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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 25, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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ONCOR, INC.
(Exact name of Registrant as specified in its charter)
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MARYLAND 52-1310084
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
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209 PERRY PARKWAY, GAITHERSBURG, MARYLAND 20877
(301) 963-3500
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
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STEPHEN TURNER
CHIEF EXECUTIVE OFFICER
ONCOR, INC.
209 PERRY PARKWAY
GAITHERSBURG, MARYLAND 20877
(301) 963-3500
(Name, address, including zip code, and telephone number,
including area code, of agent for service of process)
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COPIES TO:
RICHARD R. PLUMRIDGE, ESQ.
BRIAN B. MARGOLIS, ESQ.
BROBECK, PHLEGER & HARRISON LLP
1633 BROADWAY, 47TH FLOOR
NEW YORK, NEW YORK 10019
(212) 581-1600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable on or after this Registration Statement is declared
effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF SHARES AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED AGGREGATE PRICE PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
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Common Stock,
$.01 par value(2) 5,587,965 Shares $3.9375 $22,002,612.00 $6,491
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(1) Based upon the average of the high and low prices of the Common Stock,
as reported on the American Stock Exchange, on February 23, 1998.
(2) Pursuant to Rule 416, there are also being registered such presently
indeterminable number of additional shares as may be issued to prevent
dilution resulting from stock splits, stock dividends or similar
transactions or by reason of changes in the conversion price of
certain securities in accordance with the terms thereof.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
PROSPECTUS
5,587,965 SHARES
ONCOR, INC.
COMMON STOCK
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This Prospectus relates to the offer and sale, which is not being
underwritten, by certain persons listed herein under "Selling Stockholders"
(collectively, the "Selling Stockholders"), of (i) up to 5,587,965 shares (the
"Shares") of Common Stock, par value $.01 per share, of Oncor, Inc. ("Oncor" or
the "Company") and (ii) in accordance with Rule 416 under the Securities Act of
1933, as amended (the "Securities Act"), such presently indeterminate number of
additional shares as may be issuable upon conversion of certain shares of the
Company's Series A Convertible Preferred Stock, par value $.01 per share (the
"Series A Preferred Stock") and exercise of certain Warrants to purchase shares
of Common Stock (the "Warrants"), based upon fluctuations in the conversion
price of the Common Stock and the number of Warrants to be issued. The Shares
are issuable by the Company to the Selling Stockholders (i) upon the conversion
of the Series A Preferred Stock and (ii) upon exercise of the Warrants. The
Shares may be offered by holders of the Series A Preferred Stock who convert
their Series A Preferred Stock and the holders of the Warrants who subsequently
exercise their Warrants.
The Shares may be offered by the Selling Stockholders from time to
time in transactions on the American Stock Exchange, in negotiated
transactions, or a combination of such methods of sale, at fixed prices which
may be changed, at market prices prevailing at the time of sale, at prices
related to prevailing market prices or at negotiated prices. The Selling
Stockholders may effect such transactions by selling the Shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholders and/or the
purchasers of the Shares for whom such broker-dealers may act as agents or to
whom they sell as principals, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). In order to comply
with the securities laws of certain states, if applicable, the Shares will be
sold in such jurisdictions only through registered or licensed brokers or
dealers. The Selling Stockholders may transfer their Series A Preferred Stock
or Warrants under certain circumstances to other persons who may, in turn,
resell Shares in the manner described above. In addition, the Selling
Stockholders may pledge or make gifts of their Shares and such Shares may also
be sold by the pledgees or transferees. To the extent required, the specific
Shares to be sold, the names of the Selling Stockholders, the public offering
price, the names of any such agent, dealer or underwriter, and any applicable
commission or discount with respect to any particular offer will be set forth
in an accompanying Prospectus Supplement. See "Selling Stockholders" and "Plan
of Distribution."
None of the proceeds from the sale of the shares issued upon
conversion of the Series A Preferred Stock (the "Series A Shares") by the
Selling Stockholders will be received by the Company. The Company will receive
aggregate proceeds of up to $644,500 upon the exercise of the Warrants
outstanding as of the date of this Prospectus, but will not receive any
proceeds from the subsequent sale of the shares issued upon exercise of the
Warrants (the "Warrant Shares"). See "Issuance of the Shares and Use of
Proceeds." The Company has agreed to bear certain expenses (other than
underwriting discounts and selling commissions and fees and disbursements of
counsel and other advisors to the Selling Stockholders) in connection with the
registration of the Shares. The Company has agreed to indemnify the Selling
Stockholders and their affiliates against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Securities
Act"). The Company and the Selling Stockholders have agreed to indemnify each
other against certain liabilities, including liabilities under the Securities
Act under certain circumstances.
The Common Stock of the Company is traded on the American Stock
Exchange under the symbol "ONC." The last reported sales price of the Company's
Common Stock on the American Stock Exchange on February 23, 1998 was $4.00 per
share.
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AN INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 4.
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The Selling Stockholders and any broker-dealers, agents or
underwriters that participate with the Selling Stockholders in the
distribution of the Shares may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any commissions received by
them and any profit on the resale of the Shares purchased by them may be deemed
to be underwriting commissions or discounts under the Securities Act. See
"Plan of Distribution" herein for a description of indemnification
arrangements.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS FEBRUARY 25, 1998
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION
WITH THE OFFERING MADE HEREBY, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, ANY SELLING STOCKHOLDER OR BY ANY OTHER PERSON. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES
TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION MAY NOT LAWFULLY BE MADE. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
TABLE OF CONTENTS
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PAGE
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Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Issuance of the Shares and Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 under the Securities Act
with respect to the Common Stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and the schedules thereto. For further information with respect to
the Company and such Common Stock, reference is made to the Registration
Statement and exhibits and schedules thereto. Statements contained in this
Prospectus as to the contents of any contract or other document referred to are
not necessarily complete, and, with respect to any contract or other document
filed as an exhibit to the Registration Statement, each such statement is
qualified in all respects by reference to such exhibit. Copies of the
Registration Statement and the exhibits thereto are on file at the offices of
the Commission and may be obtained upon payment of the prescribed fee or may be
examined without charge at the public reference facilities of the Commission
described below.
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files annual and quarterly reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected, and copies of such material may be obtained upon
payment of the prescribed fees, at the Commission's Public Reference Section,
Room 1024, 450 Fifth Street, N.W., Washington D.C. 20549, as well as at the
Commission's Regional Offices at Seven World Trade Center, New York, New York
10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511, or may be obtained from the Commission's Internet site on
the world wide web at http://www.sec.gov. Copies of such material can be
obtained in person from the Public Reference Section of the Commission at its
principal office located at 450 Fifth Street, N.W., Washington, D.C. 20549,
upon payment of the prescribed fees.
The Common Stock of the Company is traded on the American Stock
Exchange, and in accordance therewith, annual and quarterly reports, proxy
statements and other information concerning the Company may be inspected at the
American Stock Exchange's offices located in New York.
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed with the Commission are hereby
incorporated by reference in this Prospectus: (1) the Annual Report of the
Company on Form 10-K for the fiscal year ended December 31, 1996 (the "1996
Form 10-K"); (2) the Quarterly Reports of the Company on Form 10-Q for the
quarters ended March 31, 1997, June 30, 1997 and September 30, 1997; (3) the
Proxy Statement of the Company in connection with the Annual Meeting of the
Stockholders held on June 25, 1997; and (4) the Current Report of the Company
on Form 8-K, dated January 16, 1998.
All reports and other documents subsequently filed by the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Prospectus and prior to the termination of this Offering shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of filing of such reports and documents. Any statement incorporated
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the foregoing documents incorporated herein by reference (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such document). Requests for such documents
should be submitted in writing to Mr. John L. Coker, Vice President, Oncor,
Inc., 209 Perry Parkway, Gaithersburg, Maryland 20877.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). ALL STATEMENTS OTHER THAN
STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS PROSPECTUS OR INCORPORATED
HEREIN BY REFERENCE REGARDING THE COMPANY'S FINANCIAL POSITION AND BUSINESS
STRATEGY MAY CONSTITUTE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY
BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE
REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE
BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THE COMPANY'S EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE
DISCLOSED IN THIS PROSPECTUS, INCLUDING WITHOUT LIMITATION, IN CONJUNCTION WITH
THE FORWARD-LOOKING STATEMENTS UNDER "RISK FACTORS." ALL SUBSEQUENT WRITTEN
AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY OR PERSONS
ACTING ON ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE
CAUTIONARY STATEMENTS
THE COMPANY
The Company was incorporated in Maryland in July 1983. The Company's
principal offices are located at 209 Perry Parkway, Gaithersburg, Maryland
20877, and its telephone number is (301) 963-3500.
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RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a
high degree of risk and should not be made by any investor who cannot afford
the loss of his entire investment. Accordingly, prospective investors should
carefully consider the following factors, in addition to all of the other
information presented in this Prospectus, before purchasing any of the shares
of Common Stock offered hereby.
ADDITIONAL FINANCING REQUIREMENTS AND ACCESS TO CAPITAL FUNDING
The Company has expended and will continue to expend in the future
substantial funds to continue the research and development of its products,
conduct clinical trials, make capital expenditures, establish additional
manufacturing capability, and market its products. The Company believes that
its existing funds will be adequate to finance its operations through April 30,
1998. This belief is based on the Company's current research and development
plans, the current regulatory environment, historical industry experience in
the development of biotechnology products and general economic conditions.
However, the Company's cash requirements may vary materially from those now
planned as a result of unforeseen changes that could consume a significant
portion of the available resources before such time. To the extent that funds
expected to be generated from the Company's operations are insufficient to meet
current or planned operating requirements, the Company will seek to obtain
additional funds through equity or debt financing, collaborative or other
arrangements with corporate partners and others, and from other sources. No
assurance can be given that additional financing will be available when needed
or on terms acceptable to the Company. If adequate funds are not available,
the Company may be required to delay or to eliminate expenditures for certain
of its products or to license to third parties the rights to commercialize
products or technologies that the Company would otherwise seek to develop
itself.
In connection with its continued need for additional financing, the
Company has engaged Lehman Brothers in an effort to effect one or more
long-term strategic transactions to increase shareholder value. Such
transactions could include, among other things, a sale of the entire Company, a
sale of a substantial portion of the Company, or a merger with another company.
There can be no assurance, however, that the Company will be able to effect
strategic transactions on terms which are favorable to its shareholders or at
all. The failure of the Company to effect one or more strategic transactions
could have a material and adverse effect on the Company's business, financial
condition or results of operations.
HISTORY OF OPERATING LOSSES
Oncor has not been profitable since its inception in July 1983. For
the year ended December 31, 1996 and the nine months ended September 30, 1997,
the Company incurred net losses of $29.0 million and $21.8 million,
respectively. As of September 30, 1997, the accumulated deficit of the Company
was $123.4 million. The Company expects to incur additional substantial losses
in the last three months of 1997 and expects to incur additional substantial
losses in future periods. The Company is unable to predict when, or if, it
will become profitable.
RISK ASSOCIATED WITH THE HER-2/NEU GENE-BASED TEST SYSTEM
On December 31, 1997, the Company received approval from the U.S. Food
and Drug Administration (the "FDA") for its Her-2/neu gene-based test system.
There can be no assurance that the Company will be capable of manufacturing the
test system in commercial quantities at reasonable costs or marketing the
product successfully, that the test system will be accepted by the medical
diagnostic community, or that the market demand for the test system will be
sufficient to allow profitable sales. If the Company is unable to manufacture
and market its Her-2/neu gene-based test system successfully, it could have a
material and adverse effect on the Company's business, financial condition or
results of operations.
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NO ASSURANCE OF REGULATORY APPROVALS; GOVERNMENT REGULATION
The Company's products are subject to extensive regulation by
governmental authorities in the United States and other countries. The FDA and
comparable agencies in other countries impose substantial requirements that
must be satisfied before newly developed products may be sold for diagnostic
use. Although the Company may sell its products in the United States for
research purposes only, it may not sell such products in the United States for
diagnostic purposes until it receives approval from the FDA. The Company is
currently pursuing FDA approval of certain existing products and expects to
pursue FDA approval of certain additional products under development. There
can be no assurance that the Company will receive regulatory approval for any
of its products or, even if it does receive regulatory approval for a
particular product, that the Company will ever recover its costs in connection
with obtaining such approval. The timing of regulatory approvals is not within
the control of the Company. The failure of the Company to receive requisite
approval, or significant delays in obtaining such approval, could have a
material and adverse effect on the Company's business, financial condition or
results of operations.
Approval by the FDA requires lengthy, detailed and costly laboratory
and clinical testing procedures and application preparation and defense efforts
to demonstrate a product's efficacy and safety before a product can be sold for
diagnostic use. Even if such regulatory approval is obtained for a product,
its manufacturer and its manufacturing facilities are subject to continual
review and periodic inspections by the FDA and other regulatory agencies. The
regulatory standards for manufacturing are applied stringently by the FDA.
Discovery of previously unknown problems with a product, manufacturer or
facility may result in restrictions on such product or manufacturer, including
costly recalls or even withdrawal of the product from the market. Furthermore,
approval may entail ongoing requirements for postmarketing studies. Failure to
maintain requisite manufacturing standards or discovery of previously unknown
problems could have a material and adverse effect on the Company's business,
financial condition or results of operations.
Sales of the Company's products outside the United States are also
subject to extensive regulatory requirements, which vary widely from country to
country. Diagnostic products that have not been approved by the FDA may be
exported for sale for diagnostic use outside the United States only after
receiving approval for export by the FDA. Furthermore, such products may be
exported for diagnostic use only in certain countries, generally countries
within Europe, Canada, Australia and Japan, and, then, only if the appropriate
regulatory authorities in such countries have approved such products for
diagnostic use in their respective countries. The time required to obtain such
approvals may be longer or shorter than that required for FDA approval.
Additionally, the Company is or may become subject to various federal,
state and local laws, regulations and recommendations relating to safe working
conditions, laboratory and manufacturing practices, the experimental use of
animals and the use and disposal of hazardous or potentially hazardous
substances, including radioactive compounds and infectious disease agents, used
in connection with the Company's research and development work. The Company is
unable to predict the extent of future government regulation.
PATENTS AND PROPRIETARY RIGHTS
The Company's success will depend in large part on its, or its
licensors', ability to obtain patents, defend its patents, maintain trade
secrets and operate without infringing upon the proprietary rights of others,
both in the United States and in foreign countries. The patent position of
firms relying upon biotechnology is highly uncertain in general and involves
complex legal and factual questions. To date there has emerged no consistent
policy regarding the breadth of claims allowed in biotechnology patents or the
degree of protection afforded under such patents. The Company relies on
certain patents and pending United States and foreign patent applications
relating to various aspects of its products. These patents and patent
applications are either owned by the Company or rights under them are licensed
to the Company. There can be no assurance that patents will issue as a result
of any such pending applications or that, if issued, such patents will be
sufficiently broad to afford protection against competitors with similar
technology. In addition, there can be no assurance that any patents issued to
the Company, or for which the Company has license rights, will not be
challenged, invalidated or circumvented, or that the rights granted thereunder
will provide competitive advantages to the Company. The commercial success of
the Company will also depend upon avoiding the infringement of patents issued
to competitors and upon maintaining the technology licenses
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<PAGE> 7
upon which certain of the Company's current products are, or any future
products under development might be, based. Litigation, which could result in
substantial cost to the Company, may be necessary to enforce the Company's
patent and license rights or to determine the scope and validity of others'
proprietary rights. If competitors of the Company prepare and file patent
applications in the United States that claim technology also claimed by the
Company, the Company may have to participate in interference proceedings
declared by the United States Patent and Trademark Office ("PTO") to determine
the priority of invention, which could result in substantial cost to the
Company, even if the outcome is favorable to the Company. An adverse outcome
could subject the Company to significant liabilities to third parties and
require the Company to license disputed rights from third parties or cease
using the technology. A United States patent application is maintained under
conditions of confidentiality while the application is pending in the PTO, so
that the Company cannot determine the inventions being claimed in pending
patent applications filed by its competitors in the PTO. Further, United
States patents do not provide any remedies for infringement that occurred
before the patent is granted.
The University of California and its licensee, Vysis, Inc. ("Vysis"),
filed suit against Oncor on September 5, 1995 in the United States District
Court for the Northern District of California (the "Court"), alleging
infringement of U.S. Patent No. 5,447,841 entitled Methods and Compositions
for Chromosome Specific Staining which issued on that same date. The patent
relates to a method of performing in situ hybridization using a blocking
nucleic acid that is complementary to repetitive sequences which are present in
the hybridization probe. The Company filed motions for summary judgment of
invalidity, non-infringement and unenforceability of the patent claims in suit,
which were denied in August and December 1997. In August 1997, the Court
granted Vysis' motion for summary judgment on novelty and non-obviousness with
respect to the patent, and granted in part and denied in part Vysis' motion for
summary judgment that the patent in suit is infringed. The Company also filed
a motion which would have permitted an immediate appeal to have been taken on
claim interpretation and invalidity issues, but was denied in October 1997. On
February 3, 1998, the Company notified the Court that it intended to concede
that the Company's probes, when used with metaphase chromosomes, infringed the
Vysis patent. A trial date of April 20, 1998 has been set by the Court to
litigate the remaining issues. A failure to successfully defend against or
settle this suit may result in damages being assessed against the Company and
an injunction against the sale of most of the Company's probes and genetic test
kits, either of which would likely have a material and adverse effect on the
Company's business, financial condition or results of operations.
The Company has filed a patent application asserting patent rights to
the Company's TRI-AMP(TM) technology. The Company is a party to an interference
proceeding declared by the PTO involving Beckman Instruments, Inc.'s
("Beckman") and the Company's claims regarding these patent rights. There can
be no assurance as to the length of time for a decision to be rendered, or the
nature of the decision, in this interference proceeding or any potential appeal
therefrom. If it is determined that Beckman's patent claims have priority over
the Company's claims, the Company may have no patent claim or protection with
respect to the Company's TRI-AMP(TM) technology, which could prevent or limit
the Company's ability to commercialize the Company's TRI-AMP(TM) technology,
absent a license from Beckman. This could have a material and adverse effect
on the Company's business, financial condition or results of operations.
The Company currently has certain licenses from third parties and in
the future may require additional licenses from other parties to develop,
manufacture and market commercially viable products effectively. There can be
no assurance that such licenses will be obtainable on commercially reasonable
terms, if at all, that the patents underlying such licenses will be valid and
enforceable or that the proprietary nature of the patented technology
underlying such licenses will remain proprietary.
The Company relies substantially on certain technologies that are not
patentable or proprietary and are therefore available to the Company's
competitors. The Company also relies on certain proprietary trade secrets and
know-how that are not patentable. Although the Company has taken steps to
protect its unpatented trade secrets and know-how, in part through the use of
confidentiality agreements with its employees, consultants and certain of its
contractors, there can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach, or that
the Company's trade secrets will not otherwise become known or be independently
developed or discovered by competitors.
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UNCERTAINTIES RELATING TO PRODUCT DEVELOPMENT
With the exception of its Her-2/neu gene-based test system, the
Company's products have not been approved by the FDA and may be sold only for
research purposes. The Company has undertaken to seek FDA approval for certain
of these products, and may in the future undertake to seek such approval for
other products, and substantial additional investment, laboratory development,
clinical testing and FDA approval will be required prior to the
commercialization of such products for diagnostic purposes. There can be no
assurance that the Company will be successful in developing such existing or
future products, that such products will prove to be efficacious in clinical
trials, that required regulatory approvals can be obtained for such products,
that such products, if developed and approved, will be capable of being
manufactured in commercial quantities at reasonable costs, will be marketed
successfully or will be accepted by the medical diagnostic community, or that
market demand for such products will be sufficient to allow profitable
operations.
INVESTMENT IN ONCORMED AND CODON
The Company owns approximately 25% of the common stock of its
publicly-traded affiliate, OncorMed, and 100% of the voting securities of its
privately-held affiliate, Codon. The shares of common stock of both OncorMed
and Codon held by the Company are not currently freely tradeable and no public
market exists for the common stock of Codon. Therefore, there can be no
assurance that the Company will be able to realize the economic benefit of its
investment or predict the timing of such realization. The value of the
Company's investment in OncorMed represents a significant portion of the total
assets of the Company and such value fluctuates with the market price of
OncorMed's common stock. Therefore, any event that has a material and adverse
effect on the market price of the common stock of OncorMed will have a material
and adverse effect on the value of the Company's investment in OncorMed.
Although Stephen Turner, the Company's Chief Executive Officer, is a Director
of OncorMed and the Company is a significant stockholder in OncorMed, the
Company does not control the day-to-day operations and management of OncorMed
and, therefore, has little direct control over its operations and financial
results.
Codon will require additional funding in the immediate future. If the
Company is successful in securing sufficient additional financing, it will
likely fund the operations of Codon into the foreseeable future. The failure
of the Company to obtain such financing on acceptable terms would have a
material and adverse effect on the recoverability of the Company's advances to
Codon. Furthermore, the inability of Codon to obtain additional financing on
acceptable terms (either from the Company or from third parties) would have a
material and adverse effect on the value of the Company's investment in Codon.
INTERNATIONAL SALES AND FOREIGN EXCHANGE RISK
The Company derived approximately $8.7 million, or 57% of its total
product revenues, from customers outside of the United States for the year
ended December 31, 1996. The Company anticipates that a significant amount of
its sales will continue outside of the United States in the foreseeable future
and that a significant amount of its sales will take place in European
countries and likely will be denominated in currencies other than the U.S.
dollar. These sales may be adversely affected by changing economic conditions
in foreign countries and by fluctuations in currency exchange rates. Any
significant decline in the applicable rates of exchange could have a material
and adverse effect on the Company's business, financial condition or results of
operations. Additional risks inherent in the Company's international business
activities generally include unexpected changes in regulatory requirements,
tariffs and other trade barriers, lack of acceptance of products in foreign
markets, or by foreign healthcare reimbursement regimes longer accounts
receivable payment cycles, difficulties in managing international operations,
potentially adverse tax consequences, restrictions on repatriation of future
earnings, if any, and the burdens of complying with a wide variety of foreign
laws. There can be no assurance that such factors will not have a material and
adverse effect on the Company's future international revenues and,
consequently, on the Company's business, financial condition or results of
operations.
- 7 -
<PAGE> 9
LIMITED MANUFACTURING EXPERIENCE
The Company's ability to conduct clinical trials on a timely basis, to
obtain regulatory approvals and to commercialize its products will depend in
part upon its ability to develop and maintain facilities to manufacture its
products, either directly or through third parties, at a competitive cost in
accordance with the FDA's prescribed current Good Manufacturing Practices
("GMP") and other regulatory requirements. Any failure to maintain
manufacturing facilities in accordance with the FDA's GMP requirements could
result in the inability of the Company to manufacture its products and may
limit the Company's ability to deliver its products to its customers, which
could have a material and adverse effect on the Company's business, financial
condition or results of operations. No assurance can be given that the Company
will be able to develop and maintain GMP facilities or engage third parties to
do so at a cost acceptable to the Company.
The Company has only limited experience in manufacturing products on a
commercial basis. The Company believes that its existing manufacturing
facilities will enable it to produce commercial quantities of its products
through 1998. No assurance can be given, however, that manufacturing or
quality control problems will not arise if the Company increases production of
its products, or if additional facilities are required in the future.
LIMITED MARKETING AND DISTRIBUTION EXPERIENCE
The Company markets and sells its products, with the exception of its
Her-2/neu gene-based test system, for research purposes and, if approved by the
appropriate regulatory authority, for diagnostic use, through its direct sales
forces in both Europe and the United States and indirectly through third
parties in the Pacific Rim. The Company only has limited experience in sales,
marketing and distribution. In order to market its products directly, the
Company must maintain a sales force with technical expertise and an
understanding of the Company's products. There can be no assurance that the
Company will be able to maintain such a sales force or that the Company's
direct sales and marketing efforts will be successful. In addition, the
Company's products compete with the products of many other companies that
currently have extensive and well-funded marketing and sales operations. There
can be no assurance that the Company's marketing and sales efforts will compete
successfully against such other companies. To the extent the Company enters
arrangements with third parties, any revenues received by the Company will be
dependent on the efforts of such third parties, and there can be no assurance
that such efforts will be successful.
COMPETITION AND TECHNOLOGICAL CHANGE
The diagnostic and biotechnology industries are subject to intense
competition and rapid and significant technological change. Competitors of the
Company in the United States and in foreign countries are numerous and include,
among others, diagnostic, health care, pharmaceutical, biotechnology and
chemical companies, academic institutions, government agencies and other public
and private research organizations. Many of these competitors have
substantially greater financial and technical resources and production and
marketing capabilities than the Company. There can be no assurance that these
competitors will not succeed in developing technologies and products that are
more effective, easier to use or less expensive than those that have been or
are being developed by the Company or that would render the Company's
technology and products obsolete and noncompetitive. The Company also competes
with various companies in acquiring technology from academic institutions,
government agencies and research organizations. In addition, many of the
Company's competitors have significantly greater experience than the Company in
conducting clinical trials of new diagnostic products and in obtaining FDA and
other regulatory approvals of products for use in health care. Accordingly,
the Company's competitors may succeed in obtaining regulatory approval for
products more rapidly than the Company.
RESTRICTED USE OF THE COMPANY'S PRODUCT
With the exception of its Her-2/neu gene-based test system, the
Company's current products, to the extent sold in the United States, must be
sold for research purposes only and must be labeled accordingly. The FDA
imposes distribution requirements and procedures on companies selling products
for research purposes only, including the requirement that the seller receive
specified certifications from its customer as to the customer's
- 8 -
<PAGE> 10
intended use of the product. As a result of these requirements, most of the
Company's products, to the extent sold in the United States, can only be sold
to a limited number of customers for limited use and can not be sold for
broader commercial use without FDA approval. No assurance can be given that
the Company will receive FDA approval for its products.
GOVERNMENT FUNDING
The Company's products being sold for research purposes only are in
large part purchased by cancer researchers operating under programs funded by
the United States and European national governments. These products are also
purchased by researchers involved in the human genome project, which is
likewise principally funded by the governments. Recently there have been
significant reductions in governmental spending for healthcare research and
there can be no assurance that such government funding will continue at its
current level. The Company would be adversely affected by decreases in or
changes in the kinds of government funding for cancer research or human genome
research.
ATTRACTION AND RETENTION OF KEY PERSONNEL
The Company's ability to successfully develop marketable products and
to maintain a competitive position will depend in large part on its ability to
attract and retain highly qualified scientific and management personnel. The
Company is highly dependent upon the principal members of its management,
scientific staff and science advisory board. Competition for such personnel
and advisors is intense, and there can be no assurance that the Company will be
able to continue to attract and retain such personnel.
UNCERTAINTY RELATED TO HEALTH CARE REFORM MEASURES AND THIRD-PARTY
REIMBURSEMENT
Political, economic and regulatory influences are likely to lead to
fundamental change in the health care industry in the United States. Numerous
proposals for comprehensive reform of the nation's health care system have been
introduced in Congress over the past several years. In addition, certain
states are considering various health care reform proposals. The Company
anticipates that Congress and state legislatures will continue to review and
assess alternative health care delivery systems and payment methodologies, and
that public debate of these issues will likely continue in the future. Due to
uncertainties regarding the ultimate features of reform initiatives and their
enactment and implementation, the Company cannot predict which, if any, reforms
will be adopted, when they may be adopted, or what impact they may have on the
Company. The Company's ability to earn sufficient returns on its products may
also depend in part on the extent to which reimbursement for the costs of such
products will be available from government health administration authorities,
private health insurers and other organizations. Third-party payors are
increasingly challenging the price and cost effectiveness of medical products
and services. Significant uncertainty exists as to the reimbursement status of
newly approved health care products, and there can be no assurance that
adequate reimbursement will be available or sufficient to allow the Company to
sell its products on a competitive basis.
PRODUCT LIABILITY
The testing, marketing and sale of health care products could expose
the Company to the risk of product liability claims. A product liability claim
could have a material and adverse effect on the Company's business, financial
condition or results of operations. The Company currently maintains product
liability insurance coverage of $5.0 million per occurrence. There can be no
assurance, however, that this coverage will be adequate to protect the Company
against future product liability claims or that product liability insurance
will be available to the Company in the future on acceptable terms, if at all.
ENVIRONMENTAL RISKS
The manufacturing and research and development processes of the
Company involve the controlled use of hazardous materials. The Company is
subject to federal, state and local laws and regulations governing the use,
manufacture, storage, handling and disposal of such materials and certain waste
products. Although the Company
- 9 -
<PAGE> 11
believes that its activities currently comply with the standards prescribed by
such laws and regulations, the risk of accidental contamination or injury from
these materials cannot be eliminated. In the event of such an accident, the
Company could be held liable for any damages that result and any such liability
could exceed the resources of the Company. In addition, there can be no
assurance that the Company will not be required to incur significant costs to
comply with environmental laws and regulations in the future.
POSSIBLE VOLATILITY OF STOCK PRICE
The market prices for securities of life sciences companies, including
the Company, have been highly volatile and the market has experienced
significant price and volume fluctuations that are unrelated to the operating
performance of particular companies. Announcements of technological
innovations or new commercial products by the Company or its competitors,
developments concerning proprietary rights, including patents and litigation
matters, publicity regarding actual or potential clinical trial results with
respect to products under development by the Company or others, decisions
regarding regulatory approvals of the products of the Company or others,
regulatory developments in both the United States and foreign countries, public
concern as to the efficacy of new technologies, general market conditions, as
well as quarterly fluctuations in the Company's revenues and financial results
and other factors, may have a significant impact on the market price of the
Common Stock. In particular, the realization of any of the risks described in
these "Risk Factors" could have a dramatic and adverse impact on such market
price.
LARGE NUMBER OF SHARES ELIGIBLE FOR FUTURE SALE; EFFECT ON ABILITY TO RAISE
CAPITAL
Sales of substantial amounts of Common Stock in the public market
following this Offering could adversely affect the prevailing market price of
the Company's Common Stock and may have a material and adverse effect on the
Company's ability to raise the capital necessary to fund its future operations.
As of December 31, 1997, without taking into account shares of Common Stock
issued upon exercise of stock options, warrants or other rights to acquire
Common Stock after December 31, 1997, the Company had outstanding 27,222,975
shares of Common Stock. The Shares and substantially all of the shares of
Common Stock already outstanding, will be freely tradeable in the public market
without restriction under the Securities Act, except that any shares held by
"affiliates" of the Company, as such term is defined in Rule 144(a) under the
Securities Act ("Affiliates"), may generally only be sold in compliance with
the applicable provisions of Rule 144 of the Securities Act. In general, under
Rule 144 an Affiliate is entitled to sell within any three-month period a
number of shares that does not exceed the greater of 1% of the then outstanding
shares of the Company's Common Stock (approximately 272,230 shares) or the
average weekly trading volume in the Company's Common Stock on the American
Stock Exchange during the four calendar weeks preceding the date on which
notice of such sale was filed under Rule 144. Sales under Rule 144 are also
subject to certain provisions relating to the manner and notice of sale and the
availability of current public information about the Company. Additional
shares of Common Stock, including shares issuable upon exercise of options,
warrants and other rights to acquire Common Stock, will also become eligible
for sale in the public market from time to time in the future. Furthermore,
certain holders of Common Stock have the right to cause the Company to register
their shares under the Securities Act in the future. The Company is required
to bear the expenses of all such required registrations (except underwriting
discounts and commissions). The Company is required to use its best efforts to
effect such registrations, subject to certain conditions and limitations.
NO DIVIDENDS
The Company has never paid any cash dividends on its Common Stock and
does not anticipate paying any cash dividends in the foreseeable future.
- 10 -
<PAGE> 12
ISSUANCE OF THE SHARES AND USE OF PROCEEDS
The Shares are issuable upon the conversion or exercise of outstanding
Series A Preferred Stock and Warrants.
None of the proceeds from the sale of the Shares by the Selling
Stockholders issued upon conversion of the Series A Preferred Stock will be
received by the Company.
The Shares issuable upon the exercise of the Warrants outstanding as
of the date of this Prospectus will be acquired by the Selling Stockholders at
a purchase price per share of $5.156, subject to adjustment. The Company will
receive aggregate gross proceeds of up to $644,500 upon the exercise of such
Warrants. The number and exercise price of the warrants issuable in connection
with future issuances of Series A Preferred Stock is dependent on the number of
shares of Series A Preferred Stock issued and the market price of the Common
Stock at such time. The Company intends to use any net proceeds from the
exercise of the Warrants for general corporate purposes, including working
capital.
BUSINESS
LEGAL PROCEEDINGS
From time to time, the Company may be involved in litigation relating
to claims arising out of its operations in the normal course of business, in
addition to the pending and threatened legal proceedings discussed in "Risk
Factors" above, or receive notification from third parties threatening to
commence such litigation. See "Risk Factors -- Patents and Proprietary
Rights." The Company is not currently a party to any such legal proceedings
relating to claims arising out of its operations in the normal course of
business, the adverse outcome of which, individually or in the aggregate, would
have a material and adverse effect on the Company's business, financial
condition or results of operations.
- 11 -
<PAGE> 13
SELLING STOCKHOLDERS
The following table sets forth the number of shares of Common Stock
beneficially owned by each of the Selling Stockholders as of January 15, 1998.
None of the Selling Stockholders has had a material relationship with the
Company within the past three years other than as a result of the ownership of
the Shares or other securities of the Company. The Shares offered by this
Prospectus may be offered from time to time by the Selling Stockholders. See
"Plan of Distribution."
The Shares being offered by the Selling Stockholders may be acquired,
from time to time, (i) upon conversion of shares of Series A Preferred Stock
issued and issuable to the Selling Stockholders, (ii) upon the exercise of
Warrants issued and issuable to the Selling Stockholders in connection with the
issuance of the shares of Series A Preferred Stock and (iii) pursuant to
certain anti-dilution provisions included in the Series A Preferred Stock and
the Warrants.
The Company has agreed to register a specific number of Shares for
resale by the Selling Stockholders. The number of Shares shown in the
following table as being offered by the Selling Stockholders does not include
such presently indeterminate number of shares of Common Stock as may be
issuable upon conversion of the issued and issuable Series A Preferred Stock
and exercise of the issued and issuable Warrants pursuant to the provisions
thereof regarding determination of the applicable conversion price of the
Series A Preferred Stock and the number of Warrants but which shares, in
accordance with Rule 416 under the Securities Act, are included in the
Registration Statement of which this Prospectus forms a part.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
NUMBER OF SHARES NUMBER OF AFTER OFFERING(4)
BENEFICIALLY OWNED SHARES ----------------------
PRIOR TO REGISTERED FOR NUMBER
NAME OF SELLING STOCKHOLDER OFFERING(1)(2) SALE HEREBY(3) OF SHARES PERCENT
--------------------------- -------------------- -------------- --------- -------
<S> <C> <C> <C> <C>
Halifax Fund, L.P. . . . . . . . . . . 1,301,593(5) 2,793,982 627,711 2.2%
Heracles Fund . . . . . . . . . . . . . 353,569(6) 838,195 151,404 *
Themis Partners L.P. . . . . . . . . . 235,964(7) 838,195 33,799 *
Leonardo, L.P. . . . . . . . . . . . . 186,225(8) 558,796 51,449 *
Ramius Fund, Ltd. . . . . . . . . . . . 80,866(9) 335,278 - -
Raphael, L.P. . . . . . . . . . . . . . 67,670(10) 223,519 13,759 *
--------- --------- --------- ---------
TOTAL . . . . . . . . . . . . 2,225,887 5,587,965 878,122 3.1%
========= ========= ========= =========
</TABLE>
- --------------------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules and
regulations promulgated under the Securities Act and generally
includes voting or investment power with respect to securities.
Pursuant to the terms of the Series A Preferred Stock and the
Warrants, no Selling Stockholder can convert any portion of such
Selling Stockholder's Series A Preferred Stock or exercise any portion
of such Selling Stockholder's Warrants if such conversion or exercise
would increase such Selling Stockholder's beneficial ownership of the
Common Stock (other than shares so owned through ownership of the
Series A Preferred Stock or Warrants) to in excess of 4.99%.
(2) Includes shares of Common Stock of the Company held by certain of the
Selling Stockholders and shares of Common Stock of the Company
issuable within 60 days of January 15, 1998 upon (i) conversion of the
Series A Preferred Stock calculated using an assumed conversion price
of $4.0938 (calculated as of January 15, 1998), based upon certain
conversion provisions of the Series A Preferred Stock (which price
could fluctuate from time to time based on changes in the market price
of the Common Stock), (ii) exercise of the Warrants, (iii) exercise of
certain warrants issued in 1996 which have been adjusted as of January
15,
- 12 -
<PAGE> 14
1998 pursuant to certain anti-dilution adjustment provisions (the
"1996 Warrants"), and (iv) conversion of certain convertible
debentures issued in 1996 (the "1996 Debentures"), as more
specifically disclosed in footnotes 5 through 10 below. This number
does not include shares of Common Stock issuable upon conversion of
Series A Preferred Stock and exercise of Warrants which may be sold to
the Selling Stockholders after January 15, 1998, pursuant to the terms
of the Securities Purchase Agreement, dated January 8, 1998, by and
among the Company and the buyers named therein.
(3) Represents each Selling Stockholder's pro rata portion (based on the
number of shares of Series A Preferred Stock purchased by such Selling
Stockholder) of the specified number of shares of Common Stock which
the Company has agreed initially to register for resale by the Selling
Stockholders. This Prospectus also covers the resale of such
presently indeterminate number of shares of Common Stock as may be
issuable upon conversion of the issued and issuable Series A Preferred
Stock and exercise of the issued and issuable Warrants pursuant to the
provisions thereof regarding determination of the applicable
conversion price of the Series A Preferred Stock and the number of
Warrants pursuant to Rule 416 under the Securities Act.
(4) The number of shares of Common Stock and the percentage of shares of
Common Stock beneficially owned by each Selling Stockholder after the
Offering are based on the assumption that each Selling Stockholder
will sell all of the Series A Shares and Warrant Shares registered for
sale hereby. See "Plan of Distribution."
(5) Consists of (i) 611,382 shares of Common Stock issuable upon
conversion of the Series A Preferred Stock, (ii) 62,500 shares of
Common Stock issuable upon exercise of the Warrant, (iii) an aggregate
of 198,916 shares of Common Stock issuable upon exercise of the 1996
Warrants, and (iv) 428,795 shares of Common Stock issuable upon
conversion of the 1996 Debenture, each as of January 15, 1998.
(6) Includes (i) 183,415 shares of Common Stock issuable upon conversion
of the Series A Preferred Stock, (ii) 18,750 shares of Common Stock
issuable upon exercise of the Warrant, and (iii) an aggregate of
84,433 shares of Common Stock issuable upon exercise of the 1996
Warrants, each as of January 15, 1998.
(7) Includes (i) 183,415 shares of Common Stock issuable upon conversion
of the Series A Preferred Stock, (ii) 18,750 shares of Common Stock
issuable upon exercise of the Warrant, and (iii) 14,183 shares of
Common Stock issuable upon exercise of the 1996 Warrant, each as of
January 15, 1998.
(8) Consists of (i) 122,276 shares of Common Stock issuable upon
conversion of the Series A Preferred Stock, (ii) 12,500 shares of
Common Stock issuable upon exercise of the Warrant, and (iii) 51,449
shares of Common Stock issuable upon exercise of the 1996 Warrant,
each as of January 15, 1998.
(9) Consists of (i) 73,366 shares of Common Stock issuable upon conversion
of the Series A Preferred Stock, and (ii) 7,500 shares of Common Stock
issuable upon exercise of the Warrant, each as of January 15, 1998.
(10) Consists of (i) 48,911 shares of Common Stock issuable upon conversion
of the Series A Preferred Stock, (ii) 5,000 shares of Common Stock
issuable upon exercise of the Warrant, and (iii) an aggregate of
13,759 shares of Common Stock issuable upon exercise of the 1996
Warrants, each as of January 15, 1998.
The Shares are being registered as a result of the contractual
arrangement with the Selling Stockholders. The Company has agreed to bear
certain expenses (other than underwriting discounts and selling commissions and
fees and disbursements of counsel and other advisors to the Selling
Stockholders) in connection with the registration of the Shares.
The Company has agreed to prepare and file such amendments and
supplements to the Registration Statement as may be necessary to keep this
Registration Statement effective until the earlier of the date on which the
Selling Stockholders shall have sold all of the securities registered hereby or
the date on which the Shares are saleable pursuant to Rule 144(k) promulgated
under the Securities Act.
- 13 -
<PAGE> 15
PLAN OF DISTRIBUTION
The sale of the Shares offered hereby may be effected by the Selling
Stockholders from time to time in transactions on the American Stock Exchange,
in negotiated transactions, or a combination of such methods of sale, at fixed
prices which may be changed, at market prices prevailing at the time of sale,
at prices related to prevailing market prices or at negotiated prices. The
Selling Stockholders may effect such transactions by selling the Shares to or
through broker-dealers, and such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the Selling Stockholders
and/or the purchasers of the Shares for whom such broker-dealers may act as
agents or to whom they sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions). In
order to comply with the securities laws of certain states, if applicable, the
Shares will be sold in such jurisdictions only through registered or licensed
brokers or dealers. The Selling Stockholders may transfer their Shares under
certain circumstances to other persons who may, in turn, resell Shares in the
manner described above. In addition, the Selling Stockholders may pledge or
make gifts of their Shares and such Shares may also be sold by the pledgees or
transferees.
From time to time, one or more Selling Stockholders may pledge,
hypothecate or grant a security interest in some or all of the Shares owned by
them, and the pledgees, secured parties or persons to whom such securities have
been hypothecated shall, upon foreclosure in the event of default, be deemed to
be Selling Stockholders hereunder. In addition, a Selling Stockholder may,
from time to time, sell short the Common Stock of the Company, and in such
instances, this Prospectus may be delivered in connection with such short sales
and the Shares offered hereby may be used to cover such short sales.
At the time a particular offer of Shares is made, to the extent
required, a Prospectus Supplement will be distributed which will set forth the
number of Shares being offered and the terms of the offering including the name
or names of any underwriters, dealers or agents, the purchase price paid by any
underwriter for the Shares purchased from Selling Stockholders, any discounts,
commissions and other items constituting compensation from the Selling
Stockholders and any discounts, commissions or concessions allowed or reallowed
or paid to dealers.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale
in the applicable state or an exemption from the registration or qualification
requirement is available and is complied with by the Company and the Selling
Stockholders.
The Selling Stockholders may also transfer their Shares pursuant to
Rule 144, whether or not the Registration Statement, of which this Prospectus
forms a part, is effective at the time of any such transfer.
The Selling Stockholders and any broker-dealers, agents or
underwriters that participate with the Selling Stockholders in the distribution
of the Shares may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act, and any commissions received by them and any
profit on the resale of the Selling Stockholder Shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.
The Company has agreed to indemnify the Selling Stockholders and their
affiliates against certain liabilities, including liabilities under the
Securities Act. The Selling Stockholders have agreed to indemnify the Company
and its affiliates against certain liabilities, including liabilities under the
Securities Act.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Shares may not simultaneously engage
in market making activities with respect to the Common Stock of the Company for
a period of two business days prior to the commencement of such distribution.
In addition and without limiting the foregoing, each Selling Stockholder will
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Regulation M, which
provisions may limit the timing of purchases and sales of shares of the
Company's Common Stock by the Selling Stockholders.
- 14 -
<PAGE> 16
The Company has agreed to bear certain expenses (other than
underwriting discounts and selling commissions and fees and disbursements of
counsel and other advisors to the Selling Stockholders) in connection with the
registration of the Shares.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by Brobeck, Phleger & Harrison LLP, New York, New York.
EXPERTS
The financial statements and schedules of the Company incorporated by
reference in this Prospectus and elsewhere in the Registration Statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
- 15 -
<PAGE> 17
5,587,965
ONCOR, INC.
COMMON STOCK
PROSPECTUS
FEBRUARY 25, 1998
<PAGE> 18
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an estimate of the expenses to be
incurred by the Company in connection with the issuance and distribution of the
securities being registered:
<TABLE>
<CAPTION>
Amount to
Be Paid
-----------
<S> <C>
Registration Fee - SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,491
AMEX Listing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,500
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,509
-------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $50,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 11 of the Registrant's Articles of Incorporation, as amended,
and Section 5-01 of the Registrant's By-Laws, as amended, provide that the
Registrant shall, to the full extent permitted by law, indemnify all directors,
officers, employees or agents of the Registrant. Section 2-418 of the Maryland
General Corporation Law permits indemnification of directors, officers,
employees, and agents of a corporation under certain conditions and subject to
certain limitations. The Section provides generally that such persons may be
indemnified unless they engage in a material act or omission in bad faith or
that is the result of active and deliberate dishonesty, they actually receive
an improper personal benefit in money, property or services, or, in the case of
a criminal proceeding, they have reasonable cause to believe that the act or
omission is unlawful. Provision is made for reimbursement of reasonable
expenses so long as it is finally determined that the standards of conduct have
been met. The Selling Stockholders have agreed to indemnify officers,
directors and controlling persons of the Registrant against certain
liabilities, including liabilities under the Securities Act under certain
circumstances.
The Company and its directors and officers have liability insurance.
ITEM 16. EXHIBITS
The following is a list of Exhibits filed as part of the Registration
Statement:
3.1 The Articles of Incorporation, as amended, of the Registrant,
incorporated herein by reference to Exhibit 3.1 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1994.
3.2 The By-Laws of the Registrant, incorporated herein by reference to
Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990.
4.1 Specimen certificate for shares of the Registrant's Common Stock,
incorporated herein by reference to Exhibit 4.1 to Registration
Statement No. 33-44520.
4.2 Specimen certificate for shares of the Registrant's Series A
Convertible Preferred Stock.*
4.3 Articles Supplementary of the Registrant defining rights of holders of
Series A Convertible Preferred Stock of the Registrant.*
4.4 Form of Common Stock Purchase Warrant.*
5.1 Opinion of Brobeck, Phleger & Harrison LLP.*
II-1
<PAGE> 19
10.1 Securities Purchase Agreement, dated as of January 8, 1998, between
the Registrant and the persons listed on the Schedule of Buyers
attached thereto.*
10.2 Registration Rights Agreement, dated as of January 8, 1998, between
the Registrant and the persons listed on the Schedule of Buyers
attached thereto.*
23.1 Consent of Arthur Andersen LLP, independent public accountants.*
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in the opinion
filed as Exhibit 5.1).
24. Powers of Attorney (included with signature page).
- --------------------
*Filed herewith.
II-2
<PAGE> 20
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than payment by the Registrant
of expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the information
set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that the undertakings set forth in paragraphs (i) and (ii)
above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") that are incorporated by
reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 21
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Gaithersburg, State of
Maryland, on February 25, 1998.
ONCOR, INC.
By: /s/ Stephen Turner
------------------------------------------
Stephen Turner
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person or entity whose
signature appears below constitutes and appoints Stephen Turner and John L.
Coker, and each of them, its true and lawful attorney-in-fact and agents, with
full power of substitution and resubstitution, for it and in its name, place
and stead, in any and all capacities, to sign any and all amendments, including
any post-effective amendments, to this Registration Statement on Form S-3, or
any registration statement relating to the offering to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as it might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons
in the capacities indicated on February 25, 1998.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Jose J. Coronas Chairman of the Board of Directors
- ----------------------------------
Jose J. Coronas
/s/ Stephen Turner Chief Executive Officer and Director (Principal
- ---------------------------------- Executive Officer)
Stephen Turner
/s/ Cecil Kost President, Chief Operating Officer and Director
- ----------------------------------
Cecil Kost
/s/ John L. Coker Vice President -- Finance and Administration and Chief Financial Officer
- ---------------------------------- (Principal Financial and Accounting Officer)
John L. Coker
/s/ Glenn W. Bartlett Director
- ----------------------------------
Glenn W. Bartlett
/s/ Derace L. Schaffer Director
- ----------------------------------
Derace L. Schaffer, M.D.
/s/William H. Taylor Director
- ----------------------------------
William H. Taylor II
/s/ Timothy J. Triche Director
- ----------------------------------
Timothy J. Triche, M.D., Ph.D.
</TABLE>
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
- ------- ----------- ----
<S> <C>
3.1 The Articles of Incorporation, as amended,of the Registrant, incorporated herein by
reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.2 The By-Laws of the Registrant, incorporated herein by reference to
Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.1 Specimen certificate for shares of the Registrant's Common Stock, incorporated herein
by reference to Exhibit 4.1 to Registration Statement No. 33-44520 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.2 Specimen certificate for shares of the Registrant's Series A Convertible Preferred Stock* . . . . . . . . . . . . . . . .
4.3 Articles Supplementary of the Registrant defining rights of holders of Series A
Convertible Preferred Stock of the Registrant* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.4 Form of Common Stock Purchase Warrant* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.1 Opinion of Brobeck, Phleger & Harrison LLP* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.1 Form of Securities Purchase Agreement, dated as of January 8, 1998, between the Registrant and the persons listed on the
Schedule of Buyers attached thereto* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.2 Form of Registration Rights Agreement, dated as of January 8, 1998, between the Registrant and the persons listed on the
Schedule of Buyers attached thereto* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23.1 Consent of Arthur Andersen LLP, independent public accountants* . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in the opinion filed as Exhibit 5.1) . . . . . . . . . . . . . . . .
24. Powers of Attorney (included with signature page) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
- --------------------
*Filed herewith.
<PAGE> 1
EXHIBIT 4.2
*--* INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND *--*
ONCOR, INC.
51,000,000 AUTHORIZED SHARES
SERIES A PREFERRED STOCK
OF ONCOR, INC.
SPECIMEN
**------------**
**-----------------**
---------------
- ---------------------------- ----------------------------
Vice President Secretary
<PAGE> 1
EXHIBIT 4.3
ONCOR, INC.
ARTICLES SUPPLEMENTARY
Oncor, Inc. (the "COMPANY"), a corporation organized and existing
under the laws of the State of Maryland, does hereby certify that, pursuant to
authority conferred upon the Board of Directors of the Company by the Charter,
as amended, of the Company, and pursuant to Section 2-208 of the General
Corporation Law of the State of Maryland, the Board of Directors of the Company
at a meeting duly held adopted resolutions (i) authorizing a series of the
Company's previously authorized preferred stock, par value $.01 per share, and
(ii) providing for the classification of Two Thousand Five Hundred (2,500)
shares of Series A Convertible Preferred Stock of the Company, as follows:
RESOLVED, that the Company is authorized to issue 2,500 shares
of Series A Convertible Preferred Stock (the "PREFERRED SHARES"), par
value $.01 per share, which shall have the following powers,
designations, preferences and other special rights:
(1) Dividends. The Preferred Shares shall not bear any
dividends.
(2) Holder's Conversion of Preferred Shares. A holder of
Preferred Shares shall have the right, at such holder's option, to
convert the Preferred Shares into shares of the Company's common
stock, par value $.01 per share (the "COMMON STOCK"), on the following
terms and conditions:
(a) Conversion Right. Subject to the provisions
of Section 2(j), at any time or times on or after the Issuance Date
(as defined below), any holder of Preferred Shares shall be entitled
to convert any whole number of Preferred Shares into fully paid and
nonassessable shares (rounded to the nearest whole share in accordance
with Section 2(h)) of Common Stock, at the Conversion Rate (as defined
below); provided, however, that in no event shall any holder be
entitled to convert Preferred Shares in excess of that number of
Preferred Shares which, upon giving effect to such conversion, would
cause the aggregate number of shares of Common Stock beneficially
owned by the holder and its affiliates to exceed 4.99% of the
outstanding shares of the Common Stock following such conversion. For
purposes of the foregoing proviso, the aggregate number of shares
<PAGE> 2
of Common Stock beneficially owned by the holder and its affiliates
shall include the number of shares of Common Stock issuable upon
conversion of the Preferred Shares with respect to which the
determination of such proviso is being made, but shall exclude the
number of shares of Common Stock which would be issuable upon (i)
conversion of the remaining, nonconverted Preferred Shares
beneficially owned by the holder and its affiliates, and (ii) exercise
or conversion of the unexercised or unconverted portion of any other
securities of the Company (including, without limitation, any
warrants) subject to a limitation on conversion or exercise analogous
to the limitation contained herein beneficially owned by the holder
and its affiliates. Except as set forth in the preceding sentence,
for purposes of this Section 2(a), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended. The holder may waive the foregoing
limitations by written notice to the Company upon not less than 61
days prior notice (with such waiver taking effect only upon the
expiration of such 61 day notice period).
(b) Conversion Rate. The number of shares of
Common Stock issuable upon conversion of each of the Preferred Shares
pursuant to Sections (2)(a) and 2(g) shall be determined according to
the following formula (the "CONVERSION RATE"):
(.06)(N/365)(10,000) + 10,000
-----------------------------
Conversion Price
For purposes of these Articles Supplementary, the following terms
shall have the following meanings:
(i) "CONVERSION PRICE" means, as of any
Conversion Date (as defined in Section 2(f)) or other date of determination,
the lower of the Fixed Conversion Price (as defined below) and the Floating
Conversion Price (as defined below), each in effect as of such date and subject
to adjustment as provided herein;
(ii) "FIXED CONVERSION PRICE" means 110%
of the Market Price (as defined below) on the date of issuance of the
applicable Preferred Shares, provided that the Fixed Conversion Price for the
Preferred Shares issued on the Initial Closing Date shall not be less than the
Closing Bid Price on the trading day immediately preceding the Issuance Date of
such Preferred Shares, subject in each case to adjustment as provided herein;
(iii) "FLOATING CONVERSION PRICE" means,
as of any date of determination, the amount obtained by multiplying the
Conversion Percentage (as defined below) in effect as of such date by the
Market Price of the Common Stock as of such date;
(iv) "CONVERSION PERCENTAGE" means (A)
100% for the period beginning on the Issuance Date and ending on and including
the date which is 90 days after the Issuance Date, (B) 97.5% for the period
beginning on and including the date which is 91 days after the Issuance Date
and ending on and including the date which is 120 days after the Issuance Date,
(C) 95% for the period beginning on and including the date which is 121 days
after the Issuance Date and ending on and including the date which is 150 days
after the Issuance Date,
-2-
<PAGE> 3
(D) 92.5% for the period beginning on and including the date which is 151 days
after the Issuance Date and ending on and including the date which is 180 days
after the Issuance Date, and (E) 90.0% for the period beginning on and
including the date which is 181 days after the Issuance Date and ending on and
including the Mandatory Conversion Date (as defined in Section 2(g)), subject
in each case to adjustment as provided herein; provided, however, that if there
has been an announcement of a pending Major Transaction (as defined in Section
3(c)), then from and after any such event the Conversion Percentage shall be
90%, subject to adjustment as provided herein;
(v) "MARKET PRICE" means, with respect
to any security for any date, the average of the two lowest Closing Bid Prices
for such security during the 22 consecutive trading days immediately preceding
such date;
(vi) "CLOSING BID PRICE" means, for any
security as of any date, the last closing bid price for such security on The
American Stock Exchange, Inc. as reported by Bloomberg Financial Markets
("BLOOMBERG"), or, if The American Stock Exchange, Inc. is not the principal
trading market for such security, the last closing bid price of such security
on the principal securities exchange or trading market where such security is
listed or traded as reported by Bloomberg, or if the foregoing do not apply,
the last closing bid price of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or,
if no closing bid price is reported for such security by Bloomberg, the last
closing trade price of such security as reported by Bloomberg, or, if no last
closing trade price is reported for such security by Bloomberg, the average of
the bid prices of any market makers for such security as reported in the "pink
sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price cannot
be calculated for such security on such date on any of the foregoing bases, the
Closing Bid Price of such security on such date shall be the fair market value
as mutually determined by the Company and the holders of Preferred Shares. If
the Company and the holders of Preferred Shares are unable to agree upon the
fair market value of the Common Stock, then such dispute shall be resolved
pursuant to Section 2(f)(iii) with the term "Closing Bid Price" being
substituted for the term "Market Price." (All such determinations to be
appropriately adjusted for any stock dividend, stock split or other similar
transaction during such period).
(vii) "N" means the number of days from,
but excluding, the Issuance Date through and including the Conversion Date for
the Preferred Shares for which conversion is being elected; and
(viii) "ISSUANCE DATE" means, with respect
to each Preferred Share, the date of issuance of the applicable Preferred
Share.
(c) Effect of Failure to Obtain and Maintain
Effectiveness of Registration Statement. If the registration
statement (the "REGISTRATION STATEMENT") covering the resale of the
shares of Common Stock issuable upon conversion or exercise of the
Preferred Shares and the Warrants (as defined in the Securities
Purchase Agreement referred to in Section 2(f)(v)), respectively, and
required to be filed by the
-3-
<PAGE> 4
Company pursuant to the Registration Rights Agreement between the
Company and the Buyers referred to therein (the "REGISTRATION RIGHTS
AGREEMENT") is not (i) filed within 30 days of the first Issuance Date
of any Preferred Shares (the "SCHEDULED FILING DATE"); (ii) declared
effective by the United States Securities and Exchange Commission (the
"SEC") on or before 60 days after the first Issuance Date for any
Preferred Shares, provided that, so long as no Material Adverse Change
(as defined in Section 2(j)) has occurred and there has not been an
announcement of a pending Major Transaction (as defined in Section
3(c)) during such 60 day period, such 60 day period shall be extended
to the earlier of (A) 90 days after the first Issuance Date for any
Preferred Shares, (B) the occurrence of a Material Adverse Change and
(C) the announcement of a pending Major Transaction (in any such case,
the "SCHEDULED EFFECTIVE DATE"); or (iii) if after the Registration
Statement has been declared effective by the SEC, sales cannot be made
pursuant to the Registration Statement (whether because of a failure
to keep the Registration Statement effective, to disclose such
information as is necessary for sales to be made pursuant to the
Registration Statement, to register sufficient shares of Common Stock
or otherwise), then, as partial relief for the damages to any holder
by reason of any such delay in or reduction of its ability to sell the
underlying shares of Common Stock (which remedy shall not be exclusive
of any other remedies available at law or in equity), the Company
shall pay to each holder of Preferred Shares an amount in cash per
Preferred Share held equal to the product of (i) $10,000 multiplied by
(ii) the sum of (A) .02, if the Registration Statement is not filed by
the Scheduled Filing Date, plus (B) .02, if the Registration Statement
is not declared effective by the SEC by the Scheduled Effective Date,
plus (C) the product of .001 multiplied by the sum of (x) the number
of days after the Scheduled Filing Date that the relevant Registration
Statement has not been filed with the SEC, (y) the number of days
after the Scheduled Effective Date and prior to the date that the
relevant Registration Statement has not been declared effective by the
SEC, and (z) the number of days that sales cannot be made pursuant to
the Registration Statement after the Registration Statement has been
declared effective. The payments to which a holder shall be entitled
pursuant to this Section 2(c) are referred to herein as "REGISTRATION
DELAY PAYMENTS." Registration Delay Payments shall be paid within
five business days of the earlier of (A) the first day of the month
following the occurrence of the event resulting in the requirement to
make Registration Delay Payments, or (B) the date on which the event
resulting in the requirement to make Registration Delay Payments is
cured. In the event the Company fails to make Registration Delay
Payments in a timely manner, such Registration Delay Payments shall
bear interest at the rate of 3.0% per month (prorated for partial
months) until paid in full. If the Company fails to pay the
Registration Delay Payments, including any interest thereon, within 15
business days of the applicable payment date, then the holder entitled
to such payments shall have the right at any time, so long as the
Company continues to fail to make such payments, to require the
Company, upon written notice, to immediately issue, in lieu of the
Registration Delay Payments, including any interest thereon, the
number of shares of Common Stock equal to the quotient of (X) the sum
of the Registration Delay Payments and all interest accrued thereon
divided by (Y) the Conversion Price in effect on such Conversion Date
as is specified by the holder in writing to the Company.
-4-
<PAGE> 5
(d) Adjustment to Conversion Price -- Dilution
and Other Events. In order to prevent dilution of the rights granted
under these Articles Supplementary, the Conversion Price will be
subject to adjustment from time to time as provided in this Section
2(d).
(i) Adjustment of Fixed Conversion Price
upon Issuance of Common Stock. If and whenever on or after the
Issuance Date, the Company issues or sells, or is deemed to have
issued or sold, any shares of Common Stock (other than shares of
Common Stock deemed to have been issued by the Company in connection
with an Approved Stock Plan (as defined below)) for a consideration
per share (the "NEW ISSUANCE CONSIDERATION") less than the Fixed
Conversion Price in effect immediately prior to such time (the
"APPLICABLE PRICE"), then immediately after such issue or sale, the
Fixed Conversion Price shall be reduced to an amount equal to such New
Issuance Consideration. For purposes of determining the adjusted
Fixed Conversion Price under this Section 2(d)(i), the following shall
be applicable:
(A) Issuance of Options. If the
Company in any manner grants any rights or options to subscribe for or
to purchase Common Stock (other than pursuant to an Approved Stock
Plan or upon conversion of the Preferred Shares) or any stock or other
securities convertible into or exchangeable for Common Stock (such
rights or options being herein called "OPTIONS" and such convertible
or exchangeable stock or securities being herein called "CONVERTIBLE
SECURITIES") then the New Issuance Consideration shall be determined
by dividing (I) the total amount, if any, received or receivable by
the Company as consideration for the granting of such Options, plus
the minimum aggregate amount of additional consideration payable to
the Company upon the exercise of all such Options, plus in the case of
such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the
Company upon the issuance or sale of such Convertible Securities and
the conversion or exchange thereof, by (II) the total maximum number
of shares of Common Stock issuable upon exercise of such Options or
upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options. No adjustment of the Fixed
Conversion Price shall be made upon the actual issuance of such Common
Stock or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
(B) Issuance of Convertible
Securities. If the Company in any manner issues or sells any
Convertible Securities and the price per share for which Common Stock
is issuable upon such conversion or exchange, then the New Issuance
Consideration shall be determined by dividing (I) the total amount
received or receivable by the Company as consideration for the issue
or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof, by (II) the total maximum
number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No adjustment of the
Fixed Conversion Price shall be made upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible
-5-
<PAGE> 6
Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment
of the Fixed Conversion Price had been or are to be made pursuant to
other provisions of this Section 2(d)(i), no further adjustment of the
Fixed Conversion Price shall be made by reason of such issue or sale.
(C) Change in Option Price or Rate
of Conversion. If the purchase price provided for in any Options, the
additional consideration, if any, payable upon the issue, conversion
or exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable for Common
Stock change at any time, the Fixed Conversion Price in effect at the
time of such change shall be readjusted to the Fixed Conversion Price
which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or changed conversion rate,
as the case may be, at the time initially granted, issued or sold;
provided that no adjustment shall be made if such adjustment would
result in an increase of the Fixed Conversion Price then in effect.
(D) Certain Definitions. For
purposes of determining the adjusted Fixed Conversion Price under this
Section 2(d)(i), the following terms have the meanings set forth
below:
(I) "APPROVED STOCK PLAN" shall
mean any contract, plan or agreement which has been approved by the
Board of Directors of the Company, pursuant to which the Company's
securities may be issued to any employee, officer, director,
consultant or other service provider.
(II) "COMMON STOCK DEEMED
OUTSTANDING" means, at any given time, the number of shares of Common
Stock actually outstanding at such time, plus the number of shares of
Common Stock deemed to be outstanding pursuant to Sections 2(d)(i)(A)
and 2(d)(i)(B) hereof regardless of whether the Options or Convertible
Securities are actually exercisable at such time, but excluding any
shares of Common Stock issuable upon conversion of the Preferred
Shares.
(E) Effect on Fixed Conversion
Price of Certain Events. For purposes of determining the adjusted
Fixed Conversion Price under this Section 2(d)(i), the following shall
be applicable:
(I) Calculation of Consideration
Received. If any Common Stock, Options or Convertible Securities are
issued or sold or deemed to have been issued or sold for cash, the
consideration received therefor will be deemed to be the net amount
received by the Company therefor. In case any Common Stock, Options
or Convertible Securities are issued or sold for a consideration other
than cash, the amount of the consideration other than cash received by
the Company will be the fair value of such consideration, except where
such consideration consists of securities, in which case the amount of
consideration received by the Company will be the Market Price of such
securities the date of receipt. In case any Common Stock, Options or
Convertible
-6-
<PAGE> 7
Securities are issued to the owners of the non-surviving entity in
connection with any merger in which the Company is the surviving
entity, the amount of consideration therefor will be deemed to be the
fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such Common Stock, Options
or Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined jointly
by the Company and the holders of a majority of the Preferred Shares
then outstanding. If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring
valuation (the "VALUATION EVENT"), the fair value of such
consideration will be determined within forty-eight (48) hours of the
tenth (10th) day following the Valuation Event by an independent,
reputable appraiser selected by the Company. The determination of
such appraiser shall be binding upon all parties absent manifest
error.
(II) Integrated Transactions.
In case any Option is issued in connection with the issue or sale of
other securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to such
Options by the parties thereto, the Options will be deemed to have
been issued for a consideration of $.01.
(III) Treasury Shares. The
number of shares of Common Stock outstanding at any given time does
not include shares owned or held by or for the account of the Company,
and the disposition of any shares so owned or held will be considered
an issue or sale of Common Stock.
(IV) Record Date. If the
Company takes a record of the holders of Common Stock for the purpose
of entitling them (1) to receive a dividend or other distribution
payable in Common Stock, Options or in Convertible Securities, or (2)
to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued
or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(ii) Adjustment of Fixed Conversion Price
upon Subdivision or Combination of Common Stock. If the Company at
any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, the Fixed
Conversion Price in effect immediately prior to such subdivision will
be proportionately reduced. If the Company at any time combines (by
combination, reverse stock split or otherwise) one or more classes of
its outstanding shares of Common Stock into a smaller number of
shares, the Fixed Conversion Price in effect immediately prior to such
combination will be proportionately increased.
(iii) Adjustment of Floating Conversion
Price upon Issuance of Convertible Securities. If the Company in any
manner issues or sells Convertible Securities that are convertible
into Common Stock at a price which varies with the
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<PAGE> 8
market price of the Common Stock (the formulation for such variable
price being herein referred to as the "VARIABLE PRICE") and such
Variable Price is not calculated using the same formula used to
calculate the Floating Conversion Price in effect immediately prior to
the time of such issue or sale, the Company shall provide written
notice thereof via facsimile and overnight courier to each holder of
the Preferred Shares (the "VARIABLE NOTICE") on the date of issuance
of such Convertible Securities. If the holders of Preferred Shares
representing at least two-thirds (2/3) of the Preferred Shares then
outstanding provide written notice via facsimile and overnight courier
(the "VARIABLE PRICE ELECTION NOTICE") to the Company within five (5)
business days of receiving a Variable Notice that such holders desire
to replace the Floating Conversion Price then in effect with the
Variable Price described in such Variable Notice, the Company shall
prepare and deliver to each holder of the Preferred Shares via
facsimile and overnight courier a copy of an amendment to these
Articles Supplementary (the "VARIABLE PRICE AMENDMENT") that
substitutes the Variable Price for the Floating Conversion Price
(together with such modifications to these Articles Supplementary as
may be required to give full effect to the substitution of the
Variable Price for the Floating Conversion Price) within five (5)
business days after receipt of the requisite number of Variable Price
Election Notices set forth above. The Company shall file such
Variable Price Amendment with the Secretary of State of the State of
Maryland within five (5) business days after delivery of the Variable
Price Amendment to the holders of the Preferred Shares; provided,
however, that in the event that the Company receives a notice prior to
the filing of the Variable Price Amendment from any holder who has
delivered a Variable Price Election Notice in connection with such
Variable Price Amendment that such holder objects to the form of the
Variable Price Amendment, the Company shall not file such Variable
Price Amendment until such time as the Variable Price Amendment has
been revised to the reasonable satisfaction of such holder and
approved in writing by the holders of the Preferred Shares
representing at least two-thirds (2/3) of the Preferred Shares then
outstanding. Except as provided in the preceding proviso, a holder's
delivery of a Variable Price Election Notice shall serve as the
consent required to amend these Articles Supplementary pursuant to
Section 12 below.
(iv) Reorganization, Reclassification,
Consolidation, Merger or Sale. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially
all of the Company's assets to another Person (as defined below) or
other transaction which is effected in such a way that holders of
Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or
in exchange for Common Stock is referred to herein as "ORGANIC
CHANGE." Prior to the consummation of any Organic Change, the Company
will make appropriate provision (in form and substance reasonably
satisfactory to the holders of a majority of the Preferred Shares then
outstanding) to insure that each of the holders of the Preferred
Shares will thereafter have the right to acquire and receive, in lieu
of or addition to (as the case may be) the shares of Common Stock
immediately theretofore acquirable and receivable upon the conversion
of such holder's Preferred Shares, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for
the number of shares of Common Stock immediately theretofore
acquirable and receivable upon the conversion of such holder's
Preferred Shares had such
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<PAGE> 9
Organic Change not taken place (without taking into account any
limitations or restrictions on the timing or amount of conversions).
In any such case, the Company will make appropriate provision (in form
and substance satisfactory to the holders of a majority of the
Preferred Shares then outstanding) with respect to such holders'
rights and interests to insure that the provisions of this Section
2(d) and Section 2(e) will thereafter be applicable to the Preferred
Shares (including, in the case of any such consolidation, merger or
sale in which the successor entity or purchasing entity is other than
the Company, an immediate adjustment of the Fixed Conversion Price to
the value for the Common Stock reflected by the terms of such
consolidation, merger or sale, if the value so reflected is less than
the Fixed Conversion Price in effect immediately prior to such
consolidation, merger or sale). The Company will not effect any such
consolidation, merger or sale, unless prior to the consummation
thereof, the successor entity (if other than the Company) resulting
from consolidation or merger or the entity purchasing such assets
assumes, by written instrument (in form and substance reasonably
satisfactory to the holders of a majority of the Preferred Shares then
outstanding), the obligation to deliver to each holder of Preferred
Shares such shares of stock, securities or assets as, in accordance
with the foregoing provisions, such holder may be entitled to acquire.
"PERSON" shall mean an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or
agency thereof.
(v) Certain Events. If any event occurs
of the type contemplated by the provisions of this Section 2(d) but
not expressly provided for by such provisions (including, without
limitation, the granting of stock appreciation rights, phantom stock
rights or other rights with equity features), then the Company's Board
of Directors will make an appropriate adjustment in the Conversion
Price so as to protect the rights of the holders of the Preferred
Shares; provided, however, that no such adjustment will increase the
Conversion Price as otherwise determined pursuant to this Section
2(d).
(vi) Notices.
(A) Immediately upon any adjustment
of the Conversion Price, the Company will give written notice thereof
to each holder of the Preferred Shares, setting forth in reasonable
detail and certifying the calculation of such adjustment.
(B) The Company will give written
notice to each holder of the Preferred Shares at least twenty (20)
days prior to the date on which the Company closes its books or takes
a record (I) with respect to any dividend or distribution upon the
Common Stock, (II) with respect to any pro rata subscription offer to
holders of Common Stock, or (III) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation; provided,
however, that in no event shall such notice be provided to such holder
prior to such information being made known to the public.
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<PAGE> 10
(C) The Company will also give
written notice to each holder of the Preferred Shares at least twenty
(20) days prior to the date on which any Organic Change, dissolution
or liquidation will take place; provided, however, that in no event
shall such notice be provided to such holder prior to such information
being made known to the public.
(e) Purchase Rights. In addition to any
adjustments of the Conversion Price pursuant to Section 2(d), if at
any time the Company grants, issues or sells any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other
property pro rata to the record holders of the Common Stock (the
"PURCHASE RIGHTS"), then the holders of the Preferred Shares will be
entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of shares of Common Stock
acquirable upon complete conversion of the Preferred Shares (without
taking into account any limitations or restrictions on the timing or
amount of conversions) immediately before the date on which a record
is taken for the grant, issuance or sale of such Purchase Rights, or,
if no such record is taken, the date as of which the record holders of
the Common Stock are to be determined for the grant, issue or sale of
such Purchase Rights.
(f) Mechanics of Conversion. Subject to the
Company's inability to fully satisfy its obligations under a
Conversion Notice (as defined below) as provided for in Section 5:
(i) Holder's Delivery Requirements. To
convert Preferred Shares into full shares of Common Stock on any date
(the "CONVERSION DATE"), the holder thereof shall (A) transmit by
facsimile (or otherwise deliver), for receipt on or prior to 9:00 p.m.
Eastern Time, on such date, a copy of a fully executed notice of
conversion in the form attached hereto as Exhibit I (the "CONVERSION
NOTICE") to the Company or its designated transfer agent (the
"TRANSFER AGENT"), and (B) surrender to a common carrier, for delivery
to the Company or the Transfer Agent as soon as practicable following
such date, the original certificate(s) representing the Preferred
Shares being converted (or an indemnification undertaking with respect
to such shares in the case of their loss, theft or destruction) (the
"PREFERRED STOCK CERTIFICATE(S)") and the originally executed
Conversion Notice.
(ii) Company's Response. Upon receipt by
the Company of a facsimile copy of a Conversion Notice, the Company
shall immediately send, via facsimile, a confirmation of receipt of
such Conversion Notice to such holder. Upon receipt by the Company or
the Transfer Agent of the Preferred Stock Certificate(s) to be
converted pursuant to a Conversion Notice, together with the
originally executed Conversion Notice, the Company or the Transfer
Agent (as applicable) shall, on the next business day following the
date of receipt, (I) issue and surrender to a common carrier for
overnight delivery to the address specified in the Conversion Notice,
a certificate, registered in the name of the holder or its designee,
for the number of shares of Common Stock to which the holder shall be
entitled, or (II) credit such aggregate number of shares
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<PAGE> 11
of Common Stock to which the holder shall be entitled to the holder's
or its designee's balance account with The Depository Trust Company.
If the number of Preferred Shares represented by the Preferred Stock
Certificate(s) submitted for conversion is greater than the number of
Preferred Shares being converted, then the Company or Transfer Agent,
as the case may be, shall, as soon as practicable and in no event
later than two business days after receipt of the Preferred Stock
Certificate(s) and at its own expense, issue and deliver to the holder
a new Preferred Stock Certificate representing the number of Preferred
Shares not converted.
(iii) Dispute Resolution. In the case of
a dispute as to the determination of the Market Price or the
arithmetic calculation of the Conversion Rate, the Company shall
promptly issue to the holder the number of shares of Common Stock that
is not disputed and shall submit the disputed determinations or
arithmetic calculations to the holder via facsimile within one (1)
business day of receipt of such holder's Conversion Notice. If such
holder and the Company are unable to agree upon the determination of
the Market Price or arithmetic calculation of the Conversion Rate
within one (1) business day of such disputed determination or
arithmetic calculation being submitted to the holder, then the Company
shall within one (1) business day submit via facsimile (A) the
disputed determination of the Market Price to an independent,
reputable investment bank, or (B) the disputed arithmetic calculation
of the Conversion Rate to its independent, outside accountant. The
Company shall cause the investment bank or the accountant, as the case
may be, to perform the determinations or calculations and notify the
Company and the holder of the results no later than forty-eight (48)
hours from the time it receives the disputed determinations or
calculations. Such investment bank's or accountant's determination or
calculation, as the case may be, shall be binding upon all parties
absent manifest error.
(iv) Record Holder. The person or
persons entitled to receive the shares of Common Stock issuable upon a
conversion of Preferred Shares shall be treated for all purposes as
the record holder or holders of such shares of Common Stock on the
Conversion Date.
(v) Company's Failure to Timely Convert.
If within five business days after the Company's or the Transfer
Agent's receipt of the Preferred Stock Certificates and the Conversion
Notice the Company shall fail (I) to issue a certificate for the
number of shares of Common Stock to which a holder is entitled or to
credit the holder's balance account with The Depository Trust Company
for such number of shares of Common Stock to which the holder is
entitled upon such holder's conversion of the Preferred Shares, or
(II) to issue a new Preferred Stock Certificate representing the
number of Preferred Shares to which such holder is entitled, pursuant
to Section 2(f)(ii), in addition to all other available remedies which
such holder may pursue hereunder and under the Securities Purchase
Agreement between the Company and the initial holders of the Preferred
Shares (the "SECURITIES PURCHASE AGREEMENT") (including
indemnification pursuant to Section 8 thereof), the Company shall pay
additional damages to such holder on each date after such fifth (5th)
business day that such conversion or delivery of such Preferred Stock
Certificates, as the case may be, is not timely effected
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<PAGE> 12
in an amount equal to 1.0% of the product of (A) the sum of the number
of shares of Common Stock not issued to the holder on a timely basis
pursuant to Section 2(f)(ii) and to which such holder is entitled and,
in the event the Company has failed to deliver a Preferred Stock
Certificate to the holder on a timely basis pursuant to Section
2(f)(ii), the number of shares of Common Stock issuable upon
conversion of the Preferred Shares represented by such Preferred Stock
Certificate as of the last possible date which the Company could have
issued such Preferred Stock Certificate to such holder without
violating Section 2(f)(ii); and (B) the Closing Bid Price of the
Common Stock on the last possible date which the Company could have
issued such Common Stock and the Preferred Stock Certificate, as the
case may be, to such holder without violating Section 2(f)(ii).
(g) Mandatory Conversion. If any Preferred
Shares remain outstanding on the Mandatory Conversion Date, then all
such Preferred Shares shall be converted as of such date in accordance
with this Section 2 as if the holders of such Preferred Shares had
given the Conversion Notice on the Mandatory Conversion Date. All
holders of Preferred Shares shall thereupon surrender all Preferred
Stock Certificates, duly endorsed for cancellation, to the Company or
the Transfer Agent. "MANDATORY CONVERSION DATE" means the date which
is five years after the applicable Issuance Date, unless extended
pursuant to Section 4(l) of the Securities Purchase Agreement, which
extension shall be equal to twice the number of days in any
Underwriting Lock-Up Period (as defined in Section 4(l) of the
Securities Purchase Agreement).
(h) Fractional Shares. The Company shall not
issue any fraction of a share of Common Stock upon any conversion.
All shares of Common Stock (including fractions thereof) issuable upon
conversion of more than one Preferred Share by a holder thereof shall
be aggregated for purposes of determining whether the conversion would
result in the issuance of a fraction of a share of Common Stock. If,
after the aforementioned aggregation, the issuance would result in the
issuance of a fraction of a share of Common Stock, the Company shall
round such fraction of a share of Common Stock up or down to the
nearest whole share.
(i) Taxes. The Company shall pay any and all
taxes which may be imposed upon it with respect to the issuance and
delivery of shares of Common Stock upon the conversion of the
Preferred Shares.
(j) Conversion Restrictions. Other than a
conversion pursuant to Section 2(g), the right of a holder of
Preferred Shares to convert Preferred Shares pursuant to this Section
2 shall be limited as set forth below. Without the prior consent of
the Company, a holder of Preferred Shares shall not be entitled to
convert an aggregate number of Preferred Shares from the Issuance Date
of such Preferred Shares through the date of this determination in
excess of the number of Preferred Shares which when divided by the
number of Preferred Shares purchased by such holder on such Issuance
Date would exceed (i) 0.00 for the period beginning on the Issuance
Date and ending on and including the date which is 90 days after the
Issuance Date, (ii) 0.33 for the period beginning on and including the
date which is 91 days after the Issuance Date
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<PAGE> 13
and ending on and including the date which is 120 days after the
Issuance Date, (iii) 0.66 for the period beginning on and including
the date which is 121 days after the Issuance Date and ending on and
including the date which is 150 days after the Issuance Date, and (iv)
1.00 for the period beginning on and including the date which is 151
days after the Issuance Date and ending on and including the Mandatory
Conversion Date. Notwithstanding the foregoing, the conversion
restrictions set forth in this Section 2(j) shall not apply (V) if
there shall have occurred a Material Adverse Change (as defined
below), (W) if there is an announcement of a pending Major Transaction
(as defined in Section 3(c)), (X) at any time after the holders'
receipt of a Lock-Up Request Notice, (Y) with respect to any
conversion of Preferred Shares on a Conversion Date during the period
beginning on the Issuance Date of such Preferred Shares and ending on
and including the date which is 90 days after such Issuance Date, if
the Closing Bid Price on such Conversion Date is greater than 150% of
the Fixed Conversion Price then in effect, or (Z) with respect to any
conversion of Preferred Shares on a Conversion Date during the period
beginning on and including the date which is 91 days after the
Issuance Date of such Preferred Shares and ending on and including the
date which is 150 days after such Issuance Date, if the Closing Bid
Price on such Conversion Date is greater than the Fixed Conversion
Price then in effect. For purposes of this Section 2, "MATERIAL
ADVERSE CHANGE" means any change, event, result or happening
involving, directly or indirectly, the Company or any of its
subsidiaries resulting in a material adverse effect on the business,
financial condition or results or operations of the Company and its
subsidiaries, taken as a whole, including, without limitation, an
event constituting a Major Transaction (as defined in Section 3(c)) or
a Triggering Event (as defined in Section 3(d)) shall have occurred;
provided, however, that the inclusion in the Company's 1997 audited
financial statements of a report from its auditors which includes a
"going-concern" qualification shall not constitute a Material Adverse
Change.
(k) Adjustment of Conversion Restrictions upon
Issuance of Convertible Securities. If the Company in any manner
issues or sells Convertible Securities that are convertible into
Common Stock and are subject to (i) restrictions on the amount of
shares that can be converted, or (ii) no restrictions on the amount of
shares that can be converted (the restriction on conversions or lack
thereof being herein referred to as the "CONVERSION RESTRICTION"), and
such Conversion Restriction is not formulated using the same time
periods and percentages used in Section 2(j), then the Company shall
provide written notice thereof via facsimile and overnight courier to
each holder of the Preferred Shares ("CONVERSION RESTRICTION NOTICE")
on the date of issuance of such Convertible Securities. If the
holders of Preferred Shares representing at least two-thirds (2/3) of
the Preferred Shares then outstanding which remain subject to the
restrictions in Section 2(j) provide written notice via facsimile and
overnight courier (the "CONVERSION RESTRICTION ELECTION NOTICE") to
the Company within five (5) business days of receiving a Conversion
Restriction Notice that such holders desire to replace the conversion
restrictions set forth in Section 2(j) then in effect with the
Conversion Restriction described in such Conversion Restriction
Notice, the Company shall prepare and deliver to each holder of the
Preferred Shares via facsimile and overnight courier a copy of an
amendment to these Articles Supplementary (the "CONVERSION RESTRICTION
AMENDMENT") that substitutes the Conversion Restriction for conversion
restrictions set forth in Section
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<PAGE> 14
2(j) (together with such modifications to these Articles Supplementary
as may be required to give full effect to the substitution of the
Conversion Restriction for the conversion restrictions set forth in
Section 2(j)) within five (5) business days after receipt of the
requisite number of Conversion Restriction Election Notices set forth
above. The Company shall file such Conversion Restriction Amendment
with the Secretary of State of the State of Maryland within five (5)
business days after delivery of the Conversion Restriction Amendment
to the holders of the Preferred Shares; provided, however, that in the
event that the Company receives a notice prior to the filing of the
Conversion Restriction Amendment from any holder who has delivered a
Conversion Restriction Election Notice in connection with such
Conversion Restriction Amendment that such holder objects to the form
of the Conversion Restriction Amendment, the Company shall not file
such Conversion Restriction Amendment until such time as the
Conversion Restriction Amendment has been revised to the reasonable
satisfaction of such holder and approved in writing by the holders of
the Preferred Shares representing at least two-thirds (2/3) of the
Preferred Shares then outstanding. Except as provided in the
preceding proviso, a holder's delivery of a Conversion Restriction
Election Notice shall serve as the consent required to amend these
Articles Supplementary pursuant to Section 12 below.
(3) Redemption at Option of Holders.
(a) Redemption Option Upon Major Transaction. In
addition to all other rights of the holders of Preferred Shares
contained herein, simultaneous with or after the occurrence of a Major
Transaction, each holder of Preferred Shares shall have the right, at
such holder's option, to require the Company to redeem all or a
portion of such holder's Preferred Shares at a price per Preferred
Share equal to the greater of (i) Liquidation Value (as defined in
Section 8); and (ii) the product of (A) the Conversion Rate at such
time, and (B) the Closing Bid Price on the date of the public
announcement of such Major Transaction or the next date on which the
exchange or market on which the Common Stock is traded is open if such
public announcement is made (X) after 12:00 p.m. Central Time, on such
date or (Y) on a date on which the exchange or market on which the
Common Stock is traded is closed (the "MAJOR TRANSACTION REDEMPTION
PRICE").
(b) Redemption Option Upon Triggering Event. In
addition to all other rights of the holders of Preferred Shares
contained herein, simultaneous with or after the occurrence of a
Triggering Event, each holder of Preferred Shares shall have the
right, at such holder's option, to require the Company to redeem all
or a portion of such holder's Preferred Shares at a price per
Preferred Share equal to the greater of (i) Liquidation Value; and
(ii) the product of (A) the Conversion Rate at such time, and (B) the
Closing Bid Price calculated as of the date immediately preceding such
Triggering Event or the next date on which the exchange or market on
which the Common Stock is traded is open (the "TRIGGERING EVENT
REDEMPTION PRICE" and, collectively with the Major Transaction
Redemption Price, the "REDEMPTION PRICE").
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<PAGE> 15
(c) "Major Transaction". A "MAJOR TRANSACTION"
shall be deemed to have occurred at such time as any of the following
events:
(i) the consolidation, merger or other
business combination of the Company with or into another Person (other
than pursuant to a migratory merger effected solely for the purpose of
changing the jurisdiction of incorporation of the Company);
(ii) the sale or transfer of all or
substantially all of the Company's assets; or
(iii) a purchase, tender or exchange offer
made to and accepted by the holders of more than 30% of the
outstanding shares of Common Stock.
(d) "Triggering Event". A "TRIGGERING EVENT"
shall be deemed to have occurred at such time as any of the following
events:
(i) the failure of the Registration
Statement to be declared effective by the SEC on or prior to the date
that is 180 days after the Initial Issuance Date;
(ii) while the Registration Statement is
required to be maintained effective pursuant to the terms of the
Registration Rights Agreement, the effectiveness of the Registration
Statement lapses for any reason (including, without limitation, the
issuance of a stop order) or is unavailable to the holder of the
Preferred Shares for sale of the Registrable Securities (as defined in
the Registration Rights Agreement) in accordance with the terms of the
Registration Rights Agreement, and such lapse or unavailability
continues for a period of five consecutive trading days, provided that
the cause of such lapse or unavailability is not due to factors solely
within the control of such holder of Preferred Shares;
(iii) the failure of the Common Stock to
be listed on The Nasdaq National Market, The New York Stock Exchange,
Inc. or The American Stock Exchange, Inc. for a period of five
consecutive days;
(iv) the Company's notice to any holder
of Preferred Shares, including by way of public announcement, at any
time, of its intention not to comply with proper requests for
conversion of any Preferred Shares into shares of Common Stock,
including due to any of the reasons set forth in Section 4(a) below;
or
(v) the Company breaches, in a material
respect, any representation, warranty, covenant or other material term
or condition of the Securities Purchase Agreement, the Registration
Rights Agreement, these Articles Supplementary or any other agreement,
document, certificate or other instrument delivered in connection with
the transactions contemplated thereby and hereby, except to the extent
that such breach would not have a Material Adverse Effect (as defined
in Section 3(a) of the
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<PAGE> 16
Securities Purchase Agreement) and except, in the case of a breach of
a covenant which is curable, only if such breach continues for a
period of at least ten days.
(e) Mechanics of Redemption at Option of Buyer
Upon Major Transaction. No sooner than 15 days nor later than 10 days
prior to the consummation of a Major Transaction, but not prior to the
public announcement of such Major Transaction, the Company shall
deliver written notice thereof via facsimile and overnight courier (a
"NOTICE OF MAJOR TRANSACTION") to each holder of Preferred Shares. At
any time after receipt of a Notice of Major Transaction, any holder of
the Preferred Shares then outstanding may require the Company to
redeem all or a portion of the holder's Preferred Shares then
outstanding by delivering written notice thereof via facsimile and
overnight courier (a "NOTICE OF REDEMPTION AT OPTION OF BUYER UPON
MAJOR TRANSACTION") to the Company, which Notice of Redemption at
Option of Buyer Upon Major Transaction shall indicate (i) the number
of Preferred Shares that such holder is submitting for redemption, and
(ii) the applicable Major Transaction Redemption Price, as calculated
pursuant to Section 3(a).
(f) Mechanics of Redemption at Option of Buyer
Upon Triggering Event. Within one (1) day after the occurrence of a
Triggering Event, the Company shall deliver written notice thereof via
facsimile and overnight courier (a "NOTICE OF TRIGGERING EVENT") to
each holder of Preferred Shares. At any time after receipt of a
Notice of Triggering Event, any holder of the Preferred Shares then
outstanding may require the Company to redeem all or a portion of the
holder's Preferred Shares then outstanding by delivering written
notice thereof via facsimile and overnight courier (a "NOTICE OF
REDEMPTION AT OPTION OF BUYER UPON TRIGGERING EVENT") to the Company,
which Notice of Redemption at Option of Buyer Upon Triggering Event
shall indicate (i) the number of Preferred Shares that such holder is
submitting for redemption, and (ii) the applicable Triggering Event
Redemption Price, as calculated pursuant to Section 3(b).
(g) Payment of Redemption Price. Upon the
Company's receipt of a Notice of Redemption at Option of Buyer Upon
Major Transaction or a Notice of Redemption at Option of Buyer Upon
Triggering Event, as the case may be, from a holder of Preferred
Shares, the Company shall immediately notify such holder by facsimile
of the Company's receipt of such notice necessary to effect a
redemption and the holder shall thereafter promptly send such holder's
Preferred Stock Certificate(s) to be redeemed to the Company or its
Transfer Agent. The Company shall deliver the applicable Redemption
Price to such holder within five days after the Company's receipt of
the requisite notice required to effect a redemption; provided,
however, that a holder's Preferred Stock Certificate(s) shall have
been delivered to the Company or its Transfer Agent; provided,
further, that the Major Transaction Redemption Price must be delivered
to such holder prior to, or simultaneously with, the occurrence of a
Major Transaction; and provided, further, that if the Company is
unable to redeem all of the Preferred Shares to be redeemed, the
Company shall redeem an amount from each holder of Preferred Shares
being redeemed equal to such holder's pro-rata amount (based on the
number of Preferred Shares held by such holder relative to the number
of Preferred Shares outstanding) of all Preferred Shares being
redeemed. The Company hereby
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<PAGE> 17
covenants and agrees that a Major Transaction shall not be consummated
until the Company redeems all of the Preferred Shares submitted for
redemption pursuant to a Major Transaction. If the Company shall fail
to redeem all of the Preferred Shares submitted for redemption
pursuant to a Triggering Event, all of the Preferred Shares submitted
for redemption (other than pursuant to a dispute as to the arithmetic
calculation of the Redemption Price), in addition to any remedy such
holder of Preferred Shares may have under these Articles Supplementary
and the Securities Purchase Agreement, the applicable Redemption Price
payable in respect of such unredeemed Preferred Shares shall bear
interest at the rate of 3.0% per month (prorated for partial months)
until paid in full. Until the Company pays any unpaid applicable
Redemption Price in full to a holder of Preferred Shares submitted for
redemption pursuant to this Section 3 and for which the applicable
Redemption Price has not been paid, a holder shall have the option
(the "VOID OPTIONAL REDEMPTION OPTION") to, in lieu of redemption,
require the Company to promptly return to the holder all of the
Preferred Shares that were submitted for redemption by such holder
under this Section 3 and for which the applicable Redemption Price has
not been paid, by sending written notice thereof to the Company via
facsimile (the "VOID OPTIONAL REDEMPTION NOTICE"). Upon the Company's
receipt of such Void Optional Redemption Notice(s) and prior to
payment of the full applicable Redemption Price to each holder, (i)
the Notice(s) of Redemption at Option of Buyer Upon Triggering Event
or the Notice(s) of Redemption at Option of Buyer Upon Major
Transaction, as the case may be, shall be null and void with respect
to those Preferred Shares submitted for redemption and for which the
applicable Redemption Price has not been paid, (ii) the Company shall
immediately return any Preferred Shares submitted to the Company by
each holder for redemption under this Section 3(g) and for which the
applicable Redemption Price has not been paid, (iii) the Fixed
Conversion Price of such returned Preferred Shares shall be adjusted
to the lesser of (A) the Fixed Conversion Price as in effect on the
date on which the Void Optional Redemption Notice(s) is delivered to
the Company and (B) the lowest Closing Bid Price during the period
beginning on the date on which the Notice(s) of Redemption of Option
of Buyer Upon Major Transaction or the Notice(s) of Redemption at
Option of Buyer Upon Triggering event, as the case may be, is
delivered to the Company and ending on the date on which the Void
Optional Redemption Notice(s) is delivered to the Company; provided
that no adjustment shall be made if such adjustment would result in an
increase of the Fixed Conversion Price then in effect, and (iv) the
Conversion Percentage in effect at such time shall be reduced by a
number of percentage points equal to the product of (A) .25 and (B)
the number of days in the period beginning on the date on which the
Notice(s) of Redemption at Option of Buyer Upon Major Transaction or
the Notice(s) of Redemption at Option of Buyer Upon Triggering Event,
as the case may be, is delivered to the Company and ending on the date
on which the Void Optional Redemption Notice(s) is delivered to the
Company. In addition, if a redemption voided pursuant to this Section
3(g) was caused by a Triggering Event involving the Company's
inability to issue Conversion Shares because of the Exchange Cap (as
defined in Section 11), and if so directed by the holders of at least
two-thirds (2/3) of the Preferred Shares then outstanding, including
shares of Preferred Shares submitted for redemption pursuant to this
Section 3 with respect to which the applicable Redemption Price has
not been paid, in a Void Mandatory Redemption Notice, the Company
shall immediately delist the
-17-
<PAGE> 18
Common Stock from such exchange and have the Common Stock, at such
holders' option, listed on The Nasdaq SmallCap Market or traded on the
electronic bulletin board or the "pink sheets". Notwithstanding the
foregoing, in the event of a dispute as to the determination of the
Closing Bid Price or the arithmetic calculation of the Redemption
Price, such dispute shall be resolved pursuant to Section 2(f)(iii)
above with the term "Closing Bid Price" being substituted for the term
"Market Price" and the term "Redemption Price" being substituted for
the term "Conversion Rate". Payments provided for in this Section 3
shall have priority to payments to other stockholders in connection
with a Major Transaction.
(4) Inability to Fully Convert.
(a) Holder's Option if Company Cannot Fully
Convert. If, upon the Company's receipt of a Conversion Notice, the
Company can not issue shares of Common Stock registered for resale
under the Registration Statement for any reason, including, without
limitation, because the Company (x) does not have a sufficient number
of shares of Common Stock authorized and available, (y) is otherwise
prohibited by applicable law or by the rules or regulations of any
stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Company or its Securities,
including without limitation the Exchange Cap, from issuing all of the
Common Stock which is to be issued to a holder of Preferred Shares
pursuant to a Conversion Notice or (z) fails to have a sufficient
number of shares of Common Stock registered for resale under the
Registration Statement, then the Company shall issue as many shares of
Common Stock as it is able to issue in accordance with such holder's
Conversion Notice and pursuant to Section 2(f) and, with respect to
the unconverted Preferred Shares, the holder, solely at such holder's
option, can elect to:
(i) require the Company to redeem from such
holder those Preferred Shares for which the Company is unable to issue
Common Stock in accordance with such holder's Conversion Notice
("MANDATORY REDEMPTION") at a price per Preferred Share (the
"MANDATORY REDEMPTION PRICE") equal to the Triggering Event Redemption
Price as of such Conversion Date;
(ii) if the Company's inability to fully
convert Preferred Shares is pursuant to Section 4(a)(z), require the
Company to issue restricted shares of Common Stock in accordance with
such holder's Conversion Notice and pursuant to Section 2(f);
(iii) void its Conversion Notice and retain
or have returned, as the case may be, the nonconverted Preferred
Shares that were to be converted pursuant to such holder's Conversion
Notice; or
(iv) if the Company's inability to fully
convert Preferred Shares is pursuant to the Exchange Cap described in
Section 4(a)(y), require the Company to issue shares of Common Stock
in accordance with such holder's Conversion Notice and pursuant to
Section 2(f) at a Conversion Price equal to the market price of the
Common
-18-
<PAGE> 19
Stock for the five consecutive trading days preceding such holder's
Notice in Response to Inability to Convert (as defined below).
(b) Mechanics of Fulfilling Holder's Election.
The Company shall immediately send via facsimile to a holder of
Preferred Shares, upon receipt of a facsimile copy of a Conversion
Notice from such holder which cannot be fully satisfied as described
in Section 4(a), a notice of the Company's inability to fully satisfy
such holder's Conversion Notice (the "INABILITY TO FULLY CONVERT
NOTICE"). Such Inability to Fully Convert Notice shall indicate (i)
the reason why the Company is unable to fully satisfy such holder's
Conversion Notice, (ii) the number of Preferred Shares which cannot be
converted and (iii) the applicable Mandatory Redemption Price. Such
holder must within five (5) business days of receipt of such Inability
to Fully Convert Notice deliver written notice via facsimile to the
Company ("NOTICE IN RESPONSE TO INABILITY TO CONVERT") of its election
pursuant to Section 4(a).
(c) Payment of Redemption Price. If such holder
shall elect to have its shares redeemed pursuant to Section 4(a)(i),
the Company shall pay the Mandatory Redemption Price in cash to such
holder within ten days of the Company's receipt of the holder's Notice
in Response to Inability to Convert. If the Company shall fail to pay
the applicable Mandatory Redemption Price to such holder on a timely
basis as described in this Section 4(c) (other than pursuant to a
dispute as to the determination of the arithmetic calculation of the
Redemption Price), in addition to any remedy such holder of Preferred
Shares may have under these Articles Supplementary and the Securities
Purchase Agreement, such unpaid amount shall bear interest at the rate
of 3.0% per month (prorated for partial months) until paid in full.
Until the full Mandatory Redemption Price is paid in full to such
holder, such holder may void the Mandatory Redemption with respect to
those Preferred Shares for which the full Mandatory Redemption Price
has not been paid and receive back such Preferred Shares.
Notwithstanding the foregoing, if the Company fails to pay the
applicable Mandatory Redemption Price within such ten days time period
due to a dispute as to the determination of the arithmetic calculation
of the Redemption Rate, such dispute shall be resolved pursuant to
Section 2(f)(iii) with the term "Redemption Price" being substituted
for the term "Conversion Rate".
(d) Pro-rata Conversion and Redemption. In the
event the Company receives a Conversion Notice from more than one
holder of Preferred Shares on the same day and the Company can convert
and redeem some, but not all, of the Preferred Shares pursuant to this
Section 4, the Company shall convert and redeem from each holder of
Preferred Shares electing to have Preferred Shares converted and
redeemed at such time an amount equal to such holder's pro-rata amount
(based on the number of Preferred Shares held by such holder relative
to the number of Preferred Shares outstanding) of all Preferred Shares
being converted and redeemed at such time.
(5) Reissuance of Certificates. In the event of a
conversion or redemption pursuant to these Articles Supplementary of
less than all of the Preferred Shares represented by a particular
Preferred Stock Certificate, the Company shall promptly
-19-
<PAGE> 20
cause to be issued and delivered to the holder of such Preferred
Shares a preferred stock certificate representing the remaining
Preferred Shares which have not been so converted or redeemed.
(6) Reservation of Shares. The Company shall, so long as
any of the Preferred Shares are outstanding, reserve and keep
available out of its authorized and unissued Common Stock, solely for
the purpose of effecting the conversion of the Preferred Shares, such
number of shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all of the Preferred Shares
then outstanding; provided that the number of shares of Common Stock
so reserved shall at no time be less than 150% of the number of shares
of Common Stock for which the Preferred Shares are at any time
convertible; provided further that such shares of Common Stock so
reserved shall be allocated for issuance upon conversion of Preferred
Shares pro rata among the holders of Preferred Shares based on the
number of Preferred Shares held by such holder relative to the total
number of authorized Preferred Shares.
(7) Voting Rights. Holders of Preferred Shares shall
have no voting rights, except as required by law, including but not
limited to the General Corporation Law of Maryland, and as expressly
provided in these Articles Supplementary.
(8) Liquidation, Dissolution, Winding-Up. In the event
of any voluntary or involuntary liquidation, dissolution or winding up
of the Company, the holders of the Preferred Shares shall be entitled
to receive in cash out of the assets of the Company, whether from
capital or from earnings available for distribution to its
stockholders (the "PREFERRED FUNDS"), before any amount shall be paid
to the holders of any of the capital stock of the Company of any class
junior in rank to the Preferred Shares in respect of the preferences
as to the distributions and payments on the liquidation, dissolution
and winding up of the Company, an amount per Preferred Share equal to
the sum of (i) $12,000 and (ii) an amount equal to the product of
(.06) (N/365) ($12,000) (such sum being referred to as the
"LIQUIDATION VALUE"); provided that, if the Preferred Funds are
insufficient to pay the full amount due to the holders of Preferred
Shares and holders of shares of other classes or series of preferred
stock of the Company that are of equal rank with the Preferred Shares
as to payments of Preferred Funds (the "PARI PASSU SHARES"), then each
holder of Preferred Shares and Pari Passu Shares shall receive a
percentage of the Preferred Funds equal to the full amount of
Preferred Funds payable to such holder as a liquidation preference, in
accordance with their respective Articles Supplementary, Preferences
and Rights, as a percentage of the full amount of Preferred Funds
payable to all holders of Preferred Shares and Pari Passu Shares. The
purchase or redemption by the Company of stock of any class, in any
manner permitted by law, shall not, for the purposes hereof, be
regarded as a liquidation, dissolution or winding up of the Company.
Neither the consolidation or merger of the Company with or into any
other Person, nor the sale or transfer by the Company of less than
substantially all of its assets, shall, for the purposes hereof, be
deemed to be a liquidation, dissolution or winding up of the Company.
No holder of Preferred Shares shall be entitled to receive any amounts
with respect thereto upon any liquidation, dissolution or winding up
of the Company other than the amounts provided for herein.
-20-
<PAGE> 21
(9) Preferred Rank. All shares of Common Stock shall be
of junior rank to all Preferred Shares in respect to the preferences
as to distributions and payments upon the liquidation, dissolution and
winding up of the Company. The rights of the shares of Common Stock
shall be subject to the preferences and relative rights of the
Preferred Shares. Without the prior express written consent of the
holders of not less than two-thirds (2/3) of the then outstanding
Preferred Shares, the Company shall not hereafter authorize or issue
additional or other capital stock that is of senior or equal rank to
the Preferred Shares in respect of the preferences as to distributions
and payments upon the liquidation, dissolution and winding up of the
Company. Without the prior express written consent of the holders of
not less than two-thirds (2/3) of the then outstanding Preferred
Shares, the Company shall not hereafter authorize or make any
amendment to the Company's Charter or bylaws, or file any resolution
of the board of directors of the Company with the Secretary of State
of the State of Maryland containing any provisions, which would
adversely affect or otherwise impair the rights or relative priority
of the holders of the Preferred Shares relative to the holders of the
Common Stock or the holders of any other class of capital stock. In
the event of the merger or consolidation of the Company with or into
another corporation, the Preferred Shares shall maintain their
relative powers, designations and preferences provided for herein and
no merger shall result inconsistent therewith.
(10) Restriction on Redemption and Cash Dividends with
respect to Other Capital Stock. Until all of the Preferred Shares
have been converted or redeemed as provided herein, the Company shall
not, directly or indirectly, redeem, or declare or pay any cash
dividend or distribution on, its Common Stock without the prior
express written consent of the holders of not less than two-thirds
(2/3) of the then outstanding Preferred Shares.
(11) Limitation on Number of Conversion Shares. The
Company shall not be obligated to issue, in the aggregate, more than
19.99% of the number of shares of Common Stock outstanding on the
Initial Closing Date (as defined in the Securities Purchase Agreement)
(such amount to be proportionately and equitably adjusted from time to
time in the event of stock splits, stock dividends, combinations,
reverse stock splits, reclassification, capital reorganizations and
similar events relating to the Common Stock) (the "EXCHANGE CAP") upon
conversion of the Preferred Shares, if issuance of a larger number of
shares of Common Stock would constitute a breach of the Company's
obligations under the rules or regulations of The American Stock
Exchange, Inc. or any other principal securities exchange or market
upon which the Common Stock is or becomes traded. The Exchange Cap
shall be allocated among the Preferred Shares pro rata based on the
total number of authorized Preferred Shares.
(12) Vote to Change the Terms of or Issue Preferred
Shares. The affirmative vote at a meeting duly called for such
purpose or the written consent without a meeting, of the holders of
not less than two-thirds (2/3) of the then outstanding Preferred
Shares, shall be required for (1) any change to these Articles
Supplementary or the Company's Charter which would amend, alter,
change or repeal any of the powers, designations,
-21-
<PAGE> 22
preferences and rights of the Preferred Shares, or (2) any issuance of
Preferred Shares other than pursuant to the Securities Purchase
Agreement.
(13) Lost or Stolen Certificates. Upon receipt by the
Company of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of any Preferred Stock Certificates
representing the Preferred Shares, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the holder to the
Company and, in the case of mutilation, upon surrender and
cancellation of the Preferred Stock Certificate(s), the Company shall
execute and deliver new preferred stock certificate(s) of like tenor
and date; provided, however, the Company shall not be obligated to
re-issue preferred stock certificates if the holder contemporaneously
requests the Company to convert such Preferred Shares into Common
Stock.
(14) Remedies, Characterizations, Other Obligations,
Breaches and Injunctive Relief. The remedies provided in these
Articles Supplementary shall be cumulative and in addition to all
other remedies available under these Articles Supplementary, at law or
in equity (including a decree of specific performance and/or other
injunctive relief), no remedy contained herein shall be deemed a
waiver of compliance with the provisions giving rise to such remedy
and nothing herein shall limit a holder's right to pursue actual
damages for any failure by the Company to comply with the terms of
these Articles Supplementary. The Company covenants to each holder of
Preferred Shares that there shall be no characterization concerning
this instrument other than as expressly provided herein. Amounts set
forth or provided for herein with respect to payments, conversion and
the like (and the computation thereof) shall be the amounts to be
received by the holder thereof and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or
the performance thereof). The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to the
holders of the Preferred Shares and that the remedy at law for any
such breach may be inadequate. The Company therefore agrees that, in
the event of any such breach or threatened breach, the holders of the
Preferred Shares shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other
security being required.
-22-
<PAGE> 23
The undersigned officers acknowledge that these Articles Supplementary
are the act of the Company, and to the best of their knowledge, information and
belief, all matters and facts set forth herein relating to the authorization
and approval of these Articles Supplementary are true in all material respects,
and that this statement is made under the penalties of perjury.
Dated: January 6, 1998
ONCOR, INC.
By: /s/
----------------------------------------
Name: Cecil Kost
Title: President
ATTEST:
/s/ (SEAL)
- -------------------------------------
John L. Coker, Secretary
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<PAGE> 24
EXHIBIT I
ONCOR, INC.
CONVERSION NOTICE
Reference is made to the Articles Supplementary of Series A Convertible
Preferred Stock (the "ARTICLES SUPPLEMENTARY"). In accordance with and
pursuant to the Articles Supplementary, the undersigned hereby elects to
convert the number of shares of Series A Convertible Preferred Stock, par value
$.01 per share (the "PREFERRED SHARES"), of Oncor, Inc., a Maryland corporation
(the "COMPANY"), indicated below into shares of Common Stock, par value $.01
per share (the "COMMON STOCK"), of the Company, by tendering the stock
certificate(s) representing the share(s) of Preferred Shares specified below as
of the date specified below.
<TABLE>
<S> <C>
Date of Conversion:
-------------------------------------------------------------------------
Number of Preferred Shares to be converted:
----------------------------------------------------------------
Stock certificate no(s). of Preferred Shares to be converted:
-----------------------------------------------
Please confirm the following information:
Conversion Price:
----------------------------------------------------------------------------------
Number of shares of Common Stock
to be issued:
----------------------------------------------------------------------------------
</TABLE>
Please issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the Company in
the following name and to the following address:
<TABLE>
<S> <C>
Issue to:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Facsimile Number:
---------------------------------------------------------------------------
Authorization:
---------------------------------------------------------------------------
By:
----------------------------------------------------------------------
Title:
-------------------------------------------------------------------
Dated:
---------------------------------------------------------------------------
Account Number:
(if electronic book entry transfer):
---------------------------------------------------------------------------
Transaction Code Number
(if electronic book entry transfer):
---------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 4.4
FORM OF WARRANT
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT. ANY SUCH OFFER, SALE, ASSIGNMENT OR TRANSFER MUST
ALSO COMPLY WITH THE APPLICABLE STATE SECURITIES LAWS.
ONCOR, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: Number of Shares:
--------------------- ---------
Date of Issuance: January 8, 1998
Oncor, Inc., a Maryland corporation (the "COMPANY"), hereby certifies that, for
Ten United States Dollars ($10.00) and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged,
____________________, the registered holder hereof or its permitted assigns, is
entitled, subject to the terms set forth below, to purchase from the Company
upon surrender of this Warrant, at any time or times on or after the date
hereof, but not after 9:00 P.M. Eastern Time on the Expiration Date (as defined
herein) _________________________ (_______________) [250 FOR EACH PREFERRED
SHARE] fully paid nonassessable shares of Common Stock (as defined herein) of
the Company (the "WARRANT SHARES") at the purchase price per share provided in
Section 1(b) below (the "WARRANT EXERCISE PRICE"); provided, however, that in
no event shall the holder be entitled to exercise this Warrant for a number of
Warrant Shares in excess of that number of Warrant Shares which, upon giving
effect to such exercise, would cause the aggregate number of shares of Common
Stock beneficially owned by the holder and its affiliates to exceed 4.99% of
the outstanding shares of the Common Stock following such exercise. For
purposes of the foregoing proviso, the aggregate number of shares of Common
Stock beneficially owned by the holder and its affiliates shall include the
number of shares of Common Stock issuable upon exercise of this Warrant with
respect to which the determination of such proviso is being made, but shall
exclude shares of Common Stock which would be
<PAGE> 2
issuable upon (i) exercise of the remaining, unexercised Warrants beneficially
owned by the holder and its affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
beneficially owned by the holder and its affiliates (including, without
limitation, any convertible notes or preferred stock) subject to a limitation
on conversion or exercise analogous to the limitation contained herein. Except
as set forth in the preceding sentence, for purposes of this paragraph,
beneficial ownership shall be calculated in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended. The holder may waive the
foregoing limitations by written notice to the Company upon not less than 61
days prior notice (with such waiver taking effect only upon the expiration of
such 61 day notice period).
Section 1.
(a) Securities Purchase Agreement. This Warrant is one
of the warrants (the "PREFERRED SHARE WARRANTS") issued pursuant to Section 1
of that certain Securities Purchase Agreement dated as of January 8, 1998,
among the Company and the Buyers referred to therein (the "PURCHASE
AGREEMENT").
(b) Definitions. The following words and terms as used
in this Warrant shall have the following meanings:
"MARKET PRICE" means, with respect to any security
for any date, the average of the two lowest Closing Bid Prices (as defined
below) for such security during the 22 consecutive trading days immediately
preceding such date.
"CLOSING BID PRICE" means, for any security as of any
date, the last closing bid price for such security on The American Stock
Exchange, Inc. as reported by Bloomberg Financial Markets ("BLOOMBERG"), or, if
The American Stock Exchange, Inc. is not the principal trading market for such
security, the last closing bid price of such security on the principal
securities exchange or trading market where such security is listed or traded
as reported by Bloomberg, or if the foregoing do not apply, the last closing
bid price of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing
bid price is reported for such security by Bloomberg, the last closing trade
price for such security as reported by Bloomberg, or, if no last closing trade
price is reported for such security by Bloomberg, the average of the bid prices
of any market makers for such security as reported in the "pink sheets" by the
National Quotation Bureau, Inc. If the Closing Bid Price cannot be calculated
for such security on such date on any of the foregoing bases, the Closing Bid
Price of such security on such date shall be the fair market value as mutually
determined by the Company and the holders of the Preferred Shares. If the
Company and the holders of the Preferred Shares are unable to agree upon the
fair market value of the Common Stock, then such dispute shall be resolved
pursuant to Section 2(a) of this Warrant with the term "Closing Bid Price"
being substituted for the term "Market Price." (All such determinations to be
appropriately adjusted for any stock dividend, stock split or other similar
transaction during such period.)
2
<PAGE> 3
"APPROVED STOCK PLAN" shall mean any contract, plan
or agreement which has been approved by the Board of Directors of the Company,
pursuant to which the Company's securities may be issued to any employee,
officer, director, consultant or other service provider for services provided
to the Company.
"ARTICLES SUPPLEMENTARY" means the Company's Articles
Supplementary of the Series A Convertible Preferred Stock.
"COMMON STOCK" means (i) the Company's common stock,
par value $.01 per share, and (ii) any capital stock into which such Common
Stock shall have been changed or any capital stock resulting from a
reclassification of such Common Stock.
"COMMON STOCK DEEMED OUTSTANDING" means, at any given
time, the number of shares of Common Stock actually outstanding at such time,
plus the number of shares of Common Stock deemed to be outstanding pursuant to
Sections 8(b)(i) and 8(b)(ii) hereof regardless of whether the Options (as
defined below) or Convertible Securities (as defined below) are actually
exercisable or convertible at such time, but excluding any shares of Common
Stock issuable upon exercise of the Preferred Share Warrants.
"EXPIRATION DATE" means the date five years from the
date of this Warrant or, if such date falls on a Saturday, Sunday or other day
on which banks are required or authorized to be closed in the City of New York
or the State of New York (a "HOLIDAY"), the next preceding date that is not a
Holiday, unless extended pursuant to Section 4(l) of the Purchase Agreement,
which extension shall be equal to twice the number of days in any Underwriting
Lock-Up Period (as defined in Section 4(l) of the Purchase Agreement).
"OTHER SECURITIES" means (i) those warrants of the
Company issued prior to, and outstanding on, the date of issuance of this
Warrant, (ii) the Preferred Shares (as defined below) and (iii) the shares of
Common Stock issued upon conversion of the Preferred Shares.
"PERSON" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
"PREFERRED SHARES" means the shares of the Company's
Series A Convertible Preferred Stock issued pursuant to the Purchase Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as
amended.
"WARRANT" means this Warrant and all Warrants issued
in exchange, transfer or replacement of any thereof.
"WARRANT EXERCISE PRICE" shall be [INSERT 125% OF THE
MARKET PRICE ON THE DATE OF ISSUANCE OF THE RELATED PREFERRED SHARES], subject
to adjustment as hereinafter provided.
3
<PAGE> 4
(c) Other Definitional Provisions.
(i) Except as otherwise specified herein, all
references herein (A) to the Company shall be deemed to include the Company's
successors and (B) to any applicable law defined or referred to herein, shall
be deemed references to such applicable law as the same may have been or may be
amended or supplemented from time to time.
(ii) When used in this Warrant, the words
"HEREIN," "HEREOF," and "HEREUNDER," and words of similar import, shall refer
to this Warrant as a whole and not to any provision of this Warrant, and the
words "SECTION," "SCHEDULE," and "EXHIBIT" shall refer to Sections of, and
Schedules and Exhibits to, this Warrant unless otherwise specified.
(iii) Whenever the context so requires, the neuter
gender includes the masculine or feminine, and the singular number includes the
plural, and vice versa.
Section 2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this
Warrant may be exercised by the holder hereof then registered on the books of
the Company, in whole or in part, at any time during normal business hours on
any business day on or after the opening of business on the date hereof and
prior to 9:00 P.M. Eastern Time on the Expiration Date by (i) delivery of a
written notice, in the form of the subscription notice attached as Exhibit A
hereto, of such holder's election to exercise this Warrant, which notice shall
specify the number of Warrant Shares to be purchased, (ii) payment to the
Company of an amount equal to the Warrant Exercise Price multiplied by the
number of Warrant Shares as to which the Warrant is being exercised (plus any
applicable issue or transfer taxes) (the "AGGREGATE EXERCISE PRICE") in cash or
by check or wire transfer, and (iii) the surrender of this Warrant, at the
principal office of the Company; provided, that if such Warrant Shares are to
be issued in any name other than that of the registered holder of this Warrant,
such issuance shall be deemed a transfer and the provisions of Section 7 shall
be applicable. In the event of any exercise of the rights represented by this
Warrant in compliance with this Section 2(a), a certificate or certificates for
the Warrant Shares so purchased, in such denominations as may be requested by
the holder hereof and registered in the name of, or as directed by, the holder,
shall be delivered at the Company's expense to, or as directed by, such holder
as soon as practicable after such rights shall have been so exercised, and in
any event no later than three business days after such exercise. In the case
of a dispute as to the determination of the Warrant Exercise Price of a
security or the arithmetic calculation of the Warrant Shares, the Company shall
promptly issue to the holder the number of shares of Common Stock that is not
disputed and shall submit the disputed determinations or arithmetic
calculations to the holder via facsimile within one business day of receipt of
the holder's subscription notice. If the holder and the Company are unable to
agree upon the determination of the Warrant Exercise Price or arithmetic
calculation of the Warrant Shares within one day of such disputed determination
or arithmetic calculation being submitted to the holder, then the Company shall
immediately submit via facsimile (i) the disputed determination of the Warrant
Exercise Price to an independent, reputable investment banking firm or (ii) the
disputed arithmetic calculation of the Warrant Shares to its independent,
outside accountant. The Company shall cause the investment banking firm or the
accountant, as the case may be, to
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<PAGE> 5
perform the determinations or calculations and notify the Company and the
holder of the results no later than forty-eight (48) hours from the time it
receives the disputed determinations or calculations. Such investment banking
firm's or accountant's determination or calculation, as the case may be, shall
be deemed conclusive absent manifest error.
(b) Unless the rights represented by this Warrant shall
have expired or shall have been fully exercised, the Company shall, as soon as
practicable and in no event later than five business days after any exercise
and at its own expense, issue a new Warrant identical in all respects to the
Warrant exercised except (i) it shall represent rights to purchase the number
of Warrant Shares purchasable immediately prior to such exercise under the
Warrant exercised, less the number of Warrant Shares with respect to which such
Warrant is exercised, and (ii) the holder thereof shall be deemed for all
corporate purposes to have become the holder of record of such Warrant Shares
immediately prior to the close of business on the date on which the Warrant is
surrendered and payment of the amount due in respect of such exercise and any
applicable taxes is made, irrespective of the date of delivery of certificates
evidencing such Warrant Shares, except that, if the date of such surrender and
payment is a date when the stock transfer books of the Company are properly
closed, such person shall be deemed to have become the holder of such Warrant
Shares at the opening of business on the next succeeding date on which the
stock transfer books are open.
(c) No fractional shares of Common Stock are to be issued
upon the exercise of this Warrant, but rather the number of shares of Common
Stock issued upon exercise of this Warrant shall be rounded up or down to the
nearest whole number.
(d) If the Company shall fail for any reason or for no
reason to issue to the holder on a timely basis as described in this Section 2,
a certificate for the number of shares of Common Stock to which the holder is
entitled upon the holder's exercise of this Warrant or a new Warrant for the
number of shares of Common Stock to which such holder is entitled pursuant to
Section 2(b) hereof, the Company shall, in addition to any other remedies under
this Warrant or the Securities Purchase Agreement or otherwise available to
such holder, including any indemnification under Section 8 of the Securities
Purchase Agreement, pay as additional damages in cash to such holder on each
date after the fifth business day following receipt by the Company of the
exercise notice that such exercise is not timely effected in an amount equal to
1% of the product of (A) the sum of the number of shares of Common Stock not
issued to the holder on a timely basis and to which the holder is entitled and,
in the event the Company has failed to timely deliver a new Warrant, the number
of shares represented by the portion of this Warrant which is not being
converted, as the case may be, and (B) the average of the Closing Bid Prices
for the three consecutive trading days immediately preceding the last possible
date which the Company could have issued such Common Stock to the holder
without violating this Section 2.
(e) Notwithstanding anything contained herein to the
contrary, the holder of this Warrant may, at its election exercised in its sole
discretion, exercise this Warrant in whole or in part and, in lieu of making
the cash payment otherwise contemplated to be made to the Company upon such
exercise in payment of the Aggregate Exercise Price, elect instead to
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<PAGE> 6
receive upon such exercise the "Net Number" of shares of Common Stock
determined according to the following formula:
Net Number = (A x B) - (A x C)
-----------------
B
For purposes of the foregoing formula:
A= the total number shares with respect to which this
Warrant is then being exercised.
B= the last reported sale price (as reported by
Bloomberg) of the Common Stock on the date
immediately preceding the date of the subscription
notice.
C= the Warrant Exercise Price then in effect at the
time of such exercise.
Section 3. Covenants as to Common Stock. The Company hereby
covenants and agrees as follows:
(a) This Warrant is, and any Preferred Share Warrants
issued in substitution for or replacement of this Warrant will upon issuance
be, duly authorized and validly issued.
(b) All Warrant Shares which may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance, be
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof.
(c) During the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have authorized
and reserved at least 100% of the number of shares of Common Stock needed to
provide for the exercise of the rights then represented by this Warrant and the
par value of said shares will at all times be less than or equal to the
applicable Warrant Exercise Price.
(d) The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of this Warrant upon each
national securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed (subject to official notice of issuance
upon exercise of this Warrant) and shall maintain, so long as any other shares
of Common Stock shall be so listed, such listing of all shares of Common Stock
from time to time issuable upon the exercise of this Warrant; and the Company
shall so list on each national securities exchange or automated quotation
system, as the case may be, and shall maintain such listing of, any other
shares of capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed on such
national securities exchange or automated quotation system.
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<PAGE> 7
(e) The Company will not, by amendment of its Charter or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this
Warrant against dilution or other impairment, consistent with the tenor and
purpose of this Warrant. No impairment of the designations, preferences and
rights of the Preferred Shares contained in the Company's Articles
Supplementary or any waiver thereof which has an adverse effect on the rights
granted hereunder shall be given effect until the Company has taken appropriate
action (satisfactory to the holders of Preferred Share Warrants representing a
majority of the shares of Common Stock issuable upon the exercise of such
Preferred Share Warrants then outstanding) to avoid such adverse effect with
respect to this Warrant. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Warrant Exercise Price
then in effect, and (ii) will take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant.
(f) This Warrant will be binding upon any entity
succeeding to the Company by merger, consolidation or acquisition of all or
substantially all of the Company's assets.
Section 4. Taxes. The Company shall pay any and all taxes which
may be payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder. Except as
otherwise specifically provided herein, no holder, as such, of this Warrant
shall be entitled to vote or receive dividends or be deemed the holder of
shares of the Company for any purpose, nor shall anything contained in this
Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise of
this Warrant. In addition, nothing contained in this Warrant shall be
construed as imposing any liabilities on such holder to purchase any securities
or as a stockholder of the Company, whether such liabilities are asserted by
the Company or by creditors of the Company. Notwithstanding this Section 5,
the Company will provide the holder of this Warrant with copies of the same
notices and other information given to the stockholders of the Company
generally, contemporaneously with the giving thereof to the stockholders.
Section 6. Representations of Holder. The holder of this
Warrant, by the acceptance hereof, represents that it is acquiring this Warrant
and the Warrant Shares for its own account for investment and not with a view
to, or for sale in connection with, any distribution hereof or of any of the
shares of Common Stock or other securities issuable upon the exercise thereof,
and not with any present intention of distributing any of the same. The holder
of this Warrant
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<PAGE> 8
further represents, by acceptance hereof, that, as of this date, such holder is
an "ACCREDITED INVESTOR" as such term is defined in Rule 501(a) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
(an "ACCREDITED INVESTOR"). Upon exercise of this Warrant, the holder shall,
if requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the Warrant Shares so purchased are being acquired solely for the
holder's own account and not as a nominee for any other party, for investment,
and not with a view toward distribution or resale and that such holder is an
Accredited Investor. Notwithstanding the foregoing, by making the
representations herein, the holder does not agree to hold the Warrant or the
Warrant Shares for any minimum or other specified term and reserves the right
to dispose of the Warrant and the Warrant Shares at any time in accordance with
or pursuant to a registration statement or an exemption under the Securities
Act. If such holder cannot make such representations because they would be
factually incorrect, it shall be a condition to such holder's exercise of the
Warrant that the Company receive such other representations as the Company
considers reasonably necessary to assure the Company that the issuance of its
securities upon exercise of the Warrant shall not violate any United States or
state securities laws.
Section 7. Ownership and Transfer.
(a) The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant, in which the Company
shall record the name and address of the person in whose name this Warrant has
been issued, as well as the name and address of each transferee. The Company
may treat the person in whose name any Warrant is registered on the register as
the owner and holder thereof for all purposes, notwithstanding any notice to
the contrary, but in all events recognizing any transfers made in accordance
with the terms of this Warrant.
(b) This Warrant and the rights granted to the holder
hereof are transferable to affiliates or associates of the holder hereof,
without the written consent of the Company, and to other Persons, with the
consent of the Company, which consent shall not be unreasonably withheld, in
whole or in part, upon surrender of this Warrant, together with a properly
executed warrant power in the form of Exhibit B attached hereto; provided,
however, that any transfer or assignment shall be subject to the conditions set
forth in Section 7(c) below.
(c) The holder of this Warrant understands that this
Warrant has not been and is not expected to be, registered under the Securities
Act or any state securities laws, and may not be offered for sale, sold,
assigned or transferred unless (a) subsequently registered thereunder, or (b)
such holder shall have delivered to the Company an opinion of counsel,
reasonably satisfactory in form, scope and substance to the Company, to the
effect that the securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration;
provided that (i) any sale of such securities made in reliance on Rule 144
promulgated under the Securities Act may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any resale of
such securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the Securities Act) may require compliance with some other exemption
under the Securities Act or the rules and regulations of
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<PAGE> 9
the Securities and Exchange Commission thereunder; and (ii) neither the Company
nor any other person is under any obligation to register the Preferred Share
Warrants under the Securities Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder.
(d) The Company is obligated to register the Warrant
Shares for resale under the Securities Act pursuant to the Registration Rights
Agreement dated January 8, 1998 by and between the Company and the Buyers
listed on the signature page thereto (the "REGISTRATION RIGHTS AGREEMENT") and
the initial holder of this Warrant (and certain assignees thereof) is entitled
to the registration rights in respect of the Warrant Shares as set forth in the
Registration Rights Agreement.
Section 8. Adjustment of Warrant Exercise Price and Number of
Shares. In order to prevent dilution of the rights granted under this Warrant,
the Warrant Exercise Price and the number of shares of Common Stock issuable
upon exercise of this Warrant shall be adjusted from time to time as follows:
(a) Adjustment of Warrant Exercise Price and Number of
Shares upon Issuance of Common Stock. If and whenever on or after the date of
issuance of this Warrant, the Company issues or sells, or is deemed to have
issued or sold, any shares of Common Stock (other than shares of Common Stock
deemed to have been issued by the Company in connection with an Approved Stock
Plan or upon exercise or conversion of the Other Securities) for a
consideration per share less than the greater of the average of the Closing Bid
Prices of the common stock for the ten (10) consecutive trading days
immediately preceding the date of such issue or sale and the Warrant Exercise
Price in effect immediately prior to such time (the "APPLICABLE PRICE"), then
immediately after such issue or sale the Warrant Exercise Price shall be
reduced to an amount equal to the product of (x) the Warrant Exercise Price in
effect immediately prior to such issue or sale and (y) the quotient determined
by dividing (1) the sum of (I) the product derived by multiplying the
Applicable Price by the number of shares of Common Stock Deemed Outstanding
immediately prior to such issue or sale, plus (II) the consideration, if any,
received by the Company upon such issue or sale, by (2) the product derived by
multiplying the (I) Applicable Price by (II) the number of shares of Common
Stock Deemed Outstanding immediately after such issue or sale. Upon each such
adjustment of the Warrant Exercise Price hereunder, the number of shares of
Common Stock acquirable upon exercise of this Warrant shall be adjusted to the
number of shares determined by multiplying the Warrant Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
acquirable upon exercise of this Warrant immediately prior to such adjustment
and dividing the product thereof by the Warrant Exercise Price resulting from
such adjustment.
(b) Effect on Warrant Exercise Price of Certain Events.
For purposes of determining the adjusted Warrant Exercise Price under Section
8(a) above, the following shall be applicable:
(i) Issuance of Options. If the Company in any
manner grants any rights or options to subscribe for or to purchase Common
Stock (other than pursuant to an Approved Stock Plan or Other Securities) or
any stock or other securities convertible into or
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<PAGE> 10
exchangeable for, directly or indirectly, Common Stock (such rights or options
being herein called "OPTIONS" and such convertible or exchangeable stock or
securities being herein called "CONVERTIBLE SECURITIES") and the price per
share for which Common Stock is issuable upon the exercise of such Options or
upon conversion or exchange of such Convertible Securities is less than the
Applicable Price, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of
the total maximum amount of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to be outstanding and to have been
issued and sold by the Company for such price per share. For purposes of this
Section 8(b)(i), the "price per share for which Common Stock is issuable upon
exercise of such Options or upon conversion or exchange of such Convertible
Securities" is determined by dividing (A) the total amount, if any, received or
receivable by the Company as consideration for the granting of such Options,
plus the minimum aggregate amount of additional consideration payable to the
Company upon the exercise of all such Options, plus in the case of such Options
which relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the issuance or
sale of such Convertible Securities and the conversion or exchange thereof, by
(B) the total maximum number of shares of Common Stock issuable upon exercise
of such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options. No adjustment of the
Warrant Exercise Price shall be made upon the actual issuance of such Common
Stock or of such Convertible Securities upon the exercise of such Options or
upon the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.
(ii) Issuance of Convertible Securities. If the
Company in any manner issues or sells any Convertible Securities and the price
per share for which Common Stock is issuable upon such conversion or exchange
is less than the Applicable Price, then the maximum number of shares of Common
Stock issuable upon conversion or exchange of such Convertible Securities shall
be deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For the purposes of this Section 8(b)(ii), the "price
per share for which Common Stock is issuable upon such conversion or exchange"
is determined by dividing (A) the total amount received or receivable by the
Company as consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the conversion or exchange thereof, by (B) the total
maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No adjustment of the Warrant
Exercise Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities, and if any such issue or
sale of such Convertible Securities is made upon exercise of any Options for
which adjustment of the Warrant Exercise Price had been or are to be made
pursuant to other provisions of this Section 8(b), no further adjustment of the
Warrant Exercise Price shall be made by reason of such issue or sale.
(iii) Change in Option Price or Rate of Conversion.
If the purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion or exchange of any
Convertible Securities, or the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock change at any time, the
Warrant Exercise Price in effect at the time of such change shall be readjusted
to the Warrant Exercise Price which would have been in effect at such time had
such Options or Convertible
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<PAGE> 11
Securities still outstanding provided for such changed purchase price,
additional consideration or changed conversion rate, as the case may be, at the
time initially granted, issued or sold and the number of shares of Common Stock
acquirable hereunder shall be correspondingly readjusted; provided that no
adjustment shall be made if such adjustment would result in an increase of the
Warrant Exercise Price then in effect.
(c) Effect on Warrant Exercise Price of Certain Events.
For purposes of determining the adjusted Warrant Exercise Price under Sections
8(a) and 8(b), the following shall be applicable:
(i) Calculation of Consideration Received. If
any Common Stock, Options or Convertible Securities are issued or sold or
deemed to have been issued or sold for cash, the consideration received
therefor will be deemed to be the net amount received by the Company therefor.
In case any Common Stock, Options or Convertible Securities are issued or sold
for a consideration other than cash, the amount of the consideration other than
cash received by the Company will be the fair value of such consideration,
except where such consideration consists of securities, in which case the
amount of consideration received by the Company will be the Market Price of
such securities on the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving entity in
connection with any merger in which the Company is the surviving entity the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving entity as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or securities
will be determined jointly by the Company and the holders of Warrants
representing a majority of the shares of Common Stock issuable upon exercise of
such Warrants then outstanding. If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring valuation (the
"VALUATION EVENT"), the fair value of such consideration will be determined
within forty-eight (48) hours of the tenth (10th) day following the Valuation
Event by an independent, reputable appraiser selected by the Company. The
determination of such appraiser shall be final and binding upon all parties.
(ii) Integrated Transactions. In case any Option
is issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $.01.
(iii) Treasury Shares. The number of shares of
Common Stock outstanding at any given time does not include shares owned or
held by or for the account of the Company, and the disposition of any shares so
owned or held will be considered an issue or sale of Common Stock.
(iv) Record Date. If the Company takes a record
of the holders of Common Stock for the purpose of entitling them (1) to receive
a dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (2) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date will be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
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<PAGE> 12
issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(d) Adjustment of Warrant Exercise Price upon Subdivision
or Combination of Common Stock. If the Company at any time after the date of
issuance of this Warrant subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Warrant Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced
and the number of shares of Common Stock obtainable upon exercise of this
Warrant will be proportionately increased. If the Company at any time after
the date of issuance of this Warrant combines (by combination, reverse stock
split or otherwise) one or more classes of its outstanding shares of Common
Stock into a smaller number of shares, the Warrant Exercise Price in effect
immediately prior to such combination will be proportionately increased and the
number of shares of Common Stock obtainable upon exercise of this Warrant will
be proportionately decreased.
(e) Reorganization, Reclassification, Consolidation,
Merger or Sale. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's assets
to another Person (as defined below) or other transaction which is effected in
such a way that holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets with
respect to or in exchange for Common Stock is referred to herein as "ORGANIC
CHANGE." Prior to the consummation of any Organic Change, the Company will
make appropriate provision (in form and substance satisfactory to the holders
of the Preferred Share Warrants representing a majority of the shares of Common
Stock issuable upon exercise of such Preferred Share Warrants then outstanding)
to insure that each of the holders of the Preferred Share Warrants will
thereafter have the right to acquire and receive in lieu of or addition to (as
the case may be) the shares of Common Stock immediately theretofore acquirable
and receivable upon the exercise of such holder's Preferred Share Warrants,
such shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for the number of shares of Common Stock immediately
theretofore acquirable and receivable upon the exercise of such holder's
Preferred Share Warrants had such Organic Change not taken place. In any such
case, the Company will make appropriate provision (in form and substance
satisfactory to the holders of the Preferred Share Warrants representing a
majority of the shares of Common Stock issuable upon exercise of such Preferred
Share Warrants then outstanding) with respect to such holders' rights and
interests to insure that the provisions of this Section 8 and Section 9 below
will thereafter be applicable to the Preferred Share Warrants (including, in
the case of any such consolidation, merger or sale in which the successor
entity or purchasing entity is other than the Company, an immediate adjustment
of the Warrant Exercise Price to the value for the Common Stock reflected by
the terms of such consolidation, merger or sale, and a corresponding immediate
adjustment in the number of shares of shares of Common Stock acquirable and
receivable upon exercise of the Preferred Share Warrants, if the value so
reflected is less than the Warrant Exercise Price in effect immediately prior
to such consolidation, merger or sale). The Company will not effect any such
consolidation, merger or sale, unless prior to the consummation thereof, the
successor entity (if other than the Company) resulting from consolidation or
merger or the entity purchasing such assets assumes, by written instrument (in
form and substance satisfactory to the
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holders of Preferred Share Warrants representing a majority of shares of Common
Stock issuable upon exercise of the Preferred Share Warrants then outstanding),
the obligation to deliver to each holder of Preferred Share Warrants such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire.
(f) Distribution of Assets. If the Company shall declare
or make any distribution of its assets (or rights to acquire its assets) to
holders of Common Stock as a partial liquidating dividend, by way or return of
capital or otherwise (including any dividend or distribution to the Company's
stockholders of cash or shares (or rights to acquire shares) of capital stock
of a subsidiary) (a "DISTRIBUTION"), at any time after the issuance of this
Warrant, then the holder of this Warrant shall be entitled upon exercise of
this Warrant for the purchase of any or all of the shares of Common Stock
subject hereto, after the record date for determining shareholders entitled to
receive such Distribution, to receive the amount of such assets (or rights)
which would have been payable to the holder had such holder been the holder of
such shares of Common Stock on the record date for determination of
stockholders entitled to such Distribution.
(g) Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 8 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity
features), then the Company's Board of Directors will make an appropriate
adjustment in the Warrant Exercise Price and the number of shares of Common
Stock obtainable upon exercise of this Warrant so as to protect the rights of
the holders of the Preferred Share Warrants; provided that no such adjustment
will increase the Warrant Exercise Price or decrease the number of shares of
Common Stock obtainable as otherwise determined pursuant to this Section 8.
(h) Notices.
(i) Immediately upon any adjustment of the
Warrant Exercise Price, the Company will give written notice thereof to the
holder of this Warrant, setting forth in reasonable detail and certifying the
calculation of such adjustment.
(ii) The Company will give written notice to the
holder of this Warrant at least twenty (20) days prior to the date on which the
Company closes its books or takes a record (A) with respect to any dividend or
distribution upon the Common Stock, (B) with respect to any pro rata
subscription offer to holders of Common Stock or (C) for determining rights to
vote with respect to any Organic Change, dissolution or liquidation, except
that in no event shall such notice be provided to such holder prior to such
information being made known to the public.
(iii) The Company will also give written notice to
the holder of this Warrant at least twenty (20) days prior to the date on which
any Organic Change, dissolution or liquidation will take place.
Section 9. Purchase Rights. In addition to any adjustments
pursuant to Section 8 above, if at any time the Company grants, issues or sells
any Options, Convertible Securities
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or rights to purchase stock, warrants, securities or other property pro rata to
the record holders of any class of Common Stock (the "PURCHASE RIGHTS"), then
the holder of this Warrant will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
holder could have acquired if such holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant immediately
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights.
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If
this Warrant is lost, stolen, mutilated or destroyed, the Company shall, on
receipt of an indemnification undertaking, issue a new Warrant of like
denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed.
Section 11. Notice. Any notices consents, waivers or other
communications required or permitted to be given under the terms of this
Warrant must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile,
provided a copy is mailed by U.S. certified mail, return receipt requested;
(iii) three days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
Oncor, Inc.
209 Perry Parkway
Gaithersburg, MD 20877
Telephone: 301-963-3500
Facsimile: 301-330-3940
Attention: President
With copy to:
Brobeck, Phleger & Harrison LLP
1633 Broadway
47th Floor
New York, NY 10019
Telephone: 212-581-1600
Facsimile: 212-586-7878
Attention: Richard R. Plumridge, Esq.
If to a holder of this Warrant, to it at the address set forth
below such holder's signature on the signature page hereof.
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Each party shall provide five (5) days' prior written notice to the other party
of any change in address or facsimile number.
Section 12. Miscellaneous. This Warrant and any term hereof may
be changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought. The headings in this Warrant are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Warrant shall be governed by and interpreted under the
laws of the State of New York
Section 13. Date. The date of this Warrant is January 8, 1998.
This Warrant, in all events, shall be wholly void and of no effect after the
close of business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 7 shall continue in full force and
effect after such date as to any Warrant Shares or other securities issued upon
the exercise of this Warrant.
15
<PAGE> 16
ONCOR, INC.
By:
-----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
<PAGE> 17
EXHIBIT A TO WARRANT
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
ONCOR, INC.
The undersigned holder hereby exercises the right to purchase
_________________ of the shares of Common Stock ("WARRANT SHARES") of Oncor,
Inc., a Maryland corporation (the "COMPANY"), evidenced by the attached Warrant
(the "WARRANT"). Capitalized terms used herein and not otherwise defined shall
have the respective meanings set forth in the Warrant.
1. Form of Warrant Exercise Price. The Holder intends that payment
of the Warrant Exercise Price shall be made as:
a "Cash Exercise" with respect to _________
------------ ______________ Warrant Shares; and/or
a "Cashless Exercise" with respect to ______
------------ _____________ Warrant Shares (to the extent
permitted by the terms of the Warrant).
2. Payment of Warrant Exercise Price. In the event that the holder
has elected a Cash Exercise with respect to some or all of the Warrant Shares
to be issued pursuant hereto, the holder shall pay the sum of
$___________________ to the Company in accordance with the terms of the
Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the
holder __________ Warrant Shares in accordance with the terms of the Warrant.
Date: ,
--------------- -- ------
- -------------------------------------------
Name of Registered Holder
By:
----------------------------------
Name:
Title:
<PAGE> 18
EXHIBIT B TO WARRANT
FORM OF WARRANT POWER
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
________________, Federal Identification No. __________, a warrant to purchase
____________ shares of the capital stock of Oncor, Inc., a Maryland
corporation, represented by warrant certificate no. _____, standing in the name
of the undersigned on the books of said corporation. The undersigned does
hereby irrevocably constitute and appoint ______________, attorney to transfer
the warrants of said corporation, with full power of substitution in the
premises.
Dated: , 199
--------- -
--------------------------------------
By:
-----------------------------
Its:
-----------------------------
<PAGE> 1
EXHIBIT 5.1
February 25, 1998
Oncor, Inc.
209 Perry Parkway
Gaithersburg, Maryland 20877
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3, (the
"Registration Statement") transmitted for filing by you with the Securities and
Exchange Commission as of the date hereof, in connection with the registration
under the Securities Act of 1933, as amended, of 5,587,965 shares of your
Common Stock, $.01 par value (the "Shares").
We have examined such records and documents and have made such
examination of laws as we considered necessary to form a basis for the opinion
set forth herein. In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, and
the conformity with the originals of all documents submitted to us as copies
thereof.
Based upon and subject to the foregoing, we are of the opinion
that the Shares, when sold in the manner described in the Registration
Statement, will be validly issued, fully paid and nonassessable.
We hereby consent to the use of our name under the caption
"Legal Matters" in the Registration Statement, including the prospectus
constituting a part thereof, and any amendment to the Registration Statement,
and consent to the filing of this opinion as an exhibit thereto.
Very truly yours,
/s/ BROBECK, PHLEGER & HARRISON LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of January
8, 1998, by and among Oncor, Inc., a Maryland corporation, with headquarters
located at 209 Perry Parkway, Gaithersburg, Maryland 20877 (the "COMPANY"), and
the investors listed on the Schedule of Buyers attached hereto (individually, a
"BUYER" and collectively, the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("REGULATION D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 ACT");
B. The Company has authorized the following new series of its
Preferred Stock, par value $.01 per share (the "PREFERRED STOCK"): the
Company's Series A Convertible Preferred Stock (the "PREFERRED SHARES"), which
shall be convertible into shares of the Company's Common Stock, par value $.01
per share (the "COMMON STOCK") (as converted, the "CONVERSION SHARES"), in
accordance with the terms of the Company's Articles Supplementary of the
Preferred Shares, substantially in the form attached hereto as Exhibit A (the
"ARTICLES SUPPLEMENTARY");
C. The Buyers wish to purchase, upon the terms and conditions
stated in this Agreement, initially an aggregate of 500 of the Preferred Shares
(the "INITIAL PREFERRED SHARES") in the respective amounts set forth opposite
each Buyer's name on the Schedule of Buyers and one warrant for each Preferred
Share purchased in substantially the form attached hereto as Exhibit E (the
"WARRANT"), to acquire 250 shares of Common Stock, which Warrants shall expire
five years after the date of issuance;
D. Subject to the terms and conditions set forth in this
Agreement, each Buyer may have the right to purchase a number of additional
Preferred Shares, along with the related Warrants, equal to up to the sum of
(i) the number of Initial Preferred Shares held by such Buyer on the date which
is 180 days after the Initial Closing Date (as defined in Section 1(b)), (ii)
the number of Initial Preferred Shares converted by such Buyer at a Conversion
Price equal to the Fixed Conversion Price of the Initial Preferred Shares (each
as defined in the Articles Supplementary) prior to the date which is 180 days
after the Initial Closing Date, (iii) the number of Put Preferred Shares (as
defined below) held by such Buyer on the date which is 180 days after the
applicable Put Closing Date (as defined in Section 1(d)) and (iv) the number of
Put Preferred Shares converted by such Buyer at a Conversion Price equal to the
Fixed Conversion Price of such Put Preferred Shares prior to the date which is
180 days after the
<PAGE> 2
applicable Put Closing Date (the "ADDITIONAL PREFERRED SHARES"). In addition,
the Company may have the right to cause the Buyers to purchase up to an
aggregate of 750 Preferred Shares, along with the related Warrants, (pro rata
based on the number of Initial Preferred Shares each Buyer purchased in
relation to the total number of Initial Preferred Shares) (the "PUT PREFERRED
SHARES") (the Initial Preferred Shares, the Additional Preferred Shares and the
Put Preferred Shares collectively are referred to in this Agreement as the
"PREFERRED SHARES");
E. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement substantially in the form attached hereto as Exhibit B (the
"REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
a. Purchase of Preferred Shares. Subject to
satisfaction (or waiver) of the conditions set forth in Sections 6(a) and 7(a),
the Company shall issue and sell to the Buyers and the Buyers severally shall
purchase from the Company an aggregate of 500 Initial Preferred Shares, in the
respective amounts set forth opposite each Buyer's name on the Schedule of
Buyers along with one Warrant for each Preferred Share purchased (the "INITIAL
CLOSING"). Subject to satisfaction (or waiver) of the conditions set forth in
Sections 1(c), 6(b) and 7(b), at the option of each Buyer, the Company shall
issue and sell to each such Buyer and each such Buyer shall purchase from the
Company at multiple closings, if applicable, an aggregate of up to that number
of Additional Preferred Shares, along with the related Warrants, equal to the
sum of (i) the number of Initial Preferred Shares held by such Buyer on the
date which is 180 days after the Initial Closing Date, (ii) the number of
Initial Preferred Shares converted by such Buyer at a Conversion Price equal to
the Fixed Conversion Price prior to the date which is 180 days after the
Initial Closing Date, (iii) the number of Put Preferred Shares held by such
Buyer on the date which is 180 days after the Put Closing Date and (iv) the
number of Put Preferred Shares converted by such Buyer at a Conversion Price
equal to the Fixed Conversion Price prior to the date which is 180 days after
the Put Closing Date (the "ADDITIONAL CLOSINGS"). Subject to satisfaction (or
waiver) of the conditions set forth in Sections 1(d), 1(e), 6(c) and 7(c), the
Company may require that each Buyer purchase that number of additional
Preferred Shares, along with the related Warrants, equal to such Buyer's pro
rata portion of up to 750 Preferred Shares (based on the number of Initial
Preferred Shares each Buyer purchased in relation to the total number of
Initial Preferred Shares purchased by the Buyers) (the "PUT CLOSING"). The
Initial Closing, the Additional Closings and the Put Closing collectively are
referred to in this Agreement as the "CLOSINGS." The purchase price (the
"PURCHASE PRICE") of each Preferred Share and the related Warrant at each of
the Closings shall be $10,000.
2
<PAGE> 3
b. The Initial Closing Date. The date and time of the
Initial Closing (the "INITIAL CLOSING DATE") shall be 10:00 a.m. Central Time,
within two (2) business days following the date hereof, subject to satisfaction
(or waiver) of the conditions to the Initial Closing set forth in Sections 6(a)
and 7(a) (or such later date as is mutually agreed to by the Company and the
Buyers). The Initial Closing shall occur on the Initial Closing Date at the
offices of Katten Muchin & Zavis, 525 West Monroe Street, Suite 1600, Chicago,
Illinois 60661-3693.
c. The Additional Closing Dates. The date and time of
each of the Additional Closings (the "ADDITIONAL CLOSING DATES") shall be 10:00
a.m. Central Time, on the date specified in an Additional Share Notice (as
defined below), subject to satisfaction (or waiver) of the conditions to the
Additional Closing set forth in Sections 6(b) and 7(b) and the conditions set
forth in this paragraph (or such later date as is mutually agreed to by the
Company and the Buyers). During the period beginning on and including the date
which is 180 days after the Initial Closing Date and ending on and including
the date which is the five year anniversary of the Initial Closing Date, but
subject to the requirements of Sections 6(b) and 7(b), each Buyer may purchase
Additional Preferred Shares by delivering written notice to the Company (an
"ADDITIONAL SHARE NOTICE") at least seven days but not more than 20 days prior
(an "ADDITIONAL SHARE NOTICE DATE") to the Additional Closing Date set forth in
such Buyer's Additional Share Notice. Each Additional Share Notice shall set
forth (i) the number of Additional Preferred Shares, along with the related
Warrants, to be purchased by such Buyer at the Additional Closing, (ii) the
aggregate Purchase Price for such Additional Preferred Shares and the related
Warrant, and (iii) the date selected by the Buyer for the Additional Closing
Date, which Additional Closing Date shall be not later than the date which is
the five year anniversary of the Initial Closing Date. Notwithstanding the
foregoing, no Buyer shall be entitled to deliver an Additional Share Notice
unless on the date of the delivery of the Additional Share Notice the Market
Price (as defined in the Articles Supplementary) of the Common Stock is greater
than the Fixed Conversion Price then in effect for the Initial Preferred
Shares. Each Additional Closing shall occur on the applicable Additional
Closing Date at the offices of Katten Muchin & Zavis, 525 West Monroe Street,
Suite 1600, Chicago, Illinois 60661-3693.
d. The Put Closing Date. The date and time of the Put
Closing (the "PUT CLOSING DATE") shall be 10:00 a.m. Central Time, on the date
specified in the Company's Put Share Notice (as defined below), subject to
satisfaction (or waiver) of the conditions to the Put Closing set forth in
Sections 6(c) and 7(c) and the conditions set forth in Section 1(e), (or such
later date as is mutually agreed to by the Company and the Buyers). During the
period (the "COMPANY PUT RIGHT PERIOD") beginning on and including the date
which is 180 days after the Initial Closing Date and ending on the date which
is 360 days after the Initial Closing Date, but subject to the requirements of
Sections 6(c) and 7(c) and satisfaction of the Put Notice Conditions (as
defined in Section 1(e)), the Company may require each Buyer to purchase Put
Preferred Shares by delivering written notice to each of the Buyers (a "PUT
SHARE NOTICE") at least 30 days but not more than 45 days (the "PUT SHARE
NOTICE DATE") prior to the Put Closing Date set forth in the Put Share Notice.
The Put Share Notice shall set forth (i) each Buyer's pro
3
<PAGE> 4
rata portion (based on the number of Initial Preferred Shares each Buyer
purchased in relation to the total number of Initial Preferred Shares purchased
by the Buyers) of the aggregate number of Put Preferred Shares, along with the
related Warrant, (which aggregate number shall not exceed 750 Preferred Shares)
which the Company is requiring each Buyer to purchase at the Put Closing, (ii)
the aggregate Purchase Price for each such Buyer's Put Preferred Shares and the
related Warrants and (iii) the date selected by the Company for the Put Closing
Date, which Put Closing Date shall be not later than the date which is 360 days
after the Initial Closing Date. The Put Closing shall occur on the Put Closing
Date at the offices of Katten Muchin & Zavis, 525 West Monroe Street, Suite
1600, Chicago, Illinois 60661-3693. The Initial Closing Date, the Additional
Closing Dates and the Put Closing Date collectively are referred to in this
Agreement as the "CLOSING DATES."
e. The Put Notice Conditions. Notwithstanding anything
in this agreement to the contrary, the Company shall not be entitled to deliver
a Put Share Notice and require the Buyers to purchase the Put Preferred Shares
along with the related Warrants unless, in addition to the satisfaction of the
requirements of Sections 6(c) and 7(c), all of the following conditions (the
"PUT NOTICE CONDITIONS") are satisfied: (i) either (A) the Company's
stockholders shall have approved the issuance of the Securities (as defined in
Section 2(a)) on or prior to the Put Share Notice Date, (B) the Company shall
have been advised in writing by The American Stock Exchange, Inc. ("AMEX") (or
The New York Stock Exchange, Inc. or The Nasdaq Stock Market, Inc., if the
Common Stock is then listed on such exchange) that the rules of such exchange
would not require the approval of the stockholders of the Company for the
issuance of a number of Conversion Shares equal to at least 20% of the number
of shares of Common Stock issued and outstanding on the Initial Closing Date,
or (C) the number of Conversion Shares issued and issuable upon the conversion
of the Initial Preferred Shares, any Additional Preferred Shares and the Put
Preferred Shares as of the Put Share Notice Date and the Put Closing Date is
not greater than 12.5% of the number of shares of Common Stock issued and
outstanding on the Initial Closing Date; (ii) during the period beginning 90
days prior to the Put Closing Date and ending on and including the Put Closing
Date, the registration statement (the "REGISTRATION STATEMENT") covering the
resale of the Conversion Shares and Warrant Shares has been declared effective
by the SEC and at all times has been effective and available for the sale of no
less than 125% of the sum of (A) the number of Conversion Shares then issuable
upon the conversion of all outstanding Preferred Shares and the Put Preferred
Shares to be issued by the Company, (B) the number of Warrant Shares then
issuable upon exercise of all outstanding Warrants and the Warrants to be
issued in connection with the Put Preferred Shares and (C) the number of
Conversion Shares and Warrant Shares that are then held by the Buyers; (iii)
during the period beginning on the Initial Closing Date and ending on and
including the Put Closing Date, the Common Stock is listed on AMEX and has not
been suspended from trading at any time during such period, nor is there any
pending or threatened delisting or suspension; (iv) no event constituting a
Major Transaction (as defined in Section 3(c) of the Articles Supplementary),
including an agreement to consummate a Major Transaction, or a Triggering Event
(as defined in Section 3(d) of the Articles Supplementary) shall have occurred
from the period beginning on and including the Initial Issuance Date and ending
on and including the Put
4
<PAGE> 5
Closing Date; (v) on each day during the period beginning 30 days prior to the
Put Share Notice Date and ending on and including the Put Share Notice Date,
the Market Price of the Common Stock has not been less than the Fixed
Conversion Price for the Initial Preferred Shares then in effect; (vi) during
the period beginning on the Put Share Notice Date and ending on and including
the Put Closing Date, the Market Price of the Common Stock has not been less
than 85% of the Market Price of the Common Stock on the Put Share Notice Date;
(vii) during the period beginning on the Initial Closing Date and ending on and
including the Put Closing Date, the Company shall have delivered Conversion
Shares upon conversion of the Preferred Shares and Warrant Shares upon exercise
of the Warrants to the Buyers on a timely basis as set forth in Section
2(f)(ii) of the Articles Supplementary and Sections 2(a) and 2(b) of the
Warrants, respectively, and (viii) there has not previously been a Put Closing.
f. Form of Payment. On each of the Closing Dates, (i)
each Buyer shall pay the Purchase Price to the Company for the Preferred Shares
and the Warrants to be issued and sold to such Buyer at the respective Closing,
by wire transfer of immediately available funds in accordance with the
Company's written wire instructions, and (ii) the Company shall deliver to each
Buyer, stock certificates (in the denominations as such Buyer shall request)
(the "STOCK CERTIFICATES") representing such number of the Preferred Shares
which such Buyer is then purchasing (as indicated opposite such Buyer's name on
the Schedule of Buyers) along with a Warrant exercisable for 250 shares of
Common Stock for each Preferred Share purchased, duly executed on behalf of the
Company and registered in the name of such Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself
that:
a. Investment Purpose. Such Buyer (i) is acquiring the
Preferred Shares and the Warrants, (ii) upon conversion of the Preferred
Shares, will acquire the Conversion Shares then issuable and (iii) upon
exercise of the Warrants, will acquire the shares of Common Stock issuable upon
exercise thereof (the "WARRANT SHARES") (the Preferred Shares, the Conversion
Shares, the Warrants and the Warrant Shares collectively are referred to herein
as the "SECURITIES"), for its own account for investment only and not with a
view towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the 1933 Act;
provided, however, that by making the representations herein, such Buyer does
not agree to hold any of the Securities for any minimum or other specific term
and reserves the right to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an exemption under the 1933
Act.
b. Accredited Investor Status. Such Buyer is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. Such Buyer understands that
the Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements
5
<PAGE> 6
of United States federal and state securities laws and that the Company is
relying in part upon the truth and accuracy of, and such Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of such Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of such Buyer to acquire
such securities.
d. Information. Such Buyer and its advisors, if any,
have been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by such Buyer. Such Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigations
conducted by such Buyer or its advisors, if any, or its representatives shall
modify, amend or affect such Buyer's right to rely on the Company's
representations and warranties contained in Section 3 below. Such Buyer
understands that its investment in the Securities involves a high degree of
risk and that it is possible that such Buyer may not be able to recoup any or
all of its investment made hereby. Such Buyer has sought such accounting,
legal and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Securities.
e. No Governmental Review. Such Buyer understands that
no United States federal or state agency or any other government or
governmental agency has passed on or made any recommendation or endorsement of
the Securities or the fairness or suitability of the investment in the
Securities nor have such authorities passed upon or endorsed the merits of the
offering of the Securities.
f. Transfer or Resale. Such Buyer understands that
except as provided in the Registration Rights Agreement: (i) the Securities
have not been and are not being registered under the 1933 Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (A) subsequently registered thereunder, (B) such Buyer shall have
delivered to the Company an opinion of counsel, in a form reasonably acceptable
to the Company and its legal counsel, to the effect that such Securities to be
sold, assigned or transferred may be sold, assigned or transferred pursuant to
an exemption from such registration, or (C) such Buyer provides the Company
with reasonable assurance that such Securities can be sold, assigned or
transferred pursuant to Rule 144 promulgated under the 1933 Act (or a successor
rule thereto) ("RULE 144"); (ii) any sale of the Securities made in reliance on
Rule 144 may be made only in accordance with the terms of Rule 144 and further,
if Rule 144 is not applicable, any resale of the Securities under circumstances
in which the seller (or the person through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the 1933 Act
or any state securities laws or to comply with the terms and conditions of any
exemption thereunder.
6
<PAGE> 7
g. Legends. Such Buyer understands that the
certificates or other instruments representing the Preferred Shares and the
Warrants and, until such time as the sale of the Conversion Shares and the
Warrant Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement, the stock certificates representing the
Conversion Shares and the Warrant Shares, except as set forth below, shall bear
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY AND ITS LEGAL COUNSEL, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR
UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it
is stamped, if (i) such Securities are registered for sale under the 1933 Act,
(ii) in connection with a sale transaction, such holder provides the Company
with an opinion of counsel, in a form reasonably acceptable to the Company and
its legal counsel, to the effect that a public sale, assignment or transfer of
such Securities may be made without registration under the 1933 Act, or (iii)
such holder provides the Company with reasonable assurances that such
Securities can be sold pursuant to Rule 144 without any restriction as to the
number of securities acquired as of a particular date that can then be
immediately sold. Each Buyer acknowledges, covenants and agrees to sell the
Securities represented by a certificate(s) from which the legend has been
removed, only pursuant to (i) a registration statement effective under the 1933
Act, or (ii) advice of counsel that such sale is exempt from registration
required by Section 5 of the 1933 Act.
h. Authorization; Enforcement. This Agreement has been
duly and validly authorized, executed and delivered on behalf of such Buyer and
is a valid and binding agreement of such Buyer enforceable in accordance with
its terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that country
specified in its address on the Schedule of Buyers.
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<PAGE> 8
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers
that:
a. Organization and Qualification. The Company and its
subsidiaries (a complete list of which as of the date hereof and as of the
applicable Closing Date is set forth in Schedule 3(a)) are corporations duly
organized and validly existing in good standing under the laws of the
jurisdiction in which they are incorporated, and have the requisite corporate
power to own their properties and to carry on their business as now being
conducted. Each of the Company and its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "MATERIAL ADVERSE EFFECT" means any material adverse
effect on the business, properties, assets, operations, results of operations,
financial condition of the Company and its subsidiaries, if any, taken as a
whole, or on the transactions contemplated hereby or by the agreements and
instruments to be entered into in connection herewith.
b. Authorization; Enforcement; Compliance with Other
Instruments. (i) The Company has the requisite corporate power and authority
to enter into and perform this Agreement, the Registration Rights Agreement,
and the Irrevocable Transfer Agent Instructions (as defined in Section 5) and
each of the other agreements entered into by the parties hereto in connection
with the transactions contemplated by this Agreement (collectively, the
"TRANSACTION DOCUMENTS"), and to issue the Securities in accordance with the
terms hereof and thereof, (ii) the execution and delivery of the Transaction
Documents, the Warrants and the Articles Supplementary by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including without limitation the issuance of the Preferred Shares and the
Warrants and the reservation for issuance and the issuance of the Conversion
Shares and the Warrant Shares issuable upon conversion or exercise thereof,
have been duly authorized by the Company's Board of Directors and no further
consent or authorization is required by the Company, its Board of Directors or
its stockholders unless otherwise herein provided for, (iii) the Transaction
Documents and the Warrants have been duly executed and delivered by the
Company, (iv) the Transaction Documents and the Warrants constitute the valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies, and (v)
prior to the Initial Closing Date, the Articles Supplementary will be filed
with the Secretary of State of the State of Maryland and prior to each of the
Closing Dates will be in full force and effect, enforceable against the Company
in accordance with its terms.
c. Capitalization. As of the date hereof, the
authorized capital stock of the Company consists of (i) 50,000,000 shares of
Common Stock, of which as of the date hereof,
8
<PAGE> 9
27,953,805 shares were issued and outstanding, 4,624,331 shares are reserved
for issuance pursuant to the Company's stock option plans and 2,741,852 shares
are reserved for issuance pursuant to securities (other than the Preferred
Shares and the Warrants) exercisable or exchangeable for, or convertible into,
shares of Common Stock and (ii) 1,000,000 shares of Preferred Stock, none of
which as of the date hereof, were issued and outstanding. All of such
outstanding shares have been, or upon issuance will be, validly issued and are
fully paid and nonassessable. Except as disclosed in Schedule 3(c), no shares
of Common Stock or Preferred Stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by the
Company. Except as disclosed in Schedule 3(c), as of the effective date of
this Agreement, (i) there are no outstanding options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or contracts, commitments, understandings
or arrangements by which the Company or any of its subsidiaries is or may
become bound to issue additional shares of capital stock of the Company or any
of its subsidiaries or options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries; (ii) there are no outstanding debt securities; (iii) there are no
agreements or arrangements under which the Company or any of its subsidiaries
is obligated to register the sale of any of their securities under the 1933 Act
(except the Registration Rights Agreement); and (iv) there are no outstanding
securities of the Company or any of its subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its subsidiaries
is or may become bound to redeem a security of the Company or any of its
subsidiaries. Except as disclosed in Schedule 3(c), there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities as described in this Agreement.
The Company has furnished to the Buyers true and correct copies of the
Company's Charter, as amended and as in effect on the date hereof (the
"CHARTER"), and the Company's By-laws, as in effect on the date hereof (the
"BY-LAWS"), and the terms of all securities convertible into or exercisable for
Common Stock and the material rights of the holders thereof in respect thereto.
d. Issuance of Securities. The Preferred Shares and the
Warrants are duly authorized and, upon issuance in accordance with the terms
hereof, shall be (i) validly issued, fully paid and non-assessable, (ii) free
from all taxes, liens and charges with respect to the issue thereof and (iii)
entitled to the rights and preferences set forth in the Articles Supplementary.
5,587,965 shares of Common Stock (subject to adjustment pursuant to the
Company's covenant set forth in Section 4(f) below) have been duly authorized
and reserved for issuance upon conversion of the Preferred Shares and upon
exercise of the Warrants. Upon conversion or exercise in accordance with the
Articles Supplementary or the Warrants, as the case may be, the Conversion
Shares and the Warrant Shares will be validly issued, duly listed, fully paid
and nonassessable and free from all taxes, liens and charges with respect to
the issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock. Assuming the
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<PAGE> 10
accuracy of each Buyer's representations and warranties contained in Section 2,
the issuance by the Company of the Securities is exempt from registration under
the 1933 Act.
e. No Conflicts. Except as disclosed in Schedule 3(e),
the execution, delivery and performance of the Transaction Documents by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the reservation for issuance
and issuance of the Conversion Shares and Warrant Shares) will not (i) result
in a violation of the Charter, any articles supplementary of any outstanding
series of Preferred Stock of the Company or the Bylaws; (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture
or instrument to which the Company or any of its subsidiaries is a party; or
(iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations and the
rules and regulations of the principal market or exchange on which the Common
Stock is traded or listed) applicable to the Company or any of its subsidiaries
or by which any property or asset of the Company or any of its subsidiaries is
bound or affected. Except as disclosed in Schedule 3(e), neither the Company
nor its subsidiaries is in violation of any term of or in default under (i) its
Charter, any articles supplementary of any outstanding series of Preferred
Stock or By-laws or their organizational charter or by-laws, respectively, or
(ii) any material contract, agreement, mortgage, indebtedness, indenture,
instrument, judgment, decree or order or any statute, rule or regulation
applicable to the Company or its subsidiaries. The business of the Company and
its subsidiaries is not being conducted, and shall not be conducted, in
violation of any law, ordinance or regulation of any governmental entity except
in such situations, if any, where such a violation would not have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and as
required under the 1933 Act, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or governmental agency in order for it to execute, deliver or perform any of
its obligations under or contemplated by the Transaction Documents or the
Articles Supplementary in accordance with the terms hereof or thereof. Except
as disclosed in Schedule 3(e), all consents, authorizations, orders, filings
and registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the date
hereof. The Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company is
not in violation of the listing requirements of AMEX as in effect on the date
hereof and on each of the Closing Dates and is not aware of any facts which
would reasonably lead to delisting of the Common Stock by AMEX in the
foreseeable future.
f. SEC Documents; Financial Statements. Since December
31, 1995, the Company has filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"1934 ACT") (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as
the "SEC DOCUMENTS"). The
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<PAGE> 11
Company has delivered to the Buyers or their respective representatives true
and complete copies of the SEC Documents. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time
they were filed with the SEC, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. As of their respective dates, the
financial statements of the Company included in the SEC Documents complied as
to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles, consistently applied, during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto, or (ii) in the case of unaudited interim statements, to the
extent they may exclude footnotes or may be condensed or summary statements)
and fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). No other information provided by or on
behalf of the Company to the Buyers which is not included in the SEC Documents,
including, without limitation, information referred to in Section 2(d) of this
Agreement, contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements therein, in the
light of the circumstance under which they are or were made, not misleading.
Neither the Company nor any of its subsidiaries or any of their officers,
directors, employees or agents have provided the Buyers with any material,
nonpublic information.
g. Absence of Certain Changes. Except as disclosed in
Schedule 3(g), from December 31, 1996 until the date hereof and until the
applicable Closing Date there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition, liabilities or results of operations of the Company or its
subsidiaries. The Company has not taken any steps, and does not currently
expect to take any steps, to seek protection pursuant to any bankruptcy law nor
does the Company or any of its subsidiaries have any knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy
proceedings.
h. Absence of Litigation. As of the date hereof and the
applicable Closing Date, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the
Company or any of its subsidiaries, threatened against or affecting the
Company, the Common Stock or any of the Company's subsidiaries or any of the
Company's or the Company's subsidiaries' officers or directors in their
capacities as such, except as expressly set forth in Schedule 3(h).
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<PAGE> 12
i. Acknowledgment Regarding Buyers' Purchase of
Preferred Shares. The Company acknowledges and agrees that each of the Buyers
is acting solely in the capacity of arm's length purchaser with respect to the
Transaction Documents and the transactions contemplated thereby. The Company
further acknowledges that each Buyer is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and any advice
given by any of the Buyers or any of their respective representatives or agents
in connection with the Transaction Documents and the transactions contemplated
thereby is merely incidental to such Buyer's purchase of the Securities. The
Company further represents to each Buyer that the Company's decision to enter
into the Transaction Documents has been based solely on the independent
evaluation by the Company and its representatives.
j. No Undisclosed Events, Liabilities, Developments or
Circumstances. As of the date hereof and the applicable Closing Date, no
event, liability, development or circumstance has occurred or exists, or is
contemplated to occur, with respect to the Company or its subsidiaries or their
respective business, properties, operations or financial condition, that would
be required to be disclosed by the Company under applicable securities laws on
a registration statement on Form S-1 filed with the SEC relating to an issuance
and sale by the Company of its Common Stock and which has not been publicly
disclosed.
k. No General Solicitation. Neither the Company, nor
any of its affiliates, nor any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the 1933 Act) in connection with the offer or
sale of the Securities.
l. No Integrated Offering. Neither the Company, nor any
of its affiliates, nor any person acting on its or their behalf has, directly
or indirectly, made any offers or sales of any security or solicited any offers
to buy any security, under circumstances that would require registration of any
of the Securities under the 1933 Act or cause this offering of Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of AMEX, nor will the Company or any of its
subsidiaries take any action or steps that would require registration of the
Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings.
m. Employee Relations. As of the date hereof and the
applicable Closing Date, neither the Company nor any of its subsidiaries is
involved in any union labor dispute nor, to the knowledge of the Company or any
of its subsidiaries, is any such dispute threatened. Neither the Company nor
any of its subsidiaries is a party to a collective bargaining agreement, and
the Company and its subsidiaries believe that relations with their employees
are good.
n. Intellectual Property Rights. As of the date hereof
and the applicable Closing Date, the Company and its subsidiaries own or
possess adequate rights or licenses to
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<PAGE> 13
use all trademarks, trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and rights necessary to
conduct their respective businesses as now conducted. Except as set forth on
Schedule 3(n), none of the Company's trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, government authorizations, trade secrets or
other intellectual property rights have expired or terminated, or are expected
to expire or terminate within two years from the date of this Agreement. The
Company and its subsidiaries do not have any knowledge of any infringement by
the Company or its subsidiaries of trademark, trade name rights, patents,
patent rights, copyrights, inventions, licenses, service names, service marks,
service mark registrations, trade secret or other similar rights of others, or
of any such development of similar or identical trade secrets or technical
information by others and, except as set forth on Schedule 3(n), there is no
claim, action or proceeding being made or brought against, or to the Company's
knowledge, being threatened against, the Company or its subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service mark registrations, trade secret or other
infringement; and the Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company and
its subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their intellectual properties.
o. Environmental Laws. As of the date hereof and the
applicable Closing Date, the Company and its subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses
or other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) are in compliance with all terms
and conditions of any such permit, license or approval, in each case except
where the failure to do so would not have a Material Adverse Effect.
p. Title. The Company and its subsidiaries have good
and marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(p) or such
as do not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company or
any of its subsidiaries. Any real property and facilities held under lease by
the Company or any of its subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries.
q. Insurance. As of the date hereof and the applicable
Closing Date, the Company and each of its subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in
such amounts as management of the Company
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<PAGE> 14
believes to be prudent and customary in the businesses in which the Company and
its subsidiaries are engaged. Neither the Company nor any such subsidiary has
been refused any insurance coverage sought or applied for and neither the
Company nor any such subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not materially and adversely affect
the condition, financial or otherwise, or the earnings, business or operations
of the Company and its subsidiaries, taken as a whole.
r. Regulatory Permits. The Company and its subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, in each case except where the failure to possess such
certificates would not have a Material Adverse Effect, and neither the Company
nor any such subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or permit
except such notices of revocation or modification which would not have a
Material Adverse Effect.
s. Internal Accounting Controls. The Company and each
of its subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
in accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
t. No Materially Adverse Contracts, Etc. Neither the
Company nor any of its subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company's officers has or is expected in the
future to have a Material Adverse Effect. Neither the Company nor any of its
subsidiaries is a party to any contract or agreement which in the judgment of
the Company's officers has or is expected to have a Material Adverse Effect.
u. Tax Status. Except as set forth on Schedule 3(u),
the Company and each of its subsidiaries has made or filed all federal and
state income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply. There are no
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<PAGE> 15
unpaid taxes in any material amount claimed to be due by the taxing authority
of any jurisdiction, and the officers of the Company know of no basis for any
such claim.
v. Certain Transactions. Except as set forth on
Schedule 3(v) or in the SEC Documents and except for arm's length transactions
pursuant to which the Company makes payments in the ordinary course of business
upon terms no less favorable than the Company could obtain from third parties
and other than the grant of stock options disclosed on Schedule 3(c), none of
the officers, directors, or employees of the Company is presently a party to
any transaction with the Company or any of its subsidiaries (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity
in which any officer, director, or any such employee has a substantial interest
or is an officer, director, trustee or partner.
w. Dilutive Effect. The Company understands and
acknowledges that the number of Conversion Shares issuable upon conversion of
the Preferred Shares and the Warrant Shares issuable upon exercise of the
Warrants will increase in certain circumstances. The Company further
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Preferred Shares in accordance with this Agreement and the Articles
Supplementary and its obligation to issue the Warrant Shares upon exercise of
the Warrants in accordance with this Agreement and the Warrants, is, in each
case, absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other stockholders of the
Company.
x. No Other Agreements. The Company has not, directly
or indirectly, made any agreements with any Buyers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts
timely to satisfy each of the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
b. Form D. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall, on or
before each of the Closing Dates, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for, or obtain
exemption for the Securities for, sale to the Buyers at each of the Closings
pursuant to this Agreement under applicable securities or "Blue Sky" laws of
the states of the United States, and shall provide evidence of any such action
so taken to the Buyers on or prior to the Closing Date. In connection
therewith, each of the Buyers shall, within five business days of any request
of
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the Company, provide to the Company any information reasonably requested by the
Company in order to comply with this Section 4(b).
c. Reporting Status. Until the earlier of (i) the date
as of which the Investors (as that term is defined in the Registration Rights
Agreement) may sell all of the Conversion Shares and the Warrant Shares without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or
successor thereto), or (ii) the date on which (A) the Investors shall have sold
all the Conversion Shares and the Warrant Shares and (B) none of the Preferred
Shares or Warrants is outstanding (the "REGISTRATION PERIOD"), the Company
shall file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise permit such termination.
d. Use of Proceeds. The Company will use the proceeds
from the sale of the Preferred Shares for substantially the same purposes and
in substantially the same amounts as indicated in Schedule 4(d).
e. Financial Information. The Company agrees to send
the following to each Investor (as that term is defined in the Registration
Rights Agreement) during the Registration Period: (i) within two (2) days after
the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its
Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any
registration statements or amendments filed pursuant to the 1933 Act; (ii) on
the same day as the release thereof, facsimile copies of all press releases
issued by the Company or any of its subsidiaries and (iii) copies of any
notices and other information made available or given to the stockholders of
the Company generally, contemporaneously with the making available or giving
thereof to the stockholders.
f. Reservation of Shares. The Company shall take all
action necessary to at all times have authorized, and reserved for the purpose
of issuance, no less than 150% of the number of shares of Common Stock needed
to provide for the issuance of the Conversion Shares and the Warrant Shares.
g. Additional Financing. Subject to the exceptions
described below, the Company agrees that during the period beginning on the
date hereof and ending 180 days following each of the Initial Closing Date and
the Put Closing Date, if any, neither the Company nor its subsidiaries will,
without the prior written consent of the holders of a majority of the Preferred
Shares then outstanding, negotiate or contract with any party for any equity
financing (including any debt financing with an equity component) or issue any
equity securities of the Company or any subsidiary or securities convertible or
exchangeable into or for equity securities of the Company or any subsidiary
(including debt securities with an equity component) in any form (each, an
"EQUITY FINANCING"). The restrictions on Equity Financings set forth in this
Section 4(g) shall not prohibit (i) the issuance of securities by the Company
pursuant to any bona fide corporate partnering arrangement (as defined below)
entered into by the Company or any
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<PAGE> 17
of its subsidiaries, or (ii) the issuance of securities by the Company in
connection with a firm commitment, underwritten public offering. As used in
this Section 4(g), the term "bona fide corporate partnering arrangement" shall
mean any strategic licensing, joint development, joint marketing or other
similar cooperative arrangement entered into by the Company or any of its
subsidiaries with a corporation or other entity with which the Company or such
subsidiary will have a continuing significant business relationship or with a
subsidiary of such corporation or other entity other than as investor, on the
one hand, and issuer, on the other hand.
h. Listing. The Company shall promptly secure the
listing of all of the Registrable Securities (as defined in the Registration
Rights Agreement) upon each national securities exchange and automated
quotation system (including AMEX), if any, upon which shares of Common Stock
are then listed (subject to official notice of issuance) and shall maintain, so
long as any other shares of Common Stock shall be so listed, such listing of
all Registrable Securities from time to time issuable under the terms of the
Transaction Documents. The Company shall seek to maintain the Common Stock's
authorization for listing on AMEX, the Nasdaq National Market or The New York
Stock Exchange, Inc. ("NYSE"). Neither the Company nor any of its subsidiaries
shall take any action which may result in the delisting or suspension of the
Common Stock on AMEX, the Nasdaq National Market or NYSE. The Company shall
promptly provide to each Buyer copies of any notices it receives from AMEX, the
Nasdaq National Market or NYSE regarding the continued eligibility of the
Common Stock for listing on such automated quotation system or securities
exchange. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(h).
i. Expenses. Subject to Section 9(l) below, following
the Initial Closing, the Company shall reimburse the Buyers for the Buyers'
expenses (including attorneys fees and expenses) in connection with negotiating
and preparing the Transaction Documents and consummating the transactions
contemplated thereby up to an aggregate of $35,000.
j. Transactions With Affiliates. So long as (i) any
Preferred Shares or Warrants are outstanding or (ii) any Buyer owns Conversion
Shares or Warrant Shares with a market value equal to or greater than $500,000,
the Company shall not, and shall cause each of its subsidiaries not to, enter
into, amend, modify or supplement, or permit any subsidiary to enter into,
amend, modify or supplement, any agreement, transaction, commitment or
arrangement with any of its or any subsidiary's officers, directors, person who
were officers or directors at any time during the previous two years,
stockholders who beneficially own 5% or more of the Common Stock, or affiliates
or with any individual related by blood, marriage or adoption to any such
individual or with any entity in which any such entity or individual owns a 5%
or more beneficial interest (each a "Related Party"), except for (a) customary
employment arrangements and benefit programs on reasonable terms, (b) any
agreement, transaction, commitment or arrangement on an arms-length basis on
terms no less favorable than terms which would have been obtainable from a
person other than such Related Party as determined by a majority of the
disinterested directors of the Company, (c) any agreement, transaction,
commitment or arrangement which is approved by a majority of the disinterested
directors of the
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Company. For purposes hereof, any director who is also an officer of the
Company or any subsidiary of the Company shall not be a disinterested director
with respect to any such agreement, transaction, commitment or arrangement.
"AFFILIATE" for purposes hereof means, with respect to any person or entity,
another person or entity that, directly or indirectly, (i) has a 5% or more
equity interest in that person or entity, (ii) has 5% or more common ownership
with that person or entity, (iii) controls that person or entity, or (iv)
shares common control with that person or entity. "Control" or "controls" for
purposes hereof means that a person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or entity.
k. Filing of Form 8-K. On or before the tenth (10th) day
following each of the Closing Dates, the Company shall file a Form 8-K with the
SEC describing the terms of the transaction contemplated by the Transaction
Documents and consummated at such Closing, in each case in the form required by
the 1934 Act.
l. Underwriting Lock-Up Agreement. At any time during
the period beginning on and including the Initial Closing Date and ending on
the date which is four years after the Initial Closing Date, the Company may
require that all, but not less than all, of the holders of the Preferred Shares
enter into a "lock-up" agreement with the underwriters of a public offering of
the Common Stock pursuant to which the holders would agree not to sell any
Conversion Shares or Warrant Shares during the period beginning on the date
designated by the Company, which date shall be not less than 20 business days
after the holders' receipt of such notice, and ending on the date which is the
earlier of the closing date of such offering and 90 days after the beginning of
the lock-up period as designated by the Company (the "UNDERWRITING LOCK-UP
PERIOD"). The Company shall exercise this right by delivering written notice
(the "LOCK-UP REQUEST NOTICE") of such request to all of the holders of the
Preferred Shares then outstanding at least 20 business days prior to the date
on which the Underwriting Lock-Up Period will begin, but in no event prior to
the filing of the registration statement for such proposed offering. The
Lock-up Request Notice shall state (i) that the underwriters of such offering
have requested that the holders of the Preferred Shares enter into a "lock-up"
agreement, (ii) the date on which the Underwriting Lock-Up Period will begin,
and (iii) the name of the managing underwriters of the proposed offering.
Notwithstanding the foregoing, the Company shall not be entitled to require the
holders to enter into a "lock-up" agreement unless (A) the Underwriting Lock-Up
Period is not more than 90 days, (B) the Underwriting Lock-Up Period shall
terminate immediately upon (I) the termination or abandonment or indefinite
delay of the underwritten offering, (II) the announcement of a pending or
consummated Major Transaction or (III) the occurrence of a Triggering Event,
(C) all officers and directors of the Company enter into substantially similar
"lock-up" agreements, (D) such underwritten public offering is completed at a
price per share to the public of not less than $5.50 per share (subject to
adjustment as a result of any stock split, stock dividend, recapitalization,
reverse stock split, consolidation, exchange or similar event) and generates
aggregate gross proceeds to the Company of at least $12,000,000, (E) there has
been no other Underwriting Lock-Up Period, and (F) during the period beginning
on and including the date which is twenty business days prior to the filing of
the registration statement for the proposed offering and
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ending on and including the first day of the Underwriting Lock-Up Period, the
Registration Statement has been effective and there has been no stop order or
other regulatory prohibition on trading of the Common Stock. In the event the
Company requires an Underwriting Lock-Up Period, the Mandatory Conversion Date
(as defined in the Articles Supplementary) and the Expiration Date (as defined
in the Warrant) shall be extended two days for each day in the Underwriting
Lock-Up Period as provided in Section 2(g) of the Articles Supplementary and in
Section 1(b) of the Warrant, respectively.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its
transfer agent, and any subsequent transfer agent, to issue certificates,
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares and the Warrant Shares in such amounts as specified from time
to time by each Buyer to the Company upon conversion of the Preferred Shares or
exercise of the Warrants (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS").
Prior to registration of the Conversion Shares and the Warrant Shares under the
1933 Act, all such certificates shall bear the restrictive legend specified in
Section 2(g) of this Agreement. The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section 5,
and stop transfer instructions to give effect to Section 2(f) hereof (in the
case of the Conversion Shares and the Warrant Shares, prior to registration of
the Conversion Shares and the Warrant Shares under the 1933 Act) will be given
by the Company to its transfer agent and that the Securities shall otherwise be
freely transferable on the books and records of the Company as and to the
extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section 5 shall affect in any way each Buyer's obligations and
agreements set forth in Section 2(g) to comply with all applicable prospectus
delivery requirements, if any, upon resale of the Securities. If a Buyer
provides the Company with an opinion of counsel, in a form reasonably
acceptable to the Company and its legal counsel, that registration of a resale
by such Buyer of any of such Securities is not required under the 1933 Act, the
Company shall permit the transfer, and, in the case of the Conversion Shares
and the Warrant Shares, promptly instruct its transfer agent to issue one or
more certificates in such name and in such denominations as specified by such
Buyer and without any restrictive legends. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Buyers by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees,
in the event of a breach or threatened breach by the Company of the provisions
of this Section 5, that the Buyers shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
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<PAGE> 20
a. Initial Closing Date. The obligation of the Company
hereunder to issue and sell the Initial Preferred Shares and the related
Warrants to each Buyer at the Initial Closing is subject to the satisfaction,
at or before the Initial Closing Date, of each of the following conditions,
provided that these conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion by providing each
Buyer with prior written notice thereof:
(i) Such Buyer shall have executed each of the
Transaction Documents and delivered the same to the Company.
(ii) The Articles Supplementary shall have been filed with
the Secretary of State of the State of Maryland.
(iii) Such Buyer shall have delivered to the Company the
Purchase Price for the Preferred Shares and the related Warrants being
purchased by such Buyer at the Initial Closing by wire transfer of
immediately available funds pursuant to the wire instructions provided
by the Company.
(iv) The representations and warranties of such Buyer
shall be true and correct in all material respects as of the date when
made and as of the Initial Closing Date as though made at that time
(except for representations and warranties that speak as of a specific
date), and such Buyer shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions
required by this Transaction Documents to be performed, satisfied or
complied with by such Buyer at or prior to the Initial Closing Date.
b. Additional Closing Dates. The obligation of the
Company hereunder to issue and sell the Additional Preferred Shares and the
related Warrants to each Buyer at each of the Additional Closings is subject to
the satisfaction, at or before the respective Additional Closing Date, of each
of the following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion by providing each Buyer with prior written notice thereof:
(i) Such Buyer shall have complied with the requirements
of Section 1(c).
(ii) Such Buyer shall have delivered to the Company the
Purchase Price for the Additional Preferred Shares and the related
Warrants being purchased by such Buyer at the Additional Closing by
wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
(iii) The representations and warranties of such Buyer
shall be true and correct in all material respects as of the date when
made and as of the Additional Closing Date as though made at that time
(except for representations and warranties that speak as of
20
<PAGE> 21
a specific date), and such Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and
conditions required by this Transaction Documents to be performed,
satisfied or complied with by such Buyer at or prior to the Additional
Closing Date.
c. Put Closing Date. The obligation of the Company
hereunder to issue and sell the Put Preferred Shares and the related Warrants
to each Buyer at the Put Closing is subject to the satisfaction, at or before
the Put Closing Date, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion by providing each Buyer with prior written
notice thereof:
(i) Such Buyer shall have delivered to the Company the
Purchase Price for the Put Preferred Shares and the related Warrants
being purchased by such Buyer at the Put Closing by wire transfer of
immediately available funds pursuant to the wire instructions provided
by the Company.
(ii) The representations and warranties of such Buyer
shall be true and correct in all material respects as of the date when
made and as of the Put Closing Date as though made at that time
(except for representations and warranties that speak as of a specific
date), and such Buyer shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions
required by this Transaction Documents to be performed, satisfied or
complied with by such Buyer at or prior to the Put Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
a. Initial Closing Date. The obligation of each Buyer
hereunder to purchase the Initial Preferred Shares and the related Warrants at
the Initial Closing is subject to the satisfaction, at or before the Initial
Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer's sole benefit and may be waived by such Buyer at
any time in its sole discretion:
(i) The Company shall have executed each of the
Transaction Documents, and delivered the same to such Buyer.
(ii) The Articles Supplementary shall have been filed with
the Secretary of State of the State of Maryland, and a copy thereof
certified by such Secretary of State shall have been delivered to such
Buyer.
(iii) The Common Stock shall be authorized for listing on
AMEX, the Nasdaq National Market or NYSE, trading in the Common Stock
issuable upon conversion of the Initial Preferred Shares and the
exercise of the related Warrants to be traded on the
21
<PAGE> 22
Nasdaq National Market, NYSE or AMEX shall not have been suspended by
the SEC, The Nasdaq Stock Market, Inc., NYSE or AMEX and all of the
Conversion Shares and Warrant Shares issuable upon conversion of the
Initial Preferred Shares and exercise of the related Warrants to be
sold at the Initial Closing shall be listed upon AMEX, the Nasdaq
National Market or NYSE.
(iv) The representations and warranties of the Company
shall be true and correct in all material respects (except to the
extent that any of such representations and warranties is already
qualified as to materiality in Section 3 above, in which case, such
representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the Initial
Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date) and the Company shall
have performed, satisfied and complied in all material respects with
the covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company
at or prior to the Initial Closing Date. Such Buyer shall have
received a certificate, executed by the Chief Executive Officer of the
Company, dated as of the Initial Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by such
Buyer including, without limitation, an update as of the Initial
Closing Date regarding the representation contained in Section 3(c)
above.
(v) Such Buyer shall have received the opinion of the
Company's counsel dated as of the Initial Closing Date, in form, scope
and substance reasonably satisfactory to such Buyer and in
substantially the form of Exhibit C attached hereto.
(vi) The Company shall have executed and delivered to such
Buyer the Warrants and the Stock Certificates (in such denominations
as such Buyer shall request) for the Initial Preferred Shares being
purchased by such Buyer at the Initial Closing.
(vii) The Board of Directors of the Company shall have
adopted the resolutions in a form reasonably acceptable to such Buyer
(the "RESOLUTIONS").
(viii) As of the Initial Closing Date, the Company shall
have reserved out of its authorized and unissued Common Stock, solely
for the purpose of effecting the conversion of the Preferred Shares
and the exercise of the Warrants, at least 5,587,965 shares of Common
Stock.
(ix) The Irrevocable Transfer Agent Instructions, in the
form of Exhibit D attached hereto, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
(x) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the
Company and each domestic subsidiary in
22
<PAGE> 23
such corporation's state of incorporation issued by the Secretary of
State of the state of incorporation as of a date within 10 days of the
Initial Closing.
(xi) The Company shall have delivered to such Buyer a
secretary's certificate certifying as to (A) the adoption of the
Resolutions, (B) certified copies of its Charter and (C) Bylaws, each
as in effect at the Initial Closing.
(xii) The Company shall have delivered to such Buyer such
other documents relating to the transactions contemplated by the
Transaction Documents as such Buyer or its counsel may reasonably
request.
b. Additional Closing Dates. The obligation of each
Buyer hereunder to purchase the Additional Preferred Shares and the related
Warrants at each of the Additional Closings is subject to the satisfaction, at
or before the Additional Closing Dates, of each of the following conditions,
provided that these conditions are for each Buyer's sole benefit and may be
waived by such Buyer at any time in its sole discretion:
(i) The Articles Supplementary shall be in full force and
effect and shall not have been amended since the Initial Closing Date,
and a copy thereof certified by the Secretary of State of the State of
Maryland shall have been delivered to such Buyer.
(ii) The Common Stock shall be authorized for listing on
AMEX, the Nasdaq National Market or NYSE, trading in the Common Stock
issuable upon conversion of the Additional Preferred Shares and the
exercise of the related Warrants to be traded on AMEX, the Nasdaq
National Market or NYSE shall not have been suspended by the SEC,
AMEX, The Nasdaq Stock Market, Inc. or NYSE and all of the Conversion
Shares and Warrant Shares issuable upon conversion of the Additional
Preferred Shares and the related Warrants to be sold at the Additional
Closing shall be listed upon AMEX, the Nasdaq National Market or NYSE.
(iii) The representations and warranties of the Company
shall be true and correct in all material respects (except to the
extent that any of such representations and warranties is already
qualified as to materiality in Section 3 above, in which case, such
representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the
respective Additional Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or
complied with by the Company at or prior to the respective Additional
Closing Date. Such Buyer shall have received a certificate, executed
by the Chief Executive Officer of the Company, dated as of such
Additional Closing Date, to the foregoing effect and as to such other
matters as may be reasonably requested by such
23
<PAGE> 24
Buyer including, without limitation, an update as of such Additional
Closing Date regarding the representation contained in Section 3(c)
above.
(iv) Such Buyer shall have received the opinion of the
Company's counsel dated as of such Additional Closing Date, in form,
scope and substance reasonably satisfactory to such Buyer and in
substantially the form of Exhibit C attached hereto.
(v) The Company shall have executed and delivered to such
Buyer the Warrants and the Stock Certificates (in such denominations
as such Buyer shall request) for the Additional Preferred Shares being
purchased by such Buyer at the Additional Closing.
(vi) The Board of Directors of the Company shall have
adopted, and shall not have amended, the Resolutions.
(vii) As of such Additional Closing Date, the Company shall
have reserved out of its authorized and unissued Common Stock, solely
for the purpose of effecting the conversion of the Preferred Shares
and the exercise of the Warrants, a number of shares of Common Stock
equal to at least 150% of the number of shares of Common Stock which
would be issuable upon conversion and exercise in full, as the case
may be, of the then outstanding Preferred Shares and Warrants,
including for such purposes the Additional Preferred Shares and the
related Warrants to be issued at such Additional Closing.
(viii) The Irrevocable Transfer Agent Instructions, in the
form of Exhibit D attached hereto, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
(ix) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the
Company and each domestic subsidiary in the state of such
corporation's state of incorporation issued by the Secretary of State
of the state of incorporation as of a date within 10 days of such
Additional Closing.
(x) The Company shall have delivered to such Buyer a
secretary's certificate certifying as to (A) the adoption of the
Resolutions, (B) certified copies of its Charter and (C) Bylaws, each
as in effect at the Additional Closing.
(xi) During the period beginning on the Additional Share
Notice Date and ending on and including the Additional Closing Date,
the Company shall have delivered Conversion Shares upon conversion of
the Preferred Shares and Warrant Shares upon exercise of the Warrants
to the Buyers on a timely basis as set forth in Section 2(f)(ii) of
the Articles Supplementary and Sections 2(a) and 2(b) of the Warrants,
respectively.
24
<PAGE> 25
(xii) The Company shall have delivered to such Buyer such
other documents relating to the transactions contemplated by this
Agreement as such Buyer or its counsel may reasonably request.
c. Put Closing Date. The obligation of each Buyer
hereunder to purchase the Put Preferred Shares at the Put Closing is subject to
the satisfaction, at or before the Put Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer's sole benefit
and may be waived by such Buyer at any time in its sole discretion:
(i) The Company shall have complied with the requirements
of Section 1(d) and all of the Put Notice Conditions set forth in
Section 1(e) shall have been satisfied.
(ii) The Articles Supplementary shall be in full force and
effect and shall not have been amended since the Put Closing Date, and
a copy thereof certified by the Secretary of State of the State of
Maryland shall have been delivered to such Buyer.
(iii) The Common Stock shall be authorized for listing on
AMEX, the Nasdaq National Market or NYSE, trading in the Common Stock
issuable upon conversion of the Put Preferred Shares and the exercise
of the related Warrants to be traded on AMEX, the Nasdaq National
Market or NYSE shall not have been suspended by the SEC, AMEX, The
Nasdaq Stock Market, Inc. or NYSE and all of the Conversion Shares
issuable upon conversion of the Put Preferred Shares and exercise of
the related Warrants to be sold at the Put Closing shall be listed
upon AMEX, the Nasdaq National Market or NYSE.
(iv) The representations and warranties of the Company
shall be true and correct in all material respects (except to the
extent that any of such representations and warranties is already
qualified as to materiality in Section 3 above, in which case, such
representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the Put
Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date) and the Company shall
have performed, satisfied and complied in all material respects with
the covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company
at or prior to the Put Closing Date. Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company,
dated as of the Put Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by such Buyer
including, without limitation, an update as of the Put Closing Date
regarding the representation contained in Section 3(c) above.
(v) Such Buyer shall have received the opinion of the
Company's counsel dated as of the Put Closing Date, in form, scope and
substance reasonably satisfactory to such Buyer and in substantially
the form of Exhibit C attached hereto.
25
<PAGE> 26
(vi) The Company shall have executed and delivered to such
Buyer the Warrants and the Stock Certificates (in such denominations
as such Buyer shall request) for the Preferred Shares being purchased
by such Buyer at the Put Closing.
(vii) The Board of Directors of the Company shall have
adopted, and shall not have amended, the Resolutions.
(viii) As of the Put Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for
the purpose of effecting the conversion of the Preferred Shares and
the exercise of the Warrants, a number of shares of Common Stock equal
to at least 150% of the number of shares of Common Stock which would
be issuable upon conversion and exercise in full, as the case may be,
of the then outstanding Preferred Shares and Warrants, including for
such purposes the Put Preferred Shares and the related Warrants to be
issued at such Put Closing.
(ix) The Irrevocable Transfer Agent Instructions, in the
form of Exhibit D attached hereto, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
(x) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the
Company and each domestic subsidiary in the state of such
corporation's state of incorporation issued by the Secretary of State
of the state of incorporation as of a date within 10 days of the Put
Closing.
(xi) The Company shall have delivered to such Buyer a
secretary's certificate certifying as to (A) the adoption of the
Resolutions, (B) certified copies of its Charter and (C) Bylaws, each
as in effect at the Put Closing.
(xii) The Company shall have delivered to such Buyer such
other documents relating to the transactions contemplated by this
Agreement as such Buyer or its counsel may reasonably request.
8. INDEMNIFICATION. In consideration of each Buyer's execution
and delivery of the Transaction Documents and acquiring the Securities
thereunder and in addition to all of the Company's other obligations under the
Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless each Buyer and each other holder of the Securities and all of their
officers, directors, employees and agents (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "INDEMNITEES") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"INDEMNIFIED LIABILITIES"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any
26
<PAGE> 27
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents, the Articles Supplementary or the
Warrants or any other certificate, instrument or document contemplated hereby
or thereby, (b) any breach of any covenant, agreement or obligation of the
Company contained in the Transaction Documents, the Articles Supplementary or
the Warrants or any other certificate, instrument or document contemplated
hereby or thereby, or (c) any cause of action, suit or claim brought or made
against such Indemnitee and arising out of or resulting from the execution,
delivery, performance or enforcement of this Agreement or any other instrument,
document or agreement executed pursuant hereto by any of the Indemnitees, any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities or the status
of such Buyer or holder of the Securities as an investor in the Company. To
the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of New York without
regard to the principles of conflict of laws. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting the City of New York, borough of Manhattan, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that the venue of
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. If any provision of
this Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or enforceability
of the remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
b. Counterparts. This Agreement may be executed in two
or more identical counterparts, all of which shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party. In the event any signature page
is delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
27
<PAGE> 28
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement
supersedes all other prior oral or written agreements between the Buyers, the
Company, their affiliates and persons acting on their behalf with respect to
the matters discussed herein, and this Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision
of this Agreement may be amended other than by an instrument in writing signed
by the Company and the holders of at least two-thirds (2/3) of the Preferred
Shares then outstanding, and no provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is sought.
No such amendment shall be effective to the extent that it applies to less than
all of the holders of the Preferred Shares then outstanding. No consideration
shall be offered or paid to any person to amend or consent to a waiver or
modification of any provision of any of the Transaction Documents or the
Articles Supplementary unless the same consideration also is offered to all of
the parties to the Transaction Documents or holders of the Preferred Shares, as
the case may be.
f. Notices. Any notices consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically generated and kept on
file by the sending party); (iii) three (3) business days after being sent by
U.S. certified mail, return receipt requested, or (iv) one (1) business day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
Oncor, Inc.
209 Perry Parkway
Gaithersburg, MD 20877
Telephone: 301-963-3500
Facsimile: 301-330-3940
Attention: President
With a copy to:
28
<PAGE> 29
Brobeck, Phleger & Harrison LLP
1633 Broadway
47th Floor
New York, NY 10019
Telephone: 212-581-1600
Facsimile: 212-586-7878
Attention: Richard R. Plumridge, Esq.
If to the Transfer Agent:
American Stock Transfer and Trust Company
40 Wall Street
New York, New York 10005
Telephone: 718-921-8209
Facsimile: 718-331-1852
Attention: Herbert Lemmer
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the
Schedule of Buyers.
Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
g. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns, including any purchasers of the Preferred Shares. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the holders of two-thirds (2/3) of the
Preferred Shares then outstanding including by merger or consolidation. A
Buyer may assign some or all of its rights hereunder to affiliates or
associates of such Buyer, without the consent of the Company, and to others,
with the consent of the Company which consent shall not be unreasonably
withheld; provided, however, that any such assignment shall not release such
Buyer from its obligations hereunder unless such obligations are assumed by
such assignee and the Company has consented to such assignment and assumption.
h. No Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
i. Survival. Unless this Agreement is terminated under
Section 9(l), the representations and warranties of the Company and the Buyers
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4, 5 and 9, and the indemnification provisions set forth in Section 8,
shall survive each of the Closings. Each Buyer shall be responsible only for
its own representations, warranties, agreements and covenants hereunder.
29
<PAGE> 30
j. Publicity. The Company and each Buyer shall have the
right to approve before issuance any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of any
Buyer, to make any press release or other public disclosure with respect to
such transactions as is required by applicable law and regulations (although
each Buyer shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release and shall be provided
with a copy thereof).
k. Further Assurances. Each party shall do and perform,
or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
l. Termination. In the event that the Initial Closing
shall not have occurred with respect to a Buyer on or before three (3) business
days from the date hereof due to the Company's or such Buyer's failure to
satisfy the conditions set forth in Sections 6 and 7 above (and the
nonbreaching party's failure to waive such unsatisfied condition(s)), the
nonbreaching party shall have the option to terminate this Agreement with
respect to such breaching party at the close of business on such date without
liability of any party to any other party; provided, however, that if this
Agreement is terminated pursuant to this Section 9(l), the Company shall remain
obligated to reimburse the non-breaching Buyers for the expenses described in
Section 4(i) above.
m. Placement Agent. The Company acknowledges that it
has not engaged a placement agent in connection with the sale of the Preferred
Shares and the Warrants. The Company shall be responsible for the payment of
brokers commissions relating to or arising out of the transactions contemplated
hereby, if any. The Company shall pay, and hold each Buyer harmless against,
any liability, loss or expense (including, without limitation, attorneys' fees
and out of pocket expenses) arising in connection with such claim.
n. No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied
against any party.
02A/352636
30
<PAGE> 31
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
ONCOR, INC. THEMIS PARTNERS L.P.
By: Promethean Investment Group L.L.C.
Its: General Partner
By: /s/
-------------------------------
Name: John L. Coker
Its: Vice President and By: /s/
Chief Financial Officer ------------------------------------
Name: James F. O'Brien, Jr.
Its: President
HERACLES FUND
By: Promethean Investment Group L.L.C.
Its: Investment Advisor
By: /s/
--------------------------------------
Name: James F. O'Brien, Jr.
Its: President
LEONARDO, L.P.
By: Angelo, Gordon & Co., L.P.
Its: General Partner
By: /s/
--------------------------------------
Name: Michael L. Gordon
Its: Chief Operating Officer
RAPHAEL, L.P.
By: /s/
--------------------------------------
Name: Michael L. Gordon
Its: Chief Operating Officer
<PAGE> 32
[signature page to Securities Purchase Agreement - p. 2 of 2]
RAMIUS FUND, LTD.
By: AG Ramius Partners, L.L.C.
Its: Investment Advisor
By: /s/
---------------------------------
Name: Michael L. Gordon
Its: Managing Officer
HALIFAX FUND, L.P.
By: The Palladin Group
Its: Investment Manager
By: Palladin Capital Management LLC
Its: General Partner
By: /s/
-------------------------------------
Name: Andrew Kaplan
Its: Authorized Representative
<PAGE> 33
SCHEDULE OF BUYERS
<TABLE>
<CAPTION>
NUMBER OF
INITIAL
INVESTOR ADDRESS PREFERRED INVESTOR'S REPRESENTATIVES' ADDRESS
INVESTOR NAME AND FACSIMILE NUMBER SHARES AND FACSIMILE NUMBER
- ------------------------ ----------------------------------------- ----------- --------------------------------------
<S> <C> <C> <C>
Themis Partners L.P. c/oPromethean Investment Group, L.L.C. 75 Promethean Investment Group, L.L.C.
40 West 57th Street, Suite 1520 40 West 57th Street, Suite 1520
New York, New York 10019 New York, New York 10019
Attn: James F. O'Brien, Jr. Attn: James F. O'Brien, Jr.
Facsimile: 212-698-0505 Thomas Lumsden
Facsimile: 212-698-0505
Katten Muchin & Zavis
525 West Monroe, Suite 1600
Chicago, Illinois 60661-3693
Attn: Robert J. Brantman, Esq.
Facsimile: 312-902-1061
Heracles Fund Bank of Bermuda (Cayman) Limited 75 Promethean Investment Group, L.L.C.
P.O. Box 513 40 West 57th Street, Suite 1520
3rd Floor British American Center New York, New York 10019
Dr. Roy's Drive Attn: James F. O'Brien, Jr.
Georgetown, Grand Cayman Thomas Lumsden
Cayman Island, BWI Facsimile: 212-698-0505
Attn: Allen J. Bernardo
Facsimile: 809-949-7802 Katten Muchin & Zavis
525 West Monroe, Suite 1600
Chicago, Illinois 60661-3693
Attn: Robert J. Brantman, Esq.
Facsimile: 312-902-1061
Leonardo, L.P. c/oAngelo, Gordon & Co., L.P. 50 Angelo, Gordon & Co., L.P.
245 Park Avenue - 26th Floor 245 Park Avenue - 26th Floor
New York, New York 10167 New York, New York 10167
Attn: Gary Wolf Attn: Gary Wolf
Facsimile: 212-867-6449 Facsimile: 212-867-6449
Raphael, L.P. c/oAngelo, Gordon & Co., L.P. 20 Angelo, Gordon & Co., L.P.
245 Park Avenue - 26th Floor 245 Park Avenue - 26th Floor
New York, New York 10167 New York, New York 10167
Attn: Gary Wolf Attn: Gary Wolf
Facsimile: 212-867-6449 Facsimile: 212-867-6449
Ramius Fund, Ltd. c/oAngelo, Gordon & Co., L.P. 30 Angelo, Gordon & Co., L.P.
245 Park Avenue - 26th Floor 245 Park Avenue - 26th Floor
New York, New York 10167 New York, New York 10167
Attn: Gary Wolf Attn: Gary Wolf
Facsimile: 212-867-6449 Facsimile: 212-867-6449
Halifax Fund, L.P. c/o CITCO Fund Services, Ltd. 250 The Palladin Group
Corporate Center, West Bay Road 40 West 57th Street
P.O. Box 31106 Suite 1500
SMB New York, New York 10019
Grand Cayman, Cayman Islands Attn: Andrew Kaplan
Attn: Patrick Agemian Facsimile: 212-698-0599
Facsimile: 809-949-3877
</TABLE>
<PAGE> 1
EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of January
8, 1998, by and among Oncor, Inc., a Maryland corporation, with headquarters
located at 209 Perry Parkway, Gaithersburg, Maryland 20872 (the "COMPANY"), and
the undersigned buyers (each, a "BUYER" and collectively, the "BUYERS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and
among the parties of even date herewith (the "SECURITIES PURCHASE AGREEMENT"),
the Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to (i) issue and sell to the Buyers, on one or
more closing dates, shares of the Company's Series A Convertible Preferred
Stock (the "PREFERRED SHARES"), which will be convertible into shares of the
Company's common stock, par value $.01 per share (the "COMMON STOCK") (as
converted, the "CONVERSION SHARES") in accordance with the terms of the
Company's Articles Supplementary of the Series A Convertible Preferred Stock
(the "ARTICLES SUPPLEMENTARY"), and (ii) issue Warrants (the "WARRANTS") which
will be exercisable to purchase shares of Common Stock (the "WARRANT SHARES");
and
B. To induce the Buyers to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Buyers hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
a. "INVESTOR" means a Buyer and any transferee or
assignee thereof to whom a Buyer assigns its rights under this Agreement and
who agrees to become bound by the provisions of this Agreement in accordance
with Section 9.
b. "PERSON" means a corporation, a limited liability
company, an association, a partnership, an organization, a business, an
individual, a governmental or political subdivision thereof or a governmental
agency.
c. "REGISTER," "REGISTERED," and "REGISTRATION" refer to
a registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act
<PAGE> 2
and pursuant to Rule 415 under the 1933 Act or any successor rule providing for
offering securities on a continuous basis ("RULE 415"), and the declaration or
ordering of effectiveness of such Registration Statement(s) by the United
States Securities and Exchange Commission (the "SEC").
d. "REGISTRABLE SECURITIES" means the Conversion Shares
and the Warrant Shares issued or issuable upon conversion of the Preferred
Shares and exercise of the Warrants, respectively, and any shares of capital
stock issued or issuable with respect to the Conversion Shares, the Warrant
Shares, the Warrants or the Preferred Shares as a result of any stock split,
stock dividend, recapitalization, exchange or similar event or otherwise.
e. "REGISTRATION STATEMENT" means a registration
statement of the Company filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare,
and, as soon as practicable but in no event later than 30 days after the date
of issuance of the relevant Preferred Shares, file with the SEC a Registration
Statement or Registration Statements (as is necessary) on Form S-3 (or, if such
form is unavailable for such a registration, on such other form as is available
for such a registration, subject to the consent of the Investors holding a
majority of the Registrable Securities and the provisions of Section 2(c),
which consent will not be unreasonably withheld), covering the resale of all of
the Registrable Securities, which Registration Statement(s) shall state that,
in accordance with Rule 416 promulgated under the 1933 Act, such Registration
Statement(s) also covers such indeterminate number of additional shares of
Common Stock as may become issuable upon conversion of the Preferred Shares or
exercise of the Warrants (i) to prevent dilution resulting from stock splits,
stock dividends or similar transactions and (ii) by reason of changes in the
Conversion Price or Conversion Rate of the Preferred Shares in accordance with
the terms thereof. Such Registration Statement shall initially register for
resale at least 5,587,965 shares of Common Stock, subject to adjustment as
provided in Section 3(b). Such registered shares of Common Stock shall be
allocated among the Investors pro rata based on the total number of Registrable
Securities issued or issuable as of each date that a Registration Statement, as
amended, relating to the resale of the Registrable Securities is declared
effective by the SEC. The Company shall use its best efforts to have the
Registration Statement declared effective by the SEC as soon as practicable,
but in no event later than 60 days after the issuance of the relevant Preferred
Shares.
b. Counsel and Investment Bankers. Subject to Section 5
hereof, in connection with any offering pursuant to Section 2, the Investors
shall have the right to select one legal counsel and an investment banker or
bankers and manager or managers to administer
2
<PAGE> 3
their interest in the offering, which investment banker or bankers or manager
or managers shall be reasonably satisfactory to the Company. The Company shall
reasonably cooperate with any such counsel and investment bankers.
c. Piggy-Back Registrations. If at any time prior to
the expiration of the Registration Period (as hereinafter defined) the Company
proposes to file with the SEC a Registration Statement relating to an offering
for its own account or the account of others under the 1933 Act of any of its
securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to securities to be issued solely in connection with any acquisition
of any entity or business or equity securities issuable in connection with
stock option or other employee benefit plans) the Company shall promptly send
to each Investor who is entitled to registration rights under this Section 2(c)
written notice of the Company's intention to file a Registration Statement and
of such Investor's rights under this Section 2(c) and, if within twenty (20)
days after receipt of such notice, such Investor shall so request in writing,
the Company shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered, subject to the
priorities set forth in Section 2(d) below. No right to registration of
Registrable Securities under this Section 2(c) shall be construed to limit any
registration required under Section 2(a). The obligations of the Company under
this Section 2(c) may be waived by Investors holding a majority of the
Registrable Securities. If an offering in connection with which an Investor is
entitled to registration under this Section 2(c) is an underwritten offering,
then each Investor whose Registrable Securities are included in such
Registration Statement shall, unless otherwise agreed by the Company, offer and
sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement,
on the same terms and conditions as other shares of Common Stock included in
such underwritten offering.
d. Priority in Piggy-Back Registration Rights in
connection with Registrations for Company Account. If the registration
referred to in Section 2(c) is to be an underwritten public offering and the
managing underwriter(s) advise the Company in writing, that in their reasonable
good faith opinion, marketing or other factors dictate that a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement is necessary to facilitate and not adversely affect the proposed
offering, then the Company shall include in such registration: (1) first, all
securities the Company proposes to sell for its own account, (2) second, up to
the full number of securities proposed to be registered for the account of the
holders of securities entitled to inclusion of their securities in the
Registration Statement by reason of demand registration rights, and (3) third,
the securities requested to be registered by the Investors and other holders of
securities entitled to participate in the registration, as of the date hereof,
drawn from them pro rata based on the number each has requested to be included
in such registration.
e. Eligibility for Form S-3. The Company represents,
warrants and covenants that on the date hereof it meets the requirements for
the use of Form S-3 for registration of the sale by the Investors of the
Registrable Securities and the Company has filed and shall file all
3
<PAGE> 4
reports required to be filed by the Company with the SEC in a timely manner so
as to obtain and maintain such eligibility for the use of Form S-3. In the
event that Form S-3 is not available for sale by the Investors of the
Registrable Securities, then the Company (i) with the consent of the Investors
holding a majority of the Registrable Securities pursuant to Section 2(a),
shall register the sale of the Registrable Securities on another appropriate
form and (ii) the Company shall undertake to register the Registrable
Securities on Form S-3 as soon as such form is available, provided that the
Company shall maintain the effectiveness of the Registration Statement then in
effect until such time as a Registration Statement on Form S-3 covering the
Registrable Securities has been declared effective by the SEC.
3. RELATED OBLIGATIONS.
Whenever an Investor has requested that any Registrable Securities be
registered pursuant to Section 2(c) or at such time as the Company is obligated
to file a Registration Statement with the SEC pursuant to Section 2(a), the
Company will use its best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following obligations:
a. The Company shall promptly prepare and file with the
SEC a Registration Statement with respect to the Registrable Securities (on or
prior to the thirtieth (30th) day after the date of issuance of any Preferred
Shares for the registration of Registrable Securities pursuant to Section 2(a))
and use its best efforts to cause such Registration Statement relating to the
Registrable Securities to become effective as soon as possible after such
filing (but in no event later than 60 days after the issuance of any Preferred
Shares for the registration of Registrable Securities pursuant to Section
2(a)), and keep the Registration Statement effective pursuant to Rule 415 at
all times until the earlier of (i) the date as of which the Investors may sell
all of the Registrable Securities without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto) or (ii) the date on which
(A) the Investors shall have sold all the Registrable Securities and (B) none
of the Preferred Shares or Warrants is outstanding (the "REGISTRATION PERIOD"),
which Registration Statement (including any amendments or supplements thereto
and prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein,
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended
4
<PAGE> 5
methods of disposition by the seller or sellers thereof as set forth in such
Registration Statement. In the event the number of shares available under a
Registration Statement filed pursuant to this Agreement is insufficient to
cover all of the Registrable Securities, the Company shall amend the
Registration Statement, or file a new Registration Statement (on the short form
available therefor, if applicable), or both, so as to cover all of the
Registrable Securities, in each case, as soon as practicable, but in any event
within fifteen (15) days after the necessity therefor arises (based on the
market price of the Common Stock and other relevant factors on which the
Company reasonably elects to rely). The Company shall use its best efforts to
cause such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof. For purposes of the
foregoing provision, the number of shares available under a Registration
Statement shall be deemed "insufficient to cover all of the Registrable
Securities" if at any time the number of Registrable Securities issued or
issuable upon conversion of the Preferred Shares and exercise of the Warrants
is greater than the quotient determined by dividing (i) the number of shares of
Common Stock available for resale under such Registration Statement by (ii)
1.5. For purposes of the calculation set forth in the foregoing sentence, any
restrictions on the convertibility of the Preferred Shares or exerciseability
of the Warrants shall be disregarded and such calculation shall assume that the
Preferred Shares and the Warrants are then convertible and exercisable,
respectively, into shares of Common Stock at the then prevailing Conversion
Rate (as defined in the Company's Articles Supplementary) and Warrant Exercise
Price (as defined in the Warrant), respectively, if applicable.
c. The Company shall furnish to each Investor whose
Registrable Securities are included in any Registration Statement and its legal
counsel without charge (i) promptly after the same is prepared and filed with
the SEC at least one copy of such Registration Statement and any amendment(s)
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits, the prospectus included in
such Registration Statement (including each preliminary prospectus) and, with
regards to such Registration Statement(s), any correspondence by or on behalf
of the Company to the SEC or the staff of the SEC and any correspondence from
the SEC or the staff of the SEC to the Company or its representatives, (ii)
upon the effectiveness of any Registration Statement, ten (10) copies of the
prospectus included in such Registration Statement and all amendments and
supplements thereto (or such other number of copies as such Investor may
reasonably request) and (iii) such other documents, including any preliminary
prospectus, as such Investor may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Investor.
d. The Company shall use reasonable efforts to (i)
register and qualify the Registrable Securities covered by a Registration
Statement under such other securities or "blue sky" laws of such jurisdictions
in the United States as any Investor reasonably requests, (ii) prepare and file
in those jurisdictions, such amendments (including post-effective amendments)
and supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the
5
<PAGE> 6
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (x) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (y) subject itself to general taxation in any such jurisdiction,
or (z) file a general consent to service of process in any such jurisdiction.
The Company shall promptly notify each Investor who holds Registrable
Securities of the receipt by the Company of any notification with respect to
the suspension of the registration or qualification of any of the Registrable
Securities for sale under the securities or "blue sky" laws of any jurisdiction
in the United States or its receipt of actual notice of the initiation or
threatening of any proceeding for such purpose.
e. In the event Investors who hold a majority of the
Registrable Securities being offered in the offering select underwriters for
the offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations (only with
respect to violation which occur in reliance upon and in conformity with
information furnished in writing to the Company by such Investor expressly for
use in the Registration Statement for such underwritten public offering), with
the underwriters of such offering.
f. As promptly as practicable after becoming aware of
such event, the Company shall notify each Investor in writing of the happening
of any event as a result of which the prospectus included in a Registration
Statement, as then in effect, includes an untrue statement of a material fact
or omission to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, and promptly prepare a supplement or amendment to
the Registration Statement to correct such untrue statement or omission, and
deliver ten (10) copies of such supplement or amendment to each Investor (or
such other number of copies as such Investor may reasonably request). The
Company shall also promptly notify each Investor in writing (i) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed, and when a Registration Statement or any post-effective amendment has
become effective (notification of such effectiveness shall be delivered to each
Investor by facsimile on the same day of such effectiveness and by overnight
mail), (ii) of any request by the SEC for amendments or supplements to a
Registration Statement or related prospectus or related information, and (iii)
of the Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (and, in the event of an underwritten offering, the
managing underwriters) of the issuance of such
6
<PAGE> 7
order and the resolution thereof or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose.
h. The Company shall permit each Investor and a single
firm of counsel, initially Katten Muchin & Zavis or such other counsel as
thereafter designated as selling stockholders' counsel by the Investors who
hold a majority of the Registrable Securities being sold, to review and comment
upon a Registration Statement and all amendments and supplements thereto at
least five (5) days prior to their filing with the SEC, and not file any
document in a form to which such counsel reasonably objects. The Company shall
not submit a request for acceleration of the effectiveness of a Registration
Statement or any amendment or supplement thereto without the prior approval of
such counsel, which consent shall not be unreasonably withheld.
i. At the request of the Investors who hold a majority
of the Registrable Securities being sold, the Company shall use its best
efforts to furnish, on the date that Registrable Securities are delivered to an
underwriter, if any, for sale in connection with the Registration Statement (i)
if required by an underwriter, a letter, dated such date, from the Company's
independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters, and (ii) an
opinion, dated as of such date, of counsel representing the Company for
purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the
underwriters and the Investors.
j. The Company shall make available for inspection by
(i) any Investor, (ii) any underwriter participating in any disposition
pursuant to a Registration Statement, (iii) one firm of attorneys and one firm
of accountants or other agents retained by the Investors, and (iv) one firm of
attorneys retained by all such underwriters (collectively, the "INSPECTORS")
all pertinent financial and other records, and pertinent corporate documents
and properties of the Company (collectively, the "RECORDS"), as shall be
reasonably deemed necessary by each Inspector to enable each Inspector to
exercise its due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence; provided, however, that
each Inspector shall hold in strict confidence and shall not make any
disclosure (except to an Investor) or use of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement of which
the Inspector has knowledge. Each Investor agrees that it shall, upon learning
that disclosure of such Records is sought in or by a court or governmental body
of competent
7
<PAGE> 8
jurisdiction or through other means, give prompt notice to the Company and
allow the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential.
k. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
l. The Company shall use its best efforts either to (i)
cause all the Registrable Securities covered by a Registration Statement to be
listed on each securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all the Registrable Securities covered
by the Registration Statement on the Nasdaq National Market or, if, despite the
Company's best efforts to satisfy the preceding clause (i) or (ii), the Company
is unsuccessful in satisfying the preceding clause (i) or (ii), to secure the
inclusion for quotation on The Nasdaq SmallCap Market for such Registrable
Securities and, without limiting the generality of the foregoing, to arrange
for at least two market makers to register with the National Association of
Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities. The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section 3(l).
m. The Company shall cooperate with the Investors who
hold Registrable Securities being offered and, to the extent applicable, any
managing underwriter or underwriters, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case
may be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any,
or the Investors may request.
n. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of
Registrable Securities pursuant to a Registration Statement.
8
<PAGE> 9
o. The Company shall provide a transfer agent and
registrar for all such Registrable Securities not later than the effective date
of such Registration Statement.
p. If requested by the managing underwriters or an
Investor, the Company shall (i) immediately incorporate in a prospectus
supplement or post-effective amendment such information as the managing
underwriters and the Investors agree should be included therein relating to the
sale and distribution of Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being sold to
such underwriters, the purchase price being paid therefor by such underwriters
and any other terms of the underwritten (or best efforts underwritten) offering
of the Registrable Securities to be sold in such offering; (ii) make all
required filings of such prospectus supplement or post-effective amendment as
soon as notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment; and (iii) supplement or make amendments
to any Registration Statement if requested by an Investor or any underwriter of
such Registrable Securities.
q. The Company shall use its best efforts to cause the
Registrable Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such Registrable
Securities.
r. The Company shall make generally available to its
security holders as soon as practical, but not later than 90 days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the 1933 Act) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.
s. The Company shall otherwise use its best efforts to
comply with all applicable rules and regulations of the SEC in connection with
any registration hereunder.
t. Within two (2) business days after the Registration
Statement which includes the Registrable Securities is ordered effective by the
SEC, the Company shall deliver, and shall cause legal counsel for the Company
to deliver, to the transfer agent for such Registrable Securities (with copies
to the Investors whose Registrable Securities are included in such Registration
Statement) confirmation that the Registration Statement has been declared
effective by the SEC in the form attached hereto as Exhibit A.
4. OBLIGATIONS OF THE INVESTORS.
a. At least seven (7) days prior to the first
anticipated filing date of the Registration Statement, the Company shall notify
each Investor in writing of the information the Company requires from each such
Investor if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration Statement. It shall be a condition
precedent to the obligations of the Company to complete the registration
pursuant to this Agreement with
9
<PAGE> 10
respect to the Registrable Securities of a particular Investor that such
Investor shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request.
b. Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from such Registration Statement.
c. In the event any Investor elects to participate in an
underwritten public offering pursuant to Section 2, each such Investor agrees
to enter into and perform such Investor's obligations under an underwriting
agreement, in usual and customary form, including, without limitation,
customary indemnification and contribution obligations (only with respect to
violation which occur in reliance upon and in conformity with information
furnished in writing to the Company by such Investor expressly for use in the
Registration Statement for such underwritten public offering), with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor notifies the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.
d. Each Investor agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
3(g) or the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the
copies of the supplemented or amended prospectus contemplated by Section 3(g)
or the first sentence of 3(f).
e. No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Investors entitled hereunder to approve such arrangements, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements, and (iii) agrees to pay its pro rata share
of all underwriting discounts and commissions.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and
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<PAGE> 11
accounting fees, and fees and disbursements of counsel for the Company and fees
and disbursements of one counsel for the Investors, shall be paid by the
Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
a. To the fullest extent permitted by law, the Company
will, and hereby does, indemnify, hold harmless and defend each Investor who
holds such Registrable Securities, the directors, officers, partners,
employees, agents of, and each Person, if any, who controls any Investor within
the meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended
(the "1934 ACT"), and any underwriter (as defined in the 1933 Act) for the
Investors, and the directors and officers of, and each Person, if any, who
controls, any such underwriter within the meaning of the 1933 Act or the 1934
Act (each, an "INDEMNIFIED PERSON"), against any losses, claims, damages,
liabilities, judgments, fines, penalties, charges, costs, attorneys' fees,
amounts paid in settlement or expenses, joint or several, (collectively,
"CLAIMS") incurred in investigating, preparing or defending any action, claim,
suit, inquiry, proceeding, investigation or appeal taken from the foregoing by
or before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto ("INDEMNIFIED DAMAGES"), to which any of
them may become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a material fact
in a Registration Statement or any post-effective amendment thereto or in any
filing made in connection with the qualification of the offering under the
securities or other "blue sky" laws of any jurisdiction in which Registrable
Securities are offered ("BLUE SKY FILING"), or the omission or alleged omission
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which the statements
therein were made, not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the omission or
alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "VIOLATIONS"). Subject to the
restrictions set forth in Section 6(d) with respect to the number of legal
counsel, the Company shall reimburse the Investors and each such underwriter or
controlling person, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained
11
<PAGE> 12
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c);
(ii) with respect to any preliminary prospectus, shall not inure to the benefit
of any such person from whom the person asserting any such Claim purchased the
Registrable Securities that are the subject thereof (or to the benefit of any
person controlling such person) if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected in the prospectus,
as then amended or supplemented, if such prospectus was timely made available
by the Company pursuant to Section 3(c), and the Indemnified Person was
promptly advised in writing not to use the incorrect prospectus prior to the
use giving rise to a violation and such Indemnified Person, notwithstanding
such advice, used it; (iii) shall not be available to the extent such Claim is
based on a failure of the Investor to deliver or to cause to be delivered the
prospectus made available by the Company; and (iv) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the
prior written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.
b. In connection with any Registration Statement in
which an Investor is participating, each such Investor agrees to severally and
not jointly indemnify, hold harmless and defend, to the same extent and in the
same manner as is set forth in Section 6(a), the Company, each of its
directors, each of its officers who signs the Registration Statement, each
Person, if any, who controls the Company within the meaning of the 1933 Act or
the 1934 Act (collectively and together with an Indemnified Person, an
"INDEMNIFIED PARTY"), against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in connection with
such Registration Statement; and, subject to Section 6(d), such Investor will
reimburse any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) and the agreement with
respect to contribution contained in Section 7 shall not apply to amounts paid
in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable under
this Section 6(b) for only that amount of a Claim or Indemnified Damages as
does not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by
or on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
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<PAGE> 13
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
c. The Company shall be entitled to receive indemnities
from underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in any distribution, to the same extent as
provided above, with respect to information such persons so furnished in
writing expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding)
involving a Claim, such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under
this Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party
and the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel with the fees and expenses to be paid by
the indemnifying party, if, in the reasonable opinion of counsel retained by
the indemnifying party, the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such Indemnified Person
or Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay reasonable fees for only one separate legal
counsel for the Investors, and such legal counsel shall be selected by the
Investors holding a majority in interest of the Registrable Securities included
in the Registration Statement to which the Claim relates. The Indemnified
Party or Indemnified Person shall cooperate fully with the indemnifying party
in connection with any negotiation or defense of any such action or claim by
the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party or Indemnified Person
which relates to such action or claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its written consent, provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such claim or
litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party
or Indemnified Person with respect to all
13
<PAGE> 14
third parties, firms or corporations relating to the matter for which
indemnification has been made. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action.
e. The indemnification required by this Section 6 shall
be made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.
f. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party
or Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however,
that: (i) no contribution shall be made under circumstances where the maker
would not have been liable for indemnification under the fault standards set
forth in Section 6; (ii) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of fraudulent misrepresentation; and (iii)
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits
of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("RULE 144"), the
Company agrees to:
a. make and keep public information available, as those
terms are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and
other documents required of the Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such requirements (it being understood
that nothing herein shall limit the Company's
14
<PAGE> 15
obligations under Section 4(c) of the Securities Purchase Agreement) and the
filing of such reports and other documents is required for the applicable
provisions of Rule 144; and
c. furnish to each Investor so long as such Investor
owns Registrable Securities, promptly upon request, (i) a written statement by
the Company that it has complied with the reporting requirements of Rule 144,
the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed
by the Company, and (iii) such other information as may be reasonably requested
to permit the investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically
assignable by the Investors to any transferee of all or any portion of
Registrable Securities if: (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned; (iii) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws;
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein; (v)
such transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement; and (vi) such transferee
shall be an "accredited investor" as that term is defined in Rule 501 of
Regulation D promulgated under the 1933 Act.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold two-thirds (2/3) of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be
binding upon each Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
15
<PAGE> 16
b. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided a confirmation of transmission is mechanically generated and kept on
file by the sending party); (iii) three (3) days after being sent by U.S.
certified mail, return receipt requested; or (iv) one (1) day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall be:
If to the Company:
Oncor, Inc.
209 Perry Parkway
Gaithersburg, MD 20877
Telephone: 301-963-3500
Facsimile: 301-330-3940
Attention: President
With a copy to:
Brobeck, Phleger & Harrison LLP
1633 Broadway
47th Floor
New York, NY 10019
Telephone: 212-581-1600
Facsimile: 212-586-7878
Attention: Richard R. Plumridge, Esq.
If to a Buyer, to its address and facsimile number on the
Schedule of Buyers attached hereto, with copies to such
Buyer's counsel as set forth on the Schedule of Buyers.
Each party shall provide five (5) days prior notice to the other party of any
change in address, phone number or facsimile number.
c. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York without regard to the
principles of conflict of laws. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting the City of
New York, borough of Manhattan, for the adjudication of any dispute
16
<PAGE> 17
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. This Agreement and the Securities Purchase Agreement
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
and therein. This Agreement and the Securities Purchase Agreement supersede
all prior agreements and understandings among the parties hereto with respect
to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this
Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more
identical counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same agreement. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
i. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the
other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
j. All consents and other determinations to be made by
the Investors pursuant to this Agreement shall be made, unless otherwise
specified in this Agreement, by Investors holding a majority of the Registrable
Securities, determined as if all of the Preferred Shares and the Warrants then
outstanding have been converted into or exercised for Registrable Securities.
17
<PAGE> 18
k. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent and no
rules of strict construction will be applied against any party.
02A/352735
18
<PAGE> 19
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYERS:
ONCOR, INC. THEMIS PARTNERS L.P.
By: Promethean Investment Group L.L.C.
Its: General Partner
By: /s/
-------------------------------
Name: John L. Coker
Its: Vice President and By: /s/
Chief Financial Officer ------------------------------
Name: James F. O'Brien, Jr.
Its: President
HERACLES FUND
By: Promethean Investment Group L.L.C.
Its: Investment Advisor
By: /s/
----------------------------------
Name: James F. O'Brien, Jr.
Its: President
LEONARDO, L.P.
By: Angelo, Gordon & Co., L.P.
Its: General Partner
By: /s/
-----------------------------------
Name: Michael L. Gordon
Its: Chief Operating Officer
RAPHAEL, L.P.
By: /s/
-----------------------------------
Name: Michael L. Gordon
Its: Chief Operating Officer
19
<PAGE> 20
[signature page to Registration Rights Agreement - p. 2 of 2]
RAMIUS FUND, LTD.
By: AG Ramius Partners, L.L.C.
Its: Investment Advisor
By: /s/
-------------------------------------
Name: Michael L. Gordon
Its: Managing Officer
HALIFAX FUND, L.P.
By: The Palladin Group
Its: Investment Manager
By: Palladin Capital Management LLC
Its: General Partner
By: /s/
-------------------------------------
Name: Andrew Kaplan
Its: Authorized Representative
20
<PAGE> 21
SCHEDULE OF BUYERS
<TABLE>
<CAPTION>
Investor Address Investor's Representatives' Address
Investor Name and Facsimile Number and Facsimile Number
- ------------------------ ---------------------------------------- -----------------------------------------
<S> <C> <C>
Themis Partners L.P. c/oPromethean Investment Group, L.L.C. Promethean Investment Group, L.L.C.
40 West 57th Street, Suite 1520 40 West 57th Street, Suite 1520
New York, New York 10019 New York, New York 10019
Attn: James F. O'Brien, Jr. Attn: James F. O'Brien, Jr.
Facsimile: 212-698-0505 Thomas Lumsden
Facsimile: 212-698-0505
Katten Muchin & Zavis
525 West Monroe, Suite 1600
Chicago, Illinois 60661-3693
Attn: Robert J. Brantman, Esq.
Facsimile: 312-902-1061
Heracles Fund Bank of Bermuda (Cayman) Limited Promethean Investment Group, L.L.C.
P.O. Box 513 40 West 57th Street, Suite 1520
3rd Floor British American Center New York, New York 10019
Dr. Roy's Drive Attn: James F. O'Brien, Jr.
Georgetown, Grand Cayman Thomas Lumsden
Cayman Island, BWI Facsimile: 212-698-0505
Attn: Allen J. Bernardo
Facsimile: 809-949-7802 Katten Muchin & Zavis
525 West Monroe, Suite 1600
Chicago, Illinois 60661-3693
Attn: Robert J. Brantman, Esq.
Facsimile: 312-902-1061
Leonardo, L.P. c/oAngelo, Gordon & Co., L.P. Angelo, Gordon & Co., L.P.
245 Park Avenue - 26th Floor 245 Park Avenue - 26th Floor
New York, New York 10167 New York, New York 10167
Attn: Gary Wolf Attn: Gary Wolf
Facsimile: 212-867-6449 Facsimile: 212-867-6449
Raphael, L.P. c/oAngelo, Gordon & Co., L.P. Angelo, Gordon & Co., L.P.
245 Park Avenue - 26th Floor 245 Park Avenue - 26th Floor
New York, New York 10167 New York, New York 10167
Attn: Gary Wolf Attn: Gary Wolf
Facsimile: 212-867-6449 Facsimile: 212-867-6449
Ramius Fund, Ltd. c/oAngelo, Gordon & Co., L.P. Angelo, Gordon & Co., L.P.
245 Park Avenue - 26th Floor 245 Park Avenue - 26th Floor
New York, New York 10167 New York, New York 10167
Attn: Gary Wolf Attn: Gary Wolf
Facsimile: 212-867-6449 Facsimile: 212-867-6449
Halifax Fund, L.P. c/o CITCO Fund Services, Ltd. The Palladin Group
Corporate Center, West Bay Road 40 West 57th Street
P.O. Box 31106 Suite 1500
SMB New York, New York 10019
Grand Cayman, Cayman Islands Attn: Andrew Kaplan
Attn: Patrick Agemian Facsimile: 212-698-0599
Facsimile: 809-949-3877
</TABLE>
21
<PAGE> 22
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
AMERICAN STOCK TRANSFER AND TRUST COMPANY
40 WALL STREET
NEW YORK, NEW YORK 10005
ATTN: HERBERT LEMMER
RE: ONCOR, INC.
Ladies and Gentlemen:
We are counsel to Oncor, Inc., a Maryland corporation (the "COMPANY"),
and have represented the Company in connection with that certain Securities
Purchase Agreement (the "PURCHASE AGREEMENT") entered into by and among the
Company and the buyers named therein (collectively, the "HOLDERS") pursuant to
which the Company issued to the Holders shares of its Series A Convertible
Preferred Stock, par value $.01 per share, (the "PREFERRED SHARES") convertible
into shares of the Company's common stock, par value $.01 per share (the
"COMMON STOCK") and warrants to purchase 250 shares of Common Stock for each
Preferred Share, subject to adjustment (the "WARRANTS"). Pursuant to the
Purchase Agreement, the Company also has entered into a Registration Rights
Agreement with the Holders (the "REGISTRATION RIGHTS AGREEMENT") pursuant to
which the Company agreed, among other things, to register the Registrable
Securities (as defined in the Registration Rights Agreement), including the
shares of Common Stock issuable upon conversion of the Preferred Shares and
exercise of the Warrants, under the Securities Act of 1933, as amended (the
"1933 ACT"). In connection with the Company's obligations under the
Registration Rights Agreement, on ____________ ___, 1998, the Company filed a
Registration Statement on Form S-3 (File No. 333-_____________) (the
"REGISTRATION STATEMENT") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities which names each of the Holders
as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER
TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no
knowledge, after telephonic inquiry of a member of the SEC's staff, that any
stop order suspending its effectiveness has been issued or that any proceedings
for that purpose are pending before, or threatened by, the SEC and the
Registrable Securities are available for resale under the 1933 Act pursuant to
the Registration Statement.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
By:
------------------------
cc: [LIST NAMES OF HOLDERS]
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated March 28, 1997
included in Oncor, Inc.'s Form 10-K for the year ended December 31, 1996 and to
all references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
---------------------------
ARTHUR ANDERSEN LLP
Washington, D.C.
February 20, 1998
