liabilities. In addition to the foregoing, the Secured Party
may exercise such other rights and remedies as may be available under the
Transaction Documents, at law or in equity.
5. Proceeds of Sale. The proceeds of the sale of any of the Collateral and
all sums received or collected from or on account of such Collateral shall be
applied to the payment of expenses incurred or paid by the Secured Party in
connection with any holding, sale, transfer or delivery of the Collateral, to
the payment of any other costs, charges, reasonable attorneys' fees or expenses
mentioned herein, and to the payment of the Secured Obligations or any part
thereof, all in such order and manner as is provided in the Purchase Agreement
and otherwise as the Secured Party may determine and as permitted by applicable
law. The Secured Party shall, upon satisfaction in full of all such Secured
Obligations, pay any balance of such proceeds to the Pledgor or otherwise as may
be required by applicable law.
6. Presentments Demands and Notices. The Secured Party shall not be under
any duty or obligation whatsoever to make or give any presentments, demands for
performances, notices of non-performance, protests, notice of protest or notice
of dishonor in connection with any obligations or evidences of indebtedness held
thereby as collateral, or in connection with any obligations or evidences of
indebtedness which constitute in whole or in part the Secured Obligations
secured hereunder.
7. Attorney-in-Fact. The Pledgor hereby appoints the Secured Party as the
Pledgor's attorney-in-fact for the purposes of carrying out the provisions of
this Agreement and taking any action and executing any instrument which the
Secured Party may deem necessary or advisable to accomplish the purposes hereof,
which appointment is coupled with an interest and is irrevocable; provided, that
the Secured Party shall have and may exercise rights under this power of
attorney only upon the occurrence and during the continuance of an Event of
Default. Without limiting the generality of the foregoing, upon the occurrence
and during the continuance of an Event of Default, the Secured Party shall have
the right and power to receive, endorse and collect all checks and other orders
for the payment of money made payable to the Pledgor representing any dividend,
interest payment, principal payment or other distribution payable or
distributable in respect of, or otherwise constituting, the Collateral or any
part thereof and to give full discharge for the same. The power granted in this
Section 7 shall terminate upon the termination of this Agreement in accordance
with Section 21 hereof.
8. Waiver by Pledgor. The Pledgor waives (to the extent permitted by
applicable law) any right to require the Secured Party or any other obligee of
the Secured Obligations to (a) proceed against any other Pledgor or any Person,
including without limitation any Guarantor, (b) proceed against or exhaust any
Collateral or other collateral for the Secured Obligations, or (c) pursue any
other remedy in its power; and waives (to the extent permitted by applicable
law) any defense arising by reason of any disability or other defense of any
other Pledgor or any other Person, including without limitation any Guarantor,
or by reason of the cessation from any cause
5
<PAGE> 6
whatsoever of the liability of any other Pledgor or any other Person, including
without limitation, any Guarantor. The Secured Party may at any time deliver
(without representation, recourse or warranty) the Collateral or any part
thereof to the Pledgor and the receipt thereof by the Pledgor shall be a
complete and full acquittance for the Collateral so delivered, and the Secured
Party shall thereafter be discharged from any liability or responsibility
therefor.
9. Dividends and Voting Rights.
(a) All dividends and other distributions with respect to the
Pledged Stock shall be subject to the pledge hereunder, except for cash
dividends which are, to the extent permitted to be made under the Purchase
Agreement, permitted to be retained by the Pledgor so long as no Event of
Default shall have occurred and be continuing, and any such dividends may be
retained by the Pledgor free from any Lien hereunder. Upon the occurrence and
during the continuance of any Event of Default, all such cash and other
dividends shall be promptly delivered to the Secured Party (together, if the
Secured Party shall request, with stock powers or instruments of assignment duly
executed in blank affixed to any stock certificate or other negotiable document
or instrument so distributed) to be held, released or disposed of by it
hereunder or, at the option of the Secured Party, to be applied to the Secured
Obligations as they become due.
(b) So long as no Event of Default shall have occurred and be
continuing, the registration of the Collateral in the name of the Pledgor shall
not be changed and the Pledgor shall be entitled to exercise all voting and
other rights and powers pertaining to the Collateral for all purposes not
inconsistent with the terms hereof.
(c) Upon the occurrence and during the continuance of any Event of
Default, at the option of the Secured Party, all rights of the Pledgor to
receive and retain dividends upon the Collateral pursuant to subsection (a)
above shall cease and shall thereupon be vested in the Secured Party.
(d) Upon the occurrence and during the continuance of any Event of
Default, at the option of the Secured Party, all rights of the Pledgor to
exercise the voting or consensual rights and powers which it is authorized to
exercise with respect to the Collateral pursuant to subsection (b) above shall
cease and the Secured Party may thereupon (but shall not be obligated to), at
its request, cause such Collateral to be registered in the name of the Secured
Party or its nominee or agent and exercise such voting or consensual rights and
powers as appertain to ownership of such Collateral, and to that end the Pledgor
hereby appoints the Secured Party as its proxy, with full power of substitution,
to vote and exercise all other rights as a shareholder with respect to the
Pledged Stock hereunder upon the occurrence and during the continuance of any
Event of Default, which proxy is coupled with an interest and is irrevocable
prior to termination of this Agreement as set forth in Section 22 hereof, and
the Pledgor hereby agrees to provide such further proxies as the Secured Party
may request; provided, however, that the Secured Party in its discretion may
from time to time refrain from exercising, and shall not be obligated to
exercise, any such voting or consensual rights or such proxy.
6
<PAGE> 7
10. Power of Sale. Until the payment in full of the Notes, the power of
sale and other rights, powers and remedies granted to the Secured Party
hereunder shall continue to exist and may be exercised by the Secured Party at
any time and from time to time in accordance with the terms of this Agreement
irrespective of the fact that any Secured Obligations or any part thereof may
have become barred by any statute of limitations.
11. Other Rights. The rights, powers and remedies given to the Secured
Party by this Agreement shall be in addition to all rights, powers and remedies
given to the Secured Party by virtue of any statute or rule of law. Any
forbearance or failure or delay by the Secured Party in exercising any right,
power or remedy hereunder shall not be deemed to be a waiver of such right,
power or remedy, and any single or partial exercise of any right, power or
remedy hereunder shall not preclude the further exercise thereof. Every right,
power and remedy of the Secured Party shall continue in full force and effect
until such right, power or remedy is specifically waived by the Secured Party by
an instrument in writing.
12. Anti-Marshaling Provisions. The right is hereby given by the Pledgor
to the Secured Party to make releases (whether in whole or in part) of all or
any part of the Collateral agreeable to the Secured Party without notice to, or
the consent, approval or agreement of other parties and interests, including
junior lienors, which releases shall not impair in any manner the validity of or
priority of the Liens and security interests in the remaining Collateral
conferred under such documents, nor release the Pledgor from liability for the
Secured Obligations hereby secured. Notwithstanding the existence of any other
security interest in the Collateral held by the Secured Party, the Secured Party
shall have the right to determine the order in which any or all of the
Collateral shall be subjected to the remedies provided in this Agreement. The
proceeds realized upon the exercise of the remedies provided herein shall be
applied by the Secured Party in the manner provided in the Purchase Agreement.
The Pledgor hereby waives any and all right to require the marshalling of assets
in connection with the exercise of any of the remedies permitted by applicable
law or provided herein.
13. Absolute Rights and Obligations. All rights of the Secured Party, and
all obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Purchase
Agreement, any other Transaction Document or any other agreement or instrument
relating to any of the Secured Obligations;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other amendment or
waiver of or any consent to any departure from the Purchase Agreement, any other
Transaction Document or any other agreement or instrument relating to any of the
Secured Obligations;
(c) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to departure from any
guaranty, for all or any of the Secured Obligations; or
7
<PAGE> 8
(d) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, the Pledgor in respect of the Secured
Obligations or of this Agreement.
14. Definitions. All terms used herein which are not defined herein or in
the Purchase Agreement shall be defined in accordance with the appropriate
definitions appearing in the Uniform Commercial Code as in effect in New York,
and such definitions are hereby incorporated herein by reference and made a part
hereof.
15. Entire Agreement. This Agreement, together with the Purchase Agreement
and other Transaction Documents, constitutes and expresses the entire
understanding between the parties hereto with respect to the subject matter
hereof; and supersedes all prior agreements and understandings, inducements,
commitments or conditions, express or implied, oral or written, except as herein
contained. The express terms hereof control and supersede any course of
performance or usage of the trade inconsistent with any of the terms hereof.
Neither this Agreement nor any portion or provision hereof may be changed,
altered, modified, supplemented, discharged, canceled, terminated, or amended
orally or in any manner other than by an agreement, in writing signed by the
parties hereto.
16. Further Assurances. The Pledgor agrees at its own expense to do such
further acts and things, and to execute and deliver such additional conveyances,
assignments, financing statements, agreements and instruments, as the Secured
Party may at any time request in connection with the administration or
enforcement of this Agreement or related to the Collateral or any part thereof
or in order better to assure and confirm unto the Secured Party its rights,
powers and remedies hereunder. The Pledgor hereby consents and agrees that the
issuers of or obligors in respect of the Collateral shall be entitled to accept
the provisions hereof as conclusive evidence of the right of the Secured Party
to exercise its rights hereunder with respect to the Collateral, notwithstanding
any other notice or direction to the contrary heretofore or hereafter given by
the Pledgor or any other Person to any of such issuers or obligors.
17. Binding Agreement; Assignment. This Agreement, and the terms,
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto, and to their respective successors and assigns, except
that Pledgor shall not assign, without the prior written consent of the Secured
Party, this Agreement or any interest herein or in the Collateral, or any part
thereof, or otherwise pledge, encumber or grant any option with respect to the
Collateral, or any part thereof, or any cash or property held by the Secured
Party as Collateral under this Agreement. All references herein to the Secured
Party shall include any successor thereof and any other obligees from time to
time of the Secured Obligations.
18. Severability. In case any Lien, security interest or other right of
the Secured Party or any provision hereof shall be held to be invalid, illegal
or unenforceable, such invalidity, illegality or unenforceability shall not
affect any other Lien, security interest or other right granted hereby or
provision hereof.
8
<PAGE> 9
19. Counterparts. This Agreement may be executed in any number of
counterparts and all the counterparts taken together shall be deemed to
constitute one and the same instrument.
20. Indemnification. Without limitation of any applicable provision the
Purchase Agreement or any other indemnification provision in any Transaction
Document, the Pledgor hereby covenants and agrees to pay, indemnify, and hold
the Secured Party and each Purchaser harmless from and against any and all other
out-of-pocket liabilities, costs, expenses or disbursements of any kind or
nature whatsoever arising in connection with any claim or litigation by any
Person resulting from the execution, delivery, enforcement, performance and
administration of this Agreement or the Transaction Documents, or the
transactions contemplated hereby or thereby, or in any respect relating to the
Collateral or any transaction pursuant to which the Pledgor has incurred any
Obligation (other than Excluded Expenses (as such term is defined in Section
1(d) above) (all the foregoing, collectively, the "indemnified liabilities");
provided, however, that the Pledgor shall have no obligation hereunder with
respect to indemnified liabilities directly or primarily arising from the
willful misconduct or gross negligence of the Secured Party or any Purchaser.
The agreements in this subsection shall survive repayment of all Secured
Obligations, termination or expiration of this Agreement and the other
Transaction Documents.
21. Termination. This Agreement and all obligations of the Pledgor
hereunder shall terminate upon the payment in full of the Notes, at which time
the Liens and rights granted to the Secured Party hereunder shall automatically
terminate and no longer be in effect, and the Collateral shall automatically be
released from the Liens created hereby. Upon such termination of this Agreement,
the Secured Party shall, at the sole expense of the Pledgor, deliver to the
Pledgor the certificates evidencing the Pledged Stock (and any other property
received as a dividend or distribution or otherwise in respect of the Pledged
Stock then in its custody), together with any cash then constituting the
Collateral, not then sold or otherwise disposed of in accordance with the
provisions hereof and take such further actions as may be reasonably necessary
to effect the same.
22. Additional Shares. If the Pledgor shall acquire or hold (a) any
additional shares of capital stock of any Pledged Subsidiary or (b) any shares
of capital stock of any Subsidiary not listed on Schedule 1 hereto (any such
shares described in clauses (a) or (b) above being referred to herein as the
"Additional Shares"), the Pledgor shall deliver to the Secured Party (i) a
revised Schedule 1 hereto reflecting the ownership and pledge of such Additional
Shares and (ii) a Stock Pledge Agreement Supplement in the form of Exhibit A
hereto with respect to such Additional Shares duly completed and signed by the
Pledgor. The Pledgor shall comply with the requirements of this Section 22
concurrently with the acquisition of any Additional Shares.
23. Remedies Cumulative. All remedies hereunder are cumulative and are not
exclusive of any other rights and remedies of the Secured Party provided by law
or under the Purchase Agreement, the other Transaction Documents, or other
applicable agreements or instruments. The purchase of the Securities by the
Secured Party pursuant to the Purchase
9
<PAGE> 10
Agreement shall be conclusively presumed to have been made or extended,
respectively, in reliance upon the terms and provisions of this Agreement.
24. Notices. Any notice required or permitted hereunder shall be given,
(a) with respect to the Pledgor, at its address indicated in Section 12.9 of the
Purchase Agreement and (b) with respect to the Secured Party, at the Secured
Party's address indicated in Section 12.9 of the Purchase Agreement. All such
notices shall be given in writing and shall be effective as provided in Section
12.9 of the Purchase Agreement.
25. Governing Law; Service of Process.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO
BE FULLY PERFORMED, IN SUCH STATE NOTWITHSTANDING ITS EXECUTION AND DELIVERY
OUTSIDE SUCH STATE.
(b) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST EACH PARTY TO THIS
AGREEMENT WITH RESPECT TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT MAY
BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE
OF NEW YORK AND, BY ITS EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY TO
THIS AGREEMENT ACCEPTS, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT FROM
WHICH NO APPEAL HAS BEEN TAKEN OR IS AVAILABLE. EACH PARTY TO THIS AGREEMENT
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS NOTICE ADDRESS SPECIFIED
IN SECTION 24 HEREOF, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH
MAILING. EACH PARTY TO THIS AGREEMENT HEREBY KNOWINGLY, INTENTIONALLY AND
IRREVOCABLY WAIVE (A) TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, AND (B) ANY OBJECTION
(INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER TRANSACTION DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN
SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
(c) EACH PARTY TO THIS AGREEMENT AGREES THAT SERVICE OF PROCESS MAY
BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS
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<PAGE> 11
AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR
BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT
IN THE STATE OF NEW YORK.
11
<PAGE> 12
IN WITNESS WHEREOF, the parties have duly executed this Pledge Agreement
on the day and year first written above.
PLEDGOR:
SENETEK PLC, as the Pledgor
By: /s/ FRANK MASSINO
-----------------------------------
Frank Massino
President
SECURED PARTY:
SILVER CREEK INVESTMENTS, LTD.,
as Collateral Agent for the Purchasers
By: /s/ ROBERT T. TUCKER
-----------------------------------
Name: Robert T. Tucker
Title: Director
[Signature page to Pledge Agreement]
<PAGE> 13
SCHEDULE 1
<TABLE>
<CAPTION>
Subsidiary Class of Stock Certificate No(s). No. of Shares
- ---------- -------------- ------------------ -------------
<S> <C> <C> <C>
Senetek Drug Delivery
Technologies, Inc. Common 2 1,000
</TABLE>
13
<PAGE> 14
EXHIBIT A TO PLEDGE AGREEMENT
PLEDGE AGREEMENT SUPPLEMENT
THIS PLEDGE AGREEMENT SUPPLEMENT (this "Supplement"), dated as of
________________, is made by and between SENETEK PLC, a corporation organized
under the laws of England (the "Pledgor"), and OAKWOOD HOLDINGS, LTD., a British
Virgin Islands company (the "Secured Party"). All capitalized terms used but not
otherwise defined herein shall have the respective meanings assigned thereto in
the Purchase Agreement (as defined below).
WHEREAS, the Pledgor has entered into the Securities Purchase Agreement
dated as of ________, 1998 between the Pledgor and the Secured Party (as from
time to time amended, revised, modified, supplemented or amended and restated,
the "Purchase Agreement"); and
WHEREAS, the Pledgor is required under the terms of the Purchase Agreement
and the Pledge Agreement to cause certain shares of capital stock held by it and
listed on Annex A to this Supplement (the "Additional Shares") to become subject
to the Pledge Agreement; and
WHEREAS, a material part of the consideration given in connection with and
as an inducement to the execution and delivery of the Purchase Agreement by the
Secured Party was the obligation of the Pledgor to pledge to the Secured Party
the Additional Shares, whether then owned and not required to be subject to a
pledge or subsequently acquired or created; and
WHEREAS, the Secured Party has required the Pledgor to pledge to the
Secured Party all of the Additional Shares in accordance with the terms of the
Purchase Agreement and the Pledge Agreement;
NOW, THEREFORE, the Pledgor hereby agrees as follows with the Secured
Party:
1. The Pledgor hereby reaffirms and acknowledges the pledge and collateral
assignment to, and the grant of security interest in, the Additional Shares
contained in the Pledge Agreement and pledges and collaterally assigns to the
Secured Party, and grants to the Secured Party a FIRST priority lien and
security interest in the Additional Shares and all of the following:
(a) all cash, securities, dividends, rights, and other property at
any time and from time to time declared or distributed in respect of or in
exchange for any or all of the Additional Shares, other than cash
dividends permitted to be retained by the Pledgor under Section 9 of the
Pledge Agreement;
(b) all other property hereafter delivered to the Secured Party in
substitution for or in addition to any of the foregoing, all certificates
and instruments representing or evidencing such property and all cash,
securities, interest, dividends, rights, and other property at any time
and from time to time declared or distributed in respect of or in exchange
for any or all of the Additional Shares; and
14
<PAGE> 15
(c) all proceeds of any of the foregoing.
The Pledgor hereby acknowledges, agrees and confirms that, by its execution of
this Supplement, the Additional Shares constitute "Pledged Stock" under and are
subject to the Pledge Agreement. Each of the representations and warranties with
respect to Pledged Stock contained in the Pledge Agreement is hereby made by the
Pledgor with respect to the Additional Shares. A revised Schedule 1 to the
Pledge Agreement reflecting the Additional Shares and all other Pledged Stock,
together with stock certificates representing the Additional Shares with stock
powers duly executed in blank by the Pledgor, have been delivered herewith to
the Secured Party.
IN WITNESS WHEREOF, the Pledgor has caused this Supplement to be duly
executed by its authorized officer as of the day and year first above written.
SENETEK PLC, as Pledgor
By:
-----------------------------------
Name:
Title:
Acknowledged and accepted:
SILVER CREEK INVESTMENTS, LTD.,
as Collateral Agent for the Purchasers
By:
----------------------------------
Name:
Title:
15
<PAGE> 16
ANNEX A
Additional Shares
<TABLE>
<CAPTION>
Subsidiary Class of Stock Certificate No(s). No. of Shares
- ---------- -------------- ------------------ -------------
<S> <C> <C> <C>
</TABLE>
16
<PAGE> 1
EXHIBIT 10.9
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (the "Agreement") is made and entered into as of
this 14th day of April, 1999 by and between SENETEK DRUG DELIVERY TECHNOLOGIES,
INC. (the "Pledgor"), and Silver Creek Investments, Ltd., a British Virgin
Islands company (the "Secured Party"), in its capacity as Collateral Agent under
that certain Collateral Agency Agreement dated as of April 14, 1999 by and among
the Secured Party, Bomoseen Investments, Ltd., a British Virgin Islands company
("Bomoseen"), Dandelion Investments, Ltd., a British Virgin Islands company
("Dandelion"), and Elstree Holdings, Ltd., a British Virgin Islands company
("Elstree" and together with the Secured Party, Bomoseen and Dandelion, the
"Purchasers"). All capitalized terms used but not otherwise defined herein shall
have the respective meanings assigned thereto in the Purchase Agreement (as
defined below).
W I T N E S S E T H:
WHEREAS, the Pledgor has entered into the Securities Purchase Agreement
dated as of the date hereof between the Pledgor and the Purchasers (as from time
to time amended, revised, modified, supplemented or amended and restated, the
"Purchase Agreement"); and
WHEREAS, as collateral security for the payment and performance of its
Obligations, the Pledgor is willing to pledge and grant to the Secured Party for
the ratable benefit of the Purchasers a security interest in all of the issued
and outstanding shares of capital stock, whether now owned or hereafter
acquired, of each of its Subsidiaries, whether now in existence or hereafter
formed (the "Pledged Stock"), including without limitation the Pledged Stock in
such Subsidiaries more particularly described on Schedule 1 hereto (such
Subsidiaries, together with all other Subsidiaries whose capital stock may be
required to be subject to this Agreement from time to time, are hereinafter
referred to collectively as the "Pledged Subsidiaries"); and
WHEREAS, the Secured Party is unwilling to enter into the Transaction
Documents unless the Pledgor enters into this Agreement;
NOW, THEREFORE, in order to induce the Secured Party to enter into the
Transaction Documents and to purchase the Securities under the Purchase
Agreement and in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. Pledge of Stock: Other Collateral.
(a) As collateral security for the payment and performance by the
Pledgor of its now or hereafter existing Obligations (the "Secured
Obligations"), the Pledgor hereby pledges and collaterally assigns to the
Secured Party, and grants to the Secured Party a FIRST priority lien and
security interest in, the Pledged Stock and all of the following, subject only
to Permitted Liens:
<PAGE> 2
(i) all cash, securities, dividends, rights, and other
property at any time and from time to time declared or distributed in
respect of or in exchange for any or all of the Pledged Stock, other
than cash dividends permitted to be retained by the Pledgor under
Section 9 hereof;
(ii) all other property hereafter delivered to the Secured
Party in substitution for or in addition to any of the foregoing, all
certificates and instruments representing or evidencing such property
and all cash, securities, interest, dividends, rights, and other
property at any time and from time to time declared or distributed in
respect of or in exchange for any or all of the Pledged Stock; and
(iii) all proceeds of any of the foregoing.
All such Pledged Stock, certificates, instruments, cash, securities,
interest, dividends, rights and other property referred to in this Section 1,
other than cash dividends issued in respect of such Pledged Stock that are
permitted to be retained by the Pledgor under Section 9 hereof, are herein
collectively referred to as the "Collateral." All of the Pledged Stock described
on Schedule 1 is currently owned by the Pledgor and represented by the stock
certificates listed on Schedule 1 hereto. Certificates evidencing all the
Pledged Stock on the Closing Date, together with stock powers duly executed in
blank by the Pledgor, have been delivered to the Secured Party or its designee.
(b) The Pledgor agrees to deliver all the Collateral to the
Secured Party or its designee at such location or locations as the Secured Party
shall from time to time designate by written notice pursuant to Section 24
hereof for its custody at all times until termination of this Agreement,
together with such instruments of assignment and transfer as requested by the
Secured Party.
(c) The Pledgor agrees to deliver all share certificates,
documents, agreements, financing statements, amendments thereto, assignments or
other writings as the Secured Party may request to carry out the terms of this
Agreement or to protect or enforce the lien and security interest in the
Collateral, granted or as evidenced thereby to the Secured Party and further
agrees to do and cause to be done all things determined by the Secured Party to
be necessary to perfect and keep in full force the Lien in the Collateral, as
evidenced thereby in favor of the Secured Party, including, but not limited to,
the prompt payment of all documented out-of-pocket fees and expenses incurred in
connection with any filings made to perfect or continue the Lien and security
interest in the Collateral, as evidenced thereby in favor of the Secured Party.
The Pledgor agrees to, and to cause each of the Pledged Subsidiaries to, make
appropriate entries upon its books and records (including without limitation its
respective stock record and transfer books) disclosing the Liens in the
Collateral, as evidenced thereby to the Secured Party hereunder.
(d) All advances, charges, costs and expenses, including
reasonable attorneys' fees, other than Excluded Expenses (as defined below)
incurred or paid by the Secured Party in
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<PAGE> 3
exercising any right, power or remedy conferred by this Agreement, or in the
enforcement thereof ("Specified Fees and Expenses"), shall become a part of the
Secured Obligations and shall be paid to the Secured Party by the Pledgor
immediately upon demand therefor, with interest thereon until paid in full at a
rate of interest equal to 12 percent (12%) per annum; provided, however, that
such interest shall not begin to accrue until three (3) days following the
Secured Party's demand for the Specified Fees and Expenses. Upon the Pledgor's
reasonable request, the Secured Party shall provide evidence of such Specified
Fees and Expenses in form and substance reasonably satisfactory to the Pledgor
provided, however, that the Secured Party's right to demand such amounts shall
remain unrestricted and unconditional. For purposes of this Agreement and
certain other Transaction Documents, as appropriate, the term "Excluded
Expenses" shall mean any costs and expenses, or claims, losses or liabilities,
as the case may be, resulting from, arising out of, or related to, any claim,
dispute, controversy or proceeding solely and exclusively among the Purchasers,
or any of them, with respect to the transactions contemplated by the Transaction
Documents, including without limitation, any claim, dispute, controversy or
proceeding resulting from, arising out of, or related to the Collateral Agent
Agreement dated as of April 14, 1999 among the Collateral Agent and the
Purchasers, including, expressly, Sections 5, 7 and 9 thereof.
2. Status of Pledged Stock. The Pledgor hereby represents and warrants
to the Secured Party that (i) all of the shares of Pledged Stock are validly
issued and outstanding, fully paid and nonassessable and constitute all the
authorized, issued and outstanding shares of common stock of each of the Pledged
Subsidiaries, (ii) the Pledgor is the registered and record and beneficial owner
of such Pledged Stock, free and clear of all Liens, charges, equities,
encumbrances and restrictions on pledge or transfer, other than the Liens
created under the Transaction Documents and restrictions imposed by applicable
law, (iii) the Pledgor has full corporate power, legal right and lawful
authority to execute this Agreement and to pledge, assign and transfer such
Pledged Stock in the manner and form hereof, and (iv) the pledge, assignment and
delivery of such Pledged Stock by the Pledgor to the Secured Party or its
designee pursuant to this Agreement creates, together with the delivery of the
certificates evidencing such Pledged Stock, which delivery has heretofore been
accomplished, a valid and perfected FIRST priority security interest in such
Pledged Stock in favor of the Secured Party, securing the payment of the Secured
Obligations. None of the Pledged Stock (nor any interest therein or thereto)
shall be sold, transferred or assigned, nor any Lien (subject only to Liens
permitted by clause (viii) of the definition of Permitted Liens in the Purchase
Agreement) created therein, without the Secured Party's prior written consent,
which may be withheld for any reason. The Pledgor covenants with the Secured
Party that it shall at all times cause the Pledged Stock to be represented by
the certificates now and hereafter delivered to the Secured Party in accordance
with Section 1 hereof and that it shall not cause, suffer or permit any of the
Pledged Subsidiaries to issue any capital stock, or securities convertible into,
or exercisable or exchangeable for, capital stock, at any time during the term
of this Agreement, other than to the Pledgor and subject to this Agreement
pursuant to Section 22 hereof.
3. Preservation and Protection of Collateral.
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<PAGE> 4
(a) The Secured Party shall be under no duty or liability with
respect to the collection, protection or preservation of the Collateral, or
otherwise, other than the obligation to deal with the Collateral while in its
possession in the same manner as the Secured Party deals with similar securities
or property for its own account.
(b) The Pledgor agrees to pay when due all taxes, charges, Liens
and assessments against the Collateral, unless being contested in good faith by
appropriate proceedings diligently conducted and against which adequate reserves
have been established in accordance with GAAP and as set forth in the Secured
Party's financial statements and provided further that all enforcement
proceedings in the nature of levy or foreclosure are effectively stayed. Upon
the failure of the Pledgor to so pay or contest such taxes, charges, Liens or
assessments, the Secured Party at its option may pay or contest any of them (the
Secured Party having the sole right to determine the legality or validity and
the amount necessary to discharge such taxes, charges, Liens or assessments).
4. Rights and Remedies Upon Default. Upon the occurrence and during the
continuance of any Event of Default, the Secured Party is given full power and
authority, then or at any time thereafter, to sell, assign and deliver or
collect the whole or any part of the Collateral, or any substitute therefor or
any addition thereto, in one or more sales, with or without any previous demands
or demand of performance or, to the extent permitted by law, notice or
advertisement, in such order as the Secured Party may elect; any such sale may
be made either at public or private sale at the Secured Party's place of
business or elsewhere, either for cash or upon credit or for future delivery, at
such price as the Secured Party may reasonably deem fair; and the Secured Party
may be the purchaser of any or all Collateral so sold and hold the same
thereafter in its own right free from any claim of the Pledgor or right of
redemption. Demands of performance, advertisements and presence of property and
sale and notice of sale are hereby waived to the extent permitted by law. Any
sale hereunder may be conducted by an auctioneer or any officer or agent of the
Secured Party. The Pledgor recognizes that the Secured Party may be unable to
effect a public sale of the Collateral by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the "Securities Act"), and
applicable law, and may be otherwise delayed or adversely affected in effecting
any sale by reason of present or future restrictions thereon imposed by
governmental authorities, and that as a consequence of such prohibitions and
restrictions the Secured Party may be compelled (i) to resort to one or more
private sales to a restricted group of purchasers who will be obliged to agree,
among other things, to acquire the stock for their own account, for investment
and not with a view to the distribution or resale thereof, or (ii) to seek
regulatory approval of any proposed sale or sales, or (iii) to limit the amount
of Collateral sold to any Person or group. The Pledgor agrees and acknowledges
that private sales so made may be at prices and upon terms less favorable to the
Pledgor than if such Collateral was sold either at public sales or at private
sales not subject to other regulatory restrictions, and that the Secured Party
has no obligation to delay the sale of any of the Collateral for the period of
time necessary to permit the issuer of such Collateral to register or otherwise
qualify the Pledged Stock, even if such issuer would agree to register or
otherwise qualify the Pledged Stock for public sale under the Securities Act or
applicable state law. The Pledgor agrees that private sales made under the
foregoing circumstances will be deemed to have been made in a manner which is
commercially reasonable. The Pledgor hereby acknowledges that a
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<PAGE> 5
ready market may not exist for the Pledged Stock since it is not traded on a
national securities exchange or quoted on an automated quotation system and
agrees and acknowledges that in such event the Pledged Stock may be sold for an
amount less than a pro rata share of the fair market value of the issuer's
assets minus its liabilities. In addition to the foregoing, the Secured Party
may exercise such other rights and remedies as may be available under the
Transaction Documents, at law or in equity.
5. Proceeds of Sale. The proceeds of the sale of any of the Collateral
and all sums received or collected from or on account of such Collateral shall
be applied to the payment of expenses incurred or paid by the Secured Party in
connection with any holding, sale, transfer or delivery of the Collateral, to
the payment of any other costs, charges, reasonable attorneys' fees or expenses
mentioned herein, and to the payment of the Secured Obligations or any part
thereof, all in such order and manner as is provided in the Purchase Agreement
and otherwise as the Secured Party may determine and as permitted by applicable
law. The Secured Party shall, upon satisfaction in full of all such Secured
Obligations, pay any balance of such proceeds to the Pledgor or otherwise as may
be required by applicable law.
6. Presentments Demands and Notices. The Secured Party shall not be
under any duty or obligation whatsoever to make or give any presentments,
demands for performances, notices of non-performance, protests, notice of
protest or notice of dishonor in connection with any obligations or evidences of
indebtedness held thereby as collateral, or in connection with any obligations
or evidences of indebtedness which constitute in whole or in part the Secured
Obligations secured hereunder.
7. Attorney-in-Fact. The Pledgor hereby appoints the Secured Party as
the Pledgor's attorney-in-fact for the purposes of carrying out the provisions
of this Agreement and taking any action and executing any instrument which the
Secured Party may deem necessary or advisable to accomplish the purposes hereof,
which appointment is coupled with an interest and is irrevocable; provided, that
the Secured Party shall have and may exercise rights under this power of
attorney only upon the occurrence and during the continuance of an Event of
Default. Without limiting the generality of the foregoing, upon the occurrence
and during the continuance of an Event of Default, the Secured Party shall have
the right and power to receive, endorse and collect all checks and other orders
for the payment of money made payable to the Pledgor representing any dividend,
interest payment, principal payment or other distribution payable or
distributable in respect of, or otherwise constituting, the Collateral or any
part thereof and to give full discharge for the same. The power granted in this
Section 7 shall terminate upon the termination of this Agreement in accordance
with Section 21 hereof.
8. Waiver by Pledgor. The Pledgor waives (to the extent permitted by
applicable law) any right to require the Secured Party or any other obligee of
the Secured Obligations to (a) proceed against any other Pledgor or any Person,
including without limitation any Guarantor, (b) proceed against or exhaust any
Collateral or other collateral for the Secured Obligations, or (c) pursue any
other remedy in its power; and waives (to the extent permitted by applicable
law) any defense arising by reason of any disability or other defense of any
other Pledgor or any other Person, including without limitation any Guarantor,
or by reason of the cessation from any cause
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<PAGE> 6
whatsoever of the liability of any other Pledgor or any other Person, including
without limitation, any Guarantor. The Secured Party may at any time deliver
(without representation, recourse or warranty) the Collateral or any part
thereof to the Pledgor and the receipt thereof by the Pledgor shall be a
complete and full acquittance for the Collateral so delivered, and the Secured
Party shall thereafter be discharged from any liability or responsibility
therefor.
9. Dividends and Voting Rights.
(a) All dividends and other distributions with respect to the
Pledged Stock shall be subject to the pledge hereunder, except for cash
dividends which are, to the extent permitted to be made under the Purchase
Agreement, permitted to be retained by the Pledgor so long as no Event of
Default shall have occurred and be continuing, and any such dividends may be
retained by the Pledgor free from any Lien hereunder. Upon the occurrence and
during the continuance of any Event of Default, all such cash and other
dividends shall be promptly delivered to the Secured Party (together, if the
Secured Party shall request, with stock powers or instruments of assignment duly
executed in blank affixed to any stock certificate or other negotiable document
or instrument so distributed) to be held, released or disposed of by it
hereunder or, at the option of the Secured Party, to be applied to the Secured
Obligations as they become due.
(b) So long as no Event of Default shall have occurred and be
continuing, the registration of the Collateral in the name of the Pledgor shall
not be changed and the Pledgor shall be entitled to exercise all voting and
other rights and powers pertaining to the Collateral for all purposes not
inconsistent with the terms hereof.
(c) Upon the occurrence and during the continuance of any Event
of Default, at the option of the Secured Party, all rights of the Pledgor to
receive and retain dividends upon the Collateral pursuant to subsection (a)
above shall cease and shall thereupon be vested in the Secured Party.
(d) Upon the occurrence and during the continuance of any Event
of Default, at the option of the Secured Party, all rights of the Pledgor to
exercise the voting or consensual rights and powers which it is authorized to
exercise with respect to the Collateral pursuant to subsection (b) above shall
cease and the Secured Party may thereupon (but shall not be obligated to), at
its request, cause such Collateral to be registered in the name of the Secured
Party or its nominee or agent and exercise such voting or consensual rights and
powers as appertain to ownership of such Collateral, and to that end the Pledgor
hereby appoints the Secured Party as its proxy, with full power of substitution,
to vote and exercise all other rights as a shareholder with respect to the
Pledged Stock hereunder upon the occurrence and during the continuance of any
Event of Default, which proxy is coupled with an interest and is irrevocable
prior to termination of this Agreement as set forth in Section 22 hereof, and
the Pledgor hereby agrees to provide such further proxies as the Secured Party
may request; provided, however, that the Secured Party in its discretion may
from time to time refrain from exercising, and shall not be obligated to
exercise, any such voting or consensual rights or such proxy.
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<PAGE> 7
10. Power of Sale. Until the payment in full of the Notes, the power of
sale and other rights, powers and remedies granted to the Secured Party
hereunder shall continue to exist and may be exercised by the Secured Party at
any time and from time to time in accordance with the terms of this Agreement
irrespective of the fact that any Secured Obligations or any part thereof may
have become barred by any statute of limitations.
11. Other Rights. The rights, powers and remedies given to the Secured
Party by this Agreement shall be in addition to all rights, powers and remedies
given to the Secured Party by virtue of any statute or rule of law. Any
forbearance or failure or delay by the Secured Party in exercising any right,
power or remedy hereunder shall not be deemed to be a waiver of such right,
power or remedy, and any single or partial exercise of any right, power or
remedy hereunder shall not preclude the further exercise thereof. Every right,
power and remedy of the Secured Party shall continue in full force and effect
until such right, power or remedy is specifically waived by the Secured Party by
an instrument in writing.
12. Anti-Marshaling Provisions. The right is hereby given by the Pledgor
to the Secured Party to make releases (whether in whole or in part) of all or
any part of the Collateral agreeable to the Secured Party without notice to, or
the consent, approval or agreement of other parties and interests, including
junior lienors, which releases shall not impair in any manner the validity of or
priority of the Liens and security interests in the remaining Collateral
conferred under such documents, nor release the Pledgor from liability for the
Secured Obligations hereby secured. Notwithstanding the existence of any other
security interest in the Collateral held by the Secured Party, the Secured Party
shall have the right to determine the order in which any or all of the
Collateral shall be subjected to the remedies provided in this Agreement. The
proceeds realized upon the exercise of the remedies provided herein shall be
applied by the Secured Party in the manner provided in the Purchase Agreement.
The Pledgor hereby waives any and all right to require the marshalling of assets
in connection with the exercise of any of the remedies permitted by applicable
law or provided herein.
13. Absolute Rights and Obligations. All rights of the Secured Party,
and all obligations of the Pledgor hereunder, shall be absolute and
unconditional irrespective of:
(a) any lack of validity or enforceability of the Purchase
Agreement, any other Transaction Document or any other agreement or instrument
relating to any of the Secured Obligations;
(b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations, or any other amendment
or waiver of or any consent to any departure from the Purchase Agreement, any
other Transaction Document or any other agreement or instrument relating to any
of the Secured Obligations;
(c) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Secured Obligations; or
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<PAGE> 8
(d) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, the Pledgor in respect of the Secured
Obligations or of this Agreement.
14. Definitions. All terms used herein which are not defined herein or
in the Purchase Agreement shall be defined in accordance with the appropriate
definitions appearing in the Uniform Commercial Code as in effect in New York,
and such definitions are hereby incorporated herein by reference and made a part
hereof.
15. Entire Agreement. This Agreement, together with the Purchase
Agreement and other Transaction Documents, constitutes and expresses the entire
understanding between the parties hereto with respect to the subject matter
hereof; and supersedes all prior agreements and understandings, inducements,
commitments or conditions, express or implied, oral or written, except as herein
contained. The express terms hereof control and supersede any course of
performance or usage of the trade inconsistent with any of the terms hereof.
Neither this Agreement nor any portion or provision hereof may be changed,
altered, modified, supplemented, discharged, canceled, terminated, or amended
orally or in any manner other than by an agreement, in writing signed by the
parties hereto.
16. Further Assurances. The Pledgor agrees at its own expense to do such
further acts and things, and to execute and deliver such additional conveyances,
assignments, financing statements, agreements and instruments, as the Secured
Party may at any time request in connection with the administration or
enforcement of this Agreement or related to the Collateral or any part thereof
or in order better to assure and confirm unto the Secured Party its rights,
powers and remedies hereunder. The Pledgor hereby consents and agrees that the
issuers of or obligors in respect of the Collateral shall be entitled to accept
the provisions hereof as conclusive evidence of the right of the Secured Party
to exercise its rights hereunder with respect to the Collateral, notwithstanding
any other notice or direction to the contrary heretofore or hereafter given by
the Pledgor or any other Person to any of such issuers or obligors.
17. Binding Agreement; Assignment. This Agreement, and the terms,
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto, and to their respective successors and assigns, except
that Pledgor shall not assign, without the prior written consent of the Secured
Party, this Agreement or any interest herein or in the Collateral, or any part
thereof, or otherwise pledge, encumber or grant any option with respect to the
Collateral, or any part thereof, or any cash or property held by the Secured
Party as Collateral under this Agreement. All references herein to the Secured
Party shall include any successor thereof and any other obligees from time to
time of the Secured Obligations.
18. Severability. In case any Lien, security interest or other right of
the Secured Party or any provision hereof shall be held to be invalid, illegal
or unenforceable, such invalidity, illegality or unenforceability shall not
affect any other Lien, security interest or other right granted hereby or
provision hereof.
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<PAGE> 9
19. Counterparts. This Agreement may be executed in any number of
counterparts and all the counterparts taken together shall be deemed to
constitute one and the same instrument.
20. Indemnification. Without limitation of any applicable provision the
Purchase Agreement or any other indemnification provision in any Transaction
Document, the Pledgor hereby covenants and agrees to pay, indemnify, and hold
the Secured Party and each Purchaser harmless from and against any and all other
out-of-pocket liabilities, costs, expenses or disbursements of any kind or
nature whatsoever arising in connection with any claim or litigation by any
Person resulting from the execution, delivery, enforcement, performance and
administration of this Agreement or the Transaction Documents, or the
transactions contemplated hereby or thereby, or in any respect relating to the
Collateral or any transaction pursuant to which the Pledgor has incurred any
Obligation (other than Excluded Expenses (as such term is defined in Section
1(d) above) (all the foregoing, collectively, the "indemnified liabilities");
provided, however, that the Pledgor shall have no obligation hereunder with
respect to indemnified liabilities directly or primarily arising from the
willful misconduct or gross negligence of the Secured Party or any Purchaser.
The agreements in this subsection shall survive repayment of all Secured
Obligations, termination or expiration of this Agreement and the other
Transaction Documents.
21. Termination. This Agreement and all obligations of the Pledgor
hereunder shall terminate upon the payment in full of the Notes, at which time
the Liens and rights granted to the Secured Party hereunder shall automatically
terminate and no longer be in effect, and the Collateral shall automatically be
released from the Liens created hereby. Upon such termination of this Agreement,
the Secured Party shall, at the sole expense of the Pledgor, deliver to the
Pledgor the certificates evidencing the Pledged Stock (and any other property
received as a dividend or distribution or otherwise in respect of the Pledged
Stock then in its custody), together with any cash then constituting the
Collateral, not then sold or otherwise disposed of in accordance with the
provisions hereof and take such further actions as may be reasonably necessary
to effect the same.
22. Additional Shares. If the Pledgor shall acquire or hold (a) any
additional shares of capital stock of any Pledged Subsidiary or (b) any shares
of capital stock of any Subsidiary not listed on Schedule 1 hereto (any such
shares described in clauses (a) or (b) above being referred to herein as the
"Additional Shares"), the Pledgor shall deliver to the Secured Party (i) a
revised Schedule 1 hereto reflecting the ownership and pledge of such Additional
Shares and (ii) a Stock Pledge Agreement Supplement in the form of Exhibit A
hereto with respect to such Additional Shares duly completed and signed by the
Pledgor. The Pledgor shall comply with the requirements of this Section 22
concurrently with the acquisition of any Additional Shares.
23. Remedies Cumulative. All remedies hereunder are cumulative and are
not exclusive of any other rights and remedies of the Secured Party provided by
law or under the Purchase Agreement, the other Transaction Documents, or other
applicable agreements or instruments. The purchase of the Securities by the
Secured Party pursuant to the Purchase
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<PAGE> 10
Agreement shall be conclusively presumed to have been made or extended,
respectively, in reliance upon the terms and provisions of this Agreement.
24. Notices. Any notice required or permitted hereunder shall be given,
(a) with respect to the Pledgor, at its address indicated in Section 12.9 of the
Purchase Agreement and (b) with respect to the Secured Party, at the Secured
Party's address indicated in Section 12.9 of the Purchase Agreement. All such
notices shall be given in writing and shall be effective as provided in Section
12.9 of the Purchase Agreement.
25. Governing Law; Service of Process.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE NOTWITHSTANDING ITS EXECUTION
AND DELIVERY OUTSIDE SUCH STATE.
(b) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST EACH PARTY TO THIS
AGREEMENT WITH RESPECT TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT MAY
BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE
OF NEW YORK AND, BY ITS EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY TO
THIS AGREEMENT ACCEPTS, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT FROM
WHICH NO APPEAL HAS BEEN TAKEN OR IS AVAILABLE. EACH PARTY TO THIS AGREEMENT
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS NOTICE ADDRESS SPECIFIED
IN SECTION 24 HEREOF, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH
MAILING. EACH PARTY TO THIS AGREEMENT HEREBY KNOWINGLY, INTENTIONALLY AND
IRREVOCABLY WAIVE (A) TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, AND (B) ANY OBJECTION
(INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER TRANSACTION DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN
SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
(c) EACH PARTY TO THIS AGREEMENT AGREES THAT SERVICE OF PROCESS
MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS
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AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR
BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT
IN THE STATE OF NEW YORK.
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IN WITNESS WHEREOF, the parties have duly executed this Pledge Agreement
on the day and year first written above.
PLEDGOR:
SENETEK DRUG DELIVERY TECHNOLOGIES, INC.
as the Pledgor
By: /s/ FRANK MASSINO
----------------------------------------
Name: Frank Massino
Title: President & CEO
SECURED PARTY:
SILVER CREEK INVESTMENTS, LTD.,
as Collateral Agent for the Purchasers
By:
-----------------------------------------
Name:
Title:
<PAGE> 13
IN WITNESS WHEREOF, the parties have duly executed this Pledge Agreement
on the day and year first written above.
PLEDGOR:
SENETEK DRUG DELIVERY TECHNOLOGIES, INC.
as the Pledgor
By:
----------------------------------------
Name:
Title:
SECURED PARTY:
SILVER CREEK INVESTMENTS, LTD.,
as Collateral Agent
By: /s/ ROBERT T. TUCKER
-----------------------------------------
Name: Robert T. Tucker
Title: Director
12
<PAGE> 14
SCHEDULE 1
<TABLE>
<CAPTION>
Subsidiary Class of Stock Certificate No(s). No. of Shares
- ---------- -------------- ------------------ -------------
<S> <C> <C> <C>
Carme Cosmeceutical Common 2 1,000
Sciences, Inc.
</TABLE>
<PAGE> 15
EXHIBIT A TO PLEDGE AGREEMENT
PLEDGE AGREEMENT SUPPLEMENT
THIS PLEDGE AGREEMENT SUPPLEMENT (this "Supplement"), dated as of
________________, is made by and between SENETEK PLC, a corporation organized
under the laws of England (the "Pledgor"), and OAKWOOD HOLDINGS, LTD., a British
Virgin Islands company (the "Secured Party"). All capitalized terms used but not
otherwise defined herein shall have the respective meanings assigned thereto in
the Purchase Agreement (as defined below).
WHEREAS, the Pledgor has entered into the Securities Purchase Agreement
dated as of ________, 1998 between the Pledgor and the Secured Party (as from
time to time amended, revised, modified, supplemented or amended and restated,
the "Purchase Agreement"); and
WHEREAS, the Pledgor is required under the terms of the Purchase
Agreement and the Pledge Agreement to cause certain shares of capital stock held
by it and listed on Annex A to this Supplement (the "Additional Shares") to
become subject to the Pledge Agreement; and
WHEREAS, a material part of the consideration given in connection with
and as an inducement to the execution and delivery of the Purchase Agreement by
the Secured Party was the obligation of the Pledgor to pledge to the Secured
Party the Additional Shares, whether then owned and not required to be subject
to a pledge or subsequently acquired or created; and
WHEREAS, the Secured Party has required the Pledgor to pledge to the
Secured Party all of the Additional Shares in accordance with the terms of the
Purchase Agreement and the Pledge Agreement;
NOW, THEREFORE, the Pledgor hereby agrees as follows with the Secured
Party:
1. The Pledgor hereby reaffirms and acknowledges the pledge and
collateral assignment to, and the grant of security interest in, the Additional
Shares contained in the Pledge Agreement and pledges and collaterally assigns to
the Secured Party, and grants to the Secured Party a FIRST priority lien and
security interest in the Additional Shares and all of the following:
(a) all cash, securities, dividends, rights, and other property
at any time and from time to time declared or distributed in respect of
or in exchange for any or all of the Additional Shares, other than cash
dividends permitted to be retained by the Pledgor under Section 9 of the
Pledge Agreement;
(b) all other property hereafter delivered to the Secured Party
in substitution for or in addition to any of the foregoing, all
certificates and instruments representing or evidencing such property
and all cash, securities, interest, dividends, rights, and other
property at any time and from time to time declared or distributed in
respect of or in exchange for any or all of the Additional Shares; and
14
<PAGE> 16
(c) all proceeds of any of the foregoing.
The Pledgor hereby acknowledges, agrees and confirms that, by its execution of
this Supplement, the Additional Shares constitute "Pledged Stock" under and are
subject to the Pledge Agreement. Each of the representations and warranties with
respect to Pledged Stock contained in the Pledge Agreement is hereby made by the
Pledgor with respect to the Additional Shares. A revised Schedule 1 to the
Pledge Agreement reflecting the Additional Shares and all other Pledged Stock,
together with stock certificates representing the Additional Shares with stock
powers duly executed in blank by the Pledgor, have been delivered herewith to
the Secured Party.
IN WITNESS WHEREOF, the Pledgor has caused this Supplement to be duly
executed by its authorized officer as of the day and year first above written.
SENETEK PLC, as Pledgor
By:
--------------------------------
Name:
Title:
Acknowledged and accepted:
SILVER CREEK INVESTMENTS, LTD.,
as Collateral Agent for the Purchasers
By:
-----------------------------------
Name:
Title:
15
<PAGE> 17
ANNEX A
<TABLE>
<CAPTION>
Additional Shares
Subsidiary Class of Stock Certificate No(s). No. of Shares
- ---------- -------------- ------------------ -------------
<S> <C> <C> <C>
Carme Cosmeceutical Common 2 1,000
Sciences, Inc.
</TABLE>
16
<PAGE> 1
EXHIBIT 10.10
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (this "Guaranty") dated as of April 14, 1999 is
made by each of the undersigned (each a "Guarantor" and collectively the
"Guarantors") to and in favor of Silver Creek Investments, Ltd., a British
Virgin Islands company (the "Collateral Agent"), in its capacity as Collateral
Agent under that certain Collateral Agency Agreement dated as of the date hereof
by and among the Collateral Agent, Bomoseen Investments, Ltd., a British Virgin
Islands company ("Bomoseen"), Dandelion Investments, Ltd., a British Virgin
Islands company ("Dandelion"), and Elstree Holdings, Ltd., a British Virgin
Islands company ("Elstree" and together with the Collateral Agent, Bomoseen and
Dandelion, the "Purchasers"). All capitalized term used but not otherwise
defined herein shall have the meaning ascribed to such terms in the Purchase
Agreement (as defined below).
W I T N E S S E T H:
WHEREAS, Senetek Plc, a corporation organized under the laws of England
(the "Company"), has entered into the Securities Purchase Agreement dated as of
the date hereof between the Company and the Purchasers (as from time to time
amended, revised, modified, supplemented or amended and restated, the "Purchase
Agreement"); and
WHEREAS, each Guarantor is, directly or indirectly, a wholly owned
Subsidiary of the Company; and
WHEREAS, as a condition to the Purchasers entering into the Purchase
Agreement and purchasing the Securities thereunder, each Guarantor is required
to guarantee to the Purchasers payment of all of the Company's obligations under
the Purchase Agreement and the other Transaction Documents in accordance with
the terms of this Guaranty; and
WHEREAS, each Guarantor will materially benefit from the purchase of the
Securities to be made under the Purchase Agreement, and each Guarantor is
willing to enter into this Guaranty to provide an inducement for the Purchasers
to purchase such Securities under the Purchase Agreement; and
WHEREAS, the Purchasers are unwilling to enter into the Purchase Agreement
and the other Transaction Documents unless the Guarantors enter into this
Guaranty;
NOW, THEREFORE, to induce each Purchaser to enter into the Purchase
Agreement and the other Transaction Documents to which it is a party, and to
induce the Purchasers to purchase the Securities, and in consideration of the
premises and mutual covenants contained herein and for other valuable
consideration the receipt of which is hereby acknowledged by each party
<PAGE> 2
hereto, each Guarantor hereby agrees as follows:
1. Guaranty. Each Guarantor hereby jointly and severally, unconditionally,
absolutely, continually and irrevocably guarantees to the Collateral Agent for
the benefit of the Purchasers, the payment and performance in full of the
Company's Liabilities (as defined below). For all purposes of this Guaranty,
"Company's Liabilities" means: (a) the Company's prompt payment in full, when
due or declared due and at all such times, of all Obligations and all other
amounts pursuant to the terms of the Purchase Agreement, the Securities, and all
other Transaction Documents executed in connection with the Purchase Agreement,
now or at any time or times hereafter owing, arising, due or payable from the
Company, including without limitation principal, interest, premium or fee
(including, but not limited to, attorneys' fees and expenses); and (b) the
Company's prompt, full and faithful performance, observance and discharge of
each and every agreement, undertaking, covenant and provision to be performed,
observed or discharged by the Company under the Purchase Agreement and all other
Transaction Documents executed in connection therewith. The Guarantors'
obligations to the Collateral Agent for the benefit of the Purchasers under this
Guaranty are hereinafter collectively referred to as the "Guarantors'
Obligations"; provided, however, that the liability of each Guarantor
individually with respect to the Guarantors' Obligations shall be limited to an
aggregate amount equal to the largest amount that would not render its
obligations hereunder subject to avoidance under Section 548 of the United
States Bankruptcy Code or any comparable provisions of any applicable state law.
Each Guarantor agrees that it is jointly and severally, directly and primarily
liable for the Company's Liabilities, and that the guaranties made hereunder are
guaranties of payment.
2. Payment. If the Company shall default in payment or performance of any
of the Company's Liabilities, whether principal, interest, premium, fees
(including, but not limited to, attorneys' fees and expenses), or otherwise,
when and as the same shall become due, whether according to the terms of the
Purchase Agreement or any other Transaction Documents, by acceleration, or
otherwise, or upon the occurrence of any Event of Default under the Purchase
Agreement that has not been cured or waived, then any or all of the Guarantors
will, upon demand thereof by the Collateral Agent for the benefit of the
Purchasers, or its successors or assigns AS OF THE DATE OF SUCH DEMAND, fully
pay to the Collateral Agent for the benefit of the Purchasers, subject to any
restriction set forth in Section 1 hereof, an amount equal to all Guarantors'
Obligations then due and owing.
3. Unconditional Obligations. This is a guaranty of payment and not of
collection. The Guarantors' Obligations under this Guaranty shall be joint and
several, absolute and unconditional irrespective of the validity, legality or
enforceability of the Purchase Agreement, the Securities or any other
Transaction Document or any other guaranty of the Company's Liabilities, and
shall not be affected by any action taken under the Purchase Agreement, the
Securities or any other Transaction Document, any other guaranty of the
Company's Liabilities, or any other agreement between the Company and any other
Person, in the exercise of any right or power therein conferred, or the order in
which rights hereunder are exercised against one or any number of the
Guarantors, or by any failure or omission to enforce any right conferred
thereby, or by any waiver of any covenant or condition therein provided, or by
any acceleration
2
<PAGE> 3
of the maturity of any of the Company's Liabilities, or by the release or other
disposal of any security for any of the Company's Liabilities, or by the
dissolution of the Company or the combination or consolidation of the Company
into or with another entity or any transfer or disposition of any assets of the
Company or by any extension or renewal of the Purchase Agreement, any of the
Securities or any other Transaction Document, in whole or in part, or by any
modification, alteration, amendment or addition of or to the Purchase Agreement,
any of the Securities or any other Transaction Document, any other guaranty of
the Company's Liabilities, or any other agreement between the Company or any
other Person, or by any other circumstance whatsoever (with or without notice to
or knowledge of any Guarantor) which may or might in any manner or to any extent
vary the risks of such Guarantor, or might otherwise constitute a legal or
equitable discharge of a surety or a guarantor; it being the purpose and intent
of the parties hereto that this Guaranty and the Guarantors' Obligations
hereunder shall be absolute and unconditional under any and all circumstances
and shall not be discharged except by payment as herein provided.
4. Currency and Funds of Payment. Each Guarantor hereby guarantees that
the Guarantors' Obligations will be paid in lawful currency of the United States
of America and in immediately available funds, regardless of any law, regulation
or decree now or hereafter in effect that might in any manner affect the
Company's Liabilities, or the rights of the Collateral Agent for the benefit of
the Purchasers with respect thereto as against the Company, or cause or permit
to be invoked any alteration in the time, amount or manner of payment by the
Company of any or all of the Company's Liabilities.
5. Suits. Each Guarantor from time to time shall pay to the Collateral
Agent for the benefit of the Purchasers, on demand, at the Collateral Agent's
place of business set forth in the Purchase Agreement or such other address as
the Collateral Agent shall give notice of to such Guarantor, the Guarantors'
Obligations as they become or are declared due, and in the event such payment is
not made forthwith, the Collateral Agent for the benefit of the Purchasers may
bring an action against any one or more or all of the Guarantors in compliance
with Section 24 hereof. At the election the Collateral Agent for the benefit of
the Purchasers, one or more and successive or concurrent actions may be brought
hereon by the Collateral Agent for the benefit of the Purchasers against any one
or more or all of the Guarantors, whether or not an action has been commenced
against the Company, any other guarantor of the Company's Liabilities, or any
other Person and whether or not the Collateral Agent for the benefit of the
Purchasers has taken or failed to take any other action to collect all or any
portion of the Company's Liabilities or have taken or failed to take any actions
against any collateral securing payment or performance of all or any portion of
the Company's Liabilities.
6. Set-Off and Waiver. Each Guarantor irrevocably waives any right to
assert against the Purchasers as a defense, counterclaim, set-off or cross
claim, any defense (legal or equitable) or other claim which such Guarantor may
now or at any time hereafter have against the Company without waiving any
additional defenses, set-offs, counterclaims or other claims otherwise available
to such Guarantor. If at any time hereafter the Collateral Agent for the benefit
of the Purchasers employs counsel for advice or other representation to enforce
the Guarantors' Obligations that arise out of an Event of Default, or with
respect to the
3
<PAGE> 4
administration or amendment of this Guaranty, the Purchase Agreement or any of
the Transaction Documents, then, in any of the foregoing events, all of the
reasonable attorneys' fees arising from such services and all expenses, costs
and charges in any way or respect arising in connection therewith or relating
thereto shall be paid by such Guarantor to the Collateral Agent for the benefit
of the Purchasers, on demand.
7. Waiver; Subrogation.
(a) Each Guarantor hereby waives notice of the following events or
occurrences:
(i) the acceptance of this Guaranty by the Collateral Agent for
the benefit of the Purchasers;
(ii) the Purchasers' purchase of the Securities, whether pursuant
to the Purchase Agreement or otherwise;
(iii) the Purchasers or the Company heretofore, now or at any time
hereafter, obtaining, amending, substituting for, releasing,
waiving or modifying the Purchase Agreement, the Securities or
any other Transaction Documents;
(iv) presentment, demand, default, non-payment, partial payment and
protest;
(v) the Purchasers heretofore, now or at any time hereafter
granting to the Company (or any other party liable to the
Purchasers on account of the Company's Liabilities) or to any
certain Guarantor any indulgence or extensions of time of
payment of the Company's Liabilities or Guarantors'
Obligations, respectively; and
(vi) the Purchasers heretofore, now or at any time hereafter
accepting from the Company, any Guarantor, any other guarantor
of the Company's Liabilities or any other Person, any partial
payment or payments on account of the Company's Liabilities or
any collateral securing the payment thereof or the Purchasers
settling, subordinating, compromising, discharging or
releasing the same. Each Guarantor agrees that the Collateral
Agent for the benefit of the Purchasers may heretofore, now or
at any time hereafter do any or all of the foregoing in such
manner, upon such terms and at such times as the Collateral
Agent for the benefit of the Purchasers, in its sole and
absolute discretion, deems advisable, without in any way or
respect impairing, affecting, reducing or releasing such
Guarantor from the Guarantors' Obligations, and each Guarantor
hereby consents to each and all of the foregoing events or
occurrences.
(b) Each Guarantor hereby agrees that payment or performance by such
Guarantor of the Guarantors' Obligations under this Guaranty may be enforced by
the Collateral Agent for the benefit of the Purchasers upon demand by the
Collateral Agent for the benefit of the Purchasers
4
<PAGE> 5
to such Guarantor without the Collateral Agent for the benefit of the Purchasers
being required, such Guarantor expressly waiving any right it may have to
require the Collateral Agent for the benefit of the Purchasers, to (i) prosecute
collection or seek to enforce or resort to any remedies against the Company or
any other Guarantor or any other guarantor of the Company's Liabilities, or (ii)
seek to enforce or resort to any remedies with respect to any security
interests, Liens or encumbrances granted to the Collateral Agent for the benefit
of the Purchasers by the Company, any other Guarantor or any other Person on
account of the Company's Liabilities or any guaranty thereof; IT BEING EXPRESSLY
UNDERSTOOD, ACKNOWLEDGED AND AGREED TO BY SUCH GUARANTOR THAT DEMAND UNDER THIS
GUARANTY MAY BE MADE BY THE COLLATERAL AGENT FOR THE BENEFIT OF THE PURCHASERS,
AND THE PROVISIONS HEREOF ENFORCED BY THE COLLATERAL AGENT FOR THE BENEFIT OF
THE PURCHASERS, EFFECTIVE AS OF THE FIRST DATE ANY EVENT OF DEFAULT OCCURS AND
IS CONTINUING UNDER THE PURCHASE AGREEMENT. The Collateral Agent for the benefit
of the Purchasers shall not have any obligation to protect, secure or insure any
of the foregoing security interests, Liens or encumbrances on the properties or
interests in properties subject thereto. The Guarantors' Obligations shall in no
way be impaired, affected, reduced, or released by reason of the failure of the
Collateral Agent for the benefit of the Purchasers or delay to do or take any of
the acts, actions or things described in this Guaranty including, without
limiting the generality of the foregoing, those acts, actions and things
described in this Section 7.
(c) Each Guarantor further agrees with respect to this Guaranty that
such Guarantor shall have no right of subrogation, reimbursement or indemnity,
nor any right of recourse to security for the Company's Liabilities until the
satisfaction and indefeasible payment in full of all of the Obligations under
the Purchase Agreement and the other Transaction Documents.
8. Effectiveness; Enforceability. This Guaranty shall be effective as of
the date of the execution and delivery of the Purchase Agreement and shall
continue in full force and effect until the satisfaction and payment in full of
all of the Notes. This Guaranty shall be binding upon and inure to the benefit
of each party hereto and their respective successors and assigns, including
without limitation all assigns of any or all of the Purchasers' rights under the
Purchase Agreement. Notwithstanding the foregoing, no Guarantor may, without the
prior written consent of the Collateral Agent for the benefit of the Purchasers,
assign any rights, powers, duties or obligations hereunder. Any claim or claims
that the Collateral Agent for the benefit of the Purchasers may at any time
hereafter have against a Guarantor under this Guaranty shall be asserted by the
Collateral Agent for the benefit of the Purchasers by written notice directed to
such Guarantor.
9. Representations and Warranties; Covenant. Each Guarantor warrants and
represents to the Collateral Agent for the benefit of the Purchasers that it is
duly authorized to execute, deliver and perform this Guaranty, that this
Guaranty is legal, valid, binding and enforceable against such Guarantor in
accordance with its terms except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles, that such
Guarantor's execution, delivery and performance of this Guaranty do not violate
or constitute a
5
<PAGE> 6
breach of its certificate of incorporation or other documents of corporate
governance or any agreement to which such Guarantor is a party, or any
applicable laws, orders, regulations, decrees or awards of any applicable
governmental authority or arbitral body, and that immediately after giving
effect to the financing transactions contemplated hereby, each Guarantor is
solvent. Each Guarantor hereby covenants that it shall remain solvent. For
purposes of this Section 9, the term "solvent" shall mean that, at the time of
said determination, (i) the fair value of such Guarantor's assets exceeds the
aggregate sum of its liabilities (including, without limitation, contingent
liabilities), (ii) such Guarantor is able to pay its debts as they mature, (iii)
the property owned by such Guarantor has a value in excess of the total
aggregate sum required to pay its debts, and (iv) such Guarantor has capital
sufficient to carry on its business.
10. Expenses. Each Guarantor agrees to be liable for the payment of all
reasonable fees, expenses, costs and charges, including attorney's fees (the
"Specified Fees and Expenses"), incurred by the Collateral Agent for the benefit
of the Purchasers in connection with or arising out of the enforcement,
administration or amendment of this Guaranty, the Purchase Agreement or any
other Transaction Document which Specified Fees and Expenses shall be paid by
such Guarantor to the Collateral Agent for the benefit of the Purchasers on
demand, provided, however, that such specified Fees and Expenses shall not
include Excluded Expenses (as such term is defined in Section 1(d) of the Pledge
Agreement). Upon the Guarantor's reasonable request, the Collateral Agent for
the benefit of the Purchasers shall provide evidence of such Specified Fees and
Expenses in form and substance reasonable satisfactory to the Guarantors,
provided, however, that the right of the Collateral Agent for the benefit of the
Purchasers to demand such amounts shall remain unrestricted and unconditional.
11. Reinstatement. Each Guarantor agrees that, subject to Section 8
hereof, this Guaranty shall continue to be effective or be reinstated, as the
case may be, at any time payment received by the Collateral Agent for the
benefit of the Purchasers under the Purchase Agreement or this Guaranty is
rescinded or disgorged, or must be restored for any reason.
12. Attorney-in-Fact. Each Guarantor hereby appoints the Collateral Agent
as such Guarantor's attorney-in-fact for the purposes of carrying out the
provisions of this Guaranty and taking any action and executing any instrument
which the Collateral Agent for the benefit of the Purchasers may deem necessary
or advisable to accomplish the purposes hereof; which appointment is coupled
with an interest and is irrevocable; provided, that the Collateral Agent shall
have and may exercise rights under this power of attorney only upon the
occurrence and during the continuance of an Event of Default.
13. Absolute Rights and Obligations. All rights of the Collateral Agent
for the benefit of the Purchasers, and all obligations of each Guarantor
hereunder, shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the Purchase
Agreement, any other Transaction Document or any other agreement or
instrument relating to any of the Guarantors' Obligations or the Company's
Liabilities;
6
<PAGE> 7
(ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Guarantors' Obligations, or any other
amendment or waiver of or any consent to any departure from the Purchase
Agreement, any other Transaction Document or any other agreement or
instrument relating to any of the Guarantors' Obligations;
(iii) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Guarantors'
Obligations; or
(iv) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, each Guarantor in respect of the
Guarantors' Obligations or of this Guaranty.
14. Reliance. Each Guarantor represents and warrants to the Collateral
Agent for the benefit of the Purchasers that: (a) such Guarantor has adequate
means to obtain from the Company, on a continuing basis, information concerning
the Company and the Company's financial condition and affairs and has full and
complete access to the Company's books and records; (b) such Guarantor is not
relying on the Collateral Agent for the benefit of the Purchasers, its or their
employees, agents or other representatives, to provide such information, now or
in the future; (c) such Guarantor is executing this Guaranty freely and
deliberately, and understands the obligations and financial risk undertaken by
providing this Guaranty; (d) such Guarantor has relied solely on the Guarantor's
own independent investigation, appraisal and analysis of the Company and the
Company's financial condition and affairs in deciding to provide this Guaranty
and is fully aware of the same; and (e) such Guarantor has not depended or
relied on the Collateral Agent for the benefit of the Purchasers, its or their
employees, agents or representatives, for any information whatsoever concerning
the Company or the Company's financial condition and affairs or other matters
material to such Guarantor's decision to execute, deliver and perform this
Guaranty or for any counseling, guidance, or special consideration or any
promise therefor with respect to such decision. Each Guarantor agrees that the
Collateral Agent on behalf of the Purchasers have no duty or responsibility
whatsoever, now or in the future, to provide to such Guarantor any information
concerning the Company or the Company's financial condition and affairs, other
than as expressly provided herein, and that, if such Guarantor receives any such
information from the Collateral Agent for the benefit of the Purchasers or its
or their employees, agents or other representatives, such Guarantor will
independently verify the information and will not rely on the Collateral Agent
for the benefit of the Purchasers its or their employees, agents or other
representatives, with respect to such information.
15. Entire Agreement. This Guaranty, together with the Purchase Agreement
and other Transaction Documents, constitutes and expresses the entire
understanding between the parties hereto with respect to the subject matter
hereof; and supersedes all prior agreements and understandings, inducements,
commitments or conditions, express or implied, oral or written, except as herein
contained. The express terms hereof control and supersede any course of
7
<PAGE> 8
performance or usage of the trade inconsistent with any of the terms hereof.
Neither this Guaranty nor any portion or provision hereof may be changed,
altered, modified, supplemented, discharged, canceled, terminated, or amended
orally or in any manner other than by an agreement, in writing signed by the
parties hereto.
16. Binding Agreement; Assignment. This Guaranty, and the terms, covenants
and conditions hereof, shall be binding upon and inure to the benefit of the
parties hereto, and to their respective successors and assigns, except that no
Guarantor shall be permitted to assign this Guaranty or any interest herein
without the prior written consent of the Collateral Agent on behalf of the
Purchasers. All references herein to the "Collateral Agent for the benefit of
the Purchasers" shall include any successor thereof and any other obligees from
time to time of the Guarantors' Obligations.
17. Severability. In case any Lien, security interest or other right of
the Collateral Agent for the benefit of the Purchasers or any provision hereof
shall be held to be invalid, illegal or unenforceable, such invalidity,
illegality or unenforceability shall not affect any other Lien, security
interest or other right granted hereby or provision hereof, or pursuant to the
Purchase Agreement or any other Transaction Document.
18. Counterparts. This Guaranty may be executed in any number of
counterparts and all the counterparts taken together shall be deemed to
constitute one and the same instrument.
19. Indemnification. Without limitation of any indemnification provision
in the Purchase Agreement or any Transaction Document, each Guarantor hereby
covenants and agrees to pay, indemnify, and hold the Collateral Agent for the
benefit of the Purchasers and each Purchaser harmless from and against any and
all other losses, liabilities, costs, expenses or disbursements of any kind or
nature (including without limitation reasonable attorneys fees and expenses)
whatsoever arising in connection with any claim or litigation by any Person
resulting from the execution, delivery, enforcement, performance and
administration of this Guaranty, the Purchase Agreement or the Transaction
Documents, or the transactions contemplated hereby or thereby, or in any respect
relating to the Collateral or any transaction pursuant to which such Guarantor
has incurred any Guarantors' Obligations (other than Excluded Expenses (as such
term is defined in Section 1(d) of the Pledge Agreement)) (all the foregoing,
collectively, the "indemnified liabilities"); provided, however, that such
Guarantor shall have no obligation hereunder with respect to indemnified
liabilities directly or primarily arising from the willful misconduct or gross
negligence of the Collateral Agent for the benefit of the Purchasers or any
Purchaser. The agreements in this subsection shall survive repayment of all
Secured Obligations and termination or expiration of this Guaranty.
20. Termination. This Guaranty and all Guarantors' Obligations hereunder
shall terminate only upon the payment in full of the Notes and all of
Guarantors' Obligations hereunder.
21. Remedies Cumulative. All remedies hereunder are cumulative and are not
exclusive of any other rights and remedies of the Collateral Agent or the
Purchasers provided by
8
<PAGE> 9
law or under the Purchase Agreement, the other Transaction Documents, or other
applicable agreements or instruments. The purchase of the Securities pursuant to
the Purchase Agreement shall be conclusively presumed to have been made or
extended in reliance upon the Guarantor's guaranty of the Guarantors'
Obligations pursuant to the terms hereof.
22. Notices. Any notice required or permitted hereunder shall be given,
(a) with respect to each Guarantor, at the address of the Company indicated in
Section 12.9 of the Purchase Agreement and (b) with respect to the Collateral
Agent for the benefit of the Purchasers, at the Collateral Agent's address
indicated in Section 12.9 of the Purchase Agreement. All such notices shall be
given in writing and shall be effective as provided in Section 12.9 of the
Purchase Agreement.
23. Governing Law; Service of Process.
(a) THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO
BE FULLY PERFORMED, IN SUCH STATE NOTWITHSTANDING ITS EXECUTION AND DELIVERY
OUTSIDE SUCH STATE.
(b) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PARTY TO THIS
GUARANTY WITH RESPECT TO THIS GUARANTY OR ANY OTHER TRANSACTION DOCUMENT MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF
NEW YORK AND, BY ITS EXECUTION AND DELIVERY OF THIS GUARANTY, EACH PARTY TO THIS
GUARANTY ACCEPTS, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY
AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND
IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL JUDGMENT RENDERED THEREBY IN
CONNECTION WITH THIS GUARANTY OR ANY OTHER TRANSACTION DOCUMENT FROM WHICH NO
APPEAL HAS BEEN TAKEN OR IS AVAILABLE. EACH PARTY TO THIS GUARANTY IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY
SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO ITS NOTICE ADDRESS SPECIFIED IN SECTION 22
HEREOF, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH MAILING. EACH
PARTY TO THIS GUARANTY HEREBY KNOWINGLY, INTENTIONALLY AND IRREVOCABLY WAIVE (A)
TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY
OTHER TRANSACTION DOCUMENT, AND (B) ANY OBJECTION (INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY OTHER TRANSACTION
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
9
<PAGE> 10
(c) EACH PARTY TO THIS GUARANTY AGREES THAT SERVICE OF PROCESS MAY
BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER
LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY ANY OTHER METHOD OF
SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW
YORK.
[Signature Page Follows.]
10
<PAGE> 11
IN WITNESS WHEREOF, the parties have duly executed this Guaranty on the
day and year first written above.
GUARANTORS:
SENETEK DRUG DELIVERY TECHNOLOGIES, INC.
CARME' COSMECEUTICAL SCIENCES, INC.
By:
-------------------------------------
Name:
Title:
SECURED PARTY:
SILVER CREEK INVESTMENTS, LTD.,
as Collateral Agent for the Purchasers
By:
-------------------------------------
Name:
Title:
[Signature page to Guaranty]
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EXHIBIT 10.11
PATENT AND TRADEMARK SECURITY AGREEMENT
THIS PATENT AND TRADEMARK SECURITY AGREEMENT (this "Agreement") is made
and entered into as of April 14, 1999 by SENETEK, PLC, a corporation organized
under the laws of England (the "Company"), and each of the undersigned (each a
"Grantor", and collectively with the Company, the "Grantors"), and SILVER CREEK
INVESTMENTS, Ltd., a British Virgin Islands company, as Collateral Agent for the
benefit of the Purchasers under the Purchase Agreement (as defined below) (the
"Collateral Agent"). All capitalized terms used but not otherwise defined herein
shall have the respective meanings assigned thereto in the Purchase Agreement;
WITNESSETH:
WHEREAS, the Company has entered into the Securities Purchase Agreement
dated as of the date hereof between the Company and the Purchasers (as from time
to time amended, revised, modified, supplemented or amended and restated, the
"Purchase Agreement"); and
WHEREAS, as collateral security for payment and performance of its
Obligations, the Company is willing to grant to the Collateral Agent for the
benefit of the Purchasers a security interest in all of its patents and
trademarks pursuant to the terms of this Agreement; and
WHEREAS, each Guarantor will materially benefit from purchase of the
Securities by the Purchasers pursuant to the Purchase Agreement and each
Guarantor is a party to that certain Guaranty Agreement (the "Guaranty"), dated
as of the date hereof, pursuant to which each Guarantor guaranteed the
Obligations of the Company; and
WHEREAS, as collateral security for payment and performance of its
Obligations (as defined in the Guaranty, and together with the Obligations, the
"Secured Obligations") under the Guaranty, each Guarantor is willing to grant to
the Collateral Agent for the benefit of the Purchasers a security interest in
all of its patents and trademarks; and
WHEREAS, the Purchasers are unwilling to enter into the Purchase
Agreement unless the Company and the Guarantors enter into this Agreement;
NOW, THEREFORE, in order to induce the Purchasers to enter into the
Purchase Agreement, and in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Defined Terms.
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(a) Unless otherwise defined herein, each capitalized term used
herein that is defined in the Purchase Agreement shall have the meaning
specified for such term in the Purchase Agreement.
(b) The words "hereof," "herein" and "hereunder" and words of
like import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and section references
are to this Agreement unless otherwise specified.
(c) All terms defined in this Agreement in the singular shall
have comparable meanings when used in the plural, and vice versa, unless
otherwise specified.
2. Grant of Security Interest in Trademarks. To secure the complete and
timely payment, performance and satisfaction of all of the Secured Obligations,
each Grantor hereby grants to the Collateral Agent for the benefit of the
Purchasers, a security interest in, as and by way of a first mortgage and
security interest having priority over all other security interests, with power
of sale to the extent permitted by applicable law, all of such Grantors' now
owned or existing and hereafter acquired or arising:
(i) all trademarks, trade names, trade dress, design marks,
service marks, logos, corporate names, company names, business names,
domain names, trade styles and other source of business identifiers, and
all federal, state and foreign registrations, renewals and recordings
thereof and all applications in connection therewith (I) listed on
Schedule A attached hereto and made a part hereof and (II) hereafter
acquired or arising and (a) all income, royalties, damages and payments
now and hereafter due and/or payable under and with respect thereto,
including, without limitation, payments under all licenses entered into
in connection therewith and damages and payments for past or future
infringements or dilutions thereof (b) the right to sue for past,
present and future infringements and dilutions thereof (c) the goodwill
of such Grantor's businesses symbolized by the foregoing and connected
therewith, and (d) all of such Grantor's rights corresponding thereto
throughout the world (all of the foregoing items described in this
Section 2(i), are sometimes hereinafter individually and/or collectively
referred to as the "Trademarks"); and
(ii) rights under or interest in any trademark or service mark
licenses or agreements with any other party, whether such Grantor is a
licensee or licensor, including, without limitation, those trademark or
service mark licenses and agreements listed on Schedule A attached
hereto and made a part hereof, in each case to the extent assignable
without violation thereof together with any goodwill connected with and
symbolized by any such trademark or service mark licenses and
agreements, the right to collect and receive payments, including but not
limited to royalties, under such licenses and agreements or damages for
breach thereof and the right to prepare for sale and sell any and all
Inventory now or hereafter owned by such Grantor and now or hereafter
covered by such licenses and agreements and all rights corresponding
thereto in the United States and any foreign country (the "Trademark
Licenses") (all of the foregoing items described in this Section 2
(i-ii) are hereinafter collectively referred to as the
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"Trademark Collateral").
3. Grant of Security Interest in Patents. To secure the complete and
timely payment, performance and satisfaction of all of the Secured Obligations,
the Grantors hereby grant to the Collateral Agent for the benefit of the
Purchasers, a security interest in, as and by way of a first mortgage and
security interest having priority over all other security interests, with power
of sale to the extent permitted by applicable law, all of the Grantors' now
owned or existing and hereafter acquired or arising:
(i) all letters patent and applications for letters patent
throughout the world, including all patent applications in preparation
for filing anywhere in the world and including each patent and patent
application referred to in Schedule B hereto (the "Patents");
(ii) all patent licenses, including each patent license referred
to in Schedule B hereto (the "Patent Licenses");
(iii) all reissues, divisions, continuations,
continuations-in-part, extensions, renewals and reexaminations of any of
the items described in the foregoing clauses (i) and (ii); and
(iv) all proceeds of, and rights associated with, the foregoing
(including license royalties and proceeds of infringement suits), the
right to sue third parties for past, present or future infringements of
any patent or patent application, including any patent or patent
application referred to in Schedule B hereto, and for breach or
enforcement of any patent license, including any patent license referred
to in Schedule B hereto, and all rights corresponding thereto throughout
the world (all of the foregoing items described in this Section 3 (i-iv)
are hereinafter collectively referred to as the "Patent Collateral").
4. Security Agreement. This Agreement has been executed and delivered by
the Grantors for the purpose of registering the security interest of the
Collateral Agent for the benefit of the Purchasers in the Trademark Collateral
and the Patent Collateral with the United States Patent and Trademark Office and
corresponding offices in other countries and foreign jurisdictions throughout
the world. The security interest granted hereby has been granted as a supplement
to, and not in limitation of, the security interest granted to the Collateral
Agent for the benefit of the Purchasers for its benefit under the Security
Agreement. The Security Agreement (and all rights and remedies of the Collateral
Agent for the benefit of the Purchasers thereunder) shall remain in full force
and effect in accordance with its terms.
5. Restrictions on Future Agreements. The Grantors agree that they will
not take any action, and will use best efforts not to permit any action to be
taken by others, including, without limitation, licensees, or fail to take any
action, which could reasonably be expected to have a material adverse effect on
the validity or enforcement of the rights collaterally assigned to the
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Collateral Agent for the benefit of the Purchasers under this Agreement or the
rights associated with the Trademark Collateral or Patent Collateral, and in
particular, the Grantors will not permit to lapse or become abandoned any
Trademark or Patent if such lapse or abandonment could reasonably be expected to
have a Material Adverse Effect.
6. No Other Liens' Perfected First Priority Liens. Except for the Liens
granted pursuant to this Agreement and the Security Agreement and Permitted
Liens, the Grantors own each of the Trademarks and Patents free and clear of any
and all Liens. No security agreement, financing statement or other public notice
with respect to all or any part of the Trademarks or Patents is on file or of
record in any public office, except such as have been filed in favor of the
Collateral Agent for the benefit of the Purchasers pursuant to this Agreement.
The Lien granted pursuant to this Agreement (i) upon completion of the filings
and other actions in appropriate filing offices will constitute perfected
security interests in the Trademarks and Patents in favor of the Collateral
Agent for the benefit of the Purchasers and (ii) is enforceable as such against
all creditors of and purchasers from the Grantors. The Grantors represent and
warrant that, (a) the Trademarks listed on Schedule A include all of the
material registered trademarks, trademark applications, registered service marks
and service mark applications now owned or held by any of the Grantors; (b) the
Patents listed on Schedule B include all of the letters patent and pending
patent applications now owned or held by any of the Grantors; and (c) the
Trademark Licenses and Patent Licenses listed on Schedules A and B,
respectively, include all of the trademark and service mark licenses and
agreements and patent licenses and agreements under which any of the Grantors is
presently the licensee or licensor and which are material individually or in the
aggregate to the operation of the businesses of the Grantors.
7. New Trademarks, Patents and Licenses. If, prior to the termination of
this Agreement, the Grantors shall (i) obtain rights to any new Trademarks or
Patents, (ii) become entitled to the benefit of any Trademarks or Patents,
whether as licensee or licensor, or (iii) enter into any new Trademark or Patent
Licenses, the provisions of Sections 2 and 3 above shall automatically apply
thereto (except in cases where any Grantor is the licensee, to the extent such
licenses are assignable without violation thereof it being understood and agreed
that the Grantors shall use commercially reasonable efforts to ensure that such
licenses are assignable for security purposes). The Grantors shall give to the
Collateral Agent for the benefit of the Purchasers written notice within 30
Business Days after the occurrence of any of the events described in clauses
(i), (ii) and (iii) of the preceding sentence. The Grantors hereby authorize the
Collateral Agent for the benefit of the Purchasers, upon receipt of such notice,
to modify this Agreement unilaterally (i) by amending Schedule A in accordance
with such notice to include any Trademarks owned or held by the Grantors and any
Trademark Licenses to which either Grantor becomes a party, (ii) by amending
Schedule B in accordance with such notice to include any future Patents owned or
held by the Grantors and any Patent Licenses to which either Grantor becomes a
party; (iii) by preparing this Agreement for filing with the United States
Patent and Trademark Office or any corresponding foreign patent or trademark
office or governmental agency, and (iv) by filing, in addition to and not in
substitution for this Agreement, a duplicate original of this Agreement
containing on Schedules A and B thereto as the case may be such future
Trademarks and Trademark Licenses, and Patent and Patent Licenses.
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8. Covenants. The Grantors covenant and agree that:
(a) Further Documentation. At any time and from time to time,
upon the written request of the Collateral Agent for the benefit of the
Purchasers, the Grantors will promptly and duly execute and deliver such further
instruments and documents and take such further action as the Collateral Agent
for the benefit of the Purchasers may reasonably request for the purpose of
obtaining or preserving the full benefits of this Agreement and of the rights
and powers herein granted, including, without limitation, the filing of any
financing or continuation statements under the Uniform Commercial Code. Any
costs or expenses incurred in connection with the performance of the obligations
set forth in the first sentence of this section (a) shall be borne by the
Grantors.
(b) Maintenance of Records. The Grantors will keep and maintain
at their own cost and expense satisfactory and complete records of the
Trademarks and Patents. The Grantors will mark their books and records
pertaining to the Trademark Collateral and Patent Collateral to evidence this
Agreement and the security interests granted hereby.
(c) Compliance with Laws etc. The Grantors will comply in all
material respects with all laws, rules, regulations, orders, decisions or
decrees of any federal, state or local executive, legislative, judicial,
regulatory or administrative agency, board or authority applicable to the
Trademark Collateral and Patent Collateral or any part thereof or to the
operation of the Grantors' businesses to the extent necessary to prevent an
impairment of the Lien granted hereby or the Collateral Agent's interest in the
Trademark Collateral and Patent Collateral.
(d) Limitation on Liens on Trademarks and Patents. The Grantors
will not create, incur or permit to exist, will defend the Collateral Agent for
the benefit of the Purchasers against, and will take such other action as is
necessary to remove any Lien or claim on or to the Trademarks and Patents other
than the Liens created hereby or the Security Agreement. The Grantors will
advise the Collateral Agent for the benefit of the Purchasers promptly of any
Lien on any of the Trademarks or Patents.
(e) Payment of Secured Obligations. The Grantors will pay and
discharge or otherwise satisfy at or before maturity, or before they become
delinquent, as the case may be, all taxes, assessments and governmental charges
or levies imposed upon the Trademark Collateral and Patent Collateral or in
respect of income or profits therefrom, as well as all claims of any kind
(including, without limitation, claims for labor, materials and supplies)
against or with respect to the Trademark Collateral and Patent Collateral
(except any Lien permitted by clause (viii) of the definition of Permitted Liens
in the Purchase Agreement).
9. Royalties. The Grantors hereby agree that when an Event of Default
has occurred and is continuing, the use by the Collateral Agent for the benefit
of the Purchasers of the Trademark Collateral and Patent Collateral as
authorized hereunder in connection with the Collateral Agent's exercise of its
rights and remedies hereunder shall be coextensive with the Grantors' rights
thereunder and with respect thereto and without any liability for royalties or
other related charges from the Collateral Agent.
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10. Further Assignments and Security Interests. Notwithstanding Section
25 hereof, no Grantor shall, without the prior written consent of the Collateral
Agent for the benefit of the Purchasers, be permitted to assign this Agreement
or any interest herein or in the Trademark Collateral or Patent Collateral, or
any part thereof, or otherwise pledge, encumber or grant any option with respect
to the Trademark Collateral or Patent Collateral, or any part thereof, held by
the Collateral Agent for the benefit of the Purchasers under this Agreement,
other than Permitted Liens. Upon and during the continuance of an Event of
Default, the Grantors agree that the Collateral Agent for the benefit of the
Purchasers, shall have the right to establish such reasonable quality controls
as the Collateral Agent for the benefit of the Purchasers, in its sole and
absolute judgment, may deem necessary to assure maintenance of the quality of
inventory marketed by the Grantors under the Trademarks and the Trademark
Licenses or in connection with which such Trademarks and Trademark Licenses are
used.
11. Continuing Security Interests. This Agreement is made for collateral
security purposes only. This Agreement shall create a continuing security
interest in the Trademark Collateral and Patent Collateral.
12. Duties of the Grantors. The Grantors shall have the duty, to the
extent desirable in the normal conduct of the Grantors' businesses, to: (i)
prosecute diligently any trademark or service mark application that is part of
the Trademarks, and any patent application that is part of the Patents, pending
as of the date hereof or hereafter until the termination of this Agreement, and
(ii) make application for the registration of any trademarks or service marks,
or application for the issuance of any patent, whether currently or hereafter
used or adopted by the Grantors in the United States and any foreign country or
territory throughout the world. The Grantors further agree (a) not to abandon
any Trademarks or Trademark Licenses, or any Patents or Patent Licenses if such
abandonment could reasonably be expected to have a Material Adverse Effect
without the prior written consent of the Collateral Agent for the benefit of the
Purchasers, and (b) to use reasonable best efforts to obtain and maintain in
full force and effect the Trademarks and Trademark Licenses and Patents and
Patent Licenses that are or shall be necessary or economically desirable in the
operation of the Grantors' businesses. Any expenses incurred in connection with
the foregoing shall be borne by the Grantors. The Collateral Agent for the
benefit of the Purchasers shall have no duty with respect to the Trademarks and
Trademark Licenses, and the Patents and Patent Licenses. Without limiting the
generality of the foregoing, the Collateral Agent for the benefit of the
Purchasers shall be under no obligation to take any steps necessary to preserve
rights in the Trademarks or Trademark Licenses, and the Patents or Patent
Licenses, but the Collateral Agent for the benefit of the Purchasers may do so
at its option upon and during the continuance of an Event of Default, and all
expenses incurred in connection therewith shall be for the sole account of the
Grantors and shall be added to the Secured Obligations secured hereby.
13. The Collateral Agent's Right to Sue. Upon and during the continuance
of an Event of Default, the Collateral Agent for the benefit of the Purchasers
shall have the right, but shall not be obligated, to bring suit in its own name
to enforce the Trademarks and the Licenses and, if the Collateral Agent for the
benefit of the Purchasers shall commence any such suit, the Grantors shall, at
the request of the Collateral Agent for the benefit of the Purchasers, do any
and
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all lawful acts and execute any and all proper documents required by the
Collateral Agent for the benefit of the Purchasers in aid of such enforcement.
The Grantors shall, upon demand, promptly reimburse the Collateral Agent for the
benefit of the Purchasers for all costs and expenses incurred by the Collateral
Agent for the benefit of the Purchasers in the exercise of its rights under this
Section 13 (including, without limitation, reasonable fees and expenses of
attorneys and paralegals for the Collateral Agent for the benefit of the
Purchasers).
14. Power of Attorney. The Grantors agree, upon the request of the
Collateral Agent for the benefit of the Purchasers and promptly following such
request, to take any action and execute any instrument which the Collateral
Agent for the benefit of the Purchasers may deem necessary or advisable to
accomplish the purposes of this Agreement. The Grantors hereby irrevocably
designate, constitute and appoint the Collateral Agent for the benefit of the
Purchasers (and all Persons designated by the Collateral Agent for the benefit
of the Purchasers in its sole and absolute discretion) with full power of
substitution, as the Grantors' true and lawful attorney-in-fact, with full power
and authority in the name of the Grantors, or in its own name, from time to time
in the Collateral Agent for the benefit of the Purchasers's discretion upon and
during the continuance of an Event of Default, for the purpose of carrying out
the terms of this Agreement, to take any and all appropriate action and to
execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes hereof and, without limiting the generality
of the foregoing, hereby give the Collateral Agent for the benefit of the
Purchasers the power and right on behalf of the Grantors, without notice or
assent by the Grantors, to the extent permitted by applicable law, to (i)
endorse the Grantors' names on all applications, documents, papers and
instruments necessary or desirable for the Collateral Agent for the benefit of
the Purchasers in the use, prosecution or protection of the Trademark Collateral
and Patent Collateral, (ii) assign, pledge, convey or otherwise transfer title
in or dispose of the Trademark Collateral or Patent Collateral to anyone on
commercially reasonable terms (but subject to the terms thereof), (iii) grant or
issue any exclusive or nonexclusive license under the Trademarks or Patents or
under the Trademark Licenses or Patent Licenses, to anyone on commercially
reasonable terms (but only, in the case of Licenses, to the extent permitted
under such Licenses), and (iv) take any other actions with respect to the
Trademarks and Patents or, to the extent permitted, the Trademark and Patent
Licenses as the Collateral Agent for the benefit of the Purchasers deems in its
own best interest. This power of attorney is coupled with an interest and shall
be irrevocable until the termination of this Agreement as provided in Section 27
hereof. The Grantors acknowledge and agree that this Agreement is not intended
to limit or restrict in any way the rights and remedies of the Collateral Agent
for the benefit of the Purchasers, but rather is intended to facilitate the
exercise of such rights and remedies. The power granted pursuant to this Section
14 shall terminate upon the termination of this Agreement as provided in Section
27 hereof.
15. Event of Default; Cumulative Remedies. The Collateral Agent for the
benefit of the Purchasers shall have, in addition to all other rights and
remedies given it by the terms of this Agreement, all rights and remedies
allowed by law and the rights and remedies of a secured party under the Uniform
Commercial Code as enacted in any jurisdiction in which the Trademarks or the
Licenses may be located or deemed located. Upon and during the continuance of an
Event of Default, the Grantors agree to assign, convey and otherwise transfer
title in and to the Trademark Collateral and Patent Collateral to the Collateral
Agent for the benefit of the Purchasers or any
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transferee of the Collateral Agent for the benefit of the Purchasers and to
execute and deliver to the Collateral Agent for the benefit of the Purchasers or
any such transferee all such agreements, documents and instruments as may be
necessary, in the Collateral Agent for the benefit of the Purchasers's sole
discretion exercised in a commercially reasonable manner, to effect such
assignment, conveyance and transfer. All of the Collateral Agent for the benefit
of the Purchasers's rights and remedies with respect to the Trademark Collateral
and Patent Collateral, whether established hereby, by the Security Agreement, by
any other agreements or by law, shall be cumulative and may be exercised
separately or concurrently. Notwithstanding anything set forth herein to the
contrary, it is hereby expressly agreed that upon and during the continuance of
an Event of Default, the Collateral Agent for the benefit of the Purchasers may
exercise any of the rights and remedies provided in this Agreement, the Security
Agreement and any of the other Transaction Documents, including, but not limited
to, the right to sell, transfer or otherwise dispose of any and all finished
goods Inventory bearing the Trademarks in any manner determined solely by the
Collateral Agent for the benefit of the Purchasers. The Grantors agree that any
notification of intended disposition of any of the Trademark Collateral or
Patent Collateral required by law shall be deemed reasonably and properly given
if given at least ten (10) Business Days before such disposition. The Grantors
hereby agree that they shall have no right to satisfy the Collateral Agent for
the benefit of the Purchasers's rights to equitable remedies by the payment of
money damages, and nothing contained in this Agreement will restrict the
Collateral Agent for the benefit of the Purchasers's rights to obtain equitable
remedies for breaches of this Agreement. To the extent permitted by applicable
law, the Grantors waive all claims, damages, and demands they may acquire
against the Collateral Agent for the benefit of the Purchasers arising out of
the lawful exercise by it of its rights hereunder.
16. Indemnity and Expenses.
(a) Each Grantor agrees to indemnify the Collateral Agent for the
benefit of the Purchasers and each Purchaser from and against any and all
claims, losses and liabilities (other than Excluded Expenses (as such term is
defined in Section 1(d) of the Pledge Agreement)) growing out of or resulting
from this Agreement that are incurred by the Collateral Agent for the benefit of
the Purchasers for the benefit of the Purchasers (including without limitation
enforcement of this Agreement), except claims, losses or liabilities directly
resulting from the gross negligence or willful misconduct of the Collateral
Agent or any Purchaser.
(b) Each Grantor will upon demand pay to the Collateral Agent for
the benefit of the Purchasers the amount of any and all reasonable expenses,
including the reasonable fees and disbursements of its counsel and of any
experts and agents (other than Excluded Expenses (as such term is defined in
Section 16(a) above)), that the Collateral Agent for the benefit of the
Purchasers may incur in connection with (i) the administration or amendment of
this Agreement, (ii) the custody, preservation, use or operation of, or the sale
of, collection from or other realization upon, any of the Trademark Collateral
and Patent Collateral, (iii) the exercise or enforcement of any of the rights of
the Collateral Agent for the benefit of the Purchasers, or (iv) the failure by
such Grantor to perform or observe any of the provisions hereof.
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17. Waivers. In addition to the other waivers contained herein, each
Grantor hereby expressly waives, to the extent permitted by law: presentment for
payment, demand, protest, notice of demand, notice of protest, notice of default
or dishonor, notice of payments and nonpayments and all other notices and
consents to any action taken by the Collateral Agent for the benefit of the
Purchasers unless expressly required by this Agreement. The Collateral Agent for
the benefit of the Purchasers's failure, at any time or times hereafter, to
require strict performance by the Grantors of any provision of this Agreement
shall not waive, affect or diminish any right of the Collateral Agent for the
benefit of the Purchasers thereafter to demand strict compliance and performance
therewith nor shall any course of dealing between the Grantors and the
Collateral Agent for the benefit of the Purchasers have such effect. No single
or partial exercise of any right hereunder shall preclude any other or further
exercise thereof or the exercise of any other right. None of the undertakings,
agreements, warranties, covenants and representations of the Grantors contained
in this Agreement shall be deemed to have been suspended or waived by the
Collateral Agent for the benefit of the Purchasers unless such suspension or
waiver is in writing signed by an officer of the Collateral Agent for the
benefit of the Purchasers and directed to the Grantors specifying such
suspension or waiver.
18. Absolute Rights and Obligations. All rights of the Collateral Agent
for the benefit of the Purchasers in the Security Interests granted hereunder,
and each of the Secured Obligations, shall be absolute and unconditional
irrespective of:
(a) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations, or any other amendment
or waiver of or any consent to departure from, the Purchase Agreement or any
other Transaction Document, including, but not limited to, (i) an increase or
decrease in the Secured Obligations and (ii) an amendment of any Transaction
Document to permit the Collateral Agent for the benefit of the Purchasers or any
one or more of them to extend further or additional credit to the Company in any
form including credit by way of loan, purchase of assets, guarantee or
otherwise, which credit shall thereupon be and become subject to the Purchase
Agreement and the other Transaction Documents as a Secured Obligation;
(b) any taking and holding of collateral or guarantees (including
without limitation any collateral pledged as security for the Secured
Obligations under the other Security Instruments) for all or any of the Secured
Obligations; or any amendment, alteration, exchange, substitution, transfer,
enforcement, waiver, subordination, termination or release of any such
collateral or guarantees, or any non-perfection of any such collateral, or any
consent to departure from any such guaranty;
(c) any manner of application of collateral, or proceeds thereof,
securing payment or enforcement of all or any of the Secured Obligations, or the
manner of sale of any such collateral;
(d) any consent by the Secured Parties to the change, restructure
or termination of the corporate structure or existence of the Company or any
Grantor and any
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corresponding restructure of the Secured Obligations, or any other restructure
or refinancing of the Secured Obligations or any portion thereof,
(e) any modification, compromise, settlement or release by the
Secured Parties, by operation of law or otherwise, collection or other
liquidation of the Secured Obligations or the liability of the Company, any
Grantor or any Guarantor (other than the Grantor against which this Agreement is
to be enforced), or of any collateral for the Secured Obligation (including
without limitation any collateral pledged as security for the Secured
Obligations under the other Security Instruments), in whole or in part, and any
refusal of payment by the Collateral Agent for the benefit of the Purchasers in
whole or in part, from any obligor or Guarantor (other than the Grantor against
which this Agreement is sought to be enforced) in connection with any of the
Secured Obligations, whether or not with notice to, or further assent by, or any
reservation of rights against, any Grantor; or
(f) any other circumstance (including without limitation any
statute of limitations) that might otherwise constitute a defense available to,
or a discharge of, the Company, any Guarantor or a Grantor.
The granting of a Security Interest in the Collateral shall continue to
be effective or be reinstated, as the case may be, if at any time any payment of
any of the Secured Obligations is rescinded or must otherwise be returned by any
Collateral Agent for the benefit of the Purchasers, upon the insolvency,
bankruptcy or reorganization of the Company or any Grantor or otherwise, all as
though such payment had not been made
19. Definitions. All terms used herein which are not defined herein or
in the Purchase Agreement shall be defined in accordance with the appropriate
definitions appearing in the Uniform Commercial Code as currently in effect in
New York, and such definitions are hereby incorporated herein by reference and
made a part hereof.
20. Entire Agreement. This Agreement, together with the Purchase
Agreement, the Guaranty and other Transaction Documents, constitutes and
expresses the entire understanding between the parties hereto with respect to
the subject matter hereof, and supersedes all prior agreements and
understandings, inducements, commitments or conditions, express or implied, oral
or written, except as herein contained. The express terms hereof control and
supersede any course of performance or usage of the trade inconsistent with any
of the terms hereof. Neither this Agreement nor any portion or provision hereof
may be changed, altered, modified, supplemented, discharged, canceled,
terminated, or amended orally or in any manner other than by an agreement, in
writing signed by the parties hereto, except at provided in Section 7.
21. Further Assurances. Each Grantor agrees at its own expense to do
such further acts and things, and to execute and deliver such additional
conveyances, assignments, financing statements, agreements and instruments, as
the Collateral Agent for the benefit of the Purchasers may at any time
reasonably request in connection with the administration or enforcement of this
Agreement or related to the Collateral or any part thereof or in order better to
assure and confirm unto the Collateral Agent for the benefit of the Purchasers
its rights, powers and remedies
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hereunder. Each Grantor hereby consents and agrees that the issuers of or
obligors in respect of the Collateral shall be entitled to accept the provisions
hereof as conclusive evidence of the right of the Collateral Agent for the
benefit of the Purchasers to exercise its rights hereunder with respect to the
Collateral, notwithstanding any other notice or direction to the contrary
heretofore or hereafter given by any Grantor or any other Person to any of such
issuers or obligors.
22. Intentionally omitted.
23. Severability. The provisions of this Agreement are independent of
and separable from each other. If any provision hereof shall for any reason be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect the validity or enforceability of any other provision hereof, but this
Agreement shall be construed as if such invalid or unenforceable provision had
never been contained herein.
24. Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of each Grantor, and the right, remedies, powers, and
privileges of the Collateral Agent for the benefit of the Purchasers hereunder
shall inure to the benefit of the successors and assigns of the Collateral Agent
for the benefit of the Purchasers; provided, however, that no Grantor shall make
any assignment hereof without the prior written consent of the Collateral Agent
for the benefit of the Purchasers.
25. Counterparts. This Agreement may be executed in any number of
counterparts and all the counterparts taken together shall be deemed to
constitute one and the same instrument.
26. Remedies Cumulative. All remedies hereunder are cumulative and are
not exclusive of any other rights and remedies of the Collateral Agent for the
benefit of the Purchasers provided by law or under the Purchase Agreement, the
other Transaction Documents, or other applicable agreements or instruments. The
purchase of the Notes by the Collateral Agent for the benefit of the Purchasers
pursuant to the Purchase Agreement shall be conclusively presumed to have been
made or extended, respectively, in reliance upon each Grantor's execution and
delivery hereof.
27. Termination: Release of Collateral. This Agreement shall terminate
upon the payment in full of the Notes, at which time the liens and rights
granted to the Collateral Agent for the benefit of the Purchasers hereunder
shall automatically terminate and no longer be in effect, and the Trademark
Collateral and Patent Collateral shall automatically be released from the liens
created hereby. Upon such termination of this Agreement, the Collateral Agent
for the benefit of the Purchasers shall, at the sole expense of the Grantors,
reassign and redeliver to each applicable Grantor such Trademark Collateral and
Patent Collateral then held by or for the Collateral Agent for the benefit of
the Purchasers and execute and deliver to such Grantor such documents as such
Grantor shall reasonably request and take such further actions as may be
reasonably necessary to effect the same.
11
<PAGE> 12
28. Notices. Any notice required or permitted hereunder shall be given,
(a) with respect to the Company or any Grantor, at the Company's address
indicated in Section 12.9 of the Purchase Agreement and (b) with respect to the
Collateral Agent for the benefit of the Purchasers, at the Collateral Agent for
the benefit of the Purchasers's address indicated in Section 12.9 of the
Purchase Agreement. All such notices shall be given and shall be effective as
provided in Section 12.9 of the Purchase Agreement.
29. Governing Law; Service of Process.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE NOTWITHSTANDING ITS EXECUTION
AND DELIVERY OUTSIDE SUCH STATE.
(b) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST EACH PARTY TO THIS
AGREEMENT WITH RESPECT TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT MAY
BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE
OF NEW YORK AND, BY ITS EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY TO
THIS AGREEMENT ACCEPTS, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT FROM
WHICH NO APPEAL HAS BEEN TAKEN OR IS AVAILABLE. EACH PARTY TO THIS AGREEMENT
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS NOTICE ADDRESS SPECIFIED
IN SECTION 28 HEREOF, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH
MAILING. EACH PARTY TO THIS AGREEMENT HEREBY KNOWINGLY, INTENTIONALLY AND
IRREVOCABLY WAIVE (A) TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, AND (B) ANY OBJECTION
(INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER TRANSACTION DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN
SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
(c) EACH PARTY TO THIS AGREEMENT AGREES THAT SERVICE OF PROCESS
MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER
LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR
12
<PAGE> 13
PROCEEDING, OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE
LAWS IN EFFECT IN THE STATE OF NEW YORK.
13
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
GRANTORS:
SENETEK, PLC
By: /s/ FRANK J. MASSINO
-------------------------------
Name: Frank J. Massino
Title: President
CARME COSMECEUTICAL SCIENCES, INC.
By: /s/ FRANK J. MASSINO
-------------------------------
Name: Frank J. Massino
Title: President
SECURED PARTY:
SILVER CREEK INVESTMENTS, LTD.
By:
-------------------------------
Name:
Title:
[Signature page to Patent and Trademark Security Agreement]
<PAGE> 1
EXHIBIT 10.12
FIXED AND FLOATING SECURITY DOCUMENT
DATED 14 APRIL 1999
CREATED BY
SENETEK PLC
(Registered No. 1759068)
As the Company
in Favour of
SILVER CREEK INVESTMENTS, LTD.
as Collateral Agent
B
One Silk Street
London EC2Y 8HQ
Tel: (+44) 171 455 2000
<PAGE> 2
This Deed is made on 14 April 1999 between:
(1) SENETEK PLC, a company incorporated in England (Registered No. 1759068)
whose registered office is at 23 Palace Street, London SW1E 5HW (the
"COMPANY") and
(2) SILVER CREEK INVESTMENTS, LTD. a company incorporated in the British Virgin
Islands as Collateral Agent for the Purchasers under the Purchase Agreement
(the "COLLATERAL AGENT", which expression includes its successors and
assigns).
BACKGROUND
(A) The Company is entering into this Deed in connection with the Purchase
Agreement.
(B) The Board of Directors of the Company is satisfied that entering into this
Deed is for the purposes and to the benefit of the Company and its
business.
(C) The Collateral Agent and the Company intend this document to take effect as
a deed (even though the Collateral Agent only executes it under hand).
(D) This Deed is intended to grant security over the assets of the Company
situated within the United Kingdom only.
It is agreed as follows:
1. Interpretation
1.1 DEFINITIONS: Except as otherwise defined, terms defined in the Purchase
Agreement have the same meaning in this Deed and, except to the extent that
the context requires otherwise:
"BANK ACCOUNTS" means all current, deposit or other accounts with any bank
or financial institution in which the Company now or in the future has an
interest and (to the extent of its interest) all balances now or in the
future standing to the credit of those accounts
"BOOK DEBTS" means all book and other debts of any nature, and all other
rights to receive money (excluding Bank Accounts), now or in the future
due, owing or payable to the Company and the benefit of all related
negotiable instruments, rights, Security, guarantees and indemnities of any
kind
"CHARGED ASSETS" means the assets from time to time subject, or expressed
to be subject, to the Charges or any part of those assets
"CHARGES" means all or any of the Security created or expressed to be
created by or pursuant to this Deed
"CURRENCY OF ACCOUNT" means the currency in which the relevant indebtedness
is denominated or, if different, is payable
"DELEGATE" means a delegate or sub-delegate appointed pursuant to Clause 16
"ENFORCEMENT EVENT" means the occurrence of an Event of Default
"EXCLUDED ASSETS SCHEDULE" means the schedule so entitled attached to this
Deed
"FIXTURES" means, fittings (including trade fixtures and fittings) and
fixed plant, machinery and apparatus
"INSOLVENCY ACT" Means the Insolvency Act of 1986
<PAGE> 3
"INSURANCES" means all contracts and policies of insurance of any kind now or in
the future taken out by or on behalf of the Company or (to the extent of its
interest) in which the Company now or in the future has an interest
"INTELLECTUAL PROPERTY" means, insofar as they exist in and/or are registrable
in the United Kingdom all patents, designs, copyrights, topographies,
trademarks, trading names, rights in confidential information and know-how, and
any associated or similar rights, which the Company now or in the future owns
or (to the extent of its interest) in which the Company now or in the future
has an interest (in each case whether registered or unregistered and including
any related licences and sub-licences of the same granted by it or to its
applications and rights to apply for the same)
"INVESTMENTS" means insofar as they exist in and/or are registrable in the
United Kingdom:
(i) securities and investments of any kind (including shares, stock,
debentures, units, depositary receipts, bonds, notes, commercial
paper and certificates of deposit)
(i) warrants, options or other rights to subscribe for, purchase or
otherwise acquire securities and investments
(ii) all rights relating to securities and investments which are
deposited with, or registered in the name of, any depositary,
custodian, nominee, clearing house or system, investment manager,
chargee or other similar person or their nominee, in each case
whether or not on a fungible basis (including rights against any
such person) and
(i) all other rights attaching or relating to securities or investments
and all cash or other securities or investments in the future
deriving from investments or such rights
in each case now or in the future owned by the Company or (to the extent of its
interest) in which the Company has an interest
"LIABILITIES" means the Obligations (as that term is defined in the Purchase
Agreement)
"LPA" means the Law of Property Act 1925
"PURCHASE AGREEMENT" means the note purchase agreement dated as of the date
hereof between the Company and the Collateral Agent
"REAL PROPERTY" means freehold and leasehold property (with an unexpired term
of 30 years or more) in England and Wales (in each including any estate or
interest therein, all rights from time to time attached or relating thereto and
all Futures from time to time therein or thereon)
"RECEIVER" means an administrative receiver, receiver and manager or other
receiver appointed in respect of the Charged Assets
"SECURITY" includes any mortgage, pledge, lien, hypothecation, security
interest or other charge or encumbrance and any other agreement having
substantially the same economic effect (and "SECURED" shall be construed
accordingly)
"TAX(ES)" includes any present or future tax, levy, impost, duty, charge, fee,
deduction or withholding of any kind (and whatever called) imposed, levied,
collected, withheld or assessed by or on any person in any jurisdiction
<PAGE> 4
the "Winding-up" of a person also includes the amalgamation,
reconstruction, administration, dissolution, liquidation, merger or
consolidation of that person, and any equivalent or analogous procedure
under the law of any jurisdiction.
1.2 CONSTRUCTION OF CERTAIN REFERENCES: Except to the extent that the context
requires otherwise, any reference in this Deed to:
"ASSETS" insofar as they exist in and/or are registrable in the United
Kingdom of any person means all or any part of its business, undertaking,
property, assets, revenues, rights and uncalled capital, wherever located
any document (including this Deed) is a reference to that document as from
time to time amended, supplemented, novated, restated or replaced and
includes a reference to any document which amends, supplements, novates,
restates, replaces or is entered into, made or given under or in
accordance with any of the terms of that document
in the event of any inconsistency between the provisions or terms of this
Deed and the Purchase Agreement, the provisions or terms of the Purchase
Agreement shall prevail
any legislative provision shall, at any particular time, include any
modification, extension or re-enactment of it then in force and all
instruments, orders and regulations then in force and made under or
deriving validly from it
"PERSON" includes any individual, company, corporation, firm, partnership,
joint venture, undertaking, association, organisation, trust, state or
agency of a state (in each case whether or not having separate legal
personality)
"RIGHTS" includes rights, authorities, discretions, remedies, liberties,
powers, easements, quasi-easements and appurtenances (in each case, of any
nature whatsoever).
1.3 HEADINGS: Headings shall be ignored in construing this Deed.
1.4 TRANSACTION DOCUMENT: The parties acknowledge that this Deed constitutes a
Transaction Document (as defined in the Purchase Agreement).
2. UNDERTAKING TO PAY
The Company shall discharge or perform each Liability when due in
accordance with its terms or, if they do not specify a time for payment or
performance, immediately on demand by the Collateral Agent.
3. FIXED CHARGES
The Company, with full title guarantee and as security for the payment and
discharge of all Liabilities, charges in favour of the Collateral Agent
for the benefit of the Purchasers:
3.1 FUTURE REAL PROPERTY: except for the Real Property (if any) set out and
described in the Excluded Assets Schedule by way of first fixed equitable
charge, all Real Property now belonging to it and all Real Property
acquired by it in the future
3.2 OTHER ASSETS: except for the Intellectual Property (if any) set out and
described in the Excluded Assets Schedule by way of first fixed charge,
all Intellectual Property both present and future.
<PAGE> 5
2 FLOATING CHARGE
3.3 CREATION: The Company, with full title guarantee and as security for the
payment and discharge of all Liabilities, charges in favour of the
Collateral Agent for the benefit of the Purchasers by way of first floating
charge, its undertaking and all its assets, both present and future
(including assets expressed to be charged by Clause 3 (Fixed Charges))
except for the undertaking and assets set out and described in the Excluded
Assets Schedule.
3.4 RANKING: The floating Charge ranks behind all the fixed Charges but ranks
in priority to any other Security over the Charged Assets except for
Security ranking in priority in accordance with paragraph 6 of Schedule 1
(Borrow Money).
3.5 CONVERSION BY NOTICE: The Collateral Agent may convert the floating Charge
into a fixed Charge (either generally or specifically) by notice to the
Company specifying the relevant Charged Assets:
3.5.1 if it considers (on reasonable grounds) it desirable to do so in
order to protect or preserve the Charges over those Charged
Assets and/or the priority of those Charges and/or
3.5.2 at any time after an Enforcement Event occurs.
3.6 AUTOMATIC CONVERSION: if:
3.6.1 the Company takes any step to create any Security in breach of
Clause 5.1 (Security) over any of the Charged Assets not subject
to a fixed Charge or
3.6.2 any person takes any step to levy any distress, attachment,
execution or other legal process against any of those Charged
Assets
the floating Charge over the relevant Charged Assets shall automatically
and immediately be converted into a fixed Charge.
4 RESTRICTION AND FURTHER ASSURANCE
4.1 SECURITY: The Company shall not (and shall not agree to) create or have
outstanding any Security over the Charged Assets except for:
4.1.1 the Charges and
4.1.2 Permitted Liens
4.2 DISPOSAL: The Company shall not (and shall not agree to) sell, factor,
discount, transfer, assign, lease or hire out, lend or otherwise dispose of
the Charged Assets, except for a disposal in the ordinary course of trade
of assets which are not then subject or expressed to be subject to a fixed
Charge and the disposal of which is not prohibited by any Transaction
Document, without the prior written consent of the Collateral Agent.
4.3 FURTHER ASSURANCE: Subject to Clause 10.2, the Company shall promptly do
whatever the Collateral Agent:
4.3.1 reasonably requires to perfect or protect the Charges or the
priority of the Charges or
4.3.2 requires following an Event of Default to facilitate the
realisation of the Charged Assets or the exercise of any rights
vested in the Collateral Agent or any Receiver
<PAGE> 6
including executing any transfer, conveyance, charge, assignment or
assurance of the Charged Assets (whether to the Collateral Agent or its
nominees or otherwise), making any registration and giving any notice,
order or direction.
5 REAL PROPERTY
5.1 ACQUISITION: The Company shall promptly notify the Collateral Agent of its
acquisition of, or agreement to acquire, any Real Property.
5.2 DOCUMENTS: The Company shall deposit with the Collateral Agent, and the
Collateral Agent shall be entitled to hold, all title deeds and documents
relating to the Company's future Real Property.
5.3 FUTURE REAL PROPERTY: In the case of the Company's future Real Property in
England and Wales, the Company shall:
5.3.1 promptly apply to H.M. Land Registry for first registration of
the title to that Real Property and/or registration of the
Company as proprietor of that Real Property and notify the
Collateral Agent of its title number and
5.3.2 request the Chief Land Registrar to register in relation to
that Real Property notice of all Charges.
5.4 UNREGISTERED REAL PROPERTY: In the case of the Company's future Real
Property in England and Wales, which is not registered at H.M. Land
Registry and is not required to be so registered, the Company shall
promptly apply to register this Deed and the Charges at the Land Charges
Registry if the title deeds and documents are not deposited with the
Collateral Agent.
5.5 LEGAL CHARGE: As security for the liabilities, the Company shall promptly
execute and deliver to the Collateral Agent such legal charge of such of
its Real Property from time to time in England and/or Wales as the
Collateral Agent requires, such charge to be in a form agreed between the
parties or failing such agreement in a form determined by the Collateral
Agent that is no more onerous than this Deed. The Company shall promptly
apply to H.M. Land Registry for registration of any such legal charge.
5.6 COMPLIANCE WITH OBLIGATIONS: The Company shall comply with any covenants,
stipulations, conditions, licences, consents, and any other statutory,
regulatory or contractual obligations relating to its Real Property or its
use, including those requiring payment of sums in respect of its Real
Property.
5.7 LEASES: THE COMPANY SHALL:
5.7.1 comply with all obligations imposed on it, and enforce the due
observance and performance of all obligations of all other
persons of which it has the benefit, under any lease of Real
Property
5.7.2 not exercise any power to determine or extend, or accept the
surrender of, any lease of Real Property of which it is the
lessor and
5.7.3 not exercise any of the powers of leasing or agreeing to lease
any Real Property vested in or conferred on mortgagors by the
general law.
5.8 NOTICES: The Company shall produce to the Collateral Agent within 7 days
of receipt by it every statutory notice made in connection with any of its
Real Property and other communication relating to the Real Property which
could in the Companies view have a material adverse effect
<PAGE> 7
on the value of the Real Property and comply with the reasonable
instructions of the Collateral Agent in relation to any such notice or
communication.
6 BOOK DEBTS
6.1 COLLECTION: Following the Charge becoming fixed over Book Debts under
Clauses 4.3 or 4.4 the Company shall promptly collect all Book Debts and
shall hold the proceeds of collection on trust for the Collateral Agent.
6.2 PAYMENT INTO DESIGNATED BANK ACCOUNT(S): Following the Charge becoming
fixed over Book Debts under Clauses 4.3 or 4.4 the Company shall
immediately pay all moneys received or receivable by it from any source
(including all proceeds of collection of Book Debts) into a Bank Account
(or, if one or more Bank Accounts have been designated for this purpose by
the Collateral Agent, the relevant Bank Account(s)). The Collateral Agent
may designate different Bank Accounts for different moneys.
6.3 RESTRICTIONS ON DEALING WITH BOOK DEBTS: Following the Charge becoming
fixed over Book Debts under Clauses 4.3 or 4.4 without prejudice and in
addition to Clauses 5.1 (Security), 5.2 (Disposal) and 5.3 (Further
Assurance):
6.3.1 except for the Charges, the Company shall not create or have
outstanding any Security over all or any part of any of the Book
Debts and
6.3.2 except as required by Clause 5.3 (Further Assurance), the Company
shall not sell, factor, discount, transfer, assign, lend or
otherwise dispose of all or any part of any of the Book Debts.
6.4 DOCUMENTS:: Following the Charge becoming fixed over Book Debts under
Clauses 4.3 or 4.4 the Company shall promptly execute and/or deliver to the
Collateral Agent such documents relating to such of the Book Debts as the
Collateral Agent reasonably requires.
7 BANK ACCOUNTS
7.1 RESTRICTION ON BANK ACCOUNTS: The Company shall have no Bank Accounts other
than those from time to time advised to the Collateral Agent.
7.2 RESTRICTIONS ON DEALING WITH BANK ACCOUNTS: Following the Charge becoming
fixed over Bank Accounts under Clauses 4.3 or 4.4 without prejudice and in
addition to Clauses 5.1 (Security), 5.2 (Disposal) and 5.3 (Further
Assurance):
7.2.1 except for the Charges, the Company shall not create or have
outstanding any Security over all or any part of any of the Bank
Accounts and
7.2.2 except as required by Clause 5.3 (Further Assurance), the Company
shall not transfer, assign or otherwise dispose of all or any
part of any of the Bank Accounts.
8 INVESTMENTS
8.1 ACQUISITION: The Company may only acquire, or agree to acquire any
investment in accordance with the terms of the Purchase Agreement. The
Company shall promptly notify the Collateral Agent of its acquisition of,
or agreement to acquire, any investment.
8.2 DOCUMENTS: Following the Charge becoming fixed over investments under
Clauses 4.3 or 4.4 the Company shall:
<PAGE> 8
8.2.1 except to the extent the Collateral Agent notifies the Company from
time to time to the contrary, deposit with the Collateral Agent, or
as it directs, all certificates representing investments and
8.2.2 execute and/or deliver to the Collateral Agent such other documents
relating to the investments, including transfers of investments
executed in blank, as the Collateral Agent requires.
2.1 VOTING COLLATERAL AGENT AND OTHER RIGHTS: Subject to Clause 9.4 (Voting and
other Rights if the Changes become Enforceable), the Company shall be
entitled to exercise or direct the exercise of the voting and other rights
attached to any investment as it sees fit provided that exercise of or
failure to exercise those rights could not reasonably be expected to have
an adverse effect on the value of the relevant investment or the Charged
Assets and would not otherwise prejudice the interests of the Collateral
Agent
8.3 VOTING AND OTHER RIGHTS IF THE CHARGES BECOME ENFORCEABLE: At any time
after an Enforcement Event occurs:
8.3.3 the Collateral Agent or the Receiver shall be entitled to exercise
or direct the exercise of the voting and other rights attached to
any investment in such manner as it or he sees fit and
8.3.4 the Company shall comply or procure the compliance with any
directions of the Collateral Agent or the Receiver in respect of the
exercise of those rights and shall promptly execute and/or deliver
to the Collateral Agent or the Receiver such forms of proxy as it or
he may require with a view to enabling such person as it or he may
select to exercise those rights.
8.4 POWER OF ATTORNEY: If any Investment is not held in the Company's name,
the Company shall promptly deliver to the Collateral Agent an irrevocable
power of attorney, expressed to be given by way of security and executed
as a deed by the person in whose name that investment is held. That power
of attorney shall appoint the Collateral Agent, each Receiver and each
Delegate the attorney of the holder in relation to that investment and
shall be in such form as the Collateral Agent reasonably requires.
8.5 COMMUNICATIONS: The Company shall promptly execute and/or deliver to the
Collateral Agent a copy of each circular, notice, report, set of accounts
or other document received by it or its nominee in connection with any
investment, as the Collateral Agent requires.
9 INTELLECTUAL PROPERTY
9.1 ACQUISITION: The Company shall promptly notify the Collateral Agent of its
acquisition of, or agreement to acquire, (by licence or otherwise) any
Intellectual Property, and any application by it or on its behalf to
register any Intellectual Property in so far as doing so would not breach
any contractual obligations of confidentiality.
9.2 DOCUMENTS: The Company shall promptly execute and/or deliver to the
Collateral Agent such documents relating to Intellectual Property as the
Collateral Agent requires. Provided that prior to an Enforcement Event the
Company shall not be required to execute a conveyance assignment or
transfer of its Intellectual Property to the Collateral Agent or its
nominee.
9.3 MAINTENANCE: The Company shall take all necessary action to safeguard and
maintain its present and future ownership and rights in connection with
all Intellectual Property used in or necessary for its business, including
observing all related covenants and stipulations, obtaining all
<PAGE> 9
actions, it will also take all steps necessary to maintain all registered
design, patent and trade mark registration held by it, including payment of
renewal fees.
10 INSURANCE
10.1 DOCUMENTS: The Company shall promptly:
10.1.1 execute and/or deliver to the Collateral Agent a copy of such
insurance policies effected by it and the related premium
receipts, and such other documents relating to the insurances, as
the Collateral Agent requires and
10.1.2 procure that the fixed Charges over the insurances are noted on
the relevant policies.
2.2 MAINTENANCE: The Company shall maintain insurances in respect of the Charge
Assets in accordance with the provisions of the Security Agreement as if
those provisions were incorporated into this Deed mutatis mutandis.
11 GENERAL UNDERTAKINGS
11.1 COMPLY WITH UNDERTAKINGS: The Company shall comply with its undertakings
and obligations under the Purchase Agreement.
12 REPRESENTATIONS AND WARRANTIES
2.3 The Company makes the representations and warranties to the Collateral
agent set out in Clause 10 of the Purchase Agreement and repeats those
representations and warranties under this Deed as the same time that they
are made or repeated under the Purchase Agreement
13 ENFORCEMENT
13.1 WHEN ENFORCEABLE: As between the Company and the Collateral Agent the
Charges shall be enforceable, and the powers conferred by Section 101 of
the LPA as varied and extended by this Deed shall be exercisable, at any
time after an Enforcement Event occurs.
13.2 POWER OF SALE: The Statutory power of sale, of appointing a Receiver and
the other statutory powers conferred on mortgagees by Section 101 of the
LPA as varied and extended by this Deed shall arise on the date of this
Deed.
13.3 SECTION 103 LPA: Section 103 of the LPA shall not apply to this Deed.
14 APPOINTMENT AND RIGHTS OF RECEIVERS
14.1 APPOINTMENT OF RECEIVERS: if:
14.1.3 requested by the Company or
14.1.4 any step is taken with a view to the administration of the
Company under the insolvency Act or
14.1.5 any other Enforcement Event occurs (whether or not the Collateral
Agent has taken possession of the Charged Assets)
without any notice or further notice, the Collateral Agent may at any time,
by deed, or otherwise in writing signed by any officer or manager of the
Collateral Agent or any person authorised for this
<PAGE> 10
Agent may similarly remove any Receiver and appoint any person instead of
any Receiver. If the Collateral Agent appoints more than one person as
Receiver, the Collateral Agent may give those persons power to act either
jointly or severally.
14.2 SCOPE OF APPOINTMENT: Any Receiver may be appointed Receiver of all of the
Charged Assets or Receiver of a part of the Charged Assets specified in the
appointment. In the latter case, the rights conferred on a Receiver as set
out in Schedule 1 (Rights of Receivers) shall have effect as though every
reference in that Schedule to any Charged Assets were a reference to the
part of those assets so specified or any part of those assets.
14.3 RIGHTS OF RECEIVERS: Any Receiver appointed pursuant to this Clause 15
shall have the rights, powers, privileges and immunities conferred by the
Insolvency Act on administrative or other receivers duly appointed under
the Insolvency Act, and shall also have the rights set out in Schedule 1
(Rights of Receivers).
14.4 AGENT OF COMPANY: Any Receiver shall be the agent of the Company for all
purposes. The Company alone shall be responsible of the Receiver's
contracts, engagements, acts, omissions, defaults and losses and for
liabilities incurred by the Receiver save where such arise directly from
the gross negligence or wilful default of the Receiver.
14.5 REMUNERATION: The Collateral Agent may determine the remuneration of any
Receiver and direct payment of that remuneration out of moneys he receives
as Receiver. The Company alone shall be liable for the remuneration and all
other costs, charges and expenses of the Receiver.
15 COLLATERAL AGENT'S RIGHTS
15.1 SAME RIGHTS AS RECEIVER: Any rights conferred by any Transaction Document
upon a Receiver may be exercised by the Collateral Agent or any delegate
appointed by it (such appointment to be upon such terms and conditions as
it sees fit) after the Charges become enforceable, whether or not the
Collateral Agent shall have taken possession or appointed a Receiver of the
Charged Assets.
16 ORDER OF DISTRIBUTIONS
16.1 APPLICATION OF PROCEEDS: All amounts received or recovered by the
Collateral Agent or any Receiver or Delegate in exercise of their rights
under this Deed shall, subject to the rights of any creditors having
priority, be applied in the order provided in Clause 17.2 (Order of
Distributions).
16.2 ORDER OF DISTRIBUTIONS: The order referred to in Clause 17.1 (Application
of Proceeds) is:
16.2.1 in or towards the payment of all costs, charges, losses,
liabilities and expenses of and incidental to the appointment of
any Receiver or Delegate and the exercise of any of his rights,
including his remuneration and all outgoings paid by him
16.2.2 in or towards the payment of the Liabilities in such order as the
Collateral Agent thinks fit and
16.2.3 in payment of any surplus to the Company or other person entitled
to it.
17 LIABILITY OF COLLATERAL AGENT, RECEIVERS AND DELEGATES
17.1 POSSESSION: If the Collateral Agent, any Receiver or any Delegate takes
possession of the Charged Assets, it or he may at any time relinquish
possession. Without prejudice to Clause 18.2
<PAGE> 11
(Collateral Agent's Liability), the Collateral Agent shall not be liable as
a mortgagee in possession by reason of viewing or repairing any of the
Company's present or future assets.
17.2 COLLATERAL AGENT'S LIABILITY: Neither the Collateral Agent nor any Receiver
or Delegate shall (either by reason or taking possession of the Charged
Assets or for any other reason and whether as mortgagee in possession or
otherwise) be liable to the Company or any other person for any costs,
charges, losses, damages, liabilities or expenses relating to the
realisation of any Charged Assets or from any act, default, omission or
misconduct of the Collateral Agent, any Receiver, any Delegate or their
respective officers, employees or agents in relation to the Charged Assets
or in connection with the Transaction Documents except to the extent caused
by its or his own gross negligence or wilful misconduct.
18 POWER OF ATTORNEY
18.1 APPOINTMENT: The Company by way of security irrevocably appoints the
Collateral Agent, every Receiver and every Delegate severally its attorney
(with full power of substitution), on its behalf and in its name or
otherwise, at such time and in such manner as the attorney thinks fit:
18.1.1 to do anything which the Company is obliged to do (but has not
done) under any Transaction Document (including to execute
charges over, transfers, conveyances, assignments and assurances
of, and other instruments, notices, orders and directions
relating to, the Charged Assets) and
18.1.2 to exercise any of the rights conferred on the Collateral Agent,
any Receiver or any Delegate in relation to the Charged Assets or
under any Transaction Document, the LPA or the Insolvency Act.
18.2 RATIFICATION: The Company ratifies and confirms and agrees to ratify and
confirm whatever any such attorney shall do in the proper exercise of the
power of attorney in Clause 19.1 (Appointment).
19 PROTECTION OF THIRD PARTIES
19.1 NO DUTY TO ENQUIRE: No person dealing with the Collateral Agent, any
Receiver or any Delegate shall be concerned to enquire:
19.1.1 whether the rights conferred by or pursuant to any Transaction
Document are exercisable
19.1.2 whether any consents, regulations, restrictions or directions
relating to such rights have been obtained or compiled with
19.1.3 otherwise as to the propriety or regularity of acts purporting or
intended to be in exercise of any such rights or
19.1.4 as to the application of any money borrowed or raised.
19.2 PROTECTION TO PURCHASERS: All the protection to purchasers contained in
Sections 104 and 107 of the LPA, Section 42(3) of the Insolvency Act or in
any other applicable legislation shall apply to any person purchasing from
or dealing with the Collateral Agent, any Receiver or any Delegate.
20 SAVINGS PROVISIONS
20.1 CONTINUING SECURITY: Subject to Clause 22 (Discharge of Security), the
Charges shall:
<PAGE> 12
20.1.2 not be affected in any way by any settlement of account (whether
or not any Liabilities remain outstanding) or other matter or
thing whatsoever and
20.1.3 be in addition to any other Security, guarantee or indemnity now
or in the future held by the Collateral Agent or any other person
in respect of any of the Liabilities.
20.2 SECURITY UNAFFECTED: Without prejudice to the generality of Clause 21.1
(Continuing Security). neither the Charges nor the Liabilities shall be
affected in any way by:
20.2.1 any time, indulgence, concession, waiver or consent given to the
Company or any other person, whether by the Collateral Agent or
any other person
20.2.2 any amendment to or change in any Security, guarantee or
indemnity (including any Transaction Document), or the terms of
any Liability
20.2.3 the making or absence of any demand for payment of any
Liabilities on the Company or any other person, whether by the
Collateral Agent or any other person
20.2.4 the enforcement or absence of enforcement of any Security,
guarantee or indemnity (including any Transaction Document)
20.2.5 the taking, existence or release of any other Security, guarantee
or indemnity
20.2.6 the Winding-up of the Company or any other person, or any step
being taken for any such Winding-up or
20.2.7 the illegality, invalidity or unenforceability of, or any defect
in, any provision of any agreement or document relating to the
liabilities or any Security, guarantee or indemnity (including
any Transaction Document) or any of the rights or obligations of
any of the parties under or in connection with any such document
or any Security, guarantee or indemnity (including any
Transaction Document).
20.3 EXERCISE OF COMPANY'S RIGHTS: So long as any Charge remains outstanding:
20.3.1 any rights of the Company, by reason of the performance of any of
its obligations under the Purchase Agreement the enforcement of
any of the Charges or any action taken pursuant to any rights
conferred by or in connection with the Purchase Agreement, to be
indemnified by any person, to prove in respect of any liability
in the Winding-up of any person or to take the benefit of or
enforce any Security, guarantees or indemnities, shall be
exercised and enforced only in such manner and on such terms as
the Collateral Agent may require and
20.3.2 any amount received or recovered by the Company (a) as a result
of any exercise of any such rights or (b) in the Winding-up of
any such person shall be held in trust for and immediately paid
to the Collateral Agent.
20.4 AVOIDANCE OF PAYMENTS: The Company shall on demand indemnify the
Collateral Agent against any cost, charge, loss, liability or expense
(including loss of profit) sustained or incurred by the Collateral Agent
as a result of the Collateral Agent being required for any reason
(including any bankruptcy, insolvency, Winding-up or similar law of any
jurisdiction) to refund all or part of any amount received or recovered
by it in respect of any of the Liabilities and shall in any event pay to
the Collateral Agent on demand the amount so refunded by it.
20.5 SUSPENSE ACCOUNTS: Any amount received or recovered by the Collateral
Agent, any Receiver or any Delegate in exercise of its rights under any
Transaction Document may be credited to an
<PAGE> 13
being credited to that account) until the Collateral Agent is satisfied
that all the Liabilities have been discharged in full and that all
facilities which might give rise to Liabilities have terminated.
20.6 TACKING: The Collateral Agent shall comply with its obligations under the
Purchase Agreement (including any obligation to purchase Notes).
21 DISCHARGE OF SECURITY
21.1 FINAL REDEMPTION: Subject to Clause 22.2 (Retention of Security). If the
Collateral Agent is satisfied that all the Liabilities have been
irrevocably and unconditionally discharged in full and that all facilities
and agreements which might give rise to Liabilities have terminated, the
Collateral Agent shall at the request and cost of the Company release,
reassign or discharge (as appropriate) the Charged Assets from the
Charges.
21.2 RETENTION OF SECURITY: If the Collateral Agent considers that any amount
paid or credited to it in respect of the Notes is capable of being avoided
or otherwise set aside on the Winding-up of the Company or any other
person, or otherwise, that amount shall not be considered to have been
paid for the purposes of determining whether all the Liabilities have been
irrevocably and unconditionally discharged.
21.3 CONSOLIDATION: Section 93 of the LPA shall not apply to the Charges.
22 EXPENSES, STAMP DUTY AND INTEREST
22.1 ENFORCEMENT EXPENSES: The Company shall pay to the Collateral Agent on
demand, all costs, and expenses (including Taxes thereon and legal fees)
incurred by the Collateral Agent, any Receiver or any Delegate in relation
to this Deed or the Notes (including the administration, protection,
realisation or enforcement of any right under or in connection with this
Deed, or any consideration by the Collateral Agent as to whether to
realise or enforce the same, and/or any such amendment, supplement,
waiver, consent or release).
22.2 STAMP DUTY: The Company shall pay promptly, and in any event before any
interest or penalty becomes payable, any stamp, documentary, registration
or similar Tax (including Land Registry fees) payable in connection with
the entry into, registration, performance, enforcement or admissibility in
evidence of this Deed or the Notes and any amendment, supplement, waiver,
consent or release and shall indemnify the Collateral Agent against any
liability with respect to or resulting from any delay in paying or
omission to pay any such Tax.
23 PAYMENTS
23.1 DEMANDS: Any demand for payment made by the Collateral Agent shall be
valid and effective even if it contains no statement of the relevant
Liabilities or an inaccurate or incomplete statement of them.
23.2 PAYMENTS: All payments by the Company under this Deed (including damages
for its breach) shall be made in the Currency of Account and to such
account, with such financial institution and in such other manner as may
be agreed between the parties or, if not so agreed, as the Collateral
Agent may direct.
23.3 CONTINUATION OF ACCOUNTS: At any time after:
23.3.1 the receipt by the Collateral Agent of notice (either actual
or otherwise) of any subsequent Security affecting the Charged
Assets or
<PAGE> 14
23.3.2 the presentation of a petition or the passing of a resolution for
or with a view to the Winding-up of the Company
the Collateral Agent may open a new account in the name of the Company
with the Collateral Agent (whether or not it permits any existing account
to continue). If the Collateral Agent does not open such a new account, it
shall nevertheless be treated as if it had done so when the relevant event
occurred. No moneys paid into any account, whether new or continuing,
after that event shall discharge or reduce the amount recoverable pursuant
to any Transaction Document.
23.4 SET-OFF: The Company authorises the Collateral Agent to apply (without
prior notice) any credit balance (whether or not then due) to which the
Company is at any time beneficially entitled on any account at, any sum
held to its order by and/or any liability to it of, any office of the
Collateral Agent in or towards satisfaction of any part of the Liabilities
which are due and unpaid and, for that purpose, to convert one currency
into another.
24 RIGHTS, AMENDMENTS, WAIVERS, CONSENTS AND DETERMINATIONS
24.1 RIGHTS ADDITIONAL: The rights and remedies provided in each Transaction
Document are cumulative and not exclusive of any other rights or remedies
(whether provided by law or otherwise). Where there is any ambiguity or
conflict between the rights conferred by law and those conferred by or
pursuant to any Transaction Document, the terms of that Transaction
Document shall prevail.
24.2 EXERCISE OF RIGHTS: If the Collateral Agent or any Receiver or Delegate
fails to exercise or delays exercising any right under any Transaction
document, it will not operate as a waiver of that right. Any single or
partial exercise of any right will not preclude any other or further
exercise of that right or the exercise of any other right.
24.3 AMENDMENTS, WAIVERS AND CONSENTS: Any provision of any Transaction
Document may be amended, supplemented or novated only if the Company and
the Collateral Agent agree in writing. Any waiver, consent or approval by
the Collateral Agent under any Transaction Document:
24.3.1 shall not be effective unless it is in writing
24.3.2 may be given subject to any conditions thought fit by the
Collateral Agent and
24.3.3 shall be effective only in the instance and for the purpose for
which it is given.
24.4 DETERMINATIONS: Any determination by or certificate of the Collateral
Agent or any Receiver or Delegate under any Transaction Document shall be
conclusive save for manifest error.
25 PARTIAL INVALIDITY
The illegality, invalidity or unenforceability of any provision of any
Transaction Document under the law of any jurisdiction shall not affect
its legality, validity or enforceability under the law of any other
jurisdiction nor the legality, validity or enforceability of any other
provision of that or any other Transaction Document.
26 COMMUNICATIONS
Each communication under any Transaction Document shall be made in
accordance with Section 12.9 of the Purchase Agreement. Each communication
or document to be delivered to a party under any Transaction Document
shall be sent to it at the fax number or address indicated in ????
<PAGE> 15
27 WITHHOLDING
27.1 PAYMENTS TO BE FREE AND CLEAR: All sums payable by the Company under this
Deed shall be paid in full without set-off or counterclaim unless
prohibited by law.
27.2 TAX INDEMNITY: If the Company or any other person must at any time pay any
Tax or other amount on, or calculated by reference to, any sum received or
receivable by the Collateral Agent under this Deed (except for a payment
by the Collateral Agent or a Purchaser of Tax on its own Overall Net
Income), the Company shall pay or procure the payment of that Tax or other
amount before any interest or penalty becomes payable or, if that Tax or
other amount is payable and paid by the Collateral Agent, shall reimburse
it on demand for the amount paid by it.
27.3 TAX RECEIPTS: Within 30 days after paying any sum from which it is
required by law to make any deduction or withholding, the Company shall
deliver to the Collateral Agent evidence satisfactory to the Collateral
Agent of that deduction, withholding or payment and (where remittance is
required) of the remittance thereof to the relevant taxing or other
authority.
27.4 TAX ON OVERALL NET INCOME: In this Clause 28, "Tax on Overall Net Income"
of a person shall be construed as a reference to Tax (other than Tax
deducted or withheld from any payment) imposed on that person by the
jurisdiction in which its principal office (and/or, in the case of the
Collateral Agent or a Purchaser, its office through which it is acting in
connection with this Deed) is located on (a) the net income, profits or
gains of that person world-wide or (b) such of its net income, profits or
gains as arise in or relate to that jurisdiction.
27.5 TAX CREDIT: If the Company makes a payment under Clause 26.2 (Tax
Indemnity) to the Collateral Agent or a Purchaser ("RECEIPIENT") and the
Receipient determines that it has received or been granted a credit
against or a refund of any tax paid or payable by it with reference to the
liability to which such payment relates, the Receipient shall to the
extent it can do so without prejudice to the retention of the amount of
such credit or refund pay to the Company such amount as it shall have
determined to be attributable to the payment. Nothing herein contained
shall interfere with the right of the Receipient to arrange its tax
affairs in whatever manner it thinks fit and, in particular, the
Receipient shall not be under any obligation to claim credit or refund
from or against its corporate profits or similar tax liability in respect
of the amount of such payment in priority to any other credits or refunds
available to it, nor to disclose any information relating to its tax
affairs or any computations in respect thereof.
28 INDEMNITIES
28.1 CURRENCY OF ACCOUNT: The Currency of Account is the sole currency of
account and payment for all sums payable by the Company under or in
connection with this Deed, including damages.
28.2 EXTENT OF DISCHARGE: Any amount received or recovered in a currency other
than the Currency of Account (whether as a result of, or of the
enforcement of, a judgment or order of a court of any jurisdiction, in
the Winding-up of the Company or otherwise) by the Collateral Agent in
respect of any Liability shall only constitute a discharge to the Company
to the extent of the amount in the Currency of Account which the
Collateral Agent is able, in accordance with its usual practice, to
purchase with the amount so received or recovered in that other currency
on the date of that receipt or recovery (or, if it is not practicable to
make that purchase on that date, on the first date on which it is
practicable to do so).
<PAGE> 16
28.3 CURRENCY INDEMNITY: If that amount in the Currency of Account is less
than the amount of the Liability in the Currency of Account the Company
shall indemnify the Collateral Agent against any loss sustained by it as
a result. In any event, the Company shall indemnify the Collateral Agent
against the cost of making any such purchase. For the purpose of this
Clause 29.3, it will be sufficient for the Collateral Agent to
demonstrate that it would have suffered a loss had an actual exchange or
purchase been made.
28.4 ENVIRONMENTAL INDEMNITY: The Company shall indemnify the Collateral Agent
against any and all costs, charges, losses, liabilities or expenses
(including any paid, incurred, suffered or sustained as a matter of
commercial prudence even if no actual liability or obligation exists)
expended, paid, incurred, suffered or sustained by the Collateral Agent
arising (directly or indirectly) out of:
28.4.1 any breach or potential breach of or liability (whether civil
and/or criminal) under any Environmental Law or
28.4.2 any responsibility on the part of the Collateral Agent in respect
of any clean-up, repair or other corrective action
arising out of or in connection with the operations of business of the
Company in the UK or in respect of any Real Property of the Company.
28.5 INDEMNITIES SEPARATE: Each indemnity in this Deed shall:
28.5.1 constitute a separate and independent obligation from the other
obligations in that or any other Transaction Document
28.5.2 give rise to a separate and independent cause of action
28.5.3 apply irrespective of any indulgence granted by the Collateral
Agent
28.5.4 continue in full force and effect despite any judgment, order,
claim or proof for a liquidated amount in respect of any
Liability or any other judgment or order and
28.5.5 apply whether or not any claim under it relates to any matter
disclosed by the Company or otherwise known to the Collateral
Agent.
29 GOVERNING LAW
29.1 GOVERNING LAW: This Deed shall be governed by and construed in accordance
with the laws of England.
2.4 JURISDICTION: Any proceedings relating to a dispute which arises out of
or in connection with any Transaction Document ("PROCEEDINGS") shall be
brought in the courts of England, save that the Collateral Agent or any
Purchaser may also bring Proceedings, whether or not concurrently with
other Proceedings, in the courts of New York.
The Company submits to the jurisdiction of each such court.
2.5 VENUE: The Company irrevocably waives any objection which it may at any
time have to the laying of the venue of any Proceedings in any court
referred to in this Clause 30 and any claim that any such Proceedings
have been brought in an inconvenient forum. Each party irrevocably waives
all right to trial by jury in any Proceedings.
In witness whereof this Deed has been duly executed as a deed on the date
stated at the beginning.
<PAGE> 17
SCHEDULE 1
RIGHTS OF RECEIVERS
Any Receiver appointed pursuant to Clause 15 (Appointment and Rights of
Receivers) shall have the right, either in his own name or in the name of the
Company or otherwise and in such manner and upon such terms and conditions as
the Receiver thinks fit, and either alone or jointly with any other person:
1 ENTER INTO POSSESSION: to take possession of, get in and collect the
Charged Assets, and to require payment to it or to the Collateral Agent of
any Book Debts or credit balance on any Bank Account
2 CARRY ON BUSINESS: to manage and carry on any business of the Company
3 CONTRACTS: to enter into any contract or arrangement and to perform,
repudiate, rescind or vary any contract or arrangement to which the Company
is a party
4 DEAL WITH CHARGED ASSETS: to sell, transfer, assign, exchange, hire out,
lend or otherwise dispose of or realise the Charged Assets (including any
Fixtures, which may be sold separately from the related Real Property) to
any person (including a new company formed pursuant to paragraph 5 (Hive
Down)) either by public offer or auction, tender or private contract and
for a consideration of any kind (which may be payable or delivered in one
amount or by installments spread over a period or deferred)
5 HIVE DOWN: to form a new company and to subscribe for or acquire (for cash
or otherwise) any investment in or of the new company and to sell,
transfer, assign, exchange and otherwise dispose of or realise any such
investments or part thereof or any rights attaching thereto
6 BORROW MONEY: to borrow or raise money either unsecured or on the security
of the Charged Assets (either in priority to the Charges or otherwise) and
on such terms and conditions and for such purpose as he may think fit
7 COVENANTS AND GUARANTEES: to enter into bonds, covenants, guarantees,
indemnities and other commitments and to make all payments needed to
effect, maintain or satisfy them
8 DEALINGS WITH TENANTS: to grant leases, tenancies, licences and rights of
user, grant renewals and accept surrenders of leases, tenancies, licences
or rights of user, in each case on such terms as he thinks fit, and
otherwise to reach agreements and make arrangements with, and to make
allowances to, any lessees, tenants or other persons (including a new
company formed pursuant to paragraph 5 (Hive Down)) from whom any rents and
profits may be receivable (including those relating to the grant of any
licences, the review of rent in accordance with the terms of, and the
variation of, the provisions of any leases, tenancies, licences or rights
of user affecting the Charged Assets)
9 RIGHTS OF OWNERSHIP: to manage and use the Charged Assets and to exercise
and do (or permit the Company or any nominee of it to exercise and do) all
such rights and things as the Receiver would be capable of exercising or
doing if he were the absolute beneficial owner of the Charged Assets
10 INSURANCE, REPAIRS, IMPROVEMENTS ETC.: to insure the Charged Assets on such
terms as he thinks fit, to carry out decorations, repairs, alterations,
improvements and additions to the Charged Assets (including the development
or redevelopment of any Real Property) and to purchase or otherwise acquire
or do anything in connection with the Charged Assets as he may think fit
<PAGE> 18
11 CLAIMS: to settle, adjust, refer to arbitration, compromise and arrange any
claims, accounts, disputes, questions and demands with or by any person who
is or claims to be a creditor of the Company or relating to the Charged
Assets
12 LEGAL ACTIONS: to bring, prosecute, enforce, defend and abandon actions,
suits and proceedings in relation to the Charged Assets or any business of
the Company
13 REDEMPTION OF SECURITY: to redeem any Security (whether or not having
priority to the Charges) over the Charged Assets and to settle the accounts
of any person with an interest in the Charged Assets
14 EMPLOYEES ETC.: to appoint, hire and employ officers, employees,
contractors, agents, advisors and others and to discharge any such persons
and any such persons appointed, hired or employed by the Company
15 INSOLVENCY ACT: to exercise all powers set out in Schedule 1 or (in the
case of a Scottish Receiver) Schedule 2 to the Insolvency Act as now in
force (whether or not in force at the date of exercise and whether or not
the Receiver is an administrative receiver) and any powers added to
Schedule 1 or Schedule 2, as the case may be, after the date of this Deed
and
16 OTHER POWERS: to do anything else he may think fit for the realisation of
the Charged Assets or incidental to the exercise of any of the rights
conferred on the Receiver under or by virtue of any Transaction Document,
the LPA or the Insolvency Act.
<PAGE> 19
SIGNED as a DEED by SENETEK PLC Signature of Director
acting by Frank Massino a Director and /s/ FRANK MASSINO
Stewart Slade ---------------------
the Secretary
Signature of Director or Secretary
---------------------
Address:
620 Airport Road Napa, CA 94558
Fax No.:
707-259-6238
Attention:
Corena Michnevich
<PAGE> 1
EXHIBIT 10.13
CONFORMED
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT is entered into as of this 13th day of
April 1999 by and among SENETEK PLC a company organized under the laws of
England ("Senetek"), SILVER CREEK INVESTMENTS, LTD., a British Virgin Islands
company ("Silver Creek"), BOMOSEEN INVESTMENTS, LTD., a British Virgin Islands
company ("Bomoseen"), ELSTREE HOLDINGS, LTD., a British Virgin Islands company
("Elstree") and DANDELION INVESTMENTS, LTD., a British Virgin Islands company
("Dandelion" and together with Silver Creek, Bomoseen and Elstree, the
"Investors"), WINDSOR CAPITAL MANAGEMENT, LTD., ("Windsor"), AL-SABAH TRADING
AND DEVELOPMENT COMPANY ("Al-Sabah"), THE ALANA GROUP, LTD. ("Alana"), PACKARD,
LTD. ("Packard") and MOHAMED HADID ("Hadid").
WHEREAS, Senetek and Windsor are parties to a Credit Agreement
dated as of April 28, 1998, as the same may have been amended (the "Credit
Agreement"), pursuant to which Windsor extended to Senetek a line of credit in
the amount of $10,000,000;
WHEREAS, prior to the date of this Agreement, Senetek borrowed an
aggregate amount of $6,600,000 under the Credit Agreement (the "Borrowings");
WHEREAS, borrowings under the Credit Agreement do not bear
interest and may be repaid at any time, without penalty, by Senetek;
WHEREAS, in connection with the Borrowings, Senetek issued to
Windsor a warrant to purchase 1,885,715 ordinary shares of Senetek ("Ordinary
Shares") at a purchase price of $3.50 per share (the "Warrant");
WHEREAS, subsequent to the issuance of the Warrant, the Warrant
may have been amended to reduce the Warrant exercise price and increase the
number of shares covered by the Warrant but the parties acknowledge that the
documentation of the amendment (if any) is in incomplete and unclear;
WHEREAS, the Warrant has been exercised by Windsor and Senetek
has issued an aggregate of 2,105,715 Ordinary Shares in respect of the exercise
of the Warrant (the "Warrant Exercise Shares");
WHEREAS, Windsor currently holds a certificate representing
1,885,715 of the Warrant Exercise Shares (the "Certificate") and the Company
currently holds the certificate representing the remaining Warrant Exercise
Shares;
WHEREAS, Windsor made no cash payment to Senetek upon the
exercise of the Warrant since Windsor and Senetek intended that the exercise
price payable by Windsor upon exercise of the Warrant would be offset against
and reduce the amount of the Borrowings;
<PAGE> 2
WHEREAS, the parties hereto desire to enter into this Agreement
for the purpose, among other, of resolving the uncertainty concerning the amount
of the exercise price payable by Windsor upon exercise of the Warrant and the
amount by which the Borrowings have been reduced as a result of the application
of the exercise price to the repayment of the Borrowings;
WHEREAS, in connection with the execution of the Credit
Agreement, Senetek issued to Windsor warrants to purchase Ordinary Shares for a
price of $6.00 per share which expire by their terms on April 28, 2001 (the
"Additional Warrants");
WHEREAS, the exercise price of the Additional Warrants may have
been reduced from $6.00 per share to $4.00 per share;
WHEREAS, the parties agree that the documentation of the
Additional Warrants is incomplete and unclear and does not clearly indicate the
number of the Additional Warrants issued or whether the exercise price of the
Additional Warrants was reduced from $6.00 per share to $4.00 per share;
WHEREAS, for purposes of resolving the foregoing uncertainty
concerning the Additional Warrants, the parties desire to enter into this
Agreement for the purpose, among others, of recording their agreement that all
of the Additional Warrants have been cancelled and that Senetek will issue to
Windsor, upon the terms and subject to the conditions set forth in this
Agreement, new warrants to purchase 440,000 Ordinary Shares at a purchase price
of $4.00 per share, which new warrants will contain the provisions set forth in
the form of certificate previously representing the Additional Warrants (the
"$4.00 Warrants");
WHEREAS, the Investors provided Windsor with the funds used by
Windsor to make the initial $6,600,000 loan to Senetek under the Credit
Agreement;
WHEREAS, Windsor desires to assign to Investors (i) all of its
right, title and interest in and to the Credit Agreement, including the right to
receive repayment of the Borrowings, and (ii) all of its right, title and
interest in and to the Warrant Exercise Shares;
WHEREAS, in connection with the settlement of the matters
referred to in this Agreement, Senetek is issuing to Investors, concurrently
with the execution of this Agreement, a warrant to purchase an aggregate of
2,261,143 Ordinary Shares at the exercise price specified therein;
WHEREAS, at or about the time of the execution of this Agreement,
Investors and Senetek are entering into a Securities Purchase Agreement pursuant
to which Investors will provide additional financing to Senetek through the
purchase of securities from Senetek upon the terms set forth therein ( the "New
Financing");
WHEREAS, a portion of the proceeds from the New Financing will be
applied to repay the Borrowings in full;
2
<PAGE> 3
WHEREAS, Al-Sabah and Alana have entered into a Consulting
Agreement with Senetek dated February 20, 1998 (the "Consulting Agreement");
WHEREAS, the parties desire to enter into this Agreement for the
purpose of documenting their agreement that neither Windsor, Al-Sabah, Alana nor
Hadid nor any affiliate of any of them shall have any right to receive any fee
or other payment pursuant to the Consulting Agreement or any other agreement,
arrangement or understanding on account of the New Financing or the repayment of
the Borrowings;
WHEREAS, Senetek and Packard, a company affiliated with Hadid,
entered into a letter agreement dated July 10, 1997 (the "Packard Agreement")
pursuant to which Packard agreed to perform certain market research for Senetek;
WHEREAS, Senetek paid Packard $200,000 (the "Deposit") in
consideration for the anticipated performance by Packard of its obligations
under the Packard Agreement and the preparation of a research report;
WHEREAS, Packard has not performed its obligations under the
Packard Agreement and Hadid, on behalf of Packard, desires to repay the Deposit
to Senetek by executing and delivering to Senetek the Promissory Note A in the
form attached to this Agreement (the "A Note");
WHEREAS, Senetek, Packard and Hadid desire to cancel the Packard
Agreement;
WHEREAS, Al-Sabah, a company affiliated with Hadid, has borrowed
$500,000 from Senetek and the obligation of Al Sabah to repay the $500,000 loan
is evidenced by a promissory note dated September 21, 1998 in the principal
amount of $500,000, bearing interest at the rate of 6% per annum, which is due
and payable to Senetek upon demand by Senetek (the "Promissory Note");
WHEREAS, Senetek has made a demand for the repayment in full of
the principal amount of and all accrued interest on the Promissory Note;
WHEREAS, $300,000 of the principal amount of the Promissory Note
has been repaid and Hadid desires to repay, on behalf of Al-Sabah, the balance
owing on the Promissory Note by executing and delivering to Senetek the
Promissory Note B in the form attached to this Agreement (the "B Note");
WHEREAS, Windsor has invested $3,300,000 in Senetek in
consideration for the issuance of Ordinary Shares, the number of which Senetek
and Windsor agreed to be 1,100,000, subject to adjustment in the event that the
market price for Senetek's American Depositary Shares was less than $5.00 per
American Depositary Share on June 30, 1998;
WHEREAS, the foregoing agreement to so adjust the number of
shares issued to Windsor was confirmed in a letter dated March 24, 1998 from
Anthony J. Cataldo, the then
3
<PAGE> 4
Chairman and Chief Executive Officer of Senetek, to Hadid as the representative
of Windsor (the "March 24 Letter");
WHEREAS, the market price for Senetek's American Depositary
Shares on June 30, 1998 was less than $5.00 per American Depositary Share and
Senetek and Windsor have agreed that the March 24 Letter would require Senetek
to issue an additional 625,000 Ordinary Shares to Windsor;
WHEREAS, Senetek desires to issue 625,000 Ordinary Shares in full
satisfaction of its obligations described in the March 24 Letter; and
WHEREAS, Windsor has assigned its right to receive 378,788 of the
625,000 Ordinary Shares to Wallington Investments and by executing this
Agreement Windsor hereby confirms such assignment and its instructions to the
Company to issue 378,788 Ordinary Shares to Wallington Investments and to issue
the remaining 246,212 Ordinary Shares to Windsor;
NOW, THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. EXERCISE OF WARRANT; REPAYMENT OF BORROWINGS UNDER THE
CREDIT AGREEMENT. The parties hereto agree that immediately prior to the
exercise of the Warrant, the Warrant entitled Windsor, as holder of the Warrant,
to purchase an aggregate of 2,105,715 Ordinary Shares at a purchase price of
$2.00 per share for an aggregate purchase price of $4,211,430 (the "Aggregate
Exercise Price"). The Warrant has been exercised by Windsor in full and Windsor
has been issued the Warrant Exercise Shares. As consideration for the issuance
of the Warrant Exercise Shares and in satisfaction of Windsor's obligation to
pay the Aggregate Exercise Price, the amount of the Borrowings has been reduced
by the Aggregate Exercise Price, with the result that the amount of the
Borrowings outstanding following exercise of the Warrant was and continues to be
$2,388,570 (the "Remaining Loan").
SECTION 2. ASSIGNMENT; POWER OF ATTORNEY. Windsor hereby assigns
to Investors all of its rights, title and interest in and to, and hereby
relinquishes to Investors any and all rights it may have in, to and under, the
Loan Agreement and the Warrant Exercise Shares, including, without limitation
its right to receive any and all payments in respect of the repayment of the
Remaining Loan. The foregoing assignment is made to the Investors in the
respective amounts set forth on Schedule I hereto. Concurrently herewith,
Windsor is delivering to Kevin McCarthy, as representative of the Investors, the
Certificate. Windsor hereby irrevocably constitutes and appoints Kevin McCarthy
as its attorney-in-fact, with full power of substitution, as its true and lawful
agent and attorney-in-fact, with full power and authority in its name, place and
stead to execute, acknowledge, deliver, file and record stock powers,
assignments, certificates and other instruments and instructions appropriate or
necessary to convey the Warrant Exercise Shares, including the shares
represented by the Certificate, to the Investors in the manner contemplated by
this Agreement, to submit the Certificate to the Company for cancellation, and
to secure the issuance of new certificates in the names of the respective
Investors representing the Warrant
4
<PAGE> 5
Exercise Shares or any portion thereof. The foregoing power of attorney is
irrevocable and a special power coupled with an interest. Windsor hereby agrees
to be bound by any act of the foregoing attorney-in-fact taken or made in good
faith pursuant to such power of attorney. Windsor and Hadid hereby represent and
warrant that Windsor has not assigned any of its right, title or interest in, to
or under the Loan Agreement, the Remaining Loan or the Warrant Exercise Shares
to any other person or entity.
SECTION 3. CANCELLATION OF THE ADDITIONAL WARRANTS. The
Additional Warrants and all amendments thereto and all warrants, if any, issued
in substitution thereof (collectively the "Cancelled Warrants") are hereby
cancelled and shall be of no further force or effect. Windsor and Hadid hereby
represent and warrant that Windsor has not assigned any of its right, title or
interest in the Cancelled Warrants to any other person or entity. Windsor and
the Investors hereby agree that they have no continuing interest in or rights
arising out of any of the Cancelled Warrants. Windsor and Hadid hereby agree to
return promptly to Senetek any and all certificates representing the Cancelled
Warrants.
SECTION 4. ISSUANCE OF $4.00 WARRANTS. As soon as practicable
following the date of this Agreement, the Company will issue 440,000 $4.00
Warrants to Windsor. The $4.00 Warrants shall provide that if Hadid shall fail
to make, for any reason whatsoever, any payment under the A Note or the B Note
(in any amount) on or prior to the payment date for such payment specified in
the respective A Note or B Note, all 440,000 $4.00 Warrants shall be cancelled
automatically and shall not be reinstated in any manner, even if the payments so
failed to be made shall later be made to the Company.
SECTION 5. EXECUTION AND DELIVER OF THE A NOTE AND THE B NOTE.
Concurrently herewith, Hadid is executing and delivering the A Note and the B
Note to Senetek. Senetek hereby agrees that upon payment in full of the
principal amount of and all accrued interest, if any, on the A Note, the
$200,000 Deposit shall be deemed to have been repaid to Senetek. Except for the
obligation of Hadid to pay the principal amount of and all accrued interest, if
any, on the A Note in full, Senetek, Packard and Hadid hereby agree that the
Packard Agreement is terminated. Senetek agrees that upon payment in full of the
principal amount of and all accrued interest, if any, on the B Note, the
obligations of Al-Sabah under the Promissory Note shall be satisfied in full.
SECTION 6. DELIVERY OF CERTIFICATES REPRESENTING AN AGGREGATE OF
625,000 ORDINARY SHARES. As soon as practicable following the date of this
Agreement and in full satisfaction of its obligations under the March 24 Letter,
the Company shall deliver (i) to Wallington Investments, Ltd. ("Wallington") a
certificate issued in the name of Wallington representing 378,788 Ordinary
Shares, and (ii) to Windsor a certificate issued in the name of Windsor
representing 246,212 Ordinary Shares.
SECTION 7. INVESTMENT REPRESENTATIONS. Windsor and Wallington (by
its execution of the acknowledgement hereto) each hereby represents and warrants
severally as to itself (but not as to the other) that (i) the 246,212 Ordinary
Shares or the 378,788 Ordinary Shares, as the case may be, issued to it and, as
to Windsor, the $4.00 Warrants, acquired as
5
<PAGE> 6
provided in this Agreement (the "Securities") are being acquired for investment
purposes only for their own respective account and not with a view to the resale
or distribution of any of the Securities in contravention of applicable law,
(ii) it has had an opportunity to ask questions and receive answers from Senetek
regarding the business of Senetek and the investment in the Securities, (iii) it
is experienced in making investments such as an investment in the Securities and
it is able to fend for itself, can bear the economic risk of its investment in
the Securities and has sufficient knowledge and experience in financial and
business matters such that it is capable of evaluating the merits and risks of
an investment in the Securities, and (iv) it is an "accredited investor" within
the meaning of Rule 501 of Regulation D of the Regulations of the SEC under the
Securities Act of 1933, as amended (the "Act"). Windsor and Wallington (by its
execution of the acknowledgement hereto) each acknowledge that it understands
that the Securities are "restricted securities" under the federal securities
laws inasmuch as they are being acquired from Senetek in a transaction not
involving a public offering and that under applicable laws and regulations the
Securities may not be resold without registration under the Act, except in
certain limited circumstances, and each represents that it is familiar with
these resale limitations. In the event the Securities have not been registered
under the Act, Windsor and Wallington (by its execution of the acknowledgement
hereto) each acknowledge that it may not dispose of any portion of the
Securities unless it shall have furnished to Senetek an opinion of counsel, in
form and substance reasonably satisfactory to Senetek, rendered by a law firm
experienced in matters involving the sale of securities under federal and state
securities laws and reasonably satisfactory to Senetek, to the effect that the
disposition will not require registration of the Securities under the Act or
registration or qualification under any state securities or "blue sky" law.
SECTION 8. LEGENDS. Windsor and Wallington (by its execution of
the acknowledgement hereto) each acknowledge that it understands that the
certificates evidencing the Securities (or the American Depositary Receipts
evidencing the American Depositary Shares representing the Securities) may bear
a legend in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") OR ANY APPLICABLE STATE
SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THE SECURITIES UNDER THE ACT AND THE
REGISTRATION OR QUALIFICATION OF THE SECURITIES UNDER APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO SENETEK, IN FORM AND CONTENT REASONABLY
SATISFACTORY TO SENETEK, THAT SUCH REGISTRATION OR QUALIFICATION
UNDER THE ACT AND STATE SECURITIES LAWS IS NOT REQUIRED.
SECTION 9. NO FEES. Windsor, Al-Sabah, Alana and Hadid hereby
acknowledge and agree that neither they nor any person controlling, controlled
by or under common control
6
<PAGE> 7
with any of them are or shall be entitled to receive from Senetek or any other
party any fee or other payment (whether in the form of cash, warrants or other
securities or property) pursuant to the Consulting Agreement or any other
agreement, arrangement or understanding, on account of or arising out of the New
Financing or the repayment of the Borrowings or the Remaining Loan.
SECTION 10. AUTHORITY OF HADID. Hadid hereby represents to
Senetek and the Investors that he has the full power and authority to enter into
this Agreement on behalf of Windsor, Al-Sabah, Packard and Alana and to bind
Windsor, Al-Sabah, Packard and Alana to the terms of this Agreement.
SECTION 11. FURTHER ASSURANCES. Each party of this Agreement
agrees to execute and deliver such further documents and instruments and take
such further action as any other party to this Agreement may reasonably request
for the purpose of further documenting the agreements set forth herein or
otherwise carrying out the intent of this Agreement.
SECTION 12. GOVERNING LAW. This Agreement, the A Note and the B
Note shall be governed by and construed in accordance with the laws of the State
of California without regard to conflict of laws principles.
SECTION 13. ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement among the parties hereto pertaining to the subject matter of
this Agreement and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties.
SECTION 14. AMENDMENTS AND WAIVERS. No amendment, supplement,
modification or waiver of this Agreement shall be binding unless set forth in a
writing executed by the party to be bound thereby. No waiver of any provision of
this Agreement shall be deemed to constitute or shall constitute a waiver of any
other provision hereof (whether or not similar), nor shall any such waiver
constitute a continuing waiver unless otherwise expressly provided in the
waiver.
SECTION 15. COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION 16. HEADINGS. The heading of the sections in this
Agreement are inserted for convenience of reference only and shall not be deemed
to be a part of or to affect the meaning or interpretation of any provision of
this Agreement.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement, or have caused this Agreement to be duly executed on their behalf by
their respective authorized representatives, as of the day and year first above
written.
<TABLE>
AL-SABAH TRADING AND
SENETEK, PLC DEVELOPMENT COMPANY
<S> <C>
By /s/ FRANK J. MASSINO By /s/ MOHAMED HADID
--------------------------------- --------------------------
Frank J. Massino Mohamed Hadid
Chief Executive Officer Authorized Signatory
WINDSOR CAPITAL MANAGEMENT, LTD. THE ALANA GROUP, LTD.
By /s/ MOHAMED HADID By /s/ MOHAMED HADID
------------------------------ --------------------------
Mohamed Hadid Mohamed Hadid
Authorized Signatory Authorized Signatory
PACKARD, LTD.
By /s/ MOHAMED HADID
------------------------------- /s/ MOHAMED HADID
Mohamed Hadid -----------------------------
Authorized Signatory MOHAMED HADID
SILVER CREEK INVESTMENTS, LTD. BOMOSEEN INVESTMENTS, LTD.
By /s/ ROBERT T. TUCKER By /s/ ROBERT T. TUCKER
------------------------------------ --------------------------
Name: Robert T. Tucker Name: Robert T. Tucker
Title: Attorney-in-fact Title: Attorney-in-fact
ELSTREE HOLDING, LTD. DANDELION INVESTMENTS, LTD.
By /s/ ROBERT T. TUCKER By /s/ ROBERT T. TUCKER
------------------------------------ --------------------------
Name: Robert T. Tucker Name: Robert T. Tucker
Title: Attorney-in-fact Title: Attorney-in-fact
THE UNDERSIGNED HEREBY ACKNOWLEDGES THIS AGREEMENT FOR THE PURPOSES SPECIFIED IN
SECTIONS 7 AND 8 OF THIS AGREEMENT ONLY:
WALLINGTON INVESTMENTS
By /s/ ROBERT T. TUCKER
------------------------------------
Name: Robert T. Tucker
Title: Attorney-in-fact
</TABLE>
8
<PAGE> 9
SCHEDULE I
The assignment made by Windsor pursuant to Section 2 of the
Settlement Agreement to which this Schedule I is attached is being made to the
following Investors in the following amounts:
<TABLE>
<CAPTION>
Percentage Interest in the Number of Warrant
Investor Loan Agreement Assigned(1) Exercise Shares Assigned
-------- --------------------------- ------------------------
<S> <C> <C>
Silver Creek Investments, Ltd. 29.74% 626,269
Bomoseen Investments, Ltd. 29.74% 626,269
Elstree Holdings, Ltd. 20.26% 426,589
Dandelion Investments, Ltd. 20.26% 426,588
</TABLE>
- ---------------
(1) Includes interest in the right to receive repayment of the Remaining
Loan.
9
<PAGE> 10
PROMISSORY NOTE A
Los Angeles, California
April 13, 1999
FOR VALUE RECEIVED, the undersigned, MOHAMED HADID, does hereby
promise to pay to SENETEK PLC, a company organized under the laws of England, at
its office located at 620 Airpark Road, Napa, California, the following amounts
on or before the following dates:
Payment Date Payment Amount
------------ --------------
June 1, 1999 40,000
July 1, 1999 40,000
August 2, 1999 40,000
September 1, 1999 40,000
October 1, 1999 15,000
November 1, 1999 40,000
If any of the foregoing amounts shall not be paid in full on or
prior to the respective payment date set forth above, the unpaid portion shall
bear interest commencing on the respective payment date and continuing until the
unpaid amount shall have been paid in full (together with all accrued interest
thereon) at the rate of 10% per annum.
/s/ MOHAMED HADID
---------------------------------
MOHAMED HADID
10
<PAGE> 11
PROMISSORY NOTE B
Los Angeles, California
April 13, 1999
FOR VALUE RECEIVED, the undersigned, MOHAMED HADID, does hereby
promise to pay to SENETEK PLC, a company organized under the laws of England, at
its office located at 620 Airpark Road, Napa, California, the following amounts
on or before the following dates:
Payment Date Payment Amount
------------ --------------
May 3, 1999 $40,000
June 1, 1999 40,000
July 1, 1999 40,000
August 2, 1999 40,000
September 1, 1999 40,000
October 1, 1999 15,000
If any of the foregoing amounts shall not be paid in full on or
prior to the respective payment date set forth above, the unpaid portion shall
bear interest commencing on the respective payment date and continuing until the
unpaid amount shall have been paid in full (together with all accrued interest
thereon) at the rate of 10% per annum.
/s/ MOHAMED HADID
---------------------------------
MOHAMED HADID
<PAGE> 1
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
BETWEEN SENETEK PLC AND GEORGE VANLEAR
This Employment Agreement ("Agreement") is made and entered into on March
27th, 1999, effective as of April 15th, 1999 (the "Effective Date"), between
Senetek PLC, a company organized under the laws of England (the"Company") and
George VanLear, Ph.D. (the "Executive"), residing at Two Sleepy Cove, San
Antonio, Texas 78230.
WITNESSETH:
WHEREAS, it is the desire of the Company to assure itself of the
management services of the Executive by engaging Executive as President & Chief
Operating Officer and
WHEREAS, the Executive desires to serve the Company as herein provided:
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and obligations hereinafter set forth, the parties agree as follows:
1. DEFINITIONS
The following terms used in this Agreement shall have the meaning
specified below unless the context clearly indicates the contrary:
"Annual Bonus" shall mean the annual incentive bonus payable to the
Executive described in Section 4.
"Average Bonus" shall mean (a) the total of the Annual Bonuses paid
hereunder with respect to the Employment Term, divided by (b) the length of such
portion of the Employment Term in years (including fractions) as falls on or
prior to the last December 31 thereof.
"Base Salary" shall mean the annual base salary payable to the Executive
at the rate set forth in Section 4.
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<PAGE> 2
"Board" shall mean the Board of Directors of the Company.
"Cause" shall mean the Executive's (a) commission of an act of fraud,
theft or embezzlement, or (b) conviction of a felony or other crime involving
moral turpitude.
"Change in Control" shall mean (a) the sale, lease or other transfer of
all or substantially all of the assets of the Company to any person or group
(as such term is used in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended); (b) the adoption by the stockholders of the Company of a plan
relating to the liquidation or dissolution of the Company; (c) the merger or
consolidation of the Company with or into another entity or the merger of
another entity into the Company or any subsidiary thereof with the effect that
immediately after such transaction the stockholders of the Company immediately
prior to such transaction (or their Related Parties) hold less than fifty
percent (50%) of the total voting power of all securities generally entitled to
vote in the election of directors, managers or trustees of the entity surviving
such merger of consolidation; (d) the acquisition by any person or group of
more than fifty percent (50%) of the voting power of all securities of the
Company generally entitled to vote in the election of directors of the Company;
or (e) that the majority of the Board is composed of members who (i) have
served less than twelve months and (ii) were not approved by a majority of the
Board at the time of their election or appointment.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean Ordinary shares in the capital of the Company.
"Compensation Committee" shall mean the Compensation Committee of the
Board.
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<PAGE> 3
"Deemed Bonus" at any time shall mean the greater of (a) the Average Bonus
calculated as of such time and (b) if any, the Annual Bonus for the last 12
month period completed as of such time.
"Employment Term" shall mean the period beginning on the Effective Date
and ending on the close of business on the effective date of the Executive's
termination of employment with the Company.
"Expiration Date" shall be as defined in Section 2.
"Good Reason" shall mean (a) the Company's material breach of any
provision hereof, (b) any adverse change in the Executive's job
responsibilities, duties, functions, status, offices, title, perquisites or
support staff, (c) relocation of the Executive's regular work address without
his consent, or (d) a Change in Control, provided, however, that the Executive
shall give the Company written notice of any actions (other than that set out in
subsection (d) above) alleged to constitute Good Reason and the Company shall
have a reasonable opportunity to cure any such alleged Good Reason.
"Option Agreement" shall mean the agreement between the Executive and the
Company pursuant to which any Option is granted to the Executive.
"Options" shall mean the non-qualified stock options to be granted to the
Executive hereunder.
"Permanent Disability" shall mean the Executive's inability to perform the
duties contemplated by this Agreement by reason of a physical or mental
disability or infirmity which
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<PAGE> 4
has continued for more than 90 working days (excluding vacation) in any twelve
consecutive month period as determined by the Board. The Executive agrees to
submit such medical evidence regarding such disability or infirmity as it is
reasonably requested by the Board.
"Related Parties" shall mean with respect to any person (a) the spouse and
lineal ascendants and descendants of such person, and any sibling of any such
persons and (b) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or persons beneficially holding an
eighty percent (80%) or more controlling interest of which consist of persons
referred to in subsection (a) above.
"Termination of Employment" shall mean the first to occur of the following
events:
(a) the date of death of the Executive;
(b) the effective date specified in the Company's written notice to the
Executive of the termination of his employment as a result of his Permanent
Disability, which effective date shall not be earlier than the 91st working day
(excluding vacation) following the commencement of the Executive's inability to
perform his duties hereunder.
(c) the effective date specified in the Company's written notice to the
Executive of the Company's termination of his employment without Cause;
(d) the effective date specified in the Company's written notice to the
Executive of the Company's termination of his employment for Cause;
(e) the effective date specified in the Executive's written notice to
the Company of the Executive's termination of his employment for Good Reason.
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<PAGE> 5
(f) the effective date specified in the Executive's written notice to the
Company of the Executive's termination of his employment without Good Reason;
and
(g) the date the Executive's employment terminates pursuant to Section 2.
"Termination without Cause" shall mean a termination by Company of the
Executive's employment without Cause.
2. EMPLOYMENT
The Company agrees to continue the employment of the Executive, and the
Executive agrees to continue to provide services to the Company, from the
Effective Date until the close of business on April 15, 2002 (the "Expiration
Date"), unless the Executive's employment is earlier terminated pursuant to a
Termination of Employment. The Executive will serve the Company subject to the
general supervision, advice and direction of the Board upon the terms and
conditions set forth in this Agreement.
3. TITLE AND DUTIES
(a) The Executive's job title shall be President & COO (Chief Operating
Officer) of the Company and will report solely to Frank J. Massino, the Chief
Executive Officer & Chairman of the Board. During the Employment Term the
Executive shall have such authority and duties as are customary in such
position, and shall perform such other services and duties as the Chief
Executive Officer may from time to time designate consistent with such position.
(b) All executives of the Company not reporting directly to Frank J.
Massino, the Chief Executive Officer & Chairman of the Board, shall report,
directly or indirectly through other senior officers, to the Executive, and the
Executive shall be responsible for reviewing the performance of such executives
of the Company.
(c) The Executive shall devote his full business time and best efforts to
the business affairs of the Company; however, the Executive may devote
reasonable time and attention to:
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<PAGE> 6
(i) serving as a director of, or member of a committee of the
directors of any not-for-profit organization or engaging in other
charitable or community activities;
(ii) serving as a director of, or member of a committee of the
directors of, the corporations or organizations for which the Executive
presently serves in such capacity, provided, that except as specified
above, the Executive may not accept employment with any other individual or
other entity, or engage in any other venture which is indirectly or
directly in conflict or competition with the then existing business of the
Company.
4. COMPENSATION AND BENEFITS
(a) Base Compensation. During the Employment Term, the Company shall pay
the Executive, in installments according to the Company's regular payroll
practice, Base Salary at the annual rate of $200,000.
(b) Annual Incentive Bonus. The Executive shall be entitles to an Annual
Bonus for each calendar year on the last day of which he is employed hereunder
and also for the calendar year, if any, in which this contract expires pursuant
to Section 2. Such Annual Bonus for any such calendar year shall be determined
by the Compensation Committee in its sole discretion to reward Executive for his
performance during the time period in question and to incentivize future
performance.
(c) Stock Option.
(i) Effective March 27, 1999 the Executive shall be granted an Option
to purchase 350,000 shares of Common Stock at the price allowable under the
terms of Option Scheme No. 1, the Employee's Option Scheme.
(ii) The Option described in paragraph (i) shall be granted subject
to the following terms and conditions: (A) 50,000 shares shall be vested on
the
-6-
<PAGE> 7
date of grant and 300,000 shares shall vest according to the terms set
forth in Option Scheme No. 1, the Employee Option Scheme; (B) the Option
shall be exercisable for the greater of three years from the date of grant
or one year from the Termination of Employment; (C) Executive shall have
the right, on two occasions, to require the Company to register (in such
manner that the Common Stock will be freely transferable, "Register"), the
Common Stock underlying the Option at no cost to the Executive. If the
Company Registers Common Stock at any other time, Executive shall also have
the right to require the Company to Register the Common Stock underlying
the Options, at no cost to Executive and (D) the Option shall be evidenced
by, and subject to, an Option Agreement.
(iii) The Option Agreement shall specify that the Option shall
remain exercisable for the periods described in paragraph (ii) above
notwithstanding any Termination of Employment
(d) Vacation. During each complete 12 month period of the Employment Term,
the Executive shall be entitled to no fewer than three weeks of paid vacation
(unless, based on his length of service with the Company and his position with
the Company, the Executive is entitled to a greater number of weeks of paid
vacation under the Company's generally applicable vacation policy, as determined
by the Compensation Committee).
(e) Employee Benefit Plans. During the Employment Term, the Executive
shall be Entitled to participate in all pension, profit sharing and other
retirement plans, all incentive compensation plans and all group health
hospitalization and disability insurance plans and other employee welfare
benefit plans in which other senior executives of the Company may participate on
terms and conditions no less favorable than those which apply to such other
senior executives of the Company.
-7-
<PAGE> 8
(f) Company Payment of Health Benefit Coverage. During the Employment
Term, the Company shall pay the amount of premiums or other cost incurred for
coverage of the Executive and his eligible spouse and dependent family members
under the applicable Company health benefits arrangement (consistent with the
terms of such arrangement).
(g) Life Insurance Policy. In addition to the insurance coverage
contemplated by Section 4(e), during the Employment Term the Company shall
maintain in effect term life insurance coverage for the executive with a death
benefit of at least $500,000, with the beneficiary or beneficiaries thereof
designated by the Executive. Notwithstanding Section 9 of this Agreement, such
life insurance policy or policies may be assigned to a trust for the benefit of
any beneficiary designated by the Executive.
(h) Automobile and Parking Allowance; Other Benefits. During the
Employment Term, the Company shall provide the Executive with an automobile
allowance of $750 per month.
5. Reimbursement of Expenses
In addition to the compensation provided for under Section 4 hereof, upon
submission of proper vouchers, the Company will pay or reimburse the Executive
for all normal and reasonable travel and entertainment expenses incurred by the
Executive during the Employment Term in connection with the Executive's
responsibilities to the Company.
6. Termination Benefits
(a) Upon the termination of the Executive's employment with the
Company for any reason, the Company shall provide the Executive (or, in the case
of his death, his estate or other legal representative), any Annual Bonus earned
but not yet paid with respect to the preceding calendar year, all benefits due
him under the Company's benefits plans and policies for his services rendered to
the Company prior to the date of such termination (according to the terms of
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<PAGE> 9
such plans and policies), and, not later than three days after such
termination, in a lump sum, all Base Salary earned through the date of such
termination. The Executive shall be entitled to the payments and benefits
described below only as applicable to such termination of employment.
(b) In the event that the Executive's employment hereunder is terminated
by the Company without Cause (but not by reason of expiration or non-renewal of
this Agreement), or by the Executive for Good Reason, the Company shall pay to
the Executive, in a lump sum no later than three days following such
termination, an amount equal to the product of (i) the sum of the Base Salary
and the Deemed Bonus and (ii) the number of calendar years (including
fractional years) form the date of such termination to the otherwise applicable
Expiration date. In such event the Company shall also cause any options held by
Executive with respect to Common Stock to become immediately vested and
exercisable.
(c) In the event that the Executive's employment hereunder is terminated
by reason of the Executive's death or Permanent Disability, the Company shall
pay the Executive (or his estate), in a lump sum no later than three days
following such termination, an amount equal to twelve months' Base Salary and
Deemed Bonus. In such event the Company shall also cause any options held by
Executive with respect to Common Stock to become immediately vested and
exercisable.
(d) In the event of any Termination of Employment, the Executive shall
not be required to seek other employment to mitigate damages, and any income
earned by the Executive from other employment or self-employment shall not be
offset against any obligations of the Company to the Executive under this
Agreement.
7. PROTECTED INFORMATION; PROHIBITED SOLICITATION
(a) The Executive hereby recognizes and acknowledges that during the
course of his
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<PAGE> 10
employment by the Company, the Company will furnish, disclose or make available
to the Executive confidential or proprietary information related to the
Company's business, that such confidential or proprietary information related to
the Company's business, that such confidential or proprietary information has
been developed and will be developed through the Company's expenditure of
substantial time and money, and that all such confidential information could be
used by the Executive and others to compete with the Company. The Executive
hereby agrees that all such confidential or proprietary information shall
constitute trade secrets, and further agrees to use such confidential or
proprietary information only for the purpose of carrying out his duties with the
Company and not to disclose such information unless required to do so by
subpoena or other legal process. No information otherwise in the public domain
(other than by an act of Executive in violation hereof) shall be considered
confidential. The Executive agrees that all memoranda, notices, files, records
and the documents concerning the business of the Company, made or compiled by
the Executive during the period of his employment or made available to him,
shall be the Company's property and shall be delivered to the Company upon its
request therefor and in any event upon the termination of the Executive's
employment with the Company, provided, however, that the Executive shall be
permitted to retain copies of personal correspondence generated or received by
him during the Employment Term, subject to the use restrictions of this Section
7(a).
(b) The restrictions in this Section 7 shall survive the termination of
this Agreement and shall be in addition to any restrictions imposed upon the
Executive by statute or common law.
8. INJUNCTIVE RELIEF
The Executive hereby expressly acknowledges that any breach or threatened
breach by
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<PAGE> 11
the Executive of any of the terms set forth in Section 7 of this Agreement may
result in significant and continuing injury to the Company, the monetary value
of which would be impossible to establish. Therefore, the Executive agrees that
the Company shall be entitled to apply for injunctive relief in a court of
appropriate jurisdiction. The provisions of this Section 8 shall survive the
Employment Term.
9. PARTIES BENEFITED; ASSIGNMENTS
This Agreement shall be binding upon the Executive, his heirs and personal
representative or representatives, and upon the Company and its successors and
assigns. Neither this Agreement nor any rights or obligations hereunder may be
assigned by the Executive, other than by will or by the laws of descent and
distribution.
10. NOTICES
Any notice required or permitted by this Agreement shall be in writing,
sent by registered or certified mail, return receipt requested, addressed to the
Board and the Company at its then principal office, or to the Executive at the
address set forth in the preamble, as the case may be, or to such other address
or addresses an any party hereto may from time to time specify in writing for
the purpose in a notice given to the other parties in compliance with this
Section 10. Notices shall be deemed given when received.
11. GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY THE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICT
OF LAW PRINCIPLES.
12. INDEMNIFICATION AND INSURANCE; LEGAL EXPENSES
The Company shall indemnify the Executive to the fullest extent permitted
by the laws of
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<PAGE> 12
the State of Delaware, as in effect at the time of the subject act or omission,
and shall advance to the Executive reasonably attorney's fees and expenses as
such fees and expenses are incurred (subject to an undertaking from the
Executive to repay such advances if it shall be finally determined by a
judicial decision which is not subject to further appeal that the Executive was
not entitled to the reimbursement of such fees and expenses). The Company shall
maintain directors' and officers' liability insurance coverage which shall
cover him against costs, charges and expenses incurred or sustained by him in
connection with any action, suit or proceeding to which he may be made a party
by reason of his being or having been a director, officer or employee of the
Company or any of its subsidiaries or his serving or having served any other
enterprises as a director, officer or employee at the request of the Company
(other than any dispute, claim or controversy arising under or relating to this
Agreement).
13. REPRESENTATIVES AND WARRANTIES OF EXECUTION
Executive represents and warrants to Company that (a) Executive is under
no contractual or other restriction which is inconsistent with the execution of
this Agreement, the performance of his duties hereunder or the other rights of
Company hereunder, and (b) Executive is under no physical or mental disability
that would hinder the performance of his duties under this Agreement.
14. DISPUTES
The Company shall pay the costs and expenses of any proceeding to resolve
any dispute arising hereunder, including the fees of the Executive's counsel
and experts. Any such dispute shall be tried in the United States.
15. INDEMNITY
The Company agrees hereby forever to indemnify, release, discharge, and
covenant not to
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<PAGE> 13
sue Executive, from any and all claims, debts, demands, accounts, judgements,
rights, causes of action, equitable relief, damages, costs, charges, complaints,
obligations, promises, agreements, controversies, suits, expenses, compensation,
responsibility and liability of every kind and character whatsoever (including
attorneys' fees and costs), whether in law or equity, known or unknown, asserted
or unasserted, suspected or unsuspected (collectively, "Claims"), which the
Company, any affiliate or any other person or entity has or may have had against
Executive or the Company based on any events or circumstances arising or
occurring on or prior to the date hereof.
16. MISCELLANEOUS
The provisions of this Agreement shall survive the termination of the
Executive's employment with the Company. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof. This Agreement
supersedes any prior written or oral agreements or understandings between the
parties relating to the subject matter hereof. No modification or amendment of
this Agreement shall be valid unless in writing and signed by or on behalf of
the parties hereto. A waiver of the breach of any term or condition of this
Agreement shall not be deemed to constitute a waiver of any subsequent breach of
the same or any other term or condition. This Agreement is intended to be
performed in accordance with, and only to the extent permitted by, all
applicable laws, ordinances, rules and regulations. If any provisions of this
Agreement, or the application thereof to any person or circumstances, shall, for
any reason and to any extent, be held invalid or unenforceable, such invalidity
and unenforceability shall not affect the remaining provisions hereof and the
application of such provisions to other persons or circumstances, all of which
shall be enforced to the greatest extent permitted by law. The compensation
provided to the Executive pursuant to this Agreement shall be subject to any
withholdings and deductions required by any applicable tax laws. Any
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<PAGE> 14
amounts payable under this Agreement to the Executive after the death of the
Executive shall be paid to the Executive's estate or legal representative. The
headings in this Agreement are inserted for convenience of reference only and
shall not be part of or control or affect the meaning of any provisions hereof.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date first written above.
Senetek PLC
By /s/ FRANK J. MASSINO
------------------------------
Title: Chief Executive Officer
By /s/ GEORGE VAN LEAR
------------------------------
Title:
-14-
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,304
<SECURITIES> 0
<RECEIVABLES> 920
<ALLOWANCES> 0
<INVENTORY> 768
<CURRENT-ASSETS> 5,463
<PP&E> 3,227
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,552
<CURRENT-LIABILITIES> 10,191
<BONDS> 0
0
0
<COMMON> 4,631
<OTHER-SE> (8,454)
<TOTAL-LIABILITY-AND-EQUITY> 13,552
<SALES> 2,693
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<CGS> 1,213
<TOTAL-COSTS> 1,213
<OTHER-EXPENSES> 5,577
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 650
<INCOME-PRETAX> (7,578)
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