<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the Quarter ended June 30, 1997.
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from __________ to
__________.
Commission File No. 0-18549
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GENSIA SICOR INC.
(Formerly Gensia, Inc.)
---------------------------
(Exact name of registrant as
specified in its charter)
Delaware 33-0176647
- ------------------------------ ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9360 Towne Centre Drive
San Diego, California 92121
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(Address of principal executive offices and zip code)
(619) 546-8300
------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO _____
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common stock $.01 par value 74,444,298
- --------------------------- ----------------------------
Class Outstanding at June 30, 1997
<PAGE>
GENSIA SICOR INC.
INDEX
PART I: FINANCIAL INFORMATION
<TABLE>
Item 1: Financial Statements PAGE
--------------------
<S> <C> <C>
Consolidated Balance Sheets at June 30, 1997 and
December 31, 1996 3
Consolidated Statements of Operations for the three
and six months ended June 30, 1997 and 1996 4
Consolidated Statements of Cash Flows for the six
months ended June 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
-----------------------------------
Results of Operations - for the three and six months ended
June 30, 1997 and 1996 9
Liquidity and Capital Resources 11
PART II OTHER INFORMATION
Item 1: Legal Proceedings 13
Item 2: Changes in Securities 13
Item 6: Exhibits and Reports on Form 8-K 13
SIGNATURES 15
</TABLE>
2
<PAGE>
GENSIA SICOR INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 23,124 $ 16,271
Short-term investments 6,496 5,096
Accounts receivable 35,033 5,038
Inventories 50,352 16,999
Other current assets 7,101 2,316
--------- ---------
Total current assets 122,106 45,720
Property and equipment, net 74,240 33,657
Other noncurrent assets 9,343 8,148
Intangibles, net 53,501 2,025
Goodwill, net 49,795 --
--------- ---------
$ 308,985 $ 89,550
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 40,490 $ 11,138
Accrued payroll and related expenses 4,558 3,057
Other accrued liabilities 10,378 4,924
Current portion of deferred revenue 2,271 1,771
Short-term borrowings 24,380 --
Current maturities of long-term obligations 3,442 76
--------- ---------
Total current liabilities 85,519 20,966
Other long-term liabilities 4,437 --
Deferred revenue, less current portion 840 500
Long-term obligations, less current maturities 30,681 85
Contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized,
1,600,000 issued and outstanding, liquidation preference of
$80,000,000. 16 16
Common stock, $.01 par value, 125,000,000 shares authorized,
74,444,298 and 39,657,982 shares issued and outstanding
at June 30, 1997 and December 31, 1996, respectively 744 396
Additional paid-in capital 499,678 332,778
Accumulated deficit (312,749) (265,136)
Unearned compensation -- (55)
Foreign currency translation adjustment (181) --
--------- ---------
Total stockholders' equity 187,508 67,999
--------- ---------
$ 308,985 $ 89,550
========= =========
</TABLE>
See accompanying notes.
3
<PAGE>
GENSIA SICOR INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------ ----------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 39,401 $ 12,785 $ 59,206 $ 25,679
Contract research and license fees 1,847 792 4,410 792
-------- -------- -------- --------
Total revenues 41,248 13,577 63,616 26,471
Costs and expenses:
Cost of sales 28,090 9,853 44,547 18,324
Research and development 6,667 8,762 12,581 16,959
Selling, general and administrative 10,906 7,792 19,990 15,719
Amortization expense 1,237 -- 1,645 --
Interest and other, net 1,032 (535) 473 (940)
Acquisition of in-process research and development -- -- 29,200 --
-------- -------- -------- --------
Total costs and expenses 47,932 25,872 108,436 50,062
-------- -------- -------- --------
Net loss before income taxes (6,684) (12,295) (44,820) (23,591)
Provision for income taxes (2,166) -- (2,793) --
-------- -------- -------- --------
Net loss before dividends (8,850) (12,295) (47,613) (23,591)
Dividends on preferred stock (1,504) (1,504) (2,992) (2,992)
-------- -------- -------- --------
Net loss applicable to common shares $(10,354) $(13,799) $(50,605) $(26,583)
======== ======== ======== ========
Net loss per common share $(.14) $(.38) $(.74) $(.74)
======== ======== ======== ========
Shares used in computing per share amounts 74,395 36,208 67,931 35,833
======== ======== ======== ========
</TABLE>
See accompanying notes.
4
<PAGE>
GENSIA SICOR INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss before dividends $ (47,613) $ (23,591)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization of property and equipment 3,708 1,827
Amortization of intangibles and goodwill 1,645 --
Amortization of licenses and other 325 150
Amortization of unearned compensation 56 715
Loss on disposal of property and equipment 6 158
Charge for acquired in-process research and
development 29,200 --
Inventory purchase price allocation adjustment 3,846 --
Change in operating assets and liabilities, net of
effects of the acquisition of Rakepoll Holding:
Accounts receivable (3,269) 3,815
Inventories (1,980) (163)
Prepaid expenses and other assets 4,368 252
Accounts payable 889 1,134
Accrued research and development costs -- (301)
Accrued payroll and related expenses 643 469
Other accrued liabilities (2,757) (1,456)
Deferred revenue 840 3.021
----------- -----------
Net cash used in operating activities (10,093) (13,970)
Cash flows from investing activities:
Acquisition of Rakepoll Holding, net of $2,232 cash acquired (8,868) --
Proceeds from short-term investments 8,253 91,498
Purchases of short-term investments (9,653) (102,233)
Purchase of property and equipment (11,687) (5,122)
Proceeds from sale of property and equipment 18 --
Notes receivable from officers and employees 148 (7)
----------- -----------
Net cash used in investing activities (21,789) (15,864)
Cash flows from financing activities:
Payments of preferred stock dividends (2,992) --
Issuance of common stock and warrants, net 23,624 6,476
Change in short-term borrowings 4,013 --
Issuance of long-term obligations 20,177 206
Principal payments on long-term obligations (1,460) (362)
Discount on long-term obligations (3,571) --
Debt issue costs (931) --
----------- -----------
Net cash provided by financing activities 38,860 6,320
----------- -----------
Effect of exchange rate changes on cash (125) --
----------- -----------
Increase (decrease) in cash and cash equivalents 6,853 (23,514)
Cash and cash equivalents at beginning of period 16,271 47,421
----------- -----------
Cash and cash equivalents at end of period $ 23,124 $ 23,907
=========== ===========
Supplemental schedule of noncash investing activities:
Common stock issued to acquire net assets of Rakepoll Holding:
Fair value of assets acquired, other than cash $207,914 $ --
Liabilities assumed 81,631 --
</TABLE>
See accompanying notes.
5
<PAGE>
GENSIA SICOR INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
1. ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
ORGANIZATION
Gensia Sicor Inc, formerly known as Gensia, Inc. ("Gensia Sicor" or
the"Company"), a Delaware corporation, was incorporated November 17, 1986. On
February 28, 1997, Gensia Sicor completed the acquisition of Rakepoll Holding
B.V. ("Rakepoll Holding") from Rakepoll Finance N.V. ("Rakepoll Finance").
Rakepoll Holding is the parent company of three specialty pharmaceutical
businesses: SICOR-Societa Italiana Corticosteroidi S.p.A. ("SICOR") of Milan,
Italy, and two companies located in Mexico: Lemery, S.A. de C.V. ("Lemery")
and Sicor de Mexico, S.A. de C.V. (formerly Sintesis Lerma, S.A. de C.V.)
("Sicor de Mexico"). Gensia Sicor is a specialty pharmaceutical company
focused on the development, manufacture and marketing of pharmaceutical
products for the worldwide oncology and injectable pharmaceutical markets.
The Company also has a proprietary medical products group focused on the
Laryngeal Mask Airway and the GenESA System and a basic research group
focused on pain, inflammation, diabetes and cardiovascular disease. The newly
combined company is headquartered in San Diego, California.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its nine wholly-owned subsidiaries: Rakepoll Holding, Gensia
Laboratories, Ltd., Gensia Automedics, Inc., Gensia Automedics Limited,
Gensia GmbH, Aramed, Inc., Gensia Development Corporation, Genchem Pharma
Ltd. and Metabasis Therapeutics, Inc. All significant intercompany accounts
and transactions have been eliminated. The accompanying consolidated balance
sheet at June 30, 1997 includes the assets, liabilities and stockholder's
equity of the combined companies. The consolidated statement of operations
and statement of cash flows for the six months ended June 30, 1997 include
the results for Rakepoll Holding from February 28, 1997 (the date of
acquisition), through June 30, 1997, only.
In the opinion of the Company, all adjustments, consisting only of normal
recurring adjustments, necessary for the fair statement of the results for
the three and six-month periods ended June 30, 1997 and 1996 have been made.
The results of operations for the three and six-month periods ended June 30,
1997 are not necessarily indicative of the results to be expected for the
full fiscal year.
The accompanying consolidated financial statements should be read in
conjunction with the audited financial statements and notes thereto included
in the Company's 1996 Form 10-K filed with the Securities and Exchange
Commission and the audited financial statements and notes thereto of Rakepoll
Holding B.V. included in the Company's 1997 Form 8-K/A filed with the
Securities and Exchange Commission.
FOREIGN CURRENCY TRANSLATION
The financial statements of subsidiaries outside the United States, except
those subsidiaries located in highly inflationary economies, are generally
measured using the local currency as the functional currency. Assets and
liabilities of these subsidiaries are translated at the rates of exchange at
the balance sheet date. The resulting translation adjustments are included
in the cumulative translation adjustment, a separate component of
stockholders' equity. Income and expense items are translated at average
monthly rates of exchange. For subsidiaries operating in highly inflationary
economies, gains and losses from balance sheet translation adjustments are
included in net earnings.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the
classifications used in 1997.
6
<PAGE>
GENSIA SICOR INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
2. RAKEPOLL HOLDING ACQUISITION
On February 28, 1997, after shareholder approval, Gensia Sicor acquired all
of the outstanding shares of capital stock of Rakepoll Holding from Rakepoll
Finance in exchange for 29,500,000 shares of the Company's Common Stock and
$100,000. The acquisition was accounted for using the purchase method. The
total purchase price was $157.7 million, which was comprised of the fair
value of Common Stock issued of $146.6 million, acquisition costs of $11.0
million, and a cash payment of $100,000.
Based on the purchase price of $157.7 million, allocation of the total
acquisition cost is as follows:
<TABLE>
<S> <C>
Net tangible assets $ 26,291
Developed technology 45,000
Other intangibles 6,870
In-process research and development 29,200
Goodwill 50,354
--------
Total $157,715
========
</TABLE>
The developed technology and other intangibles are being amortized over
their estimated lives. The excess of the purchase price over the fair value
of identified assets and liabilities, in the amount of $50.4 million was
recorded as goodwill and is being amortized over its estimated life. The
value assigned to in-process research and development was immediately charged
to the statement of operations. This charge is not deductible for income tax
purposes.
3. CONTINGENCIES
During 1995, SICOR received claims from certain of its customers in
connection with shipments of a contaminated product. While no lawsuits have
been filed against SICOR with respect to this matter, SICOR has a
reserve of approximately $2.5 million at June 30, 1997, which represents
management's best estimate of product rework costs, attorneys' costs and
other settlement costs. Actual costs to be incurred in relation to the
ultimate settlement may vary from the amount estimated.
In the second quarter of 1997, Gensia Laboratories was sued for patent
infringement in the United States District Court for the Central District of
California, Research Corporation Technologies, Inc. and Bristol Myers Squibb
----------------------------------------------------------------
Co. v. Gensia Laboratories, Ltd., Civil Action No. 97-3992 TJH (Rcx), based
--------------------------------------------------------------------
upon Gensia Laboratories' submission to the FDA seeking approval to market a
generic injectable Cisplatin product. In this action, Gensia Laboratories has
been accused of infringing a patent relating to therapeutic compositions of
Cisplatin. Cisplatin is a drug under development at Gensia Laboratories, and
there have been no commercial sales of Cisplatin by Gensia Laboratories to
date. The filing of this lawsuit has the immediate effect of delaying the
effective date of any FDA approval for Gensia Laboratories' generic Cisplatin
product for injection until at least November 1999.
7
<PAGE>
GENSIA SICOR INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
4. NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of common
shares outstanding during the period.
In February 1997, the Financial Accounting Standards Board issued Statement
of financial Accounting Standards No. 128, "Earnings Per Share." The Company
will be required to adopt these new rules effective December 15, 1997.
Management does not anticipate any impact resulting from the adoption of this
new standard upon current or previously reported primary earnings per share.
8
<PAGE>
GENSIA SICOR INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Gensia Sicor has been unprofitable on an annual basis since its inception in
1986 and expects to incur additional operating losses at least through 1997. For
the period from its inception to June 30, 1997, the Company has incurred a
cumulative net loss of $312.7 million.
When used in this Form 10-Q, the words "expects", "anticipates", "estimates"
and similar expressions are intended to identify forward-looking statements.
Such statements involve risks and uncertainties, including the timely
development, regulatory approval, and successful marketing of new products and
acceptance of new products, the impact of competitive products, product costs
and pricing, changing market conditions and other risks described in this Form
10-Q and in the Company's Annual Report on Form 10-K for the year ended December
31, 1996. Actual results may differ materially from those projected. These
forward-looking statements represent the Company's judgment only as of the date
of the filing of this Form 10-Q. The Company disclaims, however, any intent or
obligation to update these forward-looking statements.
RESULTS OF OPERATIONS
The Company reported a net loss of $10.4 million, or $.14 per common share
(after dividends on preferred stock of $1.5 million) in the second quarter ended
June 30, 1997 compared to a net loss of $13.8 million, or $.38 per common share
(after undeclared and unpaid dividends on preferred stock of $1.5 million) in
the second quarter of 1996. The 1997 second quarter includes the three month
results of Rakepoll Holding. The Company reported a net loss of $50.6 million,
or $.74 per common share (after dividends of preferred stock of $3.0 million),
for the six months ended June 30, 1997 compared to a net loss of $26.6 million,
or $.74 per common share (after undeclared and unpaid dividends on preferred
stock of $3.0 million), for the six months ended June 30, 1996. The results for
the first six months of 1997 include the results of operations for Rakepoll
Holding from February 28, 1997, the date of its acquisition. Results for the
first six months of 1997 include purchase accounting adjustments as follows: (i)
a $29.2 million write-off of in-process research and development; (ii) a $3.8
million charge to cost of sales for the write-up of purchased inventory; and
(iii) a $1.6 million charge for the amortization of goodwill and intangibles.
Product sales in the second quarter of 1997 increased to $39.4 million from
$12.8 million in the second quarter of 1996. Product sales in the first six
months of 1997 increased to $59.2 million from $25.7 million in the same period
of 1996. The increase in product sales for the three and six months ended June
30, 1997 is attributable to the inclusion of the sales reported by Rakepoll
Holding as well as increased sales at Gensia Laboratories and increased sales of
the Laryngeal Mask Airway ("LMA"), Brevibloc, and GenESA. Cost of sales
associated with product sales was $28.1 million for the second quarter of 1997
and $9.9 million for the second quarter of 1996. Gross margins increased 23% in
the second quarter of 1996 to 29% in the same period in 1997. The current
quarter includes a purchase accounting charge of $2.6 million to increase cost
of sales associated with the write-up of inventory at the Rakepoll Holding
companies. Cost of sales for the first six months of 1997 were $44.5 million
compared to $18.3 million in the same period of 1996. The gross margin for the
three and six months of 1997 increased compared to the same periods of 1996
primarily due to the inclusion of the results of Rakepoll Holding. The gross
margins for three and six months of 1997 were negatively impacted by increases
in cost of sales of $2.6 million and $3.8 million, respectively, for Rakepoll
Holding products resulting from the write-up of inventory associated with the
acquisition. The Company expects product sales to continue to grow in the second
half 1997, primarily as a result of the acquisition of Rakepoll Holding on
February 28, 1997, and sales of new injectable products if approved by the U.S.
Food and Drug Administration ("FDA") and other regulatory agencies. There can be
no assurance that Gensia Sicor will be able to achieve growth from new product
sales. In the second quarter of 1997, the FDA advised Gensia Sicor that the
GenESA System is approvable for use in conjunction with radionuclide perfusion
imaging and echocardiography for patients unable to exercise adequately. The
Company anticipates launching the product through its Gensia Automedics
subsidiary in the third quarter of 1997.
In the second quarter of 1997, contract research and license fees were $1.8
9
<PAGE>
million from research collaborations with Pfizer, Inc. and Sankyo compared to
contract and license fees of $800,000 in the second quarter of 1996, which
included contract collaborations from Pfizer, Inc. only. Contract research and
license fees for the first six months of 1997 were $4.4 million compared to
$800,000 in the same period of 1996. The increase is attributable to the
inclusion of the Sankyo contract research and license fee for the second quarter
of 1997 and an up-front non-refundable commitment received from Sankyo of $1.4
million under the provisions of a Letter of Intent signed in March 1997. The
Company is pursuing additional collaborations which would fund a portion of
Gensia's basic research and development efforts; however, there can be no
assurance that any such agreements will be reached.
Research and development expenses in the second quarter of 1997 decreased to
$6.7 million from $8.8 million in the 1996 second quarter. Research and
development expenses for the first six months of 1997 decreased to $12.6 million
from $17.0 million for the same period of 1996. The decreases are due to the
reduction of expenses for the Geomatrix nifedipine program as a result of a
restructuring of an agreement with Jago Pharma AG and Boehringer Mannheim
Corporation and due to expense reduction programs offset in part by the
inclusion of research and development expenses from the Rakepoll Holding
companies which were not included in the earlier period results.
Selling, general and administrative expenses in the second quarter of 1997
increased to $10.9 million from $7.8 million in the second quarter of 1996.
Selling, general and administrative expenses for the first six months of 1997
increased to $20.0 million from $15.7 million in the same period of 1996. The
increases in expenses for the three and six months of 1997 are mainly due to the
inclusion of Rakepoll Holding's selling, general and administrative expenses.
Selling, general and administrative expenses are expected to continue to grow as
the Company increases sales and marketing activities to support the GenESA
System product launch as well as future multi-source product launch expenses.
The amount of any such growth will depend, in part, upon the Company's success
in gaining U.S. regulatory approval for additional multisource injectable
drugs. Expenses are also expected to grow as Gensia Sicor continues to
integrate the Rakepoll Holding business.
The Company had interest and other expenses of $1.0 million in the second
quarter of 1997 compared to interest and other income of $0.5 million in the
second quarter of 1996. Interest and other expenses for the six months of 1997
were $0.5 million compared to interest and other income of $0.9 million in the
same period of 1996. The increases in interest and other expenses are mainly due
to the inclusion of Rakepoll Holding and decrease in interest income due to
lower average cash and investment balances in 1997.
In the three and six months of 1997, the Company recorded amortization
expense of $1.2 million and $1.6 million, respectively, related to the
identified intangibles and goodwill resulting from the acquisition of Rakepoll
Holding.
Income tax expense in the second quarter of 1997 increased to $2.2 million
from zero in the second quarter of 1996. Income tax expense for the first six
months of 1997 increased to $2.8 million from zero for the same period of 1996.
The increases for the 1997 periods are attributable to the inclusion of
Rakepoll Holding's profitable operations in Italy and Mexico. Although the
Company reported a net loss for the first six month's of 1997, any taxable
losses generated by the U.S. entities cannot be utilized to reduce taxable
income reported by the foreign entities.
The Company is party to a number of agreements with Gensia Clinical Partners
related to the GenESA System technology. Pursuant to these agreements, the
Company is required to make a milestone payment of approximately $5 million
payable in cash or Gensia Sicor Common Stock within a specified time after
approval of the GenESA System by the FDA.
10
<PAGE>
GENSIA SICOR INC.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had cash, cash equivalents and short-term
investments of $29.6 million. In early May 1997, the Company completed an
agreement to privately place $20 million in convertible notes due in 2004. The
notes bear a coupon of 2.675%. The notes are convertible into Gensia Sicor
Convertible Preferred Stock or Common Stock at a conversion price of $3.78 per
share and include Warrants to purchase up to 2,645,503 shares of Gensia Sicor
Common Stock at $4.35 per share. Fifty percent of these Warrants are Conditional
Warrants that may not be exercised for three years and will be canceled if the
Gensia Sicor Common Stock price exceeds certain levels during the first three
years after the closing. The terms of the agreement contain, among other
provisions, requirements for maintaining defined levels of net worth and various
financial ratios. In addition, the parties entered into a Registration Rights
Agreement under which the Company would not be required to register the shares
of Common Stock into which the notes are convertible prior to August 28, 1998.
Gensia Sicor expects to incur additional costs, including the cost
of increased sales and marketing activities to support product launches and
increased emphasis on overall commercial activities. Management also plans to
invest in plant and equipment to increase and improve the existing manufacturing
capacity in the acquired Rakepoll Holding businesses. Increased spending will
also be required to integrate the Gensia and Rakepoll Holding businesses. Any
difficulties experienced in integrating the operations of the companies
successfully could have a material adverse effect on the business and results of
operations of the combined company. The amount of such additional costs, as well
as the increased spending necessary for working capital and capital
requirements, will depend on numerous factors including the successful
integration of the Gensia Sicor companies, improvements in the sales and
profitability of SICOR, Lemery, and Gensia Laboratories, the approval and
successful marketing of new products at GLL in the U.S., the Company's ability
to obtain approval and market injectable products in the international market,
and the Company's ability to market the GenESA System in the U.S. if final
regulatory approval is received from the FDA. Gensia Laboratories has undertaken
a significant capital expenditure program beginning 1996 and continuing in 1997
related to the development of an oncology manufacturing facility which should be
ready for operations in the fourth quarter of 1997. The Company has commitments
to finance this expansion largely through lease or debt financing secured
against certain assets of Gensia Laboratories. There can be no assurance such
financing will remain available on acceptable terms, if at all.
In the second quarter of 1997, the FDA advised Gensia Sicor that the GenESA
System is approvable for use in conjunction with radionuclide perfusion imaging
and echocardiography for patients unable to exercise adequately. The Company
expects to receive final approval from the FDA to market the GenESA System in
the third quarter of 1997 and to launch the product through its Gensia
Automedics, Inc. subsidiary. Within sixty days of receiving final FDA approval,
Gensia Sicor is required to make a milestone payment of approximately $5 million
payable in cash or stock to the limited partners of Gensia Clinical Partners,
Ltd., which owns certain rights to the GenESA System technology. In addition,
under a development and supply agreement between the Company and Protocol
Systems, Inc., the Company has been obligated to make minimum purchases
following the approval of the GenESA System in Europe. Upon final approval of
the FDA to market the GenESA System in the U.S., the minimum quantities increase
under the agreement and aggregate to approximately $2.3 million in 1997, $3.8
million in 1998, $6.0 million in 1999 and $5.9 million in 2000. There is no
assurance that any such purchase commitment can be achieved or that final
approval to market the GenESA System will be received by the FDA.
As part of the Gensia Sicor restructuring, Gensia is planning to transfer its
licensed and proprietary medical products, including the LMA, the GenESA System,
Brevibloc, and the Feedback Controlled Heparin System ("FCHS") into Gensia
Automedics, Inc. This new company's mission would be to become a profitable
developer and marketer of innovative medical products for the acute care market.
Gensia Automedics' technology focus would be on developing products which use
closed-loop drug delivery. Gensia Sicor is seeking to obtain external financing
for this company.
11
<PAGE>
In June 1997, the Company's wholly owned subsidiary, SICOR, entered into a
Mid-Term Financing Contract with Interbanca SpA in the amount of Lit.
15,000,000,000 (fifteen billion Italian lira) or approximately $8.3 million.
Under the terms of the agreement, the funds shall be used for the construction
and improvement of facilities and the purchase of equipment. SICOR will make
payments of interest only through March 15, 1999. Commencing on September 15,
1999, SICOR will make principal and interest payments through March 15, 2005.
Interest will be computed and will be adjusted on a quarterly basis to equal a
rate based upon the London Interbank Offered Rate ("LIBOR"). The loan is secured
by certain real estate and other assets of SICOR and guaranteed by Rakepoll
Holding. At June 30, 1997, there were no borrowings under this contract.
The Company's current operating plan includes funding its basic research
activities primarily through collaborations with other pharmaceutical companies.
The Company is currently receiving contract research revenues through its
research collaboration with Pfizer, Inc. In April 1997, the Company entered into
an agreement with Sankyo pursuant to which Sankyo will provide basic research
funding to discover and develop drugs for the treatment of non-insulin dependent
(Type II) diabetes for a period of at least three years, and may provide
payments for attainment of certain preclinical and clinical milestones and
royalty payments from commercial sales of any successfully developed product.
Subject to certain consents an availability of funding, Gensia Sicor plans to
transfer certain of its San Diego based pharmaceutical research and development
programs into its newly created Metabasis Therapeutics, Inc. subsidiary and spin
off such subsidiary to its shareholders. To the extent the Company is unable to
spin off Metabasis Therapeutics, Inc. and is unable to fund its research
activities through its collaborations with Sankyo and Pfizer, the Company plans
to reduce its research expense to the level necessary to fulfill its obligations
under the Pfizer and Sankyo agreements. There can be no assurance that the
Company's product development efforts with Pfizer and Sankyo will be successful
or that Pfizer and or Sankyo will not terminate their respective collaborations
before any such milestones are achieved or that Gensia Sicor will be able to
obtain the consents and financing necessary to spin off Metabasis Therapeutics,
Inc. to shareholders.
The Company anticipates that its current capital resources, commitments from
third parties, including the funds received in May 1997 from issuance of
convertible notes and warrants in exchange for $20 million, and efforts to
reduce overall costs and expenses and working capital requirements will enable
it to maintain its current and planned operations through at least 1997. The
Company will continue to pursue debt and lease financing for its capital needs.
In addition, as the Company has indicated, it may seek equity funds to finance
its subsidiaries Gensia Automedics, Inc. and Metabasis Therapeutics, Inc. There
can be no assurance that any such financings will be available on acceptable
terms, if at all.
GENSIA SICOR INC.
Significant changes in operating assets and liabilities during the first six
months of 1997, excluding the net assets acquired from the Rakepoll Holding
acquisition, included a $4.4 million decrease in prepaid expenses and other
assets, a $3.3 million increase in accounts receivable, a $2.8 million decrease
in other accrued liabilities and a $2.0 million increase in inventories. Other
significant cash flows in the first six months of 1997 included $8.9 million for
the transaction costs associated with the acquisition of Rakepoll Holding as of
February 28, 1997, net of cash acquired of $2.2 million, $19.0 million received
from the issuance of $20 million in convertible notes and warrants, $23.6
million received from the issuance of common stock and warrants, primarily as a
result of a private placement of 4.2 million shares of Gensia Common Stock in
March 1997 and $11.7 million expended on property and equipment.
The Company made quarterly cash dividend payments of approximately $1.5
million per quarter on its outstanding preferred stock from June 1, 1993 through
March 1, 1995. Subsequent to March 1995, as a measure to reduce cash outflows,
the Company's Board of Directors suspended quarterly cash dividend payments on
its outstanding preferred stock. The Company resumed quarterly payment of the
Preferred Stock dividend in September 1996. At June 30, 1997, the Company had
approximately $7.5 million in undeclared cumulative preferred dividends. If the
Company chooses to not declare dividends for six cumulative quarters, the
holders of this preferred stock, voting separately as a class, will be entitled
to elect two additional directors until the dividend in arrears has been paid.
12
<PAGE>
GENSIA SICOR INC.
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
In the second quarter of 1997, Gensia Laboratories was sued for patent
infringement in the United States District Court for the Central District of
California, Research Corporation Technologies, Inc. and Bristol Myers Squibb Co.
- --------------------------------------------------------------------------------
v. Gensia Laboratories, Ltd., Civil Action No. 97-3992 TJH (Rcx), based upon
- ----------------------------------------------------------------
Gensia Laboratories' submission to the FDA seeking approval to market a generic
injectable Cisplatin product. In this action, Gensia Laboratories has been
accused of infringing a patent relating to therapeutic compositions of
Cisplatin. Cisplatin is a drug under development at Gensia Laboratories, and
there have been no commercial sales of Cisplatin by Gensia Laboratories to date.
The filing of this lawsuit has the immediate effect of delaying the effective
date of any FDA approval for Gensia Laboratories' generic Cisplatin product for
injection until at least November 1999.
ITEM 2: CHANGES IN SECURITIES
On May 16, 1997, the Company issued $20 million in convertible notes due in
2004. The notes bear a coupon of 2.675%. The notes are convertible into Gensia
Sicor Convertible Preferred Stock or Common Stock at a conversion price of
$3.78 per share and include Warrants to purchase up to 2,645,503 shares of
Gensia Sicor Common Stock at $4.35 per share. Fifty percent of these Warrants
are Conditional Warrants that may not be exercised for three years and will be
canceled if the Gensia Sicor Common Stock price exceeds certain levels during
the first three years after the closing. The Company issued these securities
pursuant to the exemption provided by Section 4(2) of the Securities Act of
1933.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description of Document
------ -----------------------
3(i) Restated Certificate of Incorporation of the Company, as
amended by Certificate of Designation of Series A
Convertible Preferred Stock.
4.1 Amendment No. 3, dated May 19, 1997, to the Shareholder's
Agreement, dated November 12, 1996, as amended on December
21, 1996 and on February 28, 1997, between the Company and
Rakepoll Finance N.V.
4.2 Securities Purchase Agreement, dated May 1, 1997, by and
between the Company and HCCP.
4.3 Registration Rights Agreement, dated May 19, 1997, by and
between the Company and HCCP.
4.4 Form of 2.675% Subordinated Convertible Notes due May 1,
2004, issued to certain affiliates of HCCP.
4.5 Form of Common Stock Purchase Warrant, dated May 19, 1997,
issued to certain affiliates of HCCP.
10.1(1)(+) Cyclosporine Amended and Restated Supply and License
Agreement, dated as of March 31, 1997, between and among the
Company, Alco Chemicals, Ltd., Vinchem, Inc. and Sangstat
13
<PAGE>
Medical Corporation.
10.2 Agreement, dated as of April 15, 1997, by and between Sicor
de Mexico S.A. de C.V. and Alco Chemicals, Ltd.
10.3(+) Agreement, dated as of April 15, 1997, by and between
GenChem Pharma, Ltd. and Alco Chemicals, Ltd.
10.4 Agreement, dated as of January 1, 1997, by and between SICOR
and Alco Chemicals, Ltd.
27.1 Financial Data Schedule
__________________
GENSIA SICOR INC.
(1) Incorporated by reference to the Exhibit 10.24 of Sangstat
Medical Corporation's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997 (File No. 000-22890).
(+) Confidential treatment has been requested for certain portions of
these agreements.
(b) Reports on Form 8-K during the second quarter
None
14
<PAGE>
GENSIA SICOR INC.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENSIA SICOR INC.
Date: August 14, 1997 By: /s/ David F. Hale
-------------------------------------
David F. Hale
President and Chief Executive Officer
Date: August 14, 1997 By: /s/ John W. Sayward
-------------------------------------
John W. Sayward
Vice President, Finance,
Chief Financial Officer
and Treasurer
<PAGE>
EXHIBIT 3 (i)
RESTATED CERTIFICATE OF INCORPORATION
-------------------------------------
OF
--
GENSIA, INC.
------------
Gensia, Inc., a corporation organized and existing under the laws of the
State of Delaware, hereby certifies as follows:
FIRST: The name of the Corporation is Gensia, Inc. and shall hereby be
changed to Gensia Sicor Inc.
SECOND: The date of filing of its original Certificate of Incorporation
with the Secretary of State of Delaware was November 17, 1986. The Corporation
was originally incorporated under the name Gensia Pharmaceuticals, Inc.
THIRD: Pursuant to the sections 242 and 245 of the General Corporation Law
of the State of Delaware, this Restated Certificate of Incorporation restates,
integrates and further amends the provisions of the Certificate of Incorporation
of this Corporation.
FOURTH: This Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of the General Corporation Law of the State of
Delaware.
FIFTH: That the text of the Certificate of Incorporation of Gensia, Inc.
shall be hereby restated, integrated and amended to read in full as follows:
ARTICLE I
The name of this Corporation is Gensia Sicor Inc.
ARTICLE II
The registered office of the Corporation within the State of Delaware is
located at 1209 Orange Street in the City of Wilmington, County of New Castle.
The name of its registered agent at that address is The Corporation Trust
Company.
ARTICLE III
The nature of the business and the purposes for which the Corporation is
formed are to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
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<PAGE>
ARTICLE IV
A. Classes of Stock. The total number of shares of all classes of
----------------
capital stock which the Corporation shall have authority to issue is One Hundred
Thirty Million (130,000,000) of which One Hundred Twenty-Five Million
(125,000,000) shares of the par value of One Cent ($.01) each shall be Common
Stock (the "Common Stock") and Five Million (5,000,000) shares of the par value
of One Cent ($.01) each shall be Preferred Stock (the "Preferred Stock").
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is authorized to fix the number of shares of any series
of Preferred Stock and to determine the designation of any such shares. The
Board of Directors is also authorized to determine or alter the rights
(including but not limited to voting rights), preferences, privileges and
restrictions granted to or imposed upon any wholly unissued series of Preferred
Stock, and within the limits and restrictions stated in any resolution or
resolutions of the Board of Directors originally fixing the number of shares
constituting any series, to increase or decrease (but not below the number of
shares of such series outstanding) the number of shares of such series
subsequent to the issue of shares of that series by filing a certificate
pursuant to the applicable laws of the State of Delaware.
B. Series I Participating Preferred Stock.
--------------------------------------
1. Designation and Amount. Of the Five Million (5,000,000) shares of
----------------------
Preferred Stock, One Hundred Twenty-Five Thousand (125,000) shares shall be
designated as "Series I Participating Preferred Stock," $0.01 par value per
share. Such number of shares may be increased or decreased by resolution of the
Board of Directors; provided, that no decrease shall reduce the number of shares
of Series I Participating Preferred Stock to a number less than that of the
shares then outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Corporation.
2. Dividends and Distributions.
---------------------------
(a) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Series I Par ticipating Preferred Stock with respect to dividends, the holders
of shares of Series I Participating Preferred Stock in preference to the holders
of shares of Common Stock of the Corporation and any other junior stock, shall
be entitled to receive, when, as and if declared by the Board
-2-
<PAGE>
of Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the first day of March, June, September and December in each
year (each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series I Participating Preferred
Stock in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $100, or (b) subject to the provision for adjustment hereinafter set
forth, 1000 times the aggregate per share amount of all cash dividends, and 1000
times the aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared on the Common Stock, since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series I Participating Preferred Stock. In the event the Corporation
shall at any time after the close of business on March 16, 1992 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, by reclassification or
otherwise, then in each such case the amount to which holders of shares of
Series I Participating Preferred Stock were entitled immediately prior to such
event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on the Series
I Participating Preferred Stock as provided in paragraph (A) above immediately
after it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $100 per share on the Series I
Participating Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series I Participating Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series I
Participating Preferred Stock unless the date of issue of such
-3-
<PAGE>
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series I Participating Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date in either of
which events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series I Participating Pre ferred
Stock in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a share-by-
share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series I Participating Preferred Stock entitled to receive payment of a dividend
or distribution declared thereon, which record date shall be no more than 30
days prior to the date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series I Participating
-------------
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment here inafter set forth, each
share of Series I Participating Preferred Stock shall entitle the holder thereof
to 1000 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock into a greater number
of shares, or (iii) combine the outstanding Common Stock into a smaller number
of shares, by reclassification or otherwise, then in each such case the number
of votes per share to which holders of shares of Series I Participating
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock outstanding
immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares
of Series I Participating Preferred Stock and the holders of shares of Common
Stock shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) (i) If at any time dividends on any Series I Participating Preferred
Stock shall be in arrears in an amount equal to six quarterly dividends thereon,
the occur-
-4-
<PAGE>
rence of such contingency shall mark the beginning of a period (herein called a
"default period") which shall extend until such time when all accrued and unpaid
dividends for all previous quarterly dividend periods and for the current
quarterly dividend period on all shares of Series I Partici pating Preferred
Stock then outstanding shall have been declared and paid or set apart for
payment. During each default period, all holders of Preferred Stock (including
holders of the Series I Participating Preferred Stock) with dividends in arrears
in an amount equal to six quarterly dividends thereon, voting as a class,
irrespective of series, shall have the right to elect two Directors.
(ii) During any default period, such voting right of the holders of Series
I Participating Preferred Stock may be exercised initially at a special meeting
called pursuant to subparagraph (iii) of this Section 3(C) or at any annual
meeting of stockholders, and thereafter at annual meetings of stockholders,
provided that neither such voting right nor the right of the holders of any
other series of Preferred Stock, if any, to increase, in certain cases, the
authorized number of Directors shall be exercised unless the holders of ten
percent (10%) in number of shares of Preferred Stock outstanding shall be
present in person or by proxy. The absence of a quorum of the holders of Common
Stock shall not affect the exercise by the holders of Preferred Stock of such
voting right. At any meeting at which the holders of Preferred Stock shall
exercise such voting right initially during an existing default period, they
shall have the right, voting as a class, to elect Directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two
Directors or, if such right is exercised at an annual meeting, to elect two
Directors. If the number which may be so elected at any special meeting does
not amount to the required number, the holders of the Preferred Stock shall have
the right to make such increase in the number of Directors as shall be necessary
to permit the election by them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in any
default period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series I Participating
Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect Directors, the
Board of Directors may order, or any stockholder or stockholders owning in the
aggregate not less than ten percent (10%) of the total number of shares of
Preferred Stock outstanding, irrespective of series, may request, the calling of
a special meeting of the holders of Preferred Stock, which meeting shall there-
-5-
<PAGE>
upon be called by the President, a Vice President or the Secretary of the
Corporation. Notice of such meeting and of any annual meeting at which holders
of Preferred Stock are entitled to vote pursuant to this paragraph (C)(iii)
shall be given to each holder of record Preferred Stock by mailing a copy of
such notice to him at his last address as the same appears on the books of the
Corporation. Such meeting shall be called for a time not earlier than 10 days
and not later than 60 days after such order or request or in default of the
calling of such meeting within 60 days after such order or request, such meeting
may be called on similar notice by any stockholder or stockholders owning in the
aggregate not less than ten percent (10%) of the total number of shares of
Preferred Stock outstanding. Notwithstanding the provisions of this paragraph
(C)(iii), no such special meeting shall be called during the period within 60
days immediately preceding the date fixed for the next annual meeting of the
stockholders.
(iv) In any default period, the holders of Common Stock, and other classes
of stock of the Corporation, if applicable, shall continue to be entitled to
elect the whole number of Directors until the holders of Preferred Stock shall
have exercised their right to elect two Directors voting as a class, after the
exercise of which right (x) the Directors so elected by the holders of Preferred
Stock shall continue in office until their successors shall have been elected by
such holders or until the expiration of the default period, and (y) any vacancy
in the Board of Direc tors may (except as provided in paragraph (C)(ii) of this
Section 3) be filled by vote of a majority of the remaining Directors
theretofore elected by the holders of the class of stock which elected the
Director whose office shall have become vacant. References in this paragraph
(C) to Directors elected by the holders of a particular class of stock shall
include Directors elected by such Directors to fill vacancies as provided in
clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right of
the holders of Preferred Stock as a class to elect Directors shall cease, (y)
the term of any Directors elected by the holders of Preferred Stock as a class
shall terminate, and (z) the number of Directors shall be such number as may be
provided for in, or pursuant to, the Certificate of Incorporation or By-Laws
irrespective of any increase made pursuant to the provisions of paragraph
(C)(ii) of this Section 3 (such number being subject, how ever, to change
thereafter in any manner provided by law or in the Certificate of Incorporation
or By-Laws). Any vacancies in the Board of Directors effected by the provisions
of clauses (y) and (z) in the preceding sentence may be filled by a majority of
the remaining Directors, even though less than a quorum.
-6-
<PAGE>
(D) Except as set forth herein, holders of Series I Participating
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series I Participating Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series I Participating
Preferred Stock outstanding shall have been paid in full, the Corporation shall
not
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series I Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series I Participating Preferred Stock
except dividends paid ratably on the Series I Participating Preferred Stock and
all such parity stock on which dividends are payable or in arrears in proportion
to the total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of
any stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series I Participating Preferred Stock
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of any stock of
the Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series I Participating Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Series
I Participating Preferred Stock or any shares of stock ranking on a parity with
the Series I Participating Preferred Stock except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
-7-
<PAGE>
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section
4, purchase or otherwise acquire such shares at such time and in such manner.
5. Reacquired Shares. Any shares of Series I Participating Preferred
-----------------
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
6. Liquidation, Dissolution or Winding Up.
--------------------------------------
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding
up of the Corporation, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series I Participating Preferred Stock unless, prior thereto,
the holders of shares of Series I Participating Preferred Stock shall have
received per share, the greater of 1000 times $1.00 or 1000 times the payment
made per share of Common Stock, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series I Liquidation Preference"). Following the payment of
the full amount of the Series I Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series I Participating
Preferred Stock unless, prior thereto, the holders of shares of Common Stock
shall have received an amount per share (the "Common Adjustment") equal to the
quotient obtained by dividing (i) the Series I Liquidation Preference by (ii)
1000 (as appropriately adjusted as set forth in subparagraph (C) below to
reflect such events as stock splits, stock dividends and recapitalization with
respect to the Common Stock) (such number in clause (ii), the "Adjustment
Number"). Following the payment of the full amount of the Series I Liquidation
Preference and the Common Adjustment in respect of all out standing shares of
Series I Participating Preferred Stock and Common Stock, respectively, holders
of Series I Participating Preferred Stock and holders of shares of Common Stock
shall receive their ratable and proportionate share of the remaining assets to
be distributed in the ratio of the Adjustment Number to 1 with respect to such
Preferred Stock and Common Stock, on a per share basis, respectively.
-8-
<PAGE>
(B) In the event there are not sufficient assets available to permit
payment in full of the Series I Liquidation Preference and the liquidation
preferences of all other series of Preferred Stock, if any, which rank on a
parity with the Series I Participating Preferred Stock then such remaining
assets shall be distributed ratably to the holders of such parity shares in
proportion to their respective liquidation preferences. In the event there are
not sufficient assets available to permit payment in full of the Common
Adjustment, then such remaining assets shall be distributed ratably to the
holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, by reclassification or
otherwise, then in each such case the Adjustment Number in effect immediately
prior to such event shall be adjusted by multiplying such Adjustment Number by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
7. Consolidation, Merger, etc. In case the Corporation shall enter into
--------------------------
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case the shares of Series I
Participating Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of shares
of Series I Participating Preferred Stock shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that are outstanding immediately prior to
such event.
8. Redemption. The shares of Series I Participating Preferred Stock
----------
shall not be redeemable.
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<PAGE>
9. Ranking. The Series I Participating Preferred Stock shall rank junior
-------
to all other series of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise.
10. Amendment. The Certificate of Incorporation and the By-Laws of the
---------
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series I
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least 66-2/3% of the outstanding shares of
Series I Participating Preferred Stock voting separately as a class.
11. Fractional Shares. Series I Participating Preferred Stock may be
-----------------
issued in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series I Participating Preferred Stock.
C. $3.75 Convertible Exchangeable Preferred Stock.
----------------------------------------------
1. Designation and Amount. Of the Five Million (5,000,000) shares of
----------------------
Preferred Stock, One Million Eight Hundred Forty Thousand (1,840,000) shares
shall be designated as "$3.75 Convertible Exchangeable Preferred Stock," $.01
par value per share.
2. Definitions. For purposes of the $3.75 Convertible Exchangeable
-----------
Preferred Stock and this Section C, in addition to those terms otherwise defined
in this Restated Certificate of Incorporation, the following terms shall have
the meanings indicated:
"Board of Directors" shall mean the board of directors of the Corporation
or any committee authorized by such Board of Directors to perform any of its
responsibilities with respect to the $3.75 Convertible Exchangeable Preferred
Stock.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
which banking institutions in the City of New York are authorized or obligated
by law or executive order to close.
"Closing Price" of a security on any day shall mean on such day the
reported last sales price, regular way, for the security or, in case no sale
takes place on such day, the average of the reported closing bid and asked
prices, regular way, for the security in either case as reported on the New York
Stock Exchange, on the principal national
-10-
<PAGE>
securities exchange on which the security is listed or admitted to trading or,
if not listed or admitted to trading on any national securities exchange, on the
Nasdaq National Market or, if the security is not quoted on such National Market
system, the average of the closing bid and asked prices for the security on such
day in or, if bid and asked prices for the security on each such date shall not
have been reported by The Nasdaq Stock Market, the average of the bid and asked
prices of the security for such day as furnished by any New York Stock Exchange
member firm regularly making a market in the security selected for such purpose
by the Board of Directors or, if no such quotations are available, the fair
market value of the security furnished by any New York Stock Exchange member
firm selected from time to time by the Board of Directors for that purpose.
"Corporation Notice" shall have the meaning set forth in paragraph (b) of
Section C5 of this Article.
"Conversion Price" shall mean the conversion price per share of Common
Stock into which the $3.75 Convertible Exchangeable Preferred Stock is
convertible, as such Conversion Price may be adjusted pursuant to Section C7 of
this Article. The initial Conversion Price will be $27.60 (equivalent to the
rate of approximately 1.8116 shares of Common Stock for each share of $3.75
Convertible Exchangeable Preferred Stock).
"Current Market Price" per share of Common Stock on any date shall mean the
Closing Price of the Common Stock on the first day which is not a Saturday, a
Sunday or a day on which banking institutions and trust companies in New York,
New York are authorized by law or executive order to close or a legal holiday.
"Dividend Payment Date" shall have the meaning set forth in paragraph (a)
of Section C3 of this Article.
"Dividend Payment Record Date" shall have the meaning set forth in
paragraph (a) of Section C3 of this Article.
"Debentures" shall mean the Corporation's 7 1/2% Convertible Subordinated
Debentures due 2003.
"Dividend Periods" shall mean quarterly dividend periods commencing on the
first day of March, June, September and December of each year and ending on and
including the day preceding the first day of the next succeeding Dividend Period
(other than the initial Dividend Period which shall commence on the Issue Date
and end on and include May 31, 1993).
-11-
<PAGE>
"Fundamental Change" shall have the meaning set forth in paragraph (c) of
Section C8 of this Article.
"Issue Date" shall mean the first date on which shares of the $3.75
Convertible Exchangeable Preferred Stock are issued.
"Person" shall mean any individual, association, partnership, corporation,
a government or a political subdivision thereof, a governmental agency or other
entity, and shall include any successor (by merger or otherwise) of such entity.
"Trading Date" with respect to Common Stock means (i) if the Common Stock
is listed or admitted for trading on the New York Stock Exchange or another
national securities exchange, a day on which the New York Stock Exchange or such
other national securities exchange is open for business or (ii) if the Common
Stock is quoted on the Nasdaq National Market, a day on which trades may be made
on such National Market system or (iii) otherwise, any Business Day.
"Transfer Agent" means ChaseMellon Shareholder Services, L.L.C., as
successor in interest to First Interstate Bank of California or such other agent
or agents of the Corporation as may be designated by the Board of Directors of
the Corporation as the transfer agent for the $3.75 Convertible Exchangeable
Preferred Stock.
3. Dividends.
---------
(a) Holders of the $3.75 Convertible Exchangeable Preferred Stock are
entitled to receive, when, as and if declared by the Board of Directors, out of
the funds of the Corporation legally available therefor, an annual cash dividend
at the annual rate of $3.75 per share of $3.75 Convertible Exchangeable
Preferred Stock, payable in quarterly installments on March 1, June 1, September
1 and December 1 (each a "Dividend Payment Date"), commencing June 1, 1993 (and,
in the case of any accrued but unpaid dividends, at such additional times and
for such interim periods, if any, as determined by the Board of Directors). If
June 1, 1993 or any other Dividend Payment Date shall be on a day other than a
Business Day, the Dividend Payment Date shall be on the next succeeding Business
Day. Dividends on the $3.75 Convertible Exchangeable Preferred Stock will be
cumulative from the Issue Date, whether or not in any Dividend Period or Periods
there shall be funds of the Corporation legally available for the payment of
such dividends and whether or not such dividends are declared, and will be
payable to holders of record as they appear on the stock books of the
Corporation on such record dates (each such date, a "Dividend Payment Record
Date"), which shall be not more than 60 days nor less than 10 days
-12-
<PAGE>
preceding the Dividend Payment Dates thereof, as shall be fixed by the Board of
Directors. Dividends on the $3.75 Convertible Exchangeable Preferred Stock
shall accrue (whether or not declared) on a daily basis from the Issue Date, and
accrued dividends for each Dividend Period shall accumulate to the extent not
paid on the Dividend Payment Date first following the Dividend Period for which
they accrue. As used herein, the term "accrued" with respect to dividends
includes both accrued and accumulated dividends.
(b) The amount of dividends payable for such full Dividend Period for the
$3.75 Convertible Exchangeable Preferred Stock shall be computed by dividing the
annual dividend rate by four (rounded down to the nearest cent). The amount of
dividends payable for the initial Dividend Period on the $3.75 Convertible
Exchangeable Preferred Stock, or any other period shorter or longer than a full
Dividend Period on the $3.75 Convertible Exchangeable Preferred Stock, shall be
computed on the basis of a 360-day year consisting of twelve 30-day months.
Holders of shares of $3.75 Convertible Exchangeable Preferred Stock called for
redemption on a redemption date falling between the close of business on a
Dividend Payment Record Date and the opening of business on the corresponding
Dividend Payment Date shall, in lieu of receiving such dividend on the Dividend
Payment Date fixed therefor, receive such dividend payment together with all
other accrued and unpaid dividends on the date fixed for redemption (unless
holder converts such shares in accordance with Section C7 of this Article).
Holders of shares of $3.75 Convertible Exchangeable Preferred Stock shall not be
entitled to any dividends, whether payable in cash, property or stock, in excess
of cumulative dividends, as herein provided. No interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend payment or
payments on the $3.75 Convertible Exchangeable Preferred Stock which may be in
arrears.
(c) So long as any shares of the $3.75 Convertible Exchangeable Preferred
Stock are outstanding, no dividends, except as described in the next succeeding
sentence, shall be declared or paid or set apart for payment on any class or
series of stock of the Corporation ranking, as to the dividends, on a parity
with the $3.75 Convertible Exchangeable Preferred Stock, for any period unless
full cumulative dividends have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for such
payment on the $3.75 Convertible Exchangeable Preferred Stock for all Dividend
Periods terminating on or prior to the date of payment, or setting apart for
payment, of such dividends on such parity stock. When dividends are not paid in
full or a sum sufficient for such payment is not set apart, as aforesaid, upon
the shares of the $3.75 Convertible Exchangeable
-13-
<PAGE>
Preferred Stock and any other class or series of stock ranking on a parity as to
dividends with the $3.75 Convertible Exchangeable Preferred Stock, all dividends
declared upon shares of the $3.75 Convertible Exchangeable Preferred Stock and
all dividends declared upon such other stock shall be declared pro rata so that
the amounts of dividends per share declared on the $3.75 Convertible
Exchangeable Preferred Stock and such other stock shall in all cases bear to
each other the same ratio that accrued dividends per share on the shares of the
$3.75 Convertible Exchangeable Preferred Stock and on such other stock bear to
each other.
(d) So long as any shares of the $3.75 Convertible Exchangeable Preferred
Stock are outstanding, no other stock of the Corporation ranking on a parity
with the $3.75 Convertible Exchangeable Preferred Stock as to dividends or upon
liquidation, dissolution or winding up shall be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid to or made available for a
sinking fund or otherwise for the purchase or redemption of any shares of any
such stock) by the Corporation (except for repurchases from employees and
consultants) unless (i) the full cumulative dividends, if any, accrued on all
outstanding shares of the $3.75 Convertible Exchangeable Preferred Stock shall
have been paid or set apart for payment for all past Dividend Periods and (ii)
sufficient funds shall have been set apart for the payment of the dividend for
the current Dividend Period with respect to the $3.75 Convertible Exchangeable
Preferred Stock.
(e) So long as any shares of the $3.75 Convertible Exchangeable Preferred
Stock are outstanding, no dividends (other than dividends or distributions paid
in shares of, or options, warrants or rights to subscribe for or purchase shares
of, Common Stock or other stock ranking junior to the $3.75 Convertible
Exchangeable Preferred Stock, as to dividends and upon liquidation, dissolution
or winding up) shall be declared or paid or set apart for payment and no other
distribution shall be declared or made or set apart for payment, in each case
upon the Common Stock or any other stock of the Corporation ranking junior to
the $3.75 Convertible Exchangeable Preferred Stock as to dividends or upon
liquidation, dissolution or winding up, nor shall any Common Stock nor any other
such stock of the Corporation ranking junior to the $3.75 Convertible
Exchangeable Preferred Stock as to dividends or upon liquidation, dissolution or
winding up be redeemed, purchased or otherwise acquired for any consideration
(or any moneys be paid to or made available for a sinking fund or otherwise for
the purchase or redemption of any shares of any such stock) by the Corporation
(except by conversion into or exchange for stock of the Corporation ranking
junior to the
-14-
<PAGE>
$3.75 Convertible Exchangeable Preferred Stock as to dividends and upon
liquidation, dissolution or winding up) unless, in each case (i) the full
cumulative dividends, if any, accrued on all outstanding shares of the $3.75
Convertible Exchangeable Preferred Stock and any other stock of the Corporation
ranking on a parity with the $3.75 Convertible Exchangeable Preferred Stock as
to dividends shall have been paid or set apart for payment for all past Dividend
Periods and all past dividend periods with respect to such other stock and (ii)
sufficient funds shall have been set apart for the payment of the dividend for
the current Dividend Period with respect to the $3.75 Convertible Exchangeable
Preferred Stock and for the current dividend period with respect to any other
stock of the Corporation ranking on a parity with the $3.75 Convertible
Exchangeable Preferred Stock as to dividends.
4. Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, before any payment or
distribution of the assets of the Corporation (whether capital or surplus) shall
be made to or set apart for the holders of Common Stock or any other series or
class of stock of the Corporation ranking junior to the $3.75 Convertible
Exchangeable Preferred Stock upon liquidation, dissolution or winding up, the
holders of the shares of $3.75 Convertible Exchangeable Preferred Stock shall be
entitled to receive $50.00 per share plus an amount per share equal to all
dividends (whether or not earned or declared) accrued and unpaid thereon to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. No payment on account of any liquidation,
dissolution or winding up of the Corporation shall be made to the holders of any
class or series of stock ranking on a parity with the $3.75 Convertible
Exchangeable Preferred Stock in respect of the distribution of assets upon
dissolution, liquidation or winding up unless there shall likewise be paid at
the same time to the holders of the $3.75 Convertible Exchangeable Preferred
Stock like proportionate amounts determined ratably in proportion to the full
amounts to which the holders of all outstanding shares of $3.75 Convertible
Exchangeable Preferred Stock and the holders of all outstanding shares of such
parity stock are respectively entitled with respect to such distribution. If,
upon any liquidation, dissolution or winding up of the Corporation, the assets
of the Corporation, or proceeds thereof, distributable among the holders of the
shares of, $3.75 Convertible Exchangeable Preferred Stock shall be insufficient
to pay in full the preferential amount aforesaid and liquidating payments on any
other shares of stock ranking, as to liquidation, dissolution or winding up, on
a parity with the $3.75 Convertible Exchangeable
-15-
<PAGE>
Preferred Stock, then such assets, or the proceeds thereof, shall be distributed
among the holders of shares of $3.75 Convertible Exchangeable Preferred Stock
and any such other stock ratably in accordance with the respective amounts which
would be payable on such shares of $3.75 Convertible Exchangeable Preferred
Stock and any such other stock if all amounts payable thereon were paid in full.
For the purposes of this Section C4, (i) a consolidation or merger of the
Corporation with one or more corporations or other entities, (ii) a sale, lease,
exchange or transfer of all or any part of the Corporation's assets or (iii) a
statutory share exchange shall not be deemed to be a liquidation, dissolution or
winding up, voluntary or involuntary.
(b) Subject to the rights of the holders of shares of any series or class
or classes of stock ranking on a parity with or prior to the $3.75 Convertible
Exchangeable Preferred Stock upon liquidation, dissolution or winding up, upon
any liquidation, dissolution or winding up of the Corporation, after payment
shall have been made in full to the holders of $3.75 Convertible Exchangeable
Preferred Stock, as provided in this Section C4, any other series or class or
classes of stock ranking junior to the $3.75 Convertible Exchangeable Preferred
Stock upon liquidation, dissolution or winding up shall, subject to the
respective terms and provisions (if any) applying thereto, be entitled to
receive any and all assets remaining to be paid or distributed, and the holder
of $3.75 Convertible Exchangeable Preferred Stock shall not be entitled to share
therein.
(c) Written notice of any liquidation, dissolution or winding up of the
Corporation, stating the payment date or dates when and the place or places
where the amounts distributable in such circumstances shall be payable, shall be
given by first class mail, postage prepaid, not less than thirty (30) days prior
to any payment date stated therein, to the holders of record of the $3.75
Convertible Exchangeable Preferred Stock at their respective addresses as the
same shall appear on the books of the Transfer Agent.
5. Redemption at the Option of the Corporation.
-------------------------------------------
(a) $3.75 Convertible Exchangeable Preferred Stock may not be redeemed by
the Corporation prior to March 6, 1996, on or after which the Corporation, at
its option, may redeem the shares of $3.75 Convertible Exchangeable Preferred
Stock, in whole or in part, out of funds legally available therefor, at any time
or from time to time, subject to the notice provisions and provisions for
partial redemption described below, during the period beginning on March 1, of
the years shown below (March 6 in the case of 1996), at the following redemption
prices per share plus an amount equal to accrued and unpaid dividends, if any,
to (and including)
-16-
<PAGE>
the date fixed for redemption, whether or not earned or declared:
<TABLE>
<CAPTION>
Year Price
---- -----
<S> <C>
1996 $52.50
1997 $52.08
1998 $51.67
1999 $51.25
2000 $50.83
2001 $50.42
2002 and thereafter $50.00
</TABLE>
Notwithstanding the foregoing, the $3.75 Convertible Exchangeable Preferred
Stock may not be redeemed prior to March 6, 1998 unless the Closing Price of the
Common Stock equals or exceeds 150% of the then effective Conversion Price per
share for any 20 Trading Dates during a period of 30 consecutive Trading Dates
ending within 15 days prior to the mailing of a Corporation Notice of
redemption.
(b) In the event the Corporation shall redeem shares of $3.75 Convertible
Exchangeable Preferred Stock, a Corporation Notice of such redemption shall be
given by first class mail, postage prepaid, mailed not less than 30 nor more
than 60 days prior to the redemption date, to each holder of record of the
shares to be redeemed, at such holder's address as the same appears on the stock
records of the Corporation. Each such notice shall state: (i) the redemption
date; (ii) the number of shares of $3.75 Convertible Exchangeable Preferred
Stock to be redeemed and, if less than all the shares held by such holder are to
be redeemed, the number of such shares to be redeemed from such holder; (iii)
the redemption price; (iv) the place or places where certificates for such
shares are to be surrendered for payment of the redemption price; (v) that
payment will be made upon presentation and surrender of such $3.75 Convertible
Exchangeable Preferred Stock; (vi) the then current conversion price and the
date on which the right to convert such shares of 3.75 Convertible Exchangeable
Preferred Stock will expire; (vii) that dividends on the shares to be redeemed
shall cease to accrue following such redemption date; (viii) that such
redemption is at the option of the Corporation; and (ix) that dividends accrued
to and including the date fixed for redemption will be paid as specified in said
notice. Notice having been mailed as aforesaid, from and after the redemption
date, unless the Corporation shall be in default in providing money for the
payment of the redemption price (including any accrued and unpaid dividends to
(and including) the date fixed for redemption) (x) dividends on the shares of
the $3.75 Convertible Exchangeable Preferred Stock so called for redemption
shall cease to accrue, (y) said shares shall be deemed no longer outstanding,
and (z) all rights of the
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<PAGE>
holders thereof as stockholder of the Corporation (except the right to receive
from the Corporation the money payable upon redemption without interest thereon)
shall cease. The Corporation's obligation to provide moneys in accordance with
the preceding sentence shall be deemed fulfilled if, on or before the redemption
date, the Corporation shall deposit with a bank or trust company having an
office or agency in the Borough of Manhattan, City of New York, and having a
capital and surplus of at least $50,000,000, the principal amount of funds
necessary for such redemption, in trust for the account of the holders of the
shares to be redeemed (and so as to be and continue to be available therefor),
with irrevocable instructions and authority to such bank or trust company that
such funds be applied to the redemption of the shares of $3.75 Convertible
Exchangeable Preferred Stock so called for redemption. Any interest accrued on
such funds shall be paid to the Corporation from time to time. Any funds so
deposited and unclaimed at the end of three years from such redemption date
shall be released or repaid to the Corporation, after which, subject to any
applicable laws relating to escheat or unclaimed property, the holder or holders
of such shares of $3.75 Convertible Exchangeable Preferred Stock so called for
redemption shall look only to the Corporation for payment of the redemption
price.
Upon surrender in accordance with said notice of the certificates for any
such shares so redeemed (properly endorsed or assigned for transfer, if the
Board of Directors shall so require and the notice shall so state), such shares
shall be redeemed by the Corporation at the applicable redemption price
aforesaid. If fewer than all the outstanding shares of $3.75 Convertible
Exchangeable Preferred Stock are to be redeemed, shares to be redeemed shall be
selected by the Corporation from outstanding shares of $3.75 Convertible
Exchangeable Preferred Stock not previously called for redemption by lot or pro
rata (as near as may be) or by any other equitable method determined by the
Corporation in its sole discretion. If fewer than all the shares represented by
any certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares without cost to the holder thereof.
Notwithstanding the foregoing, if the Corporation Notice of redemption has
been given pursuant to this Section C5 and any holder of shares of $3.75
Convertible Exchangeable Preferred Stock shall, prior to the close of business
on the third Business Day preceding the redemption date, give written notice to
the Corporation pursuant to Section C7(b) of this Article hereof of the
conversion of any or all of the shares to be redeemed held by such holder
(accompanied by a certificate or certificates for such shares, duly endorsed or
assigned to the Corporation), then the conversion of such shares to be redeemed
shall become effective as provided in Section C7 of this Article.
-18-
<PAGE>
6. Shares to Be Retired. Any shares of $3.75 Convertible Exchangeable
--------------------
Preferred Stock converted, redeemed or otherwise acquired by the Corporation
shall be retired and cancelled and shall upon cancellation be restored to the
status of authorized but unissued shares of Preferred Stock, subject to
reissuance by the Board of Directors as $3.75 Convertible Exchangeable Preferred
Stock or as shares of Preferred Stock of one or more other series.
7. Conversion. Holders of shares of $3.75 Convertible Exchangeable
----------
Preferred Stock shall have the right to convert all or a portion of such shares
(including fractions of such shares) into shares of Common Stock, as follows:
(a) Subject to and upon compliance with the provisions of this Section C7,
a holder of shares of $3.75 Convertible Exchangeable Preferred Stock shall have
the right, at his or her option, at any time, to convert any of such shares (or
fractions thereof) into the number of fully paid and nonassessable shares of
Common Stock (calculated as to each conversion to the nearest 1/100th of a
share) obtained by dividing the aggregate liquidation preference of the shares
to be converted by the Conversion Price and by surrender of such shares, such
surrender to be made in the manner provided in paragraph (b) of this Section C7;
provided, however, that the right to convert shares called for redemption
- -------- -------
pursuant to Section C5 of this Article shall terminate at the close of business
on the third Business Day preceding the date fixed for such redemption, unless
the Corporation shall default in making payment of the amount payable upon such
redemption. Subject to the following provisions of this Section C7(a), any
shares of $3.75 Convertible Exchangeable Preferred Stock may be converted, at
the option of its holder, in part into Common Stock under the procedures set
forth above. If a part of a share of $3.75 Convertible Exchangeable Preferred
Stock is converted, then the Corporation will convert such share into the
appropriate number of shares of Common Stock (subject to paragraph (c) of this
Section C7) and issue a fractional shares of $3.75 Convertible Exchangeable
Preferred Stock evidencing the remaining interest of such holder.
(b) In order to exercise the conversion right, the holder of each share of
$3.75 Convertible Exchangeable Preferred Stock (or fraction thereof) to be
converted shall surrender the certificate representing such share, duly endorsed
or assigned to the Corporation or in blank, at the office or agency of the
Transfer Agent in the Borough of Manhattan, City of New York or Los Angeles,
California, accompanied by written notice to the Corporation that the holder
thereof elects to convert the holder's $3.75 Convertible Exchangeable Preferred
Stock or a specified portion thereof. Unless the shares issuance on conversion
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<PAGE>
are to be issued in the same name as the name in which such share of $3.75
Convertible Exchangeable Preferred Stock is registered, each share surrendered
for conversion shall be accompanied by instruments of transfer, in form
satisfactory to the Corporation, duly executed by the holder or such holder's
duly authorized attorney and an amount sufficient to pay any transfer or similar
tax (or evidence reasonably satisfactory to the Corporation demonstrating that
such taxes have been paid or are not required to be paid).
Holders of shares of $3.75 Convertible Exchangeable Preferred Stock at the
close of business on a Dividend Payment Record Date will be entitled to receive
the dividend payable on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion thereof or the Corporation's default on payment
of the dividend due on such Dividend Payment Date. However, shares of $3.75
Convertible Exchangeable Preferred Stock surrendered for conversion during the
period from the close of business on any Dividend Payment Record Date to the
opening of business on the corresponding Dividend Payment Date (except shares
called for redemption on a redemption date during such period) must be
accompanied by payment of an amount equal to the dividend payable on such shares
on such Dividend Payment Date. A holder of shares of $3.75 Convertible
Exchangeable Preferred Stock on a Dividend Payment Record Date who (or whose
transferee) converts shares of $3.75 Convertible Exchangeable Preferred Stock on
a dividend payment date will receive the dividend payable on such shares of
$3.75 Convertible Exchangeable Preferred Stock by the Corporation on such date,
and the converting holder need not include payment in the amount of such
dividend upon surrender of shares of $3.75 Convertible Exchangeable Preferred
Stock for conversion. Except as provided above, no payment or adjustment will
be made on account of accrued or unpaid dividends upon conversion of shares of
$3.75 Convertible Exchangeable Preferred Stock.
As promptly as practicable after the surrender of certificates for shares
of $3.75 Convertible Exchangeable Preferred Stock as aforesaid, the Corporation
shall issue and shall deliver at such office to such holder, or on his or her
written order, a certificate or certificates for the number of shares of Common
Stock issuable upon the conversion of such shares in accordance with the
provisions of this Section C7, and any fractional interest in respect of a share
of Common Stock arising upon such conversion shall be settled as provided in
paragraph (c) of this Section C7.
Each conversion shall be deemed to have been effected immediately prior to
the close of business on the date on which the certificates for shares of $3.75
Convertible Exchangeable Preferred Stock shall have been surrendered and
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<PAGE>
such notice received by the Corporation as aforesaid, and the person or persons
in whose name or names any certificate of certificates for shares of Common
Stock shall be issuable upon such conversion shall be deemed to have become the
holder or holders of record of the shares represented thereby at such time on
such date and such conversion shall be at the Conversion Price in effect at such
time as such date, unless the stock transfer books of the Corporation shall be
closed on that date, in which event such person or persons shall be deemed to
have become such holder or holders of record at the close of business on the
next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
such shares shall have been surrendered and such notice received by the
Corporation. All shares of Common Stock delivered upon conversion of the $3.75
Convertible Exchangeable Preferred Stock will, upon delivery, be duly
authorized, validly issued and fully paid and nonassessable.
(c) In connection with the conversion of any shares of $3.75 Convertible
Exchangeable Preferred Stock, fractions of such shares may be converted;
however, no fractional shares or securities representing fractions of shares of
Common Stock shall be issued upon conversion of the $3.75 Convertible
Exchangeable Preferred Stock. Instead of any fractional interest in a share of
Common Stock which would otherwise be delivered upon the conversion of a shares
of $3.75 Convertible Exchangeable Preferred Stock (or fractions thereof), the
Corporation shall pay to the holder of such shares an amount in cash (computed
to the nearest cent) equal to the Current Market Price of Common Stock on the
Trading Date immediately preceding the date of conversion multiplied by the
fraction of a share of Common Stock represented by such fractional interest. If
more than one share (or fraction thereof) shall be surrendered for conversion at
one time by the same holder, the number of full shares of Common Stock issuable
upon conversion thereof shall be computed on the basis of the aggregate number
of shares of $3.75 Convertible Exchangeable Preferred Stock so surrendered.
(d) The Conversion Price shall be adjusted from time to time as follows:
(i) Stock Dividends and Stock Splits. If at any time after the
--------------------------------
Issue Date, (A) the Corporation shall fix a record date for the issuance of
any dividend payable in shares of Common Stock or (B) the number of shares
of Common Stock shall have been increased by a subdivision or split-up of
shares of Common Stock, then, on the record date fixed for the
determination of holders of Common Stock entitled to receive such dividend
or
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<PAGE>
immediately after the effective date of such subdivision or split-up, as
the case may be, the number of shares to be delivered upon surrender of any
share of $3.75 Convertible Exchangeable Preferred Stock for conversion will
be appropriately increased so that each holder of $3.75 Convertible
Exchangeable Preferred Stock thereafter will be entitled to receive the
number of shares of Common Stock that such holder would have owned
immediately following such action had such share been surrendered for
conversion immediately prior thereto, and the Conversion Price will be
appropriately adjusted. The time of occurrence of an event giving rise to
an adjustment made pursuant to this paragraph (d)(i) shall, in the case of
subdivision or split-up, be the effective date thereof and shall, in the
case of a stock dividend, be the record date thereof.
(ii) Combination of Stock. If the number of shares of Common Stock
--------------------
outstanding at any time after the Issue Date shall have been decreased by a
combination of the outstanding shares of Common Stock, then, immediately
after the effective date of such combination, the number of shares to be
delivered upon surrender of any shares of $3.75 Convertible Exchangeable
Preferred Stock for conversion will be appropriately decreased so that each
holder thereafter will be entitled to receive the number of shares of
Common Stock that such holder would have owned immediately following such
action had such shares been surrendered for conversion immediately prior
thereto, and the Conversion Price will be appropriately adjusted.
(iii) Reorganization. If any capital reorganization of the
--------------
Corporation, or any reclassification of the Common Stock, or any
consolidation of the Corporation with or merger of the Corporation with or
into any other corporation or any sale, lease or other transfer of all or
substantially all of the assets of the Corporation to any other person
(including any individual, partnership, joint venture, corporation, trust
or group thereof) shall be effected in such a way that the Common Stock
shall be converted into the right to receive stock, securities or other
property (including cash or any combination thereof), then, upon surrender
of the $3.75 Convertible Exchangeable Preferred Stock for conversion in
accordance with the term of this Section C7, each holder shall have the
right to receive the kind and holder shall have the right to receive the
kind and amount of stock and other
-22-
<PAGE>
securities and property receivable (including cash or any combination
thereof) upon such reorganization, reclassification, consolidation, merger
or sale, lease or other transfer by a holder of the number of shares of
Common Stock that such holder of the $3.75 Convertible Exchangeable
Preferred Stock would have been entitled to receive upon surrender of the
$3.75 Convertible Exchangeable Preferred Stock for conversion pursuant to
this Section C7 had the $3.75 Convertible Exchangeable Preferred Stock been
surrendered for conversion immediately prior to such merger or sale, lease
or other transfer.
(iv) Special Dividends. If (other than in a dissolution or
-----------------
liquidation) securities of the Corporation (other than shares of Common
Stock or rights, options or warrants referred to in subparagraph (v)
hereof) or evidence of its indebtedness or assets (other than cash
dividends payable (a) out of retained earnings or (b) out of any earnings
or surplus not in excess of 10% of the average Closing Price of the Common
Stock for the thirty (30) trading days prior to the fifth trading day
before the date of declaration multiplied by the number of shares of Common
Stock outstanding during such period), are issued by way of a dividend on
outstanding shares of Common Stock, then the number of shares to be
delivered upon surrender of the $3.75 Convertible Exchangeable Preferred
Stock shall be appropriately increased so that immediately after the date
fixed by the Corporation as the record date in respect of such issuance,
each holder will be entitled to receive the number of shares of Common
Stock determined by multiplying the number of shares such holder would have
been entitled to receive immediately before the record date for the
determination of the stockholders entitled to receive such dividend by a
fraction, the denominator of which shall be the Closing Price of the Common
Stock on such record date less the then fair market value as determined by
the Board of Directors, whose determination if made in good faith shall be
conclusive, of the portion of the securities or evidence of indebtedness or
assets distributed applicable to one share of Common Stock and the
numerator of which shall be such Closing Price; and the Conversion Price
shall be appropriately adjusted. Such adjustment shall become effective
immediately prior to the opening of business on the day following such
record date.
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(v) Rights Offering. If the Corporation at any time after the Issue
---------------
Date shall issue or sell or fix a record date for the issuance of rights,
options or warrants to all holders of Common Stock entitling the holders
thereof to subscribe for or purchase or otherwise acquire Common Stock (of
securities convertible or exchangeable for Common Stock), in any such case,
at a price per share (or having a conversion price or exchange value per
share) that, together with the value (if for consideration other than cash,
as determined in good faith by the Board of Directors) of any consideration
paid for any such rights, options or warrants is less than the Closing
Price of the Common Stock on the date of such issuance or sale or on such
record date then, immediately after such record date, the number of shares
to be delivered upon surrender of the $3.75 Convertible Exchangeable
Preferred Stock for conversion shall be appropriately increased so that
each holder thereafter will be entitled to receive the number of shares of
Common Stock determined by multiplying the number of shares such holder
would have been entitled to receive immediately before the date of such
issuance or sale on such record date by a fraction, the numerator of which
will be the number of shares of Common Stock outstanding on such date plus
the number of additional shares of Common Stock offered for subscription or
purchase (or into which the convertible securities so offered are initially
convertible) and the denominator of which will be the number of shares of
Common Stock outstanding on such date plus the number of shares of Common
Stock that the aggregate offering price of the total number of shares so
offered for subscription or purchase would purchase at such Closing Price,
and the Conversion Price shall be appropriately adjusted. Notwithstanding
the foregoing, rights issued by the Corporation to all holders of its
Common Stock entitling the holders thereof to subscribe for or purchase
securities of the Corporation, which rights (i) are deemed to be
transferred with such shares of Common Stock, (ii) are not exercisable, and
(iii) are also issued in respect of future issuances of Common Stock
pursuant to the Corporation's Rights Agreement, dated as of March 16, 1992,
between the Corporation and First Interstate Bank, Ltd. (the "Rights Plan")
or any future or successor plan substantially similar to the Rights Plan,
in each case in clauses (i) through (iii) until the occurrence of a
specified event or events, shall for purposes of this paragraph (d) of this
Section C7 not be deemed
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<PAGE>
issued until the occurrence of the earliest such specified event.
(vi) No Adjustments to Exercise Price. No adjustment in the
--------------------------------
Conversion Price in accordance with the provisions of paragraphs (i), (ii),
(iii), (iv) or (v) above need be made if such adjustment would amount to a
change in such Conversion Price of less than $.05; provided, however, that
-------- -------
the amount by which any adjustment is not made by reason of the provisions
of this section shall be carried forward and taken into account at the time
of any subsequent adjustment in the Conversion Price; and provided further,
that adjustment shall be required and made in accordance with the
provisions of this Section C7 not later than such time as may be required
in order to preserve the tax free nature of a distribution to the holder of
any share of Common Stock. Anything in this Section C7 to the contrary
notwithstanding, the Corporation shall be entitled to the extent permitted
by law to make such reductions in the Conversion Price, in addition to
those required by this Section C7, as it in its sole discretion shall
determine to be advisable in order to avoid or diminish any income tax to
any holder of Common Stock resulting from any dividend or distribution of
capital stock or rights or warrants to purchase capital stock or from any
event treated as such for income tax purposes of for any other reasons.
(vii) Readjustments, etc. If an adjustment is made under paragraphs
-------------------
(i), (ii), (iii), (iv) or (v) above, and the event to which the adjustment
relates does not occur, then any adjustment in the Conversion Price or
shares of Common Stock to be delivered upon surrender of the $3.75
Convertible Exchangeable Preferred Stock for conversion that were made in
accordance with such paragraphs shall be adjusted back to the Conversion
Price and the number of shares of Common Stock to be delivered upon
surrender of the $3.75 Convertible Exchangeable Preferred Stock for
conversion that were in effect immediately prior to the record date for
such event.
(e) Whenever the Conversion Price is adjusted as herein provided, the
Corporation shall promptly file in the custody of its Secretary or an Assistant
Secretary at its principal office and with the Transfer Agent an officers'
certificate setting forth the adjusted number of shares of Common Stock to be
delivered upon surrender of the $3.75 Convertible Exchangeable Preferred Stock
for conversion and
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<PAGE>
the Conversion Price after such adjustment, the method of calculating thereof
and setting forth a brief statement of the facts requiring such adjustment and
upon which such adjustments are based. Promptly after each such adjustment, the
Corporation shall cause a copy of such certificate to be mailed to the holder of
each share of $3.75 Convertible Exchangeable Preferred Stock at his or her last
address as shown on the stock books of the Corporation. Each such officers'
certificate shall be made available at all reasonable times for inspection by
each holder of $3.75 Convertible Exchangeable Preferred Stock.
(f) In any case in which paragraph (d) of this Section C7 provides that an
adjustment shall become effective immediately after a record date for an event
and the date fixed for conversion pursuant to Section C7 occurs after such
record date but before the occurrence of such event, the Corporation may defer
until the actual occurrence of such event (A) issuing to the holder of any share
of $3.75 Convertible Exchangeable Preferred Stock surrendered for conversion the
additional shares of Common Stock issuable upon such conversion by reason of the
adjustment required by such event over and above the Common Stock issuable upon
such conversion before giving effect to such adjustment and (B) paying to such
holder any amount in cash in lieu of any fraction pursuant to paragraph (c) of
this Section C7.
(g) The Corporation covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued shares of Common Stock or its issued shares of Common Stock held in
its treasury, or both, sufficient shares of Common Stock to provide for
conversion of the $3.75 Convertible Exchangeable Preferred Stock from time to
time as such; $3.75 Convertible Exchangeable Preferred Stock is presented for
conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the $3.75 Convertible Exchangeable Preferred Stock,
the Corporation will take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Corporation may validly and legally
issue shares of Common Stock at such adjusted Conversion Price which shares
shall be fully-paid and nonassessable and free from all taxes, liens and charges
with respect to the issue thereof.
Prior to the delivery of any securities which the Corporation shall be
obligated to deliver upon conversion of the $3.75 Convertible Exchangeable
Preferred Stock, the Corporation will endeavor in good faith and as
expeditiously as possible to comply with all federal and state laws and
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regulations thereunder requiring the registration of such securities with, or
any approval of or consent to the delivery thereof by, any governmental
authority.
(h) The Corporation will pay any and all documentary stamp or similar issue
or transfer taxes payable in respect of the issue or delivery of the shares of
$3.75 Convertible Exchangeable Preferred Stock (or any other securities issued
on account of the $3.75 Convertible Exchangeable Preferred Stock pursuant
hereto) or shares pursuant hereto; provided, however, that the Corporation shall
-------- -------
not be required to pay any tax which may be payable in respect of any transfer
involved in the issue or delivery of shares of $3.75 Convertible Exchangeable
Preferred Stock (or any other securities issued on account of the $3.75
Convertible Exchangeable Preferred Stock pursuant hereto) or shares of Common
Stock in a name other than the name in which the shares of $3.75 Convertible
Exchangeable Preferred Stock with respect to which such shares of Common Stock
are issued were registered and the Corporation shall not be required to make any
issue or delivery unless and until the person requesting such issue or delivery
has paid to the Corporation the amount of any such tax or has established, to
the reasonable satisfaction of the Corporation, that such tax has been paid or
is not required to be paid.
(i) If:
(i) the Corporation shall authorize the issuance to all holders of
the Common Stock of rights or warrants to subscribe for or purchase shares
of Common Stock or any other subscription rights or warrants; or
(ii) the Corporation shall authorize the distribution to all holders
of the Common Stock of evidences of its indebtedness or assets (other than
cash dividends payable out of retained earnings, distributions excluded
from the operation of subparagraph (d)(iv) of this Section C7, stock
dividends or securities issued pursuant to any stockholder rights plan or
any similar plan of the Corporation); or
(iii) there shall be any capital reorganization or reclassification of
the Common Stock (other than a subdivision or combination of the
outstanding Common Stock, an increase in the authorized capital stock of
the Corporation not involving the issuance of any shares thereof, or a
change in par value of the Common Stock), or any other consolidation or
merger to which the Corporation is a party (other than a consolidation or
merger with a subsidiary in which the
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<PAGE>
Corporation is the continuing corporation and that does not result in any
reclassification or change in the Common Stock outstanding) or a sale,
lease or transfer of all or substantially all of the assets of the
Corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation; or
(v) there shall be any other event that would result in an
adjustment pursuant to paragraph (d) of this Section C7 of the Conversion
Price or the number of shares of Common Stock that may be purchased upon
the conversion of the $3.75 Convertible Exchangeable Preferred Stock;
then the Corporation will cause to be filed with the Transfer Agent and to be
mailed to each holder of $3.75 Convertible Exchangeable Preferred Stock by first
class mail addressed to such holder at the address appearing in the stock
records of the Corporation, at least twenty (20) days (or ten (10) days in any
case specified in clauses (i) or (ii) above) before the applicable record or
effective date hereinafter specified, a notice stating (A) the date as of which
the holders of Common Stock of record entitled to receive any such rights,
warrants or distributions are to be determined or (B) the date on which any such
consolidation, merger, sale, lease, transfer, dissolution, liquidation or
winding-up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record will be entitled to exchange
their shares of Common Stock for securities or other property, if any,
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, lease, transfer, dissolution, liquidation or winding-up. Such notice
shall also state whether such transaction will result in any adjustment in the
Conversion Price and, if so, shall state what the adjusted Conversion Price will
be and when it will become effective. The failure to give such notice or any
defect therein shall not affect the legality or validity of any distribution
right, warrant, consolidation, merger, sale, lease, transfer, dissolution,
liquidation or winding-up or the vote upon any such action.
8. Redemption at Option of Holder Upon a Fundamental Change. (a) If a
--------------------------------------------------------
Fundamental Change (as defined in paragraph (c) of this Section C8) occurs, each
holder of $3.75 Convertible Exchangeable Preferred Stock shall have the right,
at the holder's option, to require the Corporation to repurchase all of such
holder's $3.75 Convertible Exchangeable Preferred Stock, or any portion thereof
that has an aggregate liquidation value that is a multiple of $50.00, on the
date (the "Repurchase Date")
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<PAGE>
selected by the Corporation that is not less than 10 nor more than 20 days after
the Final Surrender Date (as defined in paragraph (b) of this Section C8), a
price per share equal to $50.00, plus accrued and unpaid dividends to the
Repurchase Date. The Corporation may, at its option, pay all or any portion of
the repurchase price upon a Fundamental Change in shares of common stock of the
Corporation or any successor corporation. For purposes of calculating the
number of shares of Common Stock issuable upon such redemption, the value of any
Closing Prices of such common stock for the five Trading Dates ending on the
third Trading Date immediately preceding the Repurchase Date. Payment may not
be made in shares of common stock unless such shares (i) have been, or will be
registered on or prior to the Final Surrender Date (as defined in paragraph (b)
of this Section C8 under the Securities Act of 1933, as amended, or are freely
tradable pursuant to an exemption thereunder and (ii) are listed on a United
States national securities exchange or quoted on the Nasdaq National Market at
the time of payment.
(b) Within 30 days after the occurrence of a Fundamental Change, the
Corporation must mail to all holders of record of the $3.75 Convertible
Exchangeable Preferred Stock a Corporation Notice containing the information set
out in paragraph (b) of Section C5, of this Article, except that, for purposes
of this Section C8 only, instead of stating that such redemption is at the
option of the Corporation, the Corporation Notice shall describe the occurrence
of such Fundamental Change and of the repurchase right arising as a result
thereof. The Corporation must cause a copy of such notice to be published in a
newspaper of general circulation in the borough of Manhattan, the City of New
York. At least two Business Days prior to the Repurchase Date, the Corporation
must publish a similar notice stating whether and to what extent the repurchase
price will be paid in cash or shares of Common Stock. To exercise the
repurchase right, a holder of $3.75 Convertible Exchangeable Preferred Stock
must surrender, on or before the date which is, subject to any contrary
requirements of applicable law, 60 days after the date of mailing of the
Corporation Notice (the "Final Surrender Date"), the certificates representing
the $3.75 Convertible Exchangeable Preferred Stock with respect to which the
right is being exercised, duly endorsed for transfer to the Corporation,
together with a written notice of election.
(c) The term "Fundamental Change" shall mean any of the following:
(i) a "person" or "Group" (within the meaning of Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) becoming, in one transaction or a
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<PAGE>
series of related transactions, the "beneficial owner" (as defined in Rule
13d-2 under the Exchange Act) of Voting Shares (as defined in this
paragraph (c)) of the Corporation entitled to exercise more than 60% of the
total voting power of all outstanding Voting Shares of the Corporation
(including any Voting Shares that are not then outstanding of which such
person or Group is deemed the beneficial owner); or
(ii) any consolidation of the Corporation with, or merger of the
Corporation into, any other person, any merger of another person into the
corporation, or any sale, lease or transfer of all or substantially all of
the assets of the Corporation to another person (other than a merger, (a)
which results in the holders of Common Stock of the Corporation immediately
prior to giving effect to such transaction owning shares of capital stock
of the surviving corporation in such transaction representing in excess of
40% of the total voting power of all shares of capital stock of such
surviving corporation entitled to vote generally in the election of
directors and (b) in which the shares of the surviving corporation held by
such holders are, or immediately upon issuance will be, listed on a
national securities exchange or quoted on the Nasdaq National Market and
are not subject to any right of repurchase by the issuer thereof or any
third party and are not otherwise subject to any encumbrance as a result of
such transaction, provided, that the surviving corporation amends its
charter or certificate of incorporation to include the $3.75 Convertible
Exchangeable Preferred Stock and its terms as set forth herein);
provided, however, that a Fundamental Change shall not occur if either (i) for
- -------- -------
any five Trading Dates during the 10 Trading Dates immediately preceding either
the public announcement by the Corporation of such transaction or the
consummation of such transaction, the Closing Price of the Common Stock is at
least equal to 105% of the Conversion Price in effect on such trading days or
(ii) at least 90% of the consideration (excluding cash payments for fractional
shares) in such transaction or transactions to the holders of Common Stock
consists of shares of common stock that are, or immediately upon issuance will
be, listed on a national securities exchange or quoted on the Nasdaq National
Market, and as a result of such transaction or transactions, the $3.75
Convertible Exchangeable Preferred Stock becomes convertible into such common
stock.
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<PAGE>
(d) An election by a holder of $3.75 Convertible Exchangeable Preferred
Stock to have the Corporation redeem shares of $3.75 Convertible Exchangeable
Preferred Stock pursuant to subsection C8(a) shall become irrevocable at the
close of business on the relevant redemption date.
(e) The Corporation agrees that it will not complete any Fundamental
Change described in subsection C8(c) unless proper provision has been made to
satisfy its obligations under this Section C8.
For purposes of this Section C8, "Voting Shares" is defined to mean all
outstanding shares of any class or classes (however designated) of capital stock
entitled to vote generally in the election of members of the Board of Directors.
9. Ranking. Any class or classes of stock of the Corporation shall be
-------
deemed to rank:
(i) prior to the $3.75 Convertible Exchangeable Preferred Stock, as
to dividends or as to distribution of assets upon liquidation, dissolution
or winding up, if the holders of such class shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or priority to
the holders of $3.75 Convertible Exchangeable Preferred Stock.
(ii) on a parity with the $3.75 Convertible Exchangeable Preferred
Stock, as to dividends or as to distribution as assets upon liquidation,
dissolution or winding up, whether or not the dividend rates, dividend
payment dates or redemption or liquidation prices per share thereof be
different from those of the $3.75 Convertible Exchangeable Preferred Stock,
if the holders of such class of stock and the $3.75 Convertible
Exchangeable Preferred Stock shall be entitled to the receipt of dividends
or of amounts distributable upon liquidation, dissolution or winding up, as
the case may be, in proportion to their respective amounts of accrued and
unpaid dividends per share or liquidation prices, without preference or
priority of one over the other; and
(iii) junior to the $3.75 Convertible Exchangeable Preferred Stock,
as to dividends or as to the distribution of assets upon liquidation,
dissolution or winding up, if such stock shall be Common Stock or if the
holder of $3.75 Convertible Exchangeable Preferred Stock shall be entitled
to
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<PAGE>
receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or priority to
the holders of shares of such stock.
10. Voting. (a) Except as herein provided or as otherwise from time to
------
time required by law, holders of $3.75 Convertible Exchangeable Preferred Stock
shall have no voting rights. Whenever, at any times or times, dividends payable
on the shares of $3.75 Convertible Exchangeable Preferred Stock at the time
outstanding shall be cumulatively in arrears for such number of Dividend Periods
(whether or not consecutive) which shall in the aggregate contain not less than
540 days, the holders of $3.75 Convertible Exchangeable Preferred Stock shall
have the exclusive right, voting separately as a class with holders of shares of
any one or more other series of Preferred Stock ranking on a parity with the
$3.75 Convertible Exchangeable Preferred Stock as to dividends or on the
distribution of assets upon liquidation, dissolution or winding up and upon
which like voting rights have been conferred and are exercisable (the $3.75
Convertible Exchangeable Preferred Stock and any such other Preferred Stock,
collectively for purposes of this Section C10, the "Defaulted Preferred Stock"),
to elect two directors of the Corporation at the Corporation's next annual
meeting of stockholders and at each subsequent annual meeting of stockholders;
provided, however, that if such voting rights shall become vested more than 90
- -------- -------
days or less than 20 days before the date prescribed for the annual meeting of
stockholders, thereupon the holders of the shares of Defaulted Preferred Stock
shall be entitled to exercise their voting rights at a special meeting of the
holders of shares of Defaulted Preferred Stock as set forth in paragraphs (b)
and (c) of this Section C10. At elections for such directors, each holder of
$3.75 Convertible Exchangeable Preferred Stock shall be entitled to one vote for
each share held (the holders of shares of any other series of Defaulted
Preferred Stock ranking on such a parity being entitled to such number of votes,
if any, for each share of stock held as may be granted to them). Upon the
vesting of such right of the holders of Defaulted Preferred Stock, the maximum
authorized number of members of the Board of Directors shall automatically be
increased by two and the two vacancies so created shall be filled by vote of the
holders of outstanding Defaulted Preferred Stock as hereinafter set forth. The
right of holders of Defaulted Preferred Stock, voting separately as a class, to
elect members of the Board of Directors as aforesaid shall continue until such
time as all dividends accumulated on Defaulted Preferred Stock shall have been
paid or declared and funds set aside for payment in full, at which time such
right shall terminate, except as herein or by law expressly provided, subject to
revesting in the event
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of each and every subsequent default of the character above mentioned.
(b) Whenever such voting right shall have vested, such right may be
exercised initially either at a special meeting of the holders of shares of
Defaulted Preferred Stock called as hereinafter provided, or at any annual
meeting of stockholders held for the purpose of electing directors, and
thereafter at such meeting or by the written consent of such holders pursuant to
Section 228 of the General Corporation Law of the State of Delaware.
(c) At any time when such voting right shall have vested in the holders of
shares of Defaulted Preferred Stock entitled to vote thereon, and if such right
shall not already have been initially exercised, an officer of the Corporation
shall, upon the written request of 10% of the holders of record of shares of
such Defaulted Preferred Stock than outstanding, addressed to the Secretary of
the Corporation, call a special meeting of holders of shares of such Defaulted
Preferred Stock. Such meeting shall be held at the earliest practicable date
upon the notice required for annual meetings of stockholders at the place for
holding annual meetings of stockholders of the Corporation or, if none, at a
place designated by the Treasurer of the Corporation. If such meeting shall not
be called by the proper officers of the Corporation within 30 days after the
personal service of such written request upon the Treasurer of the Corporation,
or within 30 days after mailing the same within the United States, by registered
mail, addressed to the Secretary of the Corporation at its principal office
(such mailing to be evidenced by the registry receipt issued by the postal
authorities), then the holders of record of 10% of the shares of Defaulted
Preferred Stock then outstanding may designate in writing any person to call
such meeting at the expense of the Corporation, and such meeting may be called
by such person so designated upon the notice required for annual meetings of
stockholders and shall be held at the same place as is elsewhere provided in
this paragraph. Any holder of shares of Defaulted Preferred Stock than
outstanding that would be entitled to vote at such meeting shall have access to
the stock books of the Corporation for the purpose of causing a meeting of
stockholders to be called pursuant to the provisions of this paragraph.
Notwithstanding the provisions of this paragraph, however, no such special
meeting shall be called or held during a period within 45 days immediately
preceding the date fixed for the next annual meeting of stockholders.
(d) The directors elected pursuant to this Section shall serve until the
next annual meeting or until their respective successors shall be elected and
shall qualify; any director elected by the holders of Defaulted Preferred Stock
may be removed by, and shall not be removed otherwise
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than by, the vote of the holders of a majority of the outstanding shares of the
Defaulted Preferred Stock who were entitled to participate in such election of
directors, voting as a separate class, at a meeting called for such purpose or
by written consent as permitted by law, this Restated Certificate of
Incorporation and the By-laws of the Corporation. If the office of any director
elected by the holders of Defaulted Preferred Stock, voting as a class, becomes
vacant by reason of death, resignation, retirement, disqualification or removal
from office or otherwise, the remaining director elected by the holders of
Defaulted Preferred Stock, voting as a class, may choose a successor who shall
hold office for the unexpired term in respect of which such vacancy occurred.
Upon any termination of the right of the holders of Defaulted Preferred Stock to
vote for directors as herein provided, the term of office of all directors then
in office elected by the holders of Defaulted Preferred Stock, voting as a
class, shall terminate immediately. Whenever the terms of office of the
directors elected by the holders of Defaulted Preferred Stock, voting as a
class, shall so terminate and the special voting powers vested in the holders of
Defaulted Preferred Stock shall have expired, the number of directors shall be
such number as may be provided for in the By-laws irrespective of any increase
made pursuant to the provisions of this Section C10.
(e) So long as any shares of the $3.75 Convertible Exchangeable Preferred
Stock remain outstanding, the consent of the holders of at least a majority of
the shares of $3.75 Convertible Exchangeable Preferred Stock outstanding at the
time given in person or by proxy either in writing (as permitted by law, this
Restated Certificate of Incorporation and the By-laws of the Corporation) or at
any special or annual meeting, shall be necessary to permit, effect or validate
any one or more of the following:
(i) the authorization, creation or issuance, or any increase in the
authorized or issued amount, of any class or series of stock ranking prior
to the $3.75 Convertible Exchangeable Preferred Stock as to dividends or
the distribution of assets upon liquidation, dissolution or winding up;
(ii) the amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of this Restated
Certificate of Incorporation of the Corporation which would adversely
affect any right, preference, privilege or voting power of the $3.75
Convertible Exchangeable Preferred Stock or of the holders thereof;
provided, however, that any increase in the amount of authorized Preferred
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Stock or the
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creation and issuance of other series of Preferred Stock, or any increase
in the amount of authorized shares of such series or of any other series of
Preferred Stock, in each case ranking on a parity with or junior to the
$3.75 Convertible Exchangeable Preferred Stock with respect to the payment
of dividends and the distribution of assets upon liquidation, dissolution
or winding up, shall not be deemed to adversely affect such rights,
preferences or voting powers; or
(iii) the authorization of any reclassification of the $3.75
Convertible Exchangeable Preferred Stock.
11. Exchange. (a) The $3.75 Convertible Exchangeable Preferred Stock
--------
shall be exchangeable in whole, but not in part, at the option of the
Corporation on any dividend payment date beginning March 1, 1994, for the
Debentures. Holders of outstanding shares of $3.75 Convertible Exchangeable
Preferred Stock will be entitled to receive $50.00 principal amount of
Debentures in exchange for each share of $3.75 Convertible Exchangeable
Preferred Stock held by them at the time of exchange; provided that the
--------
Debentures will be issuable in denominations of $1,000 and integral multiples
thereof. If the exchange results in an amount of Debentures that is not an
integral multiple of $1,000, the amount in excess of the closest integral
multiple of $1,000 will be paid in cash by the Corporation.
(b) The Corporation will mail to each record holder of the $3.75
Convertible Exchangeable Preferred Stock written notice of its intention to
exchange the $3.75 Convertible Exchangeable Preferred Stock for the Debentures
no less than 30 nor more than 60 days prior to the date of the exchange (the
"Exchange Date"). The notice shall specify the effective date of the exchange
and the place where certificates for shares of $3.75 Convertible Exchangeable
Preferred Stock are to be surrendered for Debentures and shall state that
dividends on $3.75 Convertible Exchangeable Preferred Stock will cease to accrue
on the Exchange Date.
Prior to giving notice of intention to exchange, the Corporation shall have
executed and delivered to a bank or trust company selected by the Corporation to
act as Trustee with respect to the Debentures, which Trustee shall meet the
eligibility requirements of Section 310(a) of the Trust Indenture Act of 1939 as
then in effect, and which Trustee shall have executed and delivered to the
Corporation, an Indenture substantially in the form attached to the Placement
Agreement dated February 19, 1993, between the Corporation and Alex. Brown &
Sons Incorporated, Montgomery Securities and PaineWebber Incorporated with such
changes as may be required by law, stock exchange rule, Nasdaq National
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Market rule or customary usage (including, without limitation, such changes as
are requested by the Trustee with respect to its rights and obligations
thereunder, provided that any such changes do not adversely affect the rights of
holders of the Debentures thereunder).
(c) If the Corporation has caused the Debentures to be authenticated on or
prior to the Exchange Date and has complied with the other provisions of this
Section C11, then, notwithstanding that any certificate for shares of $3.75
Convertible Exchangeable Preferred Stock have not been surrendered for exchange,
on the Exchange Date dividends shall cease to accrue on the $3.75 Convertible
Exchangeable Preferred Stock and at the close of business on the Exchange Date
the holders of the $3.75 Convertible Exchangeable Preferred Stock shall cease to
be stockholders with respect to the $3.75 Convertible Exchangeable Preferred
Stock and shall have no interest in or other claims against the Corporation by
virtue thereof and shall have no voting or other rights with respect to the
$3.75 Convertible Exchangeable Preferred Stock, except the right to receive the
Debentures issuable upon such exchange and the right to accumulated and unpaid
dividends, without interest thereon, upon surrender (and endorsement, if
required by the Corporation) of their certificates, and the shares evidenced
thereby shall no longer be deemed outstanding for any purpose.
The Corporation will cause the Debentures to be authenticated on or before
the Exchange Date.
(d) Notwithstanding the foregoing, if notice or exchange has been given
pursuant to this Section C11 and any holder of shares of $3.75 Convertible
Exchangeable Preferred Stock shall, prior to the close of business on the
Exchange Date, give written notice to the Corporation pursuant to Section C7 of
this Article of the conversion of any or all of the shares held by the holder
(accompanied by a certificate or certificates for such shares, duly endorsed or
assigned to the Corporation), then the exchange shall not become effective as to
the shares to be converted and the conversion shall become effective as provided
in such Section C7.
(e) The Debentures will be delivered to the persons entitled thereto upon
surrender to the Corporation or its agent appointed for that purpose of the
certificates for the shares of $3.75 Convertible Exchangeable Preferred Stock
being exchanged therefor.
(f) Notwithstanding the other provisions of this Section C11, if on the
Exchange Date the Corporation has not paid full cumulative dividends on the
$3.75 Convertible Exchangeable Preferred Stock (or set aside a sum therefor)
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<PAGE>
the Corporation may not exchange the $3.75 Convertible Exchangeable Preferred
Stock for the Debentures and any notice previously given pursuant to this
Section C11 shall be of no effect.
(g) Prior to the Exchange Date, the Corporation will comply with any
applicable securities and blue sky laws with respect to the exchange of the
$3.75 Convertible Exchangeable Preferred Stock for the Debentures.
12. Record Holders. The Corporation and the Transfer Agent may deem and
--------------
treat the record holder of any shares of $3.75 Convertible Exchangeable
Preferred Stock as the true and lawful owner thereof for all purposes, and
neither the Corporation nor the Transfer Agent shall be affected by any notice
to the contrary.
13. Notice. Except as may otherwise be provided for herein, all notices
------
referred to herein shall be in writing, and all notices hereunder shall be
deemed to have been given upon receipt, in the case of a notice of conversion
given to the Corporation as contemplated in Section C7(b) of this Article, or,
in all other cases, upon the earlier of receipt of such notice or three Business
Days after the mailing of such notice if sent by registered mail (unless first-
class mail shall be specifically permitted for such notice under the terms of
this Section C of this Article) with postage prepaid, addressed: if to the
Corporation, to its offices at 9360 Towne Centre Drive, San Diego, California
92121 (Attention: Investor Relations Department) or to an agent of the
Corporation designated as permitted by this Certificate, or, if to any holder
of the $3.75 Convertible Exchangeable Preferred Stock, to such holder at the
address of such holder of the $3.75 Convertible Exchangeable Preferred Stock as
listed in the stock record books of the Corporation (which may include the
records of any transfer agent for the $3.75 Convertible Exchangeable Preferred
Stock); or to such other address as the Corporation or holder, as the case may
be, shall have designated by notice similarly given.
D. Common Stock.
------------
1. Relative Rights of Preferred Stock and Common Stock. All preferences,
---------------------------------------------------
voting powers, relative, participating, optional or other special rights and
privileges, and qualifications, limitations or restrictions of the Common Stock
are expressly made subject and subordinate to those that may be fixed with
respect to any shares of the Preferred Stock.
2. Voting Rights. Except as otherwise required by law or this Restated
-------------
Certificate of Incorporation, each holder of Common Stock shall have one vote in
respect of
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<PAGE>
each share of stock held by such holder of record on the books of the
Corporation for the election of directors and on all matters submitted to a vote
of stockholders of the Corporation.
3. Dividends. Subject to the preferential rights of the Preferred Stock,
---------
the holders of shares of Common Stock shall be entitled to receive, when and if
declared by the Board of Directors, out of the assets of the Corporation which
are by law available therefor, dividends payable either in cash, in property or
in shares of capital stock.
4. Dissolution, Liquidation or Winding Up. In the event of any
--------------------------------------
dissolution, liquidation or winding up of the affairs of the Corporation, after
distribution in full of the preferential amounts, if any, to be distributed to
the holders of shares of the Preferred Stock, holders of Common Stock shall be
entitled, unless otherwise provided by law or this Restated Certificate of
Incorporation, to receive all of the remaining assets of the Corporation of
whatever kind available for distribution to stockholders ratably in proportion
to the number of shares of Common Stock held by them respectively.
ARTICLE V
No action required or permitted to be taken at any annual or special
meeting of the stockholders may be taken without a meeting and the power of
stockholders to consent in writing, without a meeting, to the taking of any
action is specifically denied. Special meetings of the stockholders of the
Corporation may be called only by the Chairman of the Board or the President of
the Corporation or by a resolution adopted by the affirmative vote of a majority
of the Board of Directors.
ARTICLE VI
Except as otherwise provided for in Article IV, the Board of Directors
shall be divided into three classes, designated Class I, Class II and Class III,
as nearly equal in number as possible, and the term of office of Directors of
one class shall expire at each annual meeting of stockholders, and in all cases
as to each Director until his successor shall be elected and shall qualify or
until his earlier resignation, removal from office, death or incapacity. Except
as otherwise provided for in Article IV, additional directorships resulting from
an increase in number of Directors shall be apportioned among the classes as
equally as possible. The initial term of office of Directors of Class I shall
expire at the annual meeting of stockholders in 1993; that of Class II shall
expire at the
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<PAGE>
annual meeting in 1994; and that of Class III shall expire at the annual meeting
in 1995; and in all cases as to each Director until his successor shall be
elected and shall qualify or until his earlier resignation, removal from office,
death or incapacity. At each annual meeting of stockholders the number of
Directors equal to the number of Directors of the class whose term expires at
the time of such meeting (or, if less, the number of Directors properly
nominated and qualified for election) shall be elected to hold office until the
third succeeding annual meeting of stockholders after their election. A
Director or the entire Board of Directors may be removed, with or without cause,
by the holders of a majority of shares then entitled to vote at an election of
Directors, unless otherwise specified by law or this Restated Certificate of
Incorporation.
ARTICLE VII
Election of directors need not be by written ballot unless the By-laws so
provide.
ARTICLE VIII
Whenever a compromise or arrangement is proposed between the Corporation
and its creditors or any class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receivers appointed for the Corporation under the provisions of section 291
of Title 8 of the Delaware Code or on the application of trustees in dissolution
or of any receiver or receivers appointed for the Corporation under the
provisions of section 279 of Title 8 of the Delaware Code order a meeting of the
creditors or class of creditors, and/or the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority, in number representing three-
fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall if sanctioned by the
court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
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<PAGE>
ARTICLE IX
A. No Personal Liability. A director of the Corpo ration shall not be
---------------------
personally liable to the Corporation or its stockholders for monetary damages
for breach of fidu ciary duty as a director, except for liability (1) for any
breach of the director's duty of loyalty to the Corporation and its
stockholders; (2) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violations of law; (3) under section 174 of
the Delaware General Corporation law; or (4) for any transaction from which the
director derived an improper personal benefit.
B. Indemnification. Each person who is or is made a party or is
---------------
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, offi cer, employee or agent, shall
be indemnified and held harm less by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall incur to the benefit of
his or her heirs, executors and administrators; provided, however, that, except
as provided in the second paragraph hereof, the Corporation shall indemnify any
such person seeking indemnification in connection with a proceeding (or part
thereof) initiated by such person only if such pro ceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this section shall be a contract right and shall
include the right to be paid by the Corporation any expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation Law requires, the payment of
such expenses incurred by a director or officer
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<PAGE>
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this section or
otherwise. The Corporation may, by action of its Board of Directors, provide
indemnification to employees and agents of the Corporation with the same scope
and effect as the foregoing indemnification of directors and officers.
If a claim under the first paragraph of this section is not paid in full by
the Corporation within thirty (30) days after a written claim has been received
by the Corporation, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal coun sel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determi nation by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
section shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Restated Certificate of
Incorporation, by-law, agreement, vote of stockholders or disinterested
directors or otherwise.
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<PAGE>
The Corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Corporation or another
corporation, partner ship, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
ARTICLE X
The Board of Directors is expressly empowered to adopt, amend or repeal By-
Laws of the Corporation, provided, however, that any adoption, amendment or
repeal of By-Laws of the Corporation by the Board of Directors shall require the
approval of at least sixty-six and two-thirds percent (66 2/3%) of the total
number of authorized directors (whether or not there exist any vacancies in
previously authorized directorships at the time any resolution providing for
adoption, amendment or repeal is presented to the Board). The stockholders
shall also have power to adopt, amend or repeal By-Laws of the Corporation,
provided, however, that in addition to any vote of the holders of any class or
series of stock of this Corporation required by law or by this Restated
Certificate of Incorporation the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the
then outstanding shares of the stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required for such adoption, amendment or repeal by the stockholders of any
provisions of the By-Laws of the Corporation.
ARTICLE XI
Notwithstanding any other provision of this Restated Certificate of
Incorporation, the affirmative vote of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the voting power of all of the then outstand
ing shares of the stock of the Corporation entitled to vote generally in the
election of Directors, voting together as a
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<PAGE>
single class, shall be required to amend in any respect or repeal this Article
XI, or Articles V, VI, IX and X.
IN WITNESS WHEREOF, said Gensia, Inc. has caused its corporate seal to be
hereunto affixed and this certificate to be signed by its President and Chief
Executive Officer, David F. Hale, and its Secretary, Wesley N. Fach, this 26th
day of February, 1997.
By: /s/ David F. Hale
________________________________
David F. Hale, President and
Chief Executive Officer
Attest:
By: /s/ Wesley N. Fach
__________________________
Wesley N. Fach
Secretary
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<PAGE>
EXHIBIT 3(i)
GENSIA SICOR INC.
CERTIFICATE OF DESIGNATION
OF SERIES A CONVERTIBLE
PREFERRED STOCK
Pursuant to Section 151(g) of the General Corporation Law of the State of
Delaware, Gensia Sicor Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
That pursuant to the authority conferred upon the Board of Directors of the
Corporation by paragraph (A) of Article IV of the Restated Certificate of
Incorporation of the Corporation (the "Certificate of Incorporation"), and in
accordance with the provisions of Section 151(g) of the General Corporation Law
of the State of Delaware, the Board of Directors of the Corporation on April 28,
1997, adopted the following resolution creating a series of Preferred Stock
designated as Series A Convertible Preferred Stock.
RESOLVED that, pursuant to the authority vested in the Board of Directors
of the Corporation in accordance with the General Corporation Law of the State
of Delaware and the provisions of the Certificate of Incorporation, a series of
the class of authorized Preferred Stock, par value $.01 per share, of the
Corporation is hereby created and that the designation and number of shares
thereof and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and the qualifications,
limitations and restrictions thereof, are as follows:
Section 1. Designation and Number. (a) The shares of such series shall
----------------------
be designated "Series A Convertible Preferred Stock" (the "Series A Preferred
Stock"). The number of shares initially constituting the Series A Preferred
Stock shall be 200,000, which number may be decreased (but not increased) by the
Board of Directors without a vote of stockholders; provided, however, that such
-------- -------
number may not be decreased (i) prior to conversion or redemption of all of the
Corporation's 2.675% Subordinated Convertible Notes due May 1, 2004 (the
"Notes") and (ii) after conversion or redemption of all of the Notes, below the
number of then outstanding shares of Series A Preferred Stock.
(b) The Series A Preferred Stock shall, except as provided in Section 3(b)
hereof, with respect to dividend rights and rights on liquidation, dissolution
or winding up, (i) rank senior to the Common Stock, par value $.01 per share, of
the Corporation (the "Common Stock") and (ii) rank pari passu with or senior to
other series of convertible preferred stock of the Corporation (other than
preferred stock issuable upon exercise of the Rights as defined in Section 11)
designated by the Board of Directors of the Corporation prior to or on or after
the date hereof.
Section 2. Dividends and Distributions. (a) The holders of shares of
---------------------------
Series A Preferred Stock, in preference to the holders of shares of Common Stock
and of any shares of other capital stock of the Corporation ranking junior to
the Series A Preferred Stock as to
<PAGE>
payment of dividends, shall be entitled to receive, when, as and if declared by
the Board of Directors, out of the assets of the Corporation legally available
therefor, cumulative cash dividends at an annual rate equal to 2.675% from and
after the date of issuance of the Series A Preferred Stock (the "Issue Date"),
as long as the shares of Series A Preferred Stock remain outstanding. Dividends
shall be computed on the basis of the Stated Value, and shall accrue and be
payable quarterly, in arrears, on March 1, June 1, September 1 and December 1 in
each year or, if not a Business Day, on the next Business Day (each such date
being referred to herein as a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date following the Issue Date.
(b) Dividends payable pursuant to paragraph (a) of this Section 2 shall
begin to accrue and be cumulative from the Issue Date, whether or not earned or
declared. The amount of dividends so payable shall be determined on the basis
of twelve 30-day months and a 360-day year. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend declared thereon, which record
date shall be no more than sixty days prior to the date fixed for the payment
thereof.
(c) No dividend or distribution in cash, shares of stock or other property
on the Common Stock shall be declared or paid or set apart for payment unless,
at the same time, the same dividend or distribution is declared or paid or set
apart, as the case may be, on the Series A Preferred Stock payable on the same
date, at the rate per share of Series A Preferred Stock based upon the number of
shares of Common Stock into which each share of Series A Preferred Stock is
convertible (as adjusted pursuant to Section 8) on the record date for such
dividend or distribution on the Common Stock.
(d) In the event that (i) any dividend payable on the Series A Preferred
Stock pursuant to Section 2(a) shall not have been paid in full, (ii) the
Corporation shall have breached in any material respect any of the covenants
(provided the applicable covenant shall then be in effect pursuant to the terms
of the Purchase Agreement (as defined in Section 11)) set forth in the Purchase
Agreement, (iii) the Corporation shall have failed to redeem shares of Series A
Preferred Stock pursuant to Section 5(a), whether or not by reason of the
absence of legally available funds, or (iv), a Cross-Default or "Fundamental
Change" within the meaning of paragraph (c) of Section C8 of Article IV of the
Certificate of Incorporation shall occur, then, in any such case, the holders of
Series A Preferred Stock shall be entitled to annual dividends (in addition to
any dividend payable pursuant to Section 2(a)), at a rate of 11.75% per annum
from the applicable Quarterly Dividend Payment Date or date of such breach,
default or failure to redeem, as the case may be, through the date of payment of
such dividend, cure of such breach or default or redemption, as the case may be.
Section 3. Voting Rights. In addition to any voting rights provided by
-------------
law, the holders of shares of Series A Preferred Stock shall have the following
voting rights:
<PAGE>
(a) So long as any of the Series A Preferred Stock is outstanding, each
share of Series A Preferred Stock shall entitle the holder thereof to vote on
all matters submitted to a vote of the stockholders of the Corporation, voting
together as a single class with the holders of Common Stock. The holders of
each share of Series A Preferred Stock shall be entitled to vote with respect to
each share of Series A Preferred Stock held by each such holder a number of
votes equal to the number of votes which could be cast in such vote by a holder
of the number of shares of Common Stock into which such share of Series A
Preferred Stock is convertible (as adjusted pursuant to Section 8) on the record
date for such vote.
(b) The affirmative vote of the holders of at least 66 2/3% of the
outstanding shares of Series A Preferred Stock (the "66 2/3% Holders"), voting
together as a class, in person or by proxy, at a special or annual meeting of
stockholders called for the purpose, shall be necessary to (i) authorize,
increase the authorized number of shares of, or issue (including on conversion
or exchange of any convertible or exchangeable securities or by
reclassification) any shares of any class or classes or series within a class of
the Corporation's capital stock ranking prior to (either as to dividends or upon
voluntary or involuntary liquidation, dissolution or winding up) the Series A
Preferred Stock (other than the shares of participating preferred stock issuable
upon exercise of the Rights (as defined in Section 11)); (ii) increase the
authorized number of shares of, or issue (including on conversion or exchange of
any convertible or exchangeable securities or by reclassification) any shares
of, Series A Preferred Stock; or (iii) authorize, adopt or approve an amendment
to the Certificate of Incorporation or this Certificate of Designation which
would increase or decrease the par value of the shares of Series A Preferred
Stock, or alter or change the powers, preferences or special rights of the
Series A Preferred Stock so as to affect such shares of Series A Preferred Stock
adversely.
(c) (i) The foregoing rights of holders of shares of Series A Preferred
Stock to take any actions as provided in this Section 3 may be exercised at any
annual meeting of stockholders or at a special meeting of stockholders held for
such purpose as hereinafter provided or at any adjournment thereof.
So long as such right to vote continues, the Chairman of the Board of the
Corporation may call, and if the holders of Series A Preferred Stock are to vote
separately as a single class, upon the written request of holders of record of
20% of the outstanding shares of Series A Preferred Stock, addressed to the
Secretary of the Corporation, at the principal office of the Corporation, the
Chairman of the Board of the Corporation shall call, a special meeting of the
holders of shares of Series A Preferred Stock entitled to vote as provided
herein. The Corporation shall use its best efforts to hold such meeting within
60, but in any event not later than 90, days after delivery of such request to
the Secretary, at the place and upon the notice provided by law and in the By-
Laws of the Corporation for the holding of meetings of stockholders, provided
that the Corporation shall not be required to call such a special meeting if
such request is received fewer than 90 days before the date fixed for the next
ensuing annual meeting of stockholders of the Corporation, at which meeting such
newly created directorships shall be filled by the holders of the Series A
Preferred Stock.
<PAGE>
(ii) At each meeting of stockholders at which the holders of shares of
Series A Preferred Stock shall have the right, voting separately as a single
class, to take any action, the presence in person or by proxy of the holders of
record of one-third of the total number of shares of Series A Preferred Stock
then outstanding and entitled to vote on the matter shall be necessary and
sufficient to constitute a quorum. At any such meeting or at any adjournment
thereof, in the absence of a quorum of the holders of shares of Series A
Preferred Stock, a majority of the holders of such shares present in person or
by proxy shall have the power to adjourn the meeting as to the actions to be
taken by the holders of shares of Series A Preferred Stock from time to time and
place to place without notice other than announcement at the meeting until a
quorum shall be present.
For the taking of any action as provided in paragraph (b) of this Section 3
by the holders of shares of Series A Preferred Stock, each such holder shall
have one vote for each share of such stock standing in his name on the transfer
books of the Corporation as of any record date fixed for such purpose or, if no
such date be fixed, at the close of business on the Business Day (as defined in
Section 11) next preceding the day on which notice is given, or if notice is
waived, at the close of business on the Business Day next preceding the day on
which the meeting is held.
Section 4. Certain Restrictions. (a) Whenever (i) any dividend payable
--------------------
on the Series A Preferred Stock shall not have been paid in full, (ii) the
Corporation shall have breached in any material respect any of the covenants
(provided the applicable covenant shall then be in effect pursuant to the terms
of the Purchase Agreement) set forth in the Purchase Agreement, (iii) the
Corporation shall have failed to satisfy its obligation to redeem shares of
Series A Preferred Stock pursuant to Sections 5(a) or 5(b), whether or not by
reason of the absence of legally available funds therefor, or (iv), a Cross-
Default or Fundamental Change shall have occurred and any of such events set
forth in clauses (i) through (iv) above shall not have been remedied, the
Corporation shall not declare or pay dividends, or make any other distributions,
on any shares of Parity Stock or Junior Stock, except (1) dividends or
distributions payable in Junior Stock and (2) dividends or distributions paid
ratably on the Series A Preferred Stock and all Parity Stock on which dividends
are payable or in arrears, in proportion to the total amounts to which the
holders of all shares of the Series A Preferred Stock and such Parity Stock are
then entitled.
(b) Whenever dividends on the Series A Preferred Stock shall not have been
paid in full or any of the events set forth in clauses (ii) through (iv) of
Section 4(a) shall have occurred and shall not have been remedied, the
Corporation shall not: (A) redeem, purchase or otherwise acquire for
consideration any shares of Parity Stock or Junior Stock; provided, however,
-------- -------
that (1) the Corporation may at any time redeem, purchase or otherwise acquire
shares of Parity Stock in exchange for any shares of Junior Stock, (2) the
Corporation may accept shares of any Parity Stock or Junior Stock for conversion
into shares of Junior Stock, and (3) the Corporation may at any time redeem,
purchase or otherwise acquire shares of any Parity Stock pursuant to any
mandatory redemption, put, sinking fund or other similar obligation, pro rata
with the Series A Preferred Stock in proportion to the total amount then
required to be applied by it to redeem, repurchase or otherwise acquire shares
of Series A Preferred Stock and shares of such Parity Stock; or (B) redeem,
purchase or otherwise
<PAGE>
acquire for consideration any shares of Series A Preferred Stock; provided,
--------
however, that the Corporation (1) may accept shares of Series A Preferred Stock
- -------
surrendered for conversion into shares of capital stock of the Corporation
pursuant to Section 8, (2) may elect to redeem all outstanding shares of Series
A Preferred Stock pursuant to Section 5(a)(i) or (3) may redeem shares of Series
A Preferred Stock pro rata pursuant to Section 5(a)(i).
(c) Notwithstanding the foregoing, nothing herein shall prevent the
Corporation from redeeming the Rights (as defined in Section 11) at a price not
to exceed $.01 per Right.
(d) The Corporation shall not permit any Subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of capital stock of
the Corporation unless the Corporation could, pursuant to paragraph (b) of this
Section 4, purchase such shares at such time and in such manner.
Section 5. Redemption; Change of Control. (a) (i) On May 1, 2004, the
-----------------------------
Corporation shall redeem, out of funds legally available therefor, all
outstanding shares of Series A Preferred Stock, by paying therefor the Stated
Value per share, plus an amount equal to all accrued but unpaid dividends to
such date, in cash (the "Redemption Price").
(ii)The Company shall have the right, at its sole option and election
made in accordance with clause (c) below, to redeem the Series A Preferred
Stock, on or after the date 18 months after the Closing Date (as defined in the
Purchase Agreement) in whole but not in part, if the Current Market Price per
share of the Common Stock shall exceed the Conversion Price multiplied by 350%
for at least 90 consecutive Trading Days, at a redemption price, subject to the
final paragraphs of this clause (ii), equal to the Redemption Price.
In the event that at any time a Change of Control has occurred prior to a
redemption pursuant to this Section 5(a)(ii), the Redemption Price of each share
of Preferred Stock until the expiration of the 90-day period referred to in
clause (d) of this Section 5 shall equal the Change of Control Price (as defined
in clause (b) below).
(b) In the event that there occurs a Change of Control, any record holder
of Series A Preferred Stock, in accordance with the procedures set forth in
Clause (d) of this Section 5, may require the Company to redeem any or all of
the Series A Preferred Stock held by such holder for, at such holder's option,
an amount equal to (i) the greater of (A) 100% of the Stated Value of the
Preferred Stock and (B)(I) 135% of the Stated Value if such Change of Control
occurs on or before the first anniversary of the Closing Date and (II) 150% of
the Stated Value if such Change of Control occurs thereafter, less, in the case
of each of clause (B)(I) and (B)(II), the Warrant Value attributable to the
Series A Preferred Stock held by such holder, or (ii) the form and amount of
consideration that such holder would have received had such holder converted
such Series A Preferred Stock into Common Stock and had such holder received the
higher of (A) the same consideration per share of Common Stock received or
receivable on a per share basis by Rakepoll Finance N.V., any executive officer
of the Company or any of their respective Affiliates and Associates (the
"Affiliated Holders") and (B) the same consideration per share of Common Stock
received or receivable by non-Affiliated Holders in connection with such Change
of Control (the "Change of Control
<PAGE>
Price"), plus, in the case of each of clause (i) and clause (ii) all accrued
and unpaid dividends on the Series A Preferred Stock being redeemed to the date
of redemption, in cash. For purposes of this Section 5, the Warrant Value
attributable to a share of Preferred Stock shall be equal to the Warrant Value
on the date of the Change of Control multiplied by a fraction, the numerator of
which shall be the Stated Value of the Preferred Stock and the denominator of
which shall be $20,000,000.
(c) Notice of any redemption of shares of Series A Preferred Stock pursuant
to this Section 5(a) shall be mailed at least 30 but not more than 60 days prior
to the date fixed for redemption to each holder of shares of Series A Preferred
Stock to be redeemed, at such holder's address as it appears on the transfer
books of the Corporation. In order to facilitate the redemption of shares of
Series A Preferred Stock, the Board of Directors may fix a record date for the
determination of shares of Series A Preferred Stock to be redeemed.
(d) Promptly following a Change of Control (but in no event more than five
Business Days thereafter), the Company shall mail to each holder of Series A
Preferred Stock, at such holder's address as it appears on the transfer books of
the Company, notice of such Change of Control, which notice shall set forth each
holder's right to require the Company to redeem any or all Series A Preferred
Stock held by it. The Company shall thereafter during a period of 90 days from
the date of such notice (or the date the Company was required to give such
notice) redeem any Series A Preferred Stock, in whole or in part, at the option
of the holder, upon at least five days' written notice to the Company by such
holder specifying (i) the Stated Value of Series A Preferred Stock to be
redeemed and (ii) the redemption date.
(e) On the date of any redemption being made pursuant to this Section 5
which is specified in a notice given pursuant to paragraph (c) of this Section
5, the Corporation shall wire transfer to such holder the Redemption Price or
Change of Control Price, as the case may be, for the shares of Series A
Preferred Stock so redeemed.
Section 6. Reacquired Shares. Any shares of Series A Preferred Stock
-----------------
converted, redeemed, purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares of Series A Preferred Stock shall upon their
cancellation, and upon the filing of any document required by the General
Corporation Law of the State of Delaware, become authorized but unissued shares
of Preferred Stock, $.01 par value, of the Corporation and may be reissued as
part of another series of Preferred Stock, $.01 par value, of the Corporation,
subject to the conditions or restrictions on issuance set forth in Section 3(b)
or elsewhere herein.
Section 7. Liquidation, Dissolution or Winding Up. (a) If the Corporation
--------------------------------------
shall commence a voluntary case under the Federal bankruptcy laws or any other
applicable Federal or state bankruptcy, insolvency or similar law, or consent to
the entry of an order for relief in an involuntary case under such law or to the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation, or of any
substantial part of its property, or make an assignment for the benefit of its
creditors, or admit in writing its inability to pay its debts generally as they
become due, or if a decree or order for relief in respect of the Corporation
shall be entered by a court having jurisdiction in
<PAGE>
the premises in an involuntary case under the Federal bankruptcy laws or any
other applicable Federal or state bankruptcy, insolvency or similar law, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or other similar official) of the Corporation or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and any such
decree or order shall be unstayed and in effect for a period of 60 consecutive
days and on account of any such event the Corporation shall liquidate, dissolve
or wind up, or if the Corporation shall otherwise liquidate, dissolve or wind
up, no distribution shall be made (i) to the holders of shares of Junior Stock
unless, prior thereto, the holders of shares of Series A Preferred Stock,
subject to Section 8, shall have received the Liquidation Preference (as defined
in Section 11) with respect to each share, or (ii) to the holders of shares of
Parity Stock unless the holders of shares of Series A Preferred Stock, subject
to Section 8, shall have received distributions made ratably to the holders of
the Series A Preferred Stock and the Parity Stock in proportion to the total
amounts to which the holders of all such shares of Series A Preferred Stock and
Parity Stock would be entitled upon such liquidation, dissolution or winding up.
(b) Neither the consolidation, merger or other business combination of the
Corporation with or into any other Person or Persons nor the sale of all or
substantially all the assets of the Corporation shall be deemed to be a
liquidation, dissolution or winding up of the Corporation for purposes of this
Section 7.
Section 8. Conversion. (a) Subject to the provisions for adjustment
----------
hereinafter set forth, each share of Series A Preferred Stock shall be
convertible at the option of the holder at any time after the Issue Date into
shares of Common Stock at the Conversion Ratio (as defined in Section 11).
(b) Any conversion by the holders of the Series A Preferred Stock shall be
in an aggregate amount with a Stated Value equal to at least $100,000 or all
shares of Series A Preferred Stock of such holder. Conversion of the Series A
Preferred Stock may be effected by any such holder upon the surrender to the
Corporation at the principal office of the Corporation in the State of
California or at the office of any agent or agents of the Corporation, as may be
designated by the Board of Directors of the Corporation (the "Transfer Agent"),
of the certificate(s) for such Series A Preferred Stock to be converted,
accompanied by a written notice stating that such holder elects to convert all
or a specified whole number of such shares in accordance with the provisions of
this Section 8 and specifying the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. In case
any holder's notice shall specify a name or names other than that of such
holder, such notice shall be accompanied by payment of all transfer taxes
payable upon the issuance of shares of Common Stock in such name or names.
Other than such taxes, the Corporation will pay any and all issue and other
taxes (other than taxes based on income) that may be payable in respect of any
issue or delivery of shares of Common Stock on conversion of Series A Preferred
Stock pursuant hereto. As promptly as practicable, and in any event within five
Business Days after the surrender of such certificate or certificates and the
receipt of such notice relating thereto and, if applicable, payment of all
transfer taxes (or the demonstration to the satisfaction of the Corporation that
such taxes have been paid), the Corporation shall deliver or cause to be
delivered (i) certificates representing
<PAGE>
the number of validly issued, fully paid and nonassessable full shares of Common
Stock, to which the holder of shares of Series A Preferred Stock being converted
shall be entitled and (ii) if less than the full number of shares of Series A
Preferred Stock evidenced by the surrendered certificate or certificates is
being converted, a new certificate or certificates, of like tenor, for the
number of shares evidenced by such surrendered certificate or certificates less
the number of shares being converted. Such conversion shall be deemed to have
been made at the close of business on the date of giving such notice so that the
rights of the holder thereof as to the shares being converted shall cease except
for the right to receive shares of Common Stock, in accordance herewith, and the
person entitled to receive the shares of Common Stock shall be treated for all
purposes as having become the record holder of such shares of Common Stock at
such time, so long as certificates for such holder's shares of Series A
Preferred Stock are delivered to the Corporation within two Business Days after
the giving of notice. In any other case of conversion at the holder's option,
the date of delivery of the certificates for the shares of Series A Preferred
Stock shall be deemed to be the date of conversion.
In case any shares of Series A Preferred Stock are to be redeemed pursuant
to Section 5, such right of conversion shall cease and terminate as to the
shares of Series A Preferred Stock to be redeemed at the close of business on
the Business Day preceding the date fixed for redemption unless the Corporation
shall default in the payment of the Redemption Price or the Change of Control
Price, as the case may be.
(c) The Conversion Ratio shall be subject to adjustment from time to time
in certain instances as hereinafter provided.
(d) In connection with the conversion of any shares of Series A Preferred
Stock into Common Stock, no fractions of shares of Common Stock shall be issued,
but in lieu thereof the Corporation shall pay a cash adjustment in respect of
such fractional interest in an amount equal to such fractional interest
multiplied by the Current Market Price per share of Common Stock on the Trading
Day on which such shares of Series A Preferred Stock are deemed to have been
converted. If more than one share of Series A Preferred Stock shall be
surrendered for conversion by the same holder at the same time, the number of
full shares of Common Stock issuable on conversion thereof shall be computed on
the basis of the total number of shares of Series A Preferred Stock so
surrendered. Promptly upon conversion, the Corporation shall pay to the holder
of shares of Series A Preferred Stock so converted out of funds legally
available, an amount equal to any accrued and unpaid dividends on the shares of
Series A Preferred Stock surrendered for conversion to the date of such
conversion, together with cash in lieu of any fractional interest of such
holder.
(e) (i) The Corporation shall at all times reserve and keep available for
issuance upon the conversion of the Series A Preferred Stock, free from any
preemptive rights such number of its authorized but unissued shares of Common
Stock as will from time to time be sufficient to permit the conversion of all
outstanding shares of Series A Preferred Stock into Common Stock, and shall take
all action required to increase the authorized number of shares of Common Stock
if necessary to permit the conversion of all outstanding shares of Series A
Preferred Stock.
<PAGE>
(ii) Upon conversion of shares of Series A Preferred Stock as contemplated
by this Section 8, the Corporation shall issue together with each such share of
Common Stock one Right (or other securities in lieu thereof), or any rights
issued to holders of Common Stock of the Corporation in addition thereto or in
replacement therefor, whether or not such rights shall be exercisable at such
time, but only if such rights are issued and outstanding and held by other
holders of Common Stock of the Corporation at such time and have not expired.
(f) The Conversion Ratio will be subject to adjustment from time to time as
follows:
(i) In case the Corporation shall at any time or from time to time after
the Issue Date (A) pay a dividend, or make a distribution, on the outstanding
shares of Common Stock in shares of Common Stock, (B) subdivide the outstanding
shares of Common Stock, (C) combine the outstanding shares of Common Stock into
a smaller number of shares or (D) issue by reclassification of the shares of
Common Stock any shares of capital stock of the Corporation, then, and in each
such case, the Conversion Ratio in effect immediately prior to such event or the
record date therefor, whichever is earlier, shall be adjusted so that the holder
of any shares of Series A Preferred Stock thereafter surrendered for conversion
into Common Stock shall be entitled to receive the number of shares of Common
Stock or other securities of the Corporation which such holder would have owned
or have been entitled to receive after the happening of any of the events
described above, had such shares of Series A Preferred Stock been surrendered
for conversion immediately prior to the happening of such event or the record
date therefor, whichever is earlier. An adjustment made pursuant to this clause
(i) shall become effective (x) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the determination
of holders of shares of Common Stock entitled to receive such dividend or
distribution, or (y) in the case of such subdivision, reclassification or
combination, at the close of business on the day upon which such corporate
action becomes effective. No adjustment shall be made pursuant to this clause
(i) in connection with any transaction to which paragraph (g) applies.
(ii) In case the Corporation shall issue shares of Common Stock (or
rights, warrants or other securities convertible into or exchangeable for shares
of Common Stock) after the Issue Date at a price per share (or having a
conversion price per share) less than the Conversion Price as of the date of
issuance of such shares (or, in the case of convertible or exchangeable
securities, less than the Conversion Price as of the date of issuance of the
rights, warrants or other securities in respect of which shares of Common Stock
were issued), then, and in each such case, the Conversion Ratio and the
Conversion Price shall be adjusted so that the holder of each share of Series A
Preferred Stock shall be entitled to receive, upon the conversion thereof into
Common Stock, the number of shares of Common Stock determined by multiplying (A)
the Conversion Ratio in effect on the day immediately prior to such date by (B)
a fraction, the numerator of which shall be the sum of (1) the number of shares
of Common Stock outstanding on such date and (2) the number of additional shares
of Common Stock issued (or into which the convertible securities may convert),
and the denominator of which shall be the sum of (x) the number of shares of
Common Stock outstanding on such date and (y) the number of shares of Common
Stock purchasable at the then applicable Conversion Price per share with the
aggregate consideration receivable by the
<PAGE>
Corporation for the total number of shares of Common Stock so issued (or into
which the rights, warrants or other convertible securities may convert). An
adjustment made pursuant to this clause (ii) shall be made on the next Business
Day following the date on which any such issuance is made and shall be effective
retroactively to the close of business on the date of such issuance. For
purposes of this clause (ii), the aggregate consideration receivable by the
Corporation in connection with the issuance of shares of Common Stock or of
rights, warrants or other securities convertible into shares of Common Stock
shall be deemed to be equal to the sum of the aggregate offering price (before
deduction of underwriting discounts or commissions and expenses payable to third
parties) of all such Common Stock, rights, warrants and convertible securities
plus the minimum aggregate amount, if any, payable upon exercise or conversion
of any such rights, warrants and convertible securities into shares of Common
Stock. If Common Stock is sold as a unit with other securities, the aggregate
consideration received for such Common Stock shall be deemed to be net of the
Fair Market Value of such other securities. If Common Stock is issued in
consideration of the release of a claim brought by a shareholder against the
Corporation, whether before or after the Closing Date (as defined in the
Purchase Agreement), on the basis of events or circumstances occurring prior to
the Closing Date ("Pre-Closing Shareholder Claims"), the consideration for such
Common Stock shall be deemed to be $0. The issuance or reissuance of any shares
of Common Stock (whether treasury shares or newly issued shares) pursuant to (A)
a dividend or distribution on, or subdivision, combination or reclassification
of, the outstanding shares of Common Stock requiring an adjustment in the
conversion ratio pursuant to clause (i) of this paragraph (f), (B) shares issued
as Stock Milestone Payments or Combination Milestone Payments pursuant to
Section 5.06 of the Development and Marketing Agreement, dated June 13, 1991,
with Gensia Clinical Partners as in effect on the date hereof or pursuant to any
acquisition of BIOFA A.B. on terms approved by the full Board of Directors, (C)
any restricted stock or stock option plan or program of the Corporation
involving the grant of options or rights at below the applicable Conversion
Price (but the Company will in no event issue options or rights exercisable at
less than 85% of the Current Market Price at the date of grant) so long as the
granting of such options or rights has been approved by the full Board of
Directors or a committee of the Board of Directors on which the director
designated by the Purchaser is a member or (D) any option, warrant, right, or
convertible security outstanding as of May 1, 1997 (other than the Rights or
similar securities) shall not be deemed to constitute an issuance of Common
Stock or convertible securities by the Corporation to which this clause (ii)
applies. Upon the expiration unexercised of any options, warrants or rights to
convert any convertible securities for which an adjustment has been made
pursuant to this clause (ii), the adjustments shall forthwith be reversed to
effect such rate of conversion as would have been in effect at the time of such
expiration or termination had such options, warrants or rights or convertible
securities, to the extent outstanding immediately prior to such expiration or
termination, never been issued. Nothing herein shall limit the right of any
holder to an anti-dilution adjustment in the event that there shall occur a
"flip-in" or "flip-over" event under the Rights Agreement or any similar plan or
agreement of the Corporation. No adjustment shall be made pursuant to this
clause (ii) in connection with any transaction to which paragraph (g) applies.
(iii) In case the Corporation shall at any time or from time to time after
the Issue Date declare, order, pay or make a dividend or other distribution
(including, without
<PAGE>
limitation, any distribution of stock or other securities or property or rights
or warrants to subscribe for securities of the Corporation or any of its
Subsidiaries by way of dividend, including any distribution of shares or assets
of Metabasis Therapeutics, Inc. ("Metabasis") or Gensia Automedics, Inc.
("Automedics") and any payment or granting of anything of value in consideration
of the release of Pre-Closing Shareholder Claims, on its Common Stock, other
than dividends or distributions of shares of Common Stock which are referred to
in clause (i) of this paragraph (f), then, and in each such case, the Conversion
Ratio and the Conversion Price shall be adjusted so that the holder of each
share of Series A Preferred Stock shall be entitled to receive, upon the
conversion thereof, the number of shares of Common Stock determined by
multiplying (1) the applicable Conversion Ratio on the day immediately prior to
the record date fixed for the determination of stockholders entitled to receive
such dividend or distribution by (2) a fraction, the numerator of which shall be
the Current Market Price of the Common Stock for the period of 20 Trading Days
preceding such record date, and the denominator of which shall be such Current
Market Price of the Common Stock less the Fair Market Value (as defined in
Section 11) per share of Common Stock (as determined in good faith by the Board
of Directors and supported by an opinion from an investment banking firm of
recognized national standing acceptable to holders of a majority of the Series A
Preferred Stock) of such dividend or distribution. No adjustment shall be made
pursuant to this clause (iii) in connection with any transaction to which
paragraph (g) applies.
(iv) For purposes of this paragraph (f), the number of shares of Common
Stock at any time outstanding shall not include any shares of Common Stock then
owned or held by or for the account of the Corporation as well as any settlement
of Shareholder Litigation.
(v) The term "dividend," as used in this paragraph (f), shall mean a
dividend or other distribution upon stock of the Corporation including in
consideration of the release of claims by a shareholder against the Corporation.
(vi) Anything in this paragraph (f) to the contrary notwithstanding, the
Corporation shall not be required to give effect to any adjustment in the
Conversion Ratio (x) if such adjustment was previously taken into account in
determining the Conversion Ratio on the Issue Date, (y) if, in connection with
any event which would otherwise require an adjustment pursuant to this paragraph
(f), the holders of Series A Preferred Stock have received the dividend or
distribution to which such holders are entitled under Section 2 hereof or (z)
unless and until the net effect of one or more adjustments (each of which shall
be carried forward), determined as above provided, shall have resulted in a
change of the Conversion Ratio by at least one one-hundredth of one share of
Common Stock, and when the cumulative net effect of more than one adjustment so
determined shall be to change the Conversion Ratio by at least one one-hundredth
of one share of Common Stock, such change in Conversion Ratio shall thereupon be
given effect.
(vii) The certificate of any firm of independent public accountants of
recognized national standing selected by the Board of Directors of the
Corporation (which may be the firm of independent public accountants regularly
employed by the Corporation) shall be presumptively correct for any computation
made under this paragraph (f).
<PAGE>
(viii) If the Corporation shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the number of shares of Common
Stock issuable upon exercise of the right of conversion granted by this
paragraph (f) or in the Conversion Ratio or Conversion Price then in effect
shall be required by reason of the taking of such record.
(ix) If any event occurs as to which the provisions of this Section 8(f)
are not strictly applicable or if strictly applicable would not fairly protect
the rights of the holders of the Series A Preferred Stock in accordance with the
essential intent and principles of such provisions, the Board of Directors shall
make an adjustment in the application of such provisions, in accordance with
such essential intent and principles, so as to protect such rights of the
holders of the Series A Preferred Stock.
(x) In the case of any event which requires an adjustment to the
Conversion Ratio pursuant to this Section 8(f), the Conversion Price shall also
be appropriately adjusted to reflect such event.
(g) In the case of any consolidation or merger of the Corporation with or
into another corporation, or in case of any sale or conveyance to another
corporation of all or substantially all of the assets or property of the
Corporation (each of the foregoing being referred to as a "Transaction")
occurring in each case at any time, each share of Series A Preferred Stock then
outstanding shall thereafter be convertible into, in lieu of the Common Stock
issuable upon such conversion prior to consummation of such Transaction, the
kind and amount of shares of stock and other securities and property receivable
(including cash) upon the consummation of such Transaction by a holder of that
number of shares of Common Stock into which one share of Series A Preferred
Stock was convertible immediately prior to such Transaction. In case securities
or property other than Common Stock shall be issuable or deliverable upon
conversion as aforesaid, then all references in this Section 8 shall be deemed
to apply, so far as appropriate and nearly as may be, to such other securities
or property.
(h) In case at any time or from time to time the Corporation shall pay any
stock dividend or make any other non-cash distribution to the holders of its
Common Stock, or shall offer for subscription pro rata to the holders of its
Common Stock any additional shares of stock of any class or any other right, or
there shall be any capital reorganization or reclassification of the Common
Stock of the Corporation or consolidation or merger of the Corporation with or
into another corporation, or any sale or conveyance to another corporation of
the property of the Corporation as an entirety or substantially as an entirety,
or there shall be a voluntary or involuntary dissolution, liquidation or winding
up of the Corporation, then, in any one or more of said cases the Corporation
shall give at least 20 days' prior written notice (the time of mailing of such
notice shall be deemed to be the time of giving thereof) to the registered
holders of the Series A Preferred Stock at the addresses of each as shown on the
books of the Corporation maintained by the Transfer Agent thereof of the date on
which (i) a record shall be taken for such stock dividend, distribution or
<PAGE>
subscription rights or (ii) such reorganization, reclassification,
consolidation, merger, sale or conveyance, dissolution, liquidation or winding
up shall take place, as the case may be, provided that in the case of any
Transaction to which paragraph (g) applies the Corporation shall give at least
30 days' prior written notice as aforesaid. Such notice shall also specify the
date as of which the holders of the Common Stock of record shall participate in
said dividend, distribution or subscription rights or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale or conveyance
or participate in such dissolution, liquidation or winding up, as the case may
be. Failure to give such notice shall not invalidate any action so taken.
Section 9. Reports as to Adjustments. Upon any adjustment of the
-------------------------
Conversion Ratio then in effect and any increase or decrease in the number of
shares of Common Stock issuable upon the operation of the conversion provisions
set forth in Section 8, then, and in each such case, the Corporation shall
promptly deliver to the Transfer Agent of the Series A Preferred Stock and
Common Stock, a certificate signed by the President or a Vice President and by
the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Corporation setting forth in reasonable detail the event
requiring the adjustment and the method by which such adjustment was calculated
and specifying the Conversion Ratio then in effect following such adjustment and
the increased or decreased number of shares issuable upon the conversion granted
by Section 8, and shall set forth in reasonable detail the method of calculation
of each and a brief statement of the facts requiring such adjustment. Where
appropriate, such notice to holders of the Series A Preferred Stock may be given
in advance and included as part of the notice required under the provisions of
Section 8(h).
Section 10. Certain Covenants. Any registered holder of Series A
-----------------
Preferred Stock may proceed to protect and enforce its rights and the rights of
such holders by any available remedy by proceeding at law or in equity to
protect and enforce any such rights, whether for the specific enforcement of any
provision in this Certificate of Designation or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
Section 11. Definitions. For the purpose of this Certificate of
-----------
Designation of Series A Convertible Preferred Stock, the following terms shall
have the meanings indicated:
"Adjustment Period" shall mean the period of five consecutive trading
-----------------
days preceding the date as of which the Fair Market Value of a security is
to be determined.
"Affiliate" and "Associate" shall have the respective meanings
--------- ---------
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Exchange Act.
"Applicable Tax Rate" shall have the meaning set forth in Section
-------------------
6.18(a) of the Purchase Agreement.
"Beneficially Own" or "Beneficial Owners" with respect to any
---------------- -----------------
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule
<PAGE>
13d-3 under the Exchange Act), including pursuant to any agreement,
arrangement or understanding, whether or not in writing.
"Board of Directors" shall mean the board of directors of the
------------------
Corporation.
"Business Day" shall mean any day other than a Saturday, Sunday, or a
------------
day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
"Capitalized Lease" shall mean, with respect to any person, any lease
-----------------
or any other agreement for the use of property which, in accordance with
generally accepted accounting principals, should be capitalized on the
lessee's or user's balance sheet.
"Capitalized Lease Obligation" of any person shall mean and include,
----------------------------
as of any date as of which the amount thereof is to be determined, the
amount of the liability capitalized or disclosed (or which should be
disclosed) in a balance sheet of such person in respect of a Capitalized
Lease of such person.
"Change of Control" shall mean:
-----------------
(a) A "person" or "Group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act becoming, in the transaction or series of
related transactions, the Beneficial Owner of Voting Securities entitled to
exercise more than 60% of the total voting power of all outstanding Voting
Securities of the Company (including any Voting Securities that are not
then outstanding of which such person or Group is deemed the Beneficial
Owner); or
(b) liquidation of the Company; or
(c) a reorganization, merger or consolidation, in each case, with
respect to which (i) all or substantially all the individuals and entities
who were the respective Beneficial Owners of the Voting Securities of the
Company immediately prior to such reorganization, merger or consolidation
do not, following such reorganization, merger or consolidation Beneficially
Own, directly or indirectly, more than 50.1% of the combined voting power
of the then outstanding Voting Securities entitled to vote generally in the
election of directors of the corporation resulting from such
reorganization, merger or consolidation, or (ii) the shares of the
surviving corporation held by such holders are not, and immediately upon
issuance will not be, listed on a national securities exchange or quoted on
the NASDAQ Stock Market, or (iii) the shares of the Surviving Corporation
held by such holders are or will be subject to any right of repurchase by
the issuer thereof or any third-party or are otherwise subject to any
encumbrance as a result of such transaction; or
(d) the sale or other disposition of assets or property of the
Company in one transaction or series of related transactions having a book
value greater than 50% of
<PAGE>
the book value of the Company's total assets immediately preceding such
transaction; or
(e) a "Fundamental Change" within the meaning of paragraph (c) of
Section C8 of Article IV of the Company's Restated Certificate of
Incorporation.
"Commission" shall mean the Securities and Exchange Commission, and
----------
any successor agency.
"Contingent Warrant" shall have the meaning set forth in the Warrant
------------------
Agreement, dated as of the Closing Date (as defined in the Purchase
Agreement), between the Corporation and Health Care Capital Partners, L.P.
(the "Warrant").
"Conversion Price" shall mean the quotient obtained by dividing the
----------------
Stated Value by the Conversion Ratio in effect at the time.
"Conversion Ratio" shall mean the Conversion Ratio (as set forth in
----------------
the Purchase Agreement) in effect on the Issue Date for conversion into
Common Stock of the Notes, subject to adjustment as provided in Section
8(f).
"Cross-Default" shall mean (i) the Company or any Subsidiary (x) fails
-------------
to make any payment in respect of any Indebtedness, having an aggregate
principal amount (including undrawn committed or available amounts and
including amounts owing to all creditors under any combined or syndicated
credit arrangement) of more than $3,000,000 when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise) and such
failure continues after the applicable grace or notice period, if any,
specified in the relevant document on the date of such failure; or (y)
fails to perform or observe any other condition or covenant, or any other
event shall occur or condition exist, under any agreement or instrument
relating to any such Indebtedness, and such failure continues after the
applicable grace or notice period, if any, specified in the relevant
document on the date of such failure if the effect of such failure, event
or condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause such Indebtedness to be declared to be due and
payable prior to its stated maturity, or collateral in respect thereof to
be demanded; or (ii) there occurs under any Swap Contract an early
Termination Date (as defined in and provided for in any such Swap Contract
that is in the form of an ISDA Master Agreement) or equivalent termination
event (as provided in any other Swap Contract) resulting from (1) any event
of default under such Swap Contract as to which the Company or any
Subsidiary is the Defaulting Party (as defined in such Swap Contract) or
(2) any Termination Event (as so defined in such Swap Contract) as to which
the Company or any Subsidiary is an Affected Party (as so defined in such
Swap Contract), and, in either event, the Swap Termination Value owned by
the Company or such Subsidiary as a result thereof is greater than
$3,000,000.
<PAGE>
"Current Market Price," when used with reference to shares of Common
--------------------
Stock or other securities on any date, shall mean the closing price per
share of Common Stock or such other securities on such date and, when used
with reference to shares of Common Stock or other securities for any period
shall mean the average of the daily closing prices per share of Common
Stock or such other securities for such period. The closing price for each
day shall be the last quoted bid price in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or such other system then in use, or, if on any such date
the Common Stock or such other securities are not quoted by any such
organization, the closing bid price as furnished by a professional market
maker making a market in the Common Stock or such other securities selected
by the Board of Directors of the Corporation. If the Common Stock is
listed or admitted to trading on a national securities exchange, the
closing price shall be the closing bid price, regular way, as reported in
the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange or,
if the Common Stock or such other securities are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed
on the principal national securities exchange on which the Common Stock or
such other securities are listed or admitted to trading. If the Common
Stock or such other securities are not publicly held or so listed or
publicly traded, "Current Market Price" shall mean the Fair Market Value
per share of Common Stock or of such other securities as determined in good
faith by the Board of Directors of the Corporation based on an opinion of
an independent investment banking firm acceptable to holders of a majority
of the Series A Preferred Stock, which opinion may be based on such
assumptions as such firm shall deem to be necessary and appropriate.
"Current Warrant Price" shall have the meaning set forth in the
---------------------
Warrant.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, or any successor Federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934,
as amended, shall include reference to the comparable section, if any, of
any such successor Federal statute.
"Fair Market Value" shall mean, as to shares of Common Stock or any
-----------------
other class of capital stock or securities of the Corporation or any other
issuer which are publicly traded, the average of the Current Market Prices
of such shares of securities for each day of the Adjustment Period. The
"Fair Market Value" of any security which is not publicly traded or of any
other property shall mean the fair value thereof as determined by an
independent investment banking or appraisal firm experienced in the
valuation of such securities or property selected in good faith by the
Board of Directors of the Corporation or a committee thereof, or, if no
such investment banking or appraisal firm is in the good faith judgment of
the Board of Directors or such committee available to make such
determination, as determined in good faith by the Board of Directors of the
Corporation or such committee.
<PAGE>
"Guarantee" by any Person shall mean all obligations (other than
---------
endorsements in the ordinary course of business of negotiable instruments
for deposit or collection) of any Person guaranteeing, or in effect
guaranteeing, any Indebtedness, dividend or other obligation of any other
Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, all obligations incurred through
an agreement, contingent or otherwise, by such Person: (i) to purchase such
Indebtedness or obligation or any property or assets constituting security
therefor, (ii) to advance or supply funds (x) for the purchase or payment
of such Indebtedness or obligation, (y) to maintain working capital or
other balance sheet condition or otherwise to advance or make available
funds for the purchase or payment of such Indebtedness or obligation, (iii)
to lease property or to purchase securities or other property or services
primarily for the purpose of assuring the owner of such Indebtedness or
obligation of the ability of the primary obligor to make payment of such
Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of any computations made under this Agreement, a
Guarantee in respect of any Indebtedness for borrowed money shall be deemed
to be Indebtedness equal to the principal amount of the Indebtedness for
borrowed money which has been guaranteed, and a Guarantee in respect of any
other obligation or liability or any dividend shall be deemed to be
Indebtedness equal to the maximum aggregate amount of such obligation,
liability or dividend.
"Indebtedness" shall mean, with respect to any person, (i) all
------------
obligations of such person for borrowed money, or with respect to deposits
or advances of any kind, (ii) all obligations of such person evidenced by
bonds, debentures, notes or similar instruments, (iii) all obligations of
such person under conditional sale or other title retention agreements
relating to property purchased by such person, (iv) all obligations of such
person issued or assumed as the deferred purchase price of property or
services (other than accounts payable to suppliers and similar accrued
liabilities incurred in the ordinary course of business and paid in a
manner consistent with industry practice), (v) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any lien or security
interest on property owned or acquired by such person whether or not the
obligations secured thereby have been assumed, (vi) all Capitalized Lease
Obligations of such person, (vii) all Guarantees of such person, (viii) all
obligations (including but not limited to reimbursement obligations)
relating to the issuance of letters of credit for the account of such
person, (ix) all obligations arising out of foreign exchange contracts, and
(x) all Swap Contracts.
"Issue Date" means the date of issuance of the shares of Series A
----------
Preferred Stock upon conversion of the Notes.
"Junior Stock" shall mean any capital stock of the Corporation ranking
------------
junior (either as to dividends or upon liquidation, dissolution or winding
up) to the Series A Preferred Stock.
<PAGE>
"Liquidation Preference" with respect to a share of Series A Preferred
----------------------
Stock shall mean $100.00 per share, plus an amount equal to all accrued but
unpaid dividends.
"Parity Stock" shall mean any capital stock of the Corporation ranking
------------
on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock.
"Person" shall mean any individual, firm, corporation, partnership or
------
other entity, and shall include any successor (by merger or otherwise) of
such entity.
"Preferred Stock" shall mean the shares of Preferred Stock, par value
---------------
$.01 per share, of the Corporation.
"Purchase Agreement" shall mean the Securities Purchase Agreement,
------------------
dated as of May 1, 1997, between the Corporation and the Purchaser named
therein.
"Rights" shall mean the rights to purchase Preferred Stock issued
------
pursuant to the Stockholder Rights Agreement (the "Rights Agreement") dated
as of March 16, 1992, between the Corporation and ChaseMellon Shareholder
Services, L.L.C., as successor in interest to First Interstate Bank.
"Stated Value" with respect to the Series A Preferred Stock shall
------------
mean $100.00 per share.
"Subsidiary" of any Person means any corporation or other entity of
----------
which a majority of the voting power of the voting equity securities or
equity interest is owned, directly or indirectly, by such Person.
"Swap Contract" shall mean any agreement whether or not in writing,
-------------
relating to any transaction that is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap
or option, bond, note or bill option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, swaption, currency option or any other similar
transaction (including any option to enter into any of the foregoing) or
any combination of the foregoing, and, unless the context otherwise clearly
requires, any master agreement relating to or governing any or all of the
foregoing.
"Swap Termination Value" shall mean, in respect of any one or more
----------------------
Swap Contracts, after taking into account the effect of any legally
enforceable netting agreement relating to such Swap Contracts, (a) for any
date on or after the date such Swap Contracts have been closed out and
termination value(s) determined in accordance therewith, such termination
value(s), and (b) for any date prior to the date referenced in subclause
(a) the amount(s) determined as the mark-to-market value(s) for such Swap
Contracts, as determined by the Company based upon one or more mid-
<PAGE>
market or other readily available quotations provided by any recognized
dealer in such Swap Contracts.
"Trading Day" means a Business Day or, if the Common Stock is listed
-----------
or admitted to trading on any national securities exchange, a day on which
such exchange is open for the transaction of business.
"Voting Securities" shall mean at any time shares of any class of
-----------------
capital stock of the Company which are then entitled to vote generally in
the election of directors.
"Warrant Value" shall mean at any time an amount (not less than $0)
-------------
equal to the product of (i) the number of shares of Common Stock previously
issued upon exercise of the Contingent Warrants multiplied by (ii) an
amount equal to the difference between (A) the weighted average of the
Current Market Prices of such shares of Common Stock on the respective
exercise dates of such previously exercised Contingent Warrants less (B)
----
the weighted average of the Current Warrant Prices of such previously
exercised Contingent Warrants on their respective dates of exercise.
<PAGE>
IN WITNESS WHEREOF, the officers named below, acting for and on behalf
of Gensia Sicor Inc., have hereunto subscribed their names on this 15th day of
May, 1997.
GENSIA SICOR INC.
By: /s/ John W. Sayward
----------------------------------
Name: John W. Sayward
Title: Vice President, Finance,
Chief Financial Officer
and Treasurer
Attest:
By: /s/ Wesley N. Fach
--------------------------
Name: Wesley N. Fach
Title: Secretary
<PAGE>
EXHIBIT 4.1
AMENDMENT NO. 3 TO SHAREHOLDER'S AGREEMENT
------------------------------------------
AMENDMENT NO. 3 (the "Amendment"), dated as of May 19, 1997, to the
Shareholder's Agreement, dated as of November 12, 1996, as amended by Amendment
No. 1 dated as of December 16, 1996, and Amendment No. 2 dated as of February
28, 1997 (the "Agreement"), between Gensia Sicor Inc. (f/k/a Gensia, Inc.), a
corporation organized under the laws of Delaware (the "Company"), and Rakepoll
Finance N.V., a corporation organized under the laws of the Netherlands Antilles
("Rakepoll Finance").
W I T N E S S E T H :
WHEREAS, the Company and Rakepoll Finance are parties to the Agreement; and
WHEREAS, in connection with the investment in the Company by Health Care
Capital Partners L.P. ("HCCP"), pursuant to the certain Securities Purchase
Agreement, dated as of May 1, 1997, between HCCP and the Company (the "HCCP
Agreement") the Company and Rakepoll Finance wish to amend the Agreement, among
other things (i) to extend the lock-up period applicable to Rakepoll Finance to
parallel the lock-up period applicable to HCCP; (ii) to extend the period before
which Rakepoll Finance may exercise its registration rights under the Agreement
to parallel the analogous period applicable to HCCP; (iii) to modify the
registration rights of Rakepoll Finance to correspond to registration rights
afforded by the Company to HCCP in the HCCP Registration Rights Agreement, dated
as of May 1, 1997, and (iv) to provide for certain limitations to the incidental
registration rights of Rakepoll Finance, in each case as more fully set forth
herein and subject to the terms and conditions hereof; and
WHEREAS, Section 8.2(a) of the Agreement provides that the Agreement may be
amended in a writing signed by the Company and Rakepoll Finance;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Definitions: References. Capitalized terms used in this Amendment but
-----------------------
not defined herein shall have the meanings ascribed to them in the Agreement.
2. Amendment of Section 1.1(o). Section 1.1(o) of the Agreement is
---------------------------
hereby amended by deleting such section in its entirety and substituting in lieu
thereof the following:
"Lock-Up Period' means the period of time commencing at the Closing Date
--------------
and terminating on the date which is 18 months after the Closing Date."
-1-
<PAGE>
3. Amendment of Section 4.7. Section 4.7 of the Agreement is hereby
------------------------
amended by inserting immediately before the "." at the end thereof the
following:
", or (iii) pursuant to, or upon conversion or exercise of securities
issued pursuant to, the Securities Purchase Agreement, dated May 1, 1997,
between Health Care Capital Partners ("HCCP") and the Company".
4. Amendment of Section 6.1(a). Section 6.1(a) of the Agreement is
---------------------------
hereby amended by deleting from the first sentence thereof the words "first
anniversary of the Closing Date" appearing in the first and second lines thereof
and substituting in lieu thereof the words "termination of the Lock-Up Period".
5. Amendment of Section 6.2. Section 6.2 of the Agreement is hereby
------------------------
amended by deleting in its entirety the first sentence thereof and substituting
in lieu thereof the following:
"Subject to Section 6.7, if at any time after the termination of the Lock-
Up Period the Company proposes to file a registration statement under the
Securities Act (other than a registration statement on a Form S-4 or S-8 or
any successor or similar forms, or a registration effected pursuant to
Section 2.1 of the Registration Rights Agreement, dated as of May 1, 1997,
between HCCP and the Company (the "HCCP Registration Rights Agreement")
unless the Selling Holders (as defined in the HCCP Registration Rights
Agreement) holding at least a majority of the Registrable Securities (as
defined in the HCCP Registration Rights Agreement) included in such
registration shall have provided their written consent to the inclusion of
such Registrable Securities (as defined in the HCCP Registration Rights
Agreement) in such registration) on any form that would permit the
registration of the Registrable Securities, whether or not such filing is
to be on its behalf, each such time the Company shall give to each Holder
prompt written notice of such determination setting forth the date on which
the Company proposes to file such registration statement, which date shall
be no earlier than twenty-one days from the date of such notice, and
advising each Holder of its right under this Section 6.2 to have
Registrable Securities included in such registration".
6. Full Force and Effect. Except as modified, amended or supplemented
---------------------
above, all rights, terms and conditions of the Agreement shall remain in full
force and effect.
-2-
<PAGE>
7. Conditions to Effectiveness of this Amendment. This Amendment shall
---------------------------------------------
become effective when (a) HCCP and the Company shall have executed and delivered
all documents necessary to effect the investment in the Company by HCCP,
including, without limitation, the HCCP Agreement; (b) the Company shall have
received the Purchase Price (as defined in the HCCP Agreement); (c) the Company
shall have issued to HCCP the Notes and Warrants (each as defined in the HCCP
Agreement) in accordance with the terms of the HCCP Agreement, and (d) it shall
have been executed and delivered by each of the Company and Rakepoll Finance.
8. Governing Law. This Amendment shall be governed by and construed
-------------
under the laws of the State of New York (irrespective of its choice of law
principles).
9. Counterparts. This Amendment may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment to the
Agreement as of the date first written above.
GENSIA SICOR INC.
By:/s/ David F. Hale
---------------------------
David F. Hale
President
RAKEPOLL FINANCE N.V.
By: /s/ Carlo Salvi
---------------------------
Carlo Salvi
Chairman of the Board
-4-
<PAGE>
EXHIBIT 4.2
SECURITIES PURCHASE AGREEMENT
BETWEEN
GENSIA SICOR INC.
AND
HEALTH CARE CAPITAL PARTNERS L.P.
Dated as of May 1, 1997
-1-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Issuance and Sale of Notes and Warrants................................. 1
---------------------------------------
1.1. Issuance, Purchase and Sale of Notes and Warrants.................. 1
1.2. Closing............................................................ 1
1.3. Conditions to Closing.............................................. 2
1.4. Deliveries at Closing.............................................. 3
1.5. Definitions........................................................ 3
1.6. Transaction Fee.................................................... 3
2. Representations and Warranties of the Company........................... 4
---------------------------------------------
2.1. Organization and Qualification..................................... 4
2.2. Due Authorization.................................................. 4
2.3. Subsidiaries....................................................... 4
2.4. SEC Reports........................................................ 5
2.5. Financial Statements............................................... 5
2.6. Actions Pending; Compliance with Laws.............................. 6
2.7. Title to Properties; Insurance..................................... 7
2.8. Governmental Consents, etc......................................... 7
2.9. Holding Company Act and Investment Company Act..................... 7
2.10. Taxes............................................................. 8
2.11. Conflicting Agreements and Charter Provisions..................... 8
2.12. Capitalization.................................................... 8
2.13. Disclosure........................................................ 9
2.14. Status of Securities.............................................. 10
2.15. Registration Under Exchange Act................................... 10
2.16. ERISA............................................................. 10
2.17. Possession of Franchises, Licenses, etc........................... 10
2.18. Environmental Matters............................................. 11
2.19. Certain Agreements................................................ 11
2.20. Offering of Notes and Warrants.................................... 13
2.21. Use of Proceeds................................................... 13
2.22. Unlawful Use of Proceeds.......................................... 13
2.23. Product Warranties and Liabilities................................ 13
2.24. [Reserved]........................................................ 14
2.25. Intellectual Property Rights...................................... 14
2.26. Related Transactions.............................................. 15
2.27. No Brokerage or Finder's Fees..................................... 15
3. Representations and Warranties of the Purchaser......................... 15
-----------------------------------------------
3.1. Organization and Qualification..................................... 15
3.2. Due Authorization................................................. 16
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
3.3. Conflicting Agreements and Other Matters........................... 16
3.4. Acquisition for Investment......................................... 16
3.5. Brokers or Finders................................................. 16
3.6. Accredited Investor................................................ 17
3.7. HSR Notification................................................... 17
4. Registration, Exchange and Transfer of Notes............................ 17
--------------------------------------------
4.1. Authorized Denominations of Notes.................................. 17
4.2. The Note Register; Persons Deemed Owners........................... 17
4.3. Issuance of New Notes Upon Exchange or Transfer.................... 17
4.4. Lost, Stolen, Damaged and Destroyed Notes.......................... 18
5. Payment of Notes........................................................ 18
---------------
5.1. Home Office Payment................................................ 18
5.2. Limitation on Interest............................................. 18
5.3. No Prepayment...................................................... 19
5.4. Interest........................................................... 19
6. Covenants of the Company................................................ 19
------------------------
6.1. Financial Covenants................................................ 19
6.2. Limitation on Convertible Securities............................... 20
6.3. Merger............................................................. 20
6.4. Dividends and Distributions........................................ 21
6.5. Compliance with Laws............................................... 21
6.6. Limitation on Agreements........................................... 22
6.7. Preservation of Franchises and Existence........................... 22
6.8. Insurance.......................................................... 22
6.9. Payment of Taxes and Other Charges................................. 23
6.10. [Reserved]........................................................ 23
6.11. [Reserved]........................................................ 23
6.12. Financial Statements and Other Reports............................ 23
6.13. Inspection of Property............................................ 24
6.14. Board Membership.................................................. 25
6.15. Lost, Stolen, Damaged and Destroyed Stock Certificates............ 25
6.16. [Reserved]........................................................ 26
6.17. HSR............................................................... 26
6.18. Certain Tax Matters............................................... 26
6.19. Certain Additional Payments Following Redemption
under Certain Circumstances....................................... 28
6.20. Notice of Breach.................................................. 29
6.21. Limitation on Transactions with Affiliates........................ 29
7. Covenants of the Purchaser.............................................. 29
--------------------------
7.1. Nondisclosure of Confidential Information.......................... 29
8. Events of Default and Remedies.......................................... 31
------------------------------
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
8.1. Events of Default.................................................. 31
8.2. Acceleration of Maturity........................................... 32
8.3. Other Remedies..................................................... 33
8.4. Conduct No Waiver; Collection Expenses............................. 34
8.5. Annulment of Acceleration.......................................... 34
8.6. Remedies Cumulative................................................ 34
8.7. Limitations........................................................ 35
9. Redemption.............................................................. 35
----------
9.1. Optional Redemption................................................ 35
9.2. Mandatory Redemption.............................................. 35
9.3. Change of Control.................................................. 35
9.4. Redemption Procedures.............................................. 36
10. Conversion............................................................... 36
----------
10.1. Holder's Option to Convert into Preferred Stock................... 36
10.2. Holder's Option to Convert into Common Stock...................... 36
10.3. Company's Option to Convert....................................... 37
10.4. Exercise of Conversion Privilege.................................. 37
10.5. Fractions of Shares; Interest..................................... 38
10.6. Reservation of Stock.............................................. 39
10.7. Adjustment of Conversion Ratio.................................... 39
10.8. Merger or Consolidation........................................... 43
10.9. Notice of Certain Corporate Actions............................... 43
10.10. Reports as to Adjustments........................................ 44
11. Subordination of Notes................................................... 44
----------------------
11.1. Subordination of Notes to Senior Indebtedness..................... 44
11.2. Proofs of Claim of Holders of Senior Indebtedness; Voting......... 47
11.3. Rights of Holders of Senior Indebtedness Unimpaired............... 47
11.4. Effects of Event of Default....................................... 48
11.5. Company's Obligations Unimpaired.................................. 48
11.6. Subrogation....................................................... 48
12. Interpretation........................................................... 48
--------------
12.1. Definitions....................................................... 48
12.2. Accounting Principles............................................. 59
13. Miscellaneous............................................................ 59
-------------
13.1. Payments.......................................................... 59
13.2. Severability...................................................... 59
13.3. Specific Enforcement.............................................. 60
13.4. Entire Agreement.................................................. 60
13.5. Counterparts...................................................... 60
13.6. Notices and Other Communications.................................. 60
13.7. Amendments........................................................ 61
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
13.8. Cooperation....................................................... 61
13.9. Successors and Assigns............................................ 62
13.10. Expenses and Remedies............................................ 62
13.11. Survival of Representations and Warranties....................... 64
13.12. Transfer of Securities........................................... 64
13.13. Governing Law.................................................... 64
13.14. Term............................................................. 64
13.15. Publicity........................................................ 64
13.16. Signatures....................................................... 65
</TABLE>
-iv-
<PAGE>
SCHEDULES
---------
Schedule 2.3 Subsidiaries of the Company
Schedule 2.5(a) Financial Statements
Schedule 2.7 Insurance Policies
Schedule 2.12 Options and Warrants Outstanding
Schedule 2.16 ERISA
Schedule 2.19(a) Certain Agreements
Schedule 2.19(b) Related Agreements
Schedule 2.23 Product Warranty and Liability Matters
Schedule 2.25 Intellectual Property Rights Matters
Schedule 2.26 Related Transactions
EXHIBITS
--------
Exhibit A Form of Note
Exhibit B Form of Warrant
Exhibit C Opinion Matters of Pillsbury Madison & Sutro LLP
Exhibit D Form of Registration Rights Agreement
Exhibit E Certificate of Designation of Preferred Stock
Exhibit F Form of Amendment to Shareholder's Agreement
-v-
<PAGE>
THIS SECURITIES PURCHASE AGREEMENT, dated as of May 1, 1997 (this
"Agreement"), between Gensia Sicor Inc., a Delaware corporation (the "Company"),
and Health Care Capital Partners L.P., a Delaware limited partnership (the
"Purchaser").
WHEREAS, the Purchaser wishes to purchase from the Company, and the
Company wishes to sell to the Purchaser, 2.675% Subordinated Convertible Notes
due May 1, 2004 (the "Notes") in the aggregate principal amount set forth herein
and warrants (the "Warrants") to purchase shares of the Company's Common Stock,
par value $.01 (the "Common Stock"), upon the terms set forth herein;
WHEREAS, the Notes shall be convertible (under the circumstances
described herein) into the Company's Series A Convertible Preferred Stock, par
value $.01 per share (the "Preferred Stock") and the Common Stock; the Notes and
the Warrants are referred to collectively as the "Purchased Securities"; the
Notes, the Warrants and the Preferred Stock are referred to collectively as the
"Convertible Securities"; and the Convertible Securities and the Common Stock
are referred to collectively as the "Securities"; and
WHEREAS, the Purchaser and the Company desire to provide for such
purchase and sale and to establish various rights and obligations in connection
therewith.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto agree as follows:
1. Issuance and Sale of Notes and Warrants
---------------------------------------
1.1. Issuance, Purchase and Sale of Notes and Warrants. Upon the terms
-------------------------------------------------
set forth herein, the Company will sell to the Purchaser, and the Purchaser will
purchase from the Company, Notes in the aggregate principal amount of
$20,000,000 (the "Initial Principal Balance") and Notes and the Warrants
referred to collectively as the "Purchase Price"). Each Note shall be in the
form of Exhibit A hereto and the Warrants shall be in the form set forth in
Exhibit B hereto. The initial Conversion Price of the Notes shall be $3.78 per
share. The Warrants shall be initially exercisable at a price equal to $4.347
per share.
1.2. Closing. The closing of the transactions contemplated hereby
-------
(the "Closing") will take place at the offices of Fried, Frank, Harris, Shriver
& Jacobson, New York, New York, at 9:00 a.m. on May 16, 1997 or on such other
date as shall be mutually agreed by the Company and the Purchaser (the "Closing
Date").
<PAGE>
1.3. Conditions to Closing. (a) The obligations of the Company and
---------------------
the Purchaser to consummate the transactions contemplated hereby at the Closing
are subject to the satisfaction of the following conditions: no temporary
restraining order, preliminary or permanent injunction or other order or decree
which prevents the consummation of the transactions contemplated hereby shall
have been issued and remain in effect, and no statutes, rule or regulation shall
have been enacted by any governmental authority (of the United States or
otherwise) which prevents the consummation of the transactions contemplated
hereby; provided, however, that the parties shall use their reasonable best
-------- -------
efforts to cause any such decree, ruling, injunction or other order to be
vacated or lifted.
(b) The obligations of the Purchaser to consummate the
transactions contemplated hereby at the Closing is subject to the satisfaction
or waiver of the following conditions:
(i) the representations and warranties of the Company
set forth in Section 2 of this Agreement shall be true and correct in
all material respects as of the date when made and (unless made as of
a specified date) as of the Closing Date; and the Company shall have
performed in all material respects its covenants set forth in this
Agreement to be performed prior to the Closing Date and shall not have
taken any action which (if any shares of Preferred Stock or the Notes
were outstanding) would violate any provision of the Certificate of
Designation or this Agreement, as the case may be (and at the Closing
the Company shall deliver to the Purchaser an officer's certificate
certifying as to the Company's compliance with the conditions set
forth in this clause (i));
(ii) Pillsbury Madison & Sutro LLP, counsel to the
Company, shall have delivered to the Purchaser an opinion dated the
Closing Date with respect to the matters set forth in Exhibit C
hereto;
(iii) at the Closing, the Company shall have executed a
registration rights agreement in the form of Exhibit D hereto (the
"Registration Rights Agreement");
(iv) the Company and the Purchaser shall have entered
into a warrant agreement in the form of Exhibit B hereto (the "Warrant
Agreement");
(v) prior to the Closing, the Restated Certificate of
Incorporation of the Company, as amended, shall have been amended and
supplemented by the Certificate of Designation substantially in the
form of Exhibit E hereto setting forth the rights and preferences of
the Preferred Stock (the
-2-
<PAGE>
"Certificate of Designation"), and the Certificate of Designation shall
have been filed with the Secretary of State of the State of Delaware in
accordance with the General Corporation Law ("GCL") of the State of
Delaware (the Certificate of Incorporation, as amended, including such
Certificate of Designation, the "Certificate of Incorporation");
(vi) at or prior to the Closing, the Company and Rakepoll
Finance, N.V. ("Rakepoll Finance") shall have entered into an amendment to
the Shareholder's Agreement, dated November 12, 1996, as amended December
21, 1996 and February 28, 1997, between the Company and Rakepoll Finance
(the "Shareholder's Agreement") in the form attached as Exhibit G (the
"Rakepoll Finance Consent");
(vii) the Common Stock to be issued upon conversion of the Notes
or Preferred Stock, as the case may be, or upon exercise of the Warrant
shall have been approved for quotation on the Nasdaq Stock Market, subject
to official notice of issuance; and
(viii) the Purchaser shall have received funding from its limited
partners pursuant to its capital call sufficient to fund the transactions
contemplated hereby.
1.4. Deliveries at Closing. At the Closing, the Company shall
---------------------
deliver to the Purchaser, against payment in full of the Purchase Price,
(a) Notes in such denominations as the Purchaser has requested, dated the
Closing Date hereof and registered in the names requested by the Purchaser, in
an aggregate principal amount corresponding to the Initial Principal Balance and
(b) the Warrants.
The Closing of the purchase and sale of the Purchased Securities
shall be deemed to have taken place in the State of New York.
1.5. Definitions. Certain capitalized terms used in this Agreement
-----------
are defined in Section 12 hereof.
1.6. Transaction Fee. The Company shall pay the general partner of
---------------
the Purchaser on the date hereof a transaction fee of $500,000 by wire transfer
to an account specified by the Purchaser.
-3-
<PAGE>
2. Representations and Warranties of the Company
---------------------------------------------
The Company represents and warrants as of the date hereof as follows:
2.1. Organization and Qualification. Each of the Company and its
------------------------------
Subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated and has the power to
own its respective property and to carry on its respective business as now being
conducted. Each of the Company and its Subsidiaries is duly qualified as a
foreign corporation to do business and in good standing in every jurisdiction in
which the nature of the respective business conducted or property owned by it
makes such qualification necessary and where the failure so to qualify would
have a material adverse effect on the properties, business, results of
operations, prospects or condition (financial or otherwise) of the Company and
its Subsidiaries taken as a whole (a "Material Adverse Effect").
2.2. Due Authorization. The execution and delivery of this
-----------------
Agreement, the Registration Rights Agreement and the Warrant Agreement and the
issuance and sale of the Purchased Securities by the Company and compliance by
the Company with all the provisions of this Agreement, the Registration Rights
Agreement, the Warrant Agreement, the Certificate of Designation and the
Convertible Securities (i) are within the corporate power and authority of the
Company; (ii) except for the Rakepoll Finance Consent, do not or will not
require the approval or consent of the stockholders of the Company; and (iii)
have been authorized by all requisite corporate proceedings on the part of the
Company. This Agreement, the Registration Rights Agreement and the Warrant
Agreement have been duly executed and delivered by the Company and constitute
valid and binding agreements of the Company, enforceable in accordance with
their respective terms, except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights, and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought. The Company has furnished to the
Purchaser true and correct copies of the Company's Certificate of Incorporation
and By-laws as in effect on the date of this Agreement. Prior to the Closing,
the Certificate of Designation will have been filed with the Secretary of State
of the State of Delaware in accordance with the GCL.
2.3. Subsidiaries. The Subsidiaries of the Company, together with
------------
their jurisdiction of incorporation, are as set forth on Schedule 2.3 hereto.
2.4. SEC Reports
-----------
-4-
<PAGE>
The Company has filed all registration statements, proxy statements,
reports and other documents required to be filed by it under the Securities Act
and the Exchange Act since January 1, 1994; and the Company has furnished the
Purchaser copies of its Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (the "1996 Form 10-K") and all proxy statement filings
(including the definitive proxy statement, dated January 15, 1997 (the "Proxy
Statement"), filed by the Company in connection with the stock exchange between
the Company and Rakepoll Finance), registration statements and reports under the
Securities Act and the Exchange Act filed by the Company after such date, each
as filed with the Commission (collectively, the "SEC Reports"). Each SEC Report
was in substantial compliance with the requirements of its respective report
form and did not on the date of filing 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 the light of the circumstances
under which they were made, not misleading and as of the date hereof there is no
fact not disclosed in the SEC Reports which is peculiar to the Company and which
materially adversely affects the properties, business, results of operations,
prospects or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole.
2.5. Financial Statements. (a) Attached hereto as Schedule 2.5(a) are
--------------------
true and correct copies of: (i) the audited consolidated balance sheet and
statements of operations, stockholders' equity and cash flows of the Company for
the year ended December 31, 1996 (including the related notes thereto), together
with the unqualified report of Ernst & Young LLP ("E&Y") and (ii) the audited
consolidated balance sheet and statements of operations, stockholder's equity
and cash flow of Rakepoll Holding B.V. ("Rakepoll") and its subsidiaries for the
year ended December 31, 1996 (including the related notes thereto), together
with the unqualified report of KPMG Peat Marwick LLP thereon (such financial
statements of Rakepoll and those referred to in clause (i), the "1996 Financial
Statements").
(b) The 1996 Financial Statements and the financial
statements included in the SEC Reports (including any related schedules and/or
notes) have been prepared in accordance with generally accepted accounting
principles consistently followed (except as indicated in the notes thereto)
throughout the periods involved and fairly present the consolidated financial
condition, results of operations and changes in stockholders' equity of the
Company and its Subsidiaries or Rakepoll and its Subsidiaries, as the case may
be, as of the dates thereof and for the periods ended on such dates (in each
case subject, as to interim statements, to changes resulting from year-end
adjustments, none of which will be material in amount or effect), and the
Company has no material liabilities or obligations, contingent or otherwise, not
reserved against or otherwise disclosed in the1996 Financial Statements, other
than any such liabilities which are not material and were incurred in the
ordinary course of business since December 31,
-5-
<PAGE>
1996. The pro forma financial statements of the Company and its Subsidiaries
giving effect to the acquisition of Rakepoll and its Subsidiaries and the
related notes thereto included in the Proxy Statement present fairly the
information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial statements
and have been properly compiled on the bases described therein, and the
assumptions used in the preparation thereof are reasonable and the adjustments
used therein, including the valuation adjustments, are appropriate to give
effect to the transactions and circumstances referred to therein. Since December
31, 1996, the Company and its Subsidiaries have operated their respective
businesses only in the ordinary course and there has been no material adverse
change in the properties, business, results of operation, prospects or condition
(financial or otherwise) of the Company and the Subsidiaries taken as a whole,
other than changes disclosed or referred to in the SEC Reports or the 1996
Financial Statements, and provided that an adverse decision by the Food and Drug
Administration in respect of the Company's New Drug Application for the GenESA
System shall not be deemed to be a material adverse change for purposes of this
Agreement.
2.6. Actions Pending; Compliance with Laws.
--------------------------------------
There is no action, suit, investigation or proceeding pending or, to
the knowledge of the Company, threatened by any public official or governmental
authority, against the Company or any of its Subsidiaries or any of their
respective properties or assets by or before any court, arbitrator or
governmental body, department, commission, board, bureau, agency or
instrumentality (collectively, "Litigation"), which questions the validity or
enforceability of, or seeks to enjoin or invalidate this Agreement, the
Registration Rights Agreement, the Warrant Agreement, the Certificate of
Designation or the Convertible Securities or any action taken or to be taken
pursuant hereto or thereto, or, except as set forth in the SEC Reports or the
1996 Financial Statements, which is reasonably likely to result in any Material
Adverse Effect, and neither the Company nor any of its Subsidiaries is in
default in any material respect with respect to any judgment, order, writ,
injunction, decree or award. To the knowledge of the Company, the Company and
each Subsidiary is in material compliance with, and at all times since December
31, 1992 has been in material compliance with, all applicable federal, state,
local and foreign laws, statutes, orders, rules, regulations, policies or
guidelines promulgated, or judgments, decisions or orders entered by any
governmental authority (collectively, "Applicable Laws") relating to the Company
or any Subsidiary or their respective business or properties, including, without
limitation, social security laws, workers' protection laws, laws regarding the
provision of insurance, third party administration and primary health care
services, good manufacturing practices of the Food and Drug Administration (the
"FDA"), the Prescription Drug Marketing Act, the Federal Controlled Substances
Act of 1970, the Food, Drug and Cosmetic Act, any federal or state Pharmacy
Practice Acts, Controlled Substance Acts, Dangerous Drugs Acts and Food, Drug
and Cosmetic Acts, the
-6-
<PAGE>
Occupational Safety and Health Act and the regulations promulgated thereunder
("OSHA"), the Foreign Corrupt Practices Act (the "FCPA") and all rules of
professional conduct applicable to the Company or any Subsidiary by which any of
its properties are bound or subject, except where the failure to be in
compliance therewith could not reasonably be expected to have a Material Adverse
Effect.
2.7. Title to Properties; Insurance. The Company and its
-------------------------------
Subsidiaries have good and valid title to, or, in the case of property leased by
any of them as lessee, a valid and subsisting leasehold interest in, their
respective properties and assets, free of all liens and encumbrances other than
those referred to in the 1996 Financial Statements, except in each case for such
defects in title and such other liens and encumbrances which are disclosed in
the SEC Reports or the 1996 Financial Statements or which do not in the
aggregate materially detract from the value to the Company of the properties and
assets of the Company and its Subsidiaries taken as a whole. The Company and its
Subsidiaries maintain insurance in such amounts, including self-insurance,
retainage and deductible arrangements, and of such a character as is reasonable
for companies engaged in the same or similar business, including directors' and
officers' liability and product liability insurance. Schedule 2.7 sets forth a
complete and correct list of all such policies, including the amount of all
policy limits and deductibles.
2.8. Governmental Consents, etc. The Company is not required to
--------------------------
obtain any consent, approval or authorization of, or to make any declaration or
filing with, any governmental authority as a condition to or in connection with
the valid execution, delivery and performance of this Agreement, the
Registration Rights Agreement and the Warrant Agreement and the valid offer,
issue, sale or delivery of the Securities, or the performance by the Company of
its obligations in respect thereof, except for the filing with the Secretary of
State of the State of Delaware of the Certificate of Designation which will have
been made prior to the Closing Date, any filings required to effect any
registration pursuant to the Registration Rights Agreement, and any filings
required pursuant to state and federal securities laws which will be timely made
after the Closing hereunder.
2.9. Holding Company Act and Investment Company Act. Neither the
----------------------------------------------
Company nor any Subsidiary is: (i) a "public utility company" or a "holding
company," or an "affiliate" or a "subsidiary company" of a "holding company," or
an "affiliate" of such a "subsidiary company," as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended, or (ii) a "public
utility," as defined in the Federal Power Act, as amended, or (iii) an
"investment company" or an "affiliated person" thereof or an "affiliated person"
of any such "affiliated person," as such terms are defined in the Investment
Company Act of 1940, as amended.
-7-
<PAGE>
2.10. Taxes. The representations set forth in Sections 2.6 and 3.7
-----
of the Stock Exchange Agreement, including items disclosed in the applicable
sections of the Gensia Disclosure Schedules and the Rakepoll Disclosure Schedule
thereto, are true.
2.11. Conflicting Agreements and Charter Provisions. None of (i) the
---------------------------------------------
execution and delivery of this Agreement, the Registration Rights Agreement and
the Warrant Agreement and the issuance of the Securities, (ii) the fulfillment
of and compliance with the terms and provisions hereof and thereof and of the
Securities, (iii) the payment of dividends, if any, on shares of Preferred Stock
and the redemption of the Notes and Preferred Stock as contemplated by the
Governing Instruments out of funds legally available therefor, and (iv) the
conversion or exercise, as the case may be, of the Convertible Securities as
contemplated by the Governing Instruments will conflict with or result in a
breach of the terms, conditions or provisions of, or give rise to a right of
termination under, or constitute a default under, or result in any violation of,
the Certificate of Incorporation or By-laws of the Company or any mortgage,
agreement, instrument, order, judgment, decree, statute, law, rule or
regulations to which the Company or any of its Subsidiaries or any of their
respective property is subject. Neither the Company nor any of its Subsidiaries
is in default under any outstanding indenture or other debt instrument or with
respect to the payment of principal of or interest on any outstanding obligation
for borrowed money, is in default under any of their respective contracts or
agreements, or under any instrument by which the Company or any of its
Subsidiaries is bound, in each case which default materially and adversely
affects the properties, business, results of operations, prospects or condition
(financial or otherwise) of the Company and its Subsidiaries taken as a whole.
2.12. Capitalization. As of April 15, 1997, the authorized capital
--------------
stock of the Company consists solely of (a) 125,000,000 shares of the Common
Stock of which (i) 74,338,932 shares are issued and outstanding and
(ii) 11,656,248 shares were reserved for issuance upon the exercise of options
or warrants granted or issuable by the Company or pursuant to the Company's
Employee Stock Purchase Plan or pursuant to conversion of outstanding
convertible securities of the Company; and (b) 5,000,000 shares of preferred
stock, $.01 per share, of which (i) 1,840,000 shares have been designated as
$3.75 Convertible Exchangeable Preferred Stock of which 1,600,000 shares were
issued and outstanding or reserved for issuance, and (ii) 125,000 shares have
been designated as Series I Participating Preferred Stock, none of which were
issued or outstanding, all of which were reserved for issuance under the Gensia
Preferred Stock Purchase Rights. All of the outstanding shares of Common Stock
have been validly issued and are fully paid and nonassessable. No class of
capital stock of the Company is entitled to preemptive or similar rights. Except
for the securities referred to in the first sentence of this Section 2.12 and
the options and warrants listed on Schedule 2.12 hereto, there are no
outstanding subscriptions, options, warrants, puts, calls, scrip, rights to
subscribe to, calls or
-8-
<PAGE>
commitments of any character whatsoever relating to, or securities or rights
convertible into, shares of any class of capital stock of the Company, or
contracts, commitments, understandings, or arrangements by which the Company is
or may become bound to issue additional shares of its capital stock or options,
warrants or rights to purchase or acquire any shares of its capital stock. Since
April 15, 1997, the Company has not, and between the date hereof and the Closing
Date the Company will not, issue any additional shares of capital stock, other
than pursuant to the exercise of outstanding stock options or warrants or
pursuant to the Company's Employee Stock Purchase Plan or pursuant to the
conversion of the Company's outstanding convertible securities or as
contemplated by Schedule 2.12. Except as disclosed in the SEC Reports or the
1996 Financial Statements, all dividends on all series of preferred stock have
been paid in full. Except as set forth in Schedule 2.12, the Company has not
agreed to register any securities under the Securities Act or under any state
securities law or granted registration rights to any person or entity. Except
for the Shareholder's Agreement, there are no voting trusts, stockholders
agreements, proxies or other similar agreements or understandings in effect to
which the Company is a party or of which it has knowledge with respect to the
voting or transfer of any of the shares of Common Stock other than a letter
agreement with the State of Wisconsin Investment Board obligating the Company to
obtain stockholder approval for any proposed repricing of stock options. To the
extent that any rights, options or warrants to acquire any securities of the
Company are outstanding, none of (i) the issuance and sale of the Purchased
Securities pursuant to this Agreement, (ii) the conversion of the Notes into
Preferred Stock or (iii) the issuance of the Common Stock upon conversion of the
Notes or the Preferred Stock or upon exercise of the Warrants will result in an
adjustment of the exercise price or number of shares issuable upon the exercise
in respect of any such rights, options or warrants.
2.13. Disclosure. Neither this Agreement nor any certificate,
----------
instrument or written statement furnished or made to the Purchaser by or on
behalf of the Company in connection with this Agreement contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein misleading. There is
no fact which the Company has not disclosed to the Purchaser or its counsel in
writing and of which the Company is aware which materially and adversely affects
or which could reasonably be expected to have a Material Adverse Effect or
materially and adversely affect the ability of the Company to perform its
obligations under this Agreement.
2.14. Status of Securities. The Securities have been duly authorized
--------------------
by all necessary corporate action on the part of the Company (no consent or
approval of stockholders being required by law, the Certificate of Incorporation
or the By-laws of the Company or otherwise), and the Preferred Stock or Common
Stock, as the case may be, issuable upon conversion of the Notes and the
Preferred Stock and the exercise of the
-9-
<PAGE>
Warrants, as the case may be, will be validly issued and outstanding, fully paid
and nonassessable, and the issuance of such Preferred Stock or Common Stock is
not and will not be subject to preemptive rights of any other stockholder of the
Company. Such shares of Preferred Stock and such shares of Common Stock have
been validly reserved for issuance.
2.15. Registration Under Exchange Act. The Company has not
-------------------------------
registered the Notes, the Warrants or the Preferred Stock as a class pursuant to
Section 12 of the Exchange Act. Neither the Notes, the Warrants nor the
Preferred Stock will be registered as such class and such registration is not
required except as otherwise required by the provisions of the Registration
Rights Agreement.
2.16. ERISA. Except as set forth in Schedule 2.16, the
-----
representations and warranties contained in Section 2.14(a)-(j) (substituting,
however, "Gensia Plans" for "Employee Plans" in Section 2.14(j) each time it
appears therein) and Section 3.14(a)-(g) of the Stock Exchange Agreement, which
incorporate the respective applicable sections of the Gensia Disclosure Schedule
and the Rakepoll Disclosure Schedule, are true and correct in all material
respects as if made as of the date hereof and will be true and correct as of the
Closing Date. Rakepoll and its Subsidiaries have complied in all material
respects with all laws applicable to their Employee Benefit Plans and their
employees. Except as set forth in Schedule 2.16, Schedule 2.14(h) of the Gensia
Disclosure Schedule and Schedule 3.14(h) of the Rakepoll Disclosure Schedule set
forth all material compensatory arrangements between the Company, Rakepoll or
any Subsidiary of the Company or Rakepoll and any of its or their employees,
officers or directors.
2.17. Possession of Franchises, Licenses, etc. The Company and its
----------------------------------------
Subsidiaries possess all franchises, certificates, licenses, permits and other
authorizations from governmental or political subdivisions or regulatory
authorities and all patents, trademarks, service marks, trade names, copyrights,
licenses and other rights, free from burdensome restrictions, that are necessary
in any material respect to the Company and its Subsidiaries taken as a whole for
the ownership, maintenance and operation of their respective properties and
assets, and neither the Company nor any of its Subsidiaries is in violation of
any thereof in any material respect.
2.18. Environmental Matters. Except as listed in Section 2.22 to the
---------------------
Gensia Disclosure Schedule or Section 3.22 to the Rakepoll Disclosure Schedule:
(a) There are, with respect to the Company and each
Subsidiary, or any predecessor of the foregoing, no past or present material
violations of Environmental Law, nor any actions, activities, circumstances,
conditions, events, incidents, or contractual obligations which may give rise to
any liability pursuant to any
10
<PAGE>
Environmental Law and neither the Company nor any of its Subsidiaries has
received any notice with respect to any of the foregoing, nor is any Litigation
pending or threatened in connection with any of the foregoing.
(b) No Hazardous Materials are present on or about any real
property currently owned, leased or used by the Company or any of its
Subsidiaries and no Hazardous Materials were present on or about any real
property previously owned, leased or used by the Company or any its Subsidiaries
during the period the property was owned, leased or used by the Company or any
of its Subsidiaries, except in the normal course of the Company's or any such
Subsidiary's business.
(c) No Hazardous Materials have been released on or about, or
where they may pose a threat of migration to, any real property currently owned,
leased or used by the Company or any of its Subsidiaries and no Hazardous
Materials were released on or about any real property previously owned, leased
or used by the Company or any of its Subsidiaries during the period the property
was owned, leased or used by the Company or any of its Subsidiaries, except as
may be required in the normal course of business and in material compliance with
applicable Environmental Law.
(d) No asbestos-containing materials or PCBs are present on or
about any property currently owned, leased or used by the Company or any of its
Subsidiaries.
(e) There are not now, nor have there ever been, any
underground storage tanks or similar facilities of any kind on or under any real
property currently or previously owned, leased or used by the Company or any of
its Subsidiaries.
2.19. Certain Agreements. (a) Except as set forth in Schedule 2.15
------------------
to the Gensia Disclosure Schedule, Schedule 3.15 to the Rakepoll Disclosure
Schedule or Schedule 2.19(a) hereto, neither the Company nor any Subsidiary is a
party to any written or oral contract, agreement, guarantee, lease or executory
commitment (each a "Contract") falling within any of the following categories:
(a) Contracts valued at over $250,000 obligating any party to pay or receive
money, goods or services, (b) joint venture, partnership and similar agreements,
(c) Contracts which are service contracts or equipment leases involving payments
by the Company or any Subsidiary of more than $100,000 per year, (d) Contracts
containing covenants purporting to limit the freedom of the Company or any
Subsidiary to compete in any line of business in any geographic area or to hire
any individual or group of individuals, (e) Contracts which contain minimum
purchase conditions or requirements or other terms that restrict or limit the
purchasing relationships of the Company or any Subsidiary, (f) Contracts
relating to any outstanding commitment for capital expenditures in excess of
$250,000, (g) Contracts relating to the
11
<PAGE>
lease or sublease of or sale or purchase of real or personal property involving
any annual expense or price in excess of $100,000 and not cancelable by the
Company or any Subsidiary (without premium or penalty) within one month, (h)
Contracts with any labor organization, (i) indentures, mortgages, promissory
notes, loan agreements, guarantees of amounts in excess of $100,000, letters of
credit or other agreements or instruments of the Company or any Subsidiary or
commitments for the borrowing or the lending of amounts in excess of $100,000 or
by the Company or any Subsidiary or providing for the creation of any charge,
security interest, encumbrance or lien upon any of the assets of the Company or
any Subsidiary, (j) Contracts involving annual revenues or expenditures to the
business of the Company or any Subsidiary, in excess of 5.0% of the Company's
annual revenues and (k) Contracts with or for the benefit of any officer,
director or Affiliate of the Company or any Subsidiary or Associate thereof. All
such contracts are valid and binding obligations of the Company and each
Subsidiary, as the case may be, and, to the knowledge of the Company and each
Subsidiary, are the valid and binding obligation of each other party thereto
except such Contracts which if not so valid and binding would not, individually
or in the aggregate, have a Material Adverse Effect. Neither the Company or any
Subsidiary nor, to the knowledge of the Company or any Subsidiary, any other
party thereto is in violation of or in default in respect of, nor has there
occurred an event or condition which with the passage of time or giving of
notice (or both) would constitute a default under, any such Contract except such
violations or defaults under such Contracts which, individually or in the
aggregate, would not have a Material Adverse Effect.
(b) Except for Non-Disclosable Contracts, Schedule 2.19 (b) lists
all Contracts to which the Company or any Subsidiary is a party with or for the
benefit of any officer, director or Affiliate of the Company or any Subsidiary
or Associate thereof, and the Company has provided to the Purchaser true and
correct copies of each such Contract as currently in effect.
2.20. Offering of Notes and Warrants. Neither the Company nor any
------------------------------
Person acting on its behalf has offered the Notes or the Warrants or any similar
securities of the Company for sale to, solicited any offers to buy the Notes or
the Warrants or any similar securities of the Company from or otherwise
approached or negotiated with respect to the Company with any Person other than
the Purchaser and other "Accredited Investors" (as defined in Rule 501(a) under
the Securities Act). Neither the Company nor any Person acting on its behalf has
taken or will take any action (including, without limitation, any offering of
any securities of the Company under circumstances which would require the
integration of such offering with the offering of the Notes and Warrants under
the Securities Act and the rules and regulations of the Commission thereunder)
which could reasonably be expected to subject the offering, issuance or sale of
the Notes and Warrants to the registration requirements of Section 5 of the
Securities Act.
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<PAGE>
2.21. Use of Proceeds. The proceeds of the sale of the Purchased
---------------
Securities will be used by the Company for general corporate purposes.
2.22. Unlawful Use of Proceeds. (a) The Company does not own,
------------------------
directly or indirectly, any "margin security", as defined in Regulation G issued
by the Board of Governors of the Federal Reserve System (12 CFR Part 207); and
the Company will not use any proceeds from the sale of the Purchased Securities
to purchase or carry any "Security", as defined in Section 3(a)(10) of the
Exchange Act, or for any other purpose which would result in any transaction
contemplated by this Agreement constituting a "purpose credit" within the
meaning of said Regulation G, or which would involve a violation of Section 7 of
the Exchange Act or Regulation T, U or X of said Board of Governors (12 CFR
Parts 220, 221 and 224, respectively).
(b) The Company does not intend to apply and will not apply
any part of the proceeds of the sale of the Purchased Securities in any manner
which is unlawful or which would involve a violation of Executive Orders 12775
and 12779 (56 Fed. Reg. 50645 and 55976) Prohibiting Certain Transactions with
respect to Haiti or any of the following regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended): the Foreign
Assets Control Regulations, the Transactions Control Regulations, the Cuban
Assets Control Regulations, the Foreign Funds Control Regulations, the Iranian
Assets Control Regulations, the Iraqi Transactions Regulations, the Nicaraguan
Trade Control Regulations, the South African Transactions Regulations and the
Libyan Sanctions Regulations.
2.23. Product Warranties and Liabilities. Except as set forth in the
SEC Reports or as otherwise set forth in Schedule 2.23 or in Section 2.21 to the
Gensia Disclosure Schedule or Section 3.21 to the Rakepoll Disclosure Schedule,
the Company and each Subsidiary have no forms of warranties or guarantees of its
products and services that are in effect or proposed to be used by it. Schedule
2.23 sets forth a description, which is true and correct in all material
respects, of each pending or, to the knowledge of the Company, threatened
material action under any warranty or guaranty of the Company or any Subsidiary
which is not accurately described in all material respects in the SEC Reports.
Except for amounts covered by specific reserves in the 1996 Financial
Statements, the Company and each Subsidiary have not incurred, nor does the
Company or any Subsidiary know or have any reason to believe there is any basis
for alleging, any material liability, damage, loss, cost or expense as a result
of any material defect or other deficiency (whether of design, materials,
workmanship, labeling instructions or otherwise) ("Product Liability") with
respect to any product sold or services rendered by or on behalf of the Company
or any Subsidiary (including any lessee thereof), whether such Product Liability
is incurred by reason of any express or implied
-13-
<PAGE>
warranty (including, without limitation, any warranty of merchantability or
fitness), any doctrine of common law (tort, contract or other), any statutory
provision or otherwise and irrespective of whether such Product Liability is
covered by insurance.
2.24. [Reserved].
--------
2.25. Intellectual Property Rights. To the Company's knowledge,
----------------------------
except as described in the SEC Reports or as set forth in Schedule 2.25 or in
the Gensia Disclosure Schedule or the Rakepoll Disclosure Schedule:
(a) The Company or a Subsidiary owns or has a license to use
all patents and patent applications, trademark registrations and applications
and copyright registrations and applications, and all other material intangible
property and technology ("Intellectual Property") which are used by the Company
or any Subsidiary free and clear of all mortgages, liens, loans and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair such ownership or use of such
Intellectual Property or materially detract from the value thereof. With respect
to such Intellectual Property licensed by the Company or any Subsidiary, such
licenses are in full force and effect, the Company or such Subsidiary is in
compliance with the terms and provisions thereof, and no event has occurred
which, with notice or lapse of time or both, would constitute a breach or
violation thereof which could have a Material Adverse Effect, and the Company or
such Subsidiary holds a valid license to use such Intellectual Property, free of
any liens, claims or encumbrances except those liens, claims or encumbrances
which do not and will not, individually or in the aggregate, have a Material
Adverse Effect.
(b) The Company and the Subsidiaries have the right and
authority to use such Intellectual Property in connection with the conduct of
the business of the Company and the Subsidiaries in the manner and to the extent
such business is presently conducted, and neither the Company nor any Subsidiary
has been notified of any claim that such use conflicts with, infringes upon or
violates any rights of any other person or entity, except to the extent that
such conflict, infringement or violation does not and will not, individually or
in the aggregate, have a Material Adverse Effect.
2.26. Related Transactions. Except as disclosed in the SEC Reports
--------------------
or on Schedule 2.26, no current stockholder, director, officer or employee of
the Company, or any "Affiliate" or "associate" (as such term is defined in Rule
12b-2 under the Exchange Act) of any of the foregoing persons or the Company or
any Subsidiary is presently, or during the past three years has been, directly
or indirectly, a party to any agreement, transaction or series of similar
transactions with the Company or any Subsidiary which are or will be required to
be disclosed under the provisions of the 1934 Act, other than in
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<PAGE>
connection with any such person's duties as a director, officer or employee of
the Company.
2.27. No Brokerage or Finder's Fees. Except for the Company's
-----------------------------
potential obligations to C S First Boston Corporation under an engagement letter
dated May 1, 1995, neither the Company, any Subsidiary of the Company, nor any
stockholder, director, officer or employee of the Company or any Subsidiary has
incurred or will incur any brokerage, finder's or similar fee in connection with
the transactions contemplated by this Agreement.
3. Representations and Warranties of the Purchaser. The Purchaser
-----------------------------------------------
represents and warrants as to it itself as of the date hereof as follows:
3.1. Organization and Qualification. The Purchaser is a limited
------------------------------
partnership duly organized and existing in good standing under the laws of the
jurisdiction of its formation and has the power to own its respective property
and to carry on its respective business as now being conducted. The Purchaser is
duly qualified to do business and in good standing in every jurisdiction in
which the nature of the respective business conducted or property owned by it
makes such qualification necessary, except where the failure to so qualify would
not prevent consummation of the transactions contemplated hereby or have a
material adverse effect on the Purchaser's ability to perform its obligations
hereunder.
3.2. Due Authorization. The Purchaser has all right, power and
-----------------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Purchaser and the consummation by the Purchaser of the transactions contemplated
hereby have been duly authorized by all necessary action on behalf of the
Purchaser. This Agreement has been duly executed and delivered by the Purchaser
and constitutes a valid and binding agreement of the Purchaser enforceable in
accordance with its terms, except that (i)such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights, and (ii)the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
3.3. Conflicting Agreements and Other Matters. Neither the
----------------------------------------
execution and delivery of this Agreement nor the performance by the Purchaser of
its obligations hereunder will conflict with, result in a breach of the terms,
conditions or provisions of, constitute a default under, or require any consent,
approval or other action by or any notice to or filing with any court or
administrative or governmental body pursuant to, the organizational documents or
agreements of the Purchaser or any mortgage, agreement,
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<PAGE>
instrument, order, judgment, decree, statute, law, rule or regulation to which
the Purchaser or any of its respective properties are subject, except for
filings after the Closing under Section13(d) of the Exchange Act.
3.4. Acquisition for Investment. The Purchaser is acquiring the
--------------------------
Purchased Securities being purchased by it for its own account for the purpose
of investment and not with a view to or for sale in connection with any
distribution thereof, and the Purchaser has no present intention or plan to
effect any distribution thereof. The Purchaser acknowledges that the Securities,
including the Securities issuable upon conversion or exercise, as the case may
be, of the Convertible Securities, have not been registered under the Securities
Act of 1933, as amended, and may be sold or disposed of in the absence of such
registration only pursuant to an exemption from such registration and in
accordance with this Agreement. At the date hereof the Purchaser does not
beneficially own, directly or, to the knowledge of the Purchaser, indirectly (or
have any option or right to acquire), any securities of the Company other than
the Securities being purchased by it hereunder.
3.5. Brokers or Finders. No agent, broker, investment banker or
------------------
other firm or Person, including any of the foregoing that is an Affiliate of the
Purchaser, is or will be entitled to any broker's fee or any other commission or
similar fee from the Purchaser in connection with any of the transactions
contemplated by this Agreement that the Company will be responsible for pursuant
to Section13.10.
3.6. Accredited Investor. The Purchaser is an "accredited
-------------------
investor" within the meaning of Rule501 promulgated under the Securities Act.
3.7. HSR Notification. The Purchaser will cause to be filed its
----------------
notification ("HSR Notification") of the transaction contemplated by this
Agreement pursuant to the HSR Act at the same time as the Company files its HSR
Notification pursuant to Section 6.17.
4. Registration, Exchange and Transfer of Notes
--------------------------------------------
4.1. Authorized Denominations of Notes. The Notes are issuable
---------------------------------
only as fully registered Notes in denominations of at least $100,000.
4.2. The Note Register; Persons Deemed Owners. The Company shall
----------------------------------------
maintain, at its office designated for notices in accordance with Section 13.6,
a register for the Notes (the "Note Register"), in which the Company shall
record the name and address of the person in whose name each Note has been
issued and the name and address of each transferee and prior owner of each Note.
The Company may deem and treat the
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<PAGE>
person in whose name a Note is so registered as the holder and owner thereof for
all purposes and shall not be affected by any notice to the contrary, until due
presentment of such Note for registration of transfer as provided in this
Article 4.
4.3. Issuance of New Notes Upon Exchange or Transfer. Upon
-----------------------------------------------
surrender for exchange or registration of transfer of any Note at the office of
the Company designated for notices in accordance with Section13.6, the Company
shall execute and deliver, at its expense, one or more new Notes of any
authorized denominations requested by the holder of the surrendered Note, each
dated the date to which interest, if any, has been paid on the Note so
surrendered (or, if no interest has been paid, the date of such surrendered
Note), but in the same aggregate unpaid principal amount as such surrendered
Note, and registered in the name of such person or persons as shall be
designated in writing by such holder. Every Note surrendered for registration of
transfer shall be duly endorsed, or be accompanied by a written instrument of
transfer duly executed, by the holder of such Note or by his attorney duly
authorized in writing. The Company may also condition the issuance of any new
Note or Notes in connection with a transfer by any person on the payment of a
sum sufficient to cover any stamp tax or other governmental charge imposed in
respect of such transfer.
4.4. Lost, Stolen, Damaged and Destroyed Notes. Upon receipt by
-----------------------------------------
the Company of evidence reasonably satisfactory to it of the ownership of and
the loss, theft, destruction or mutilation of any Note (which evidence shall be,
in the case of the Purchaser or any Affiliate of the Purchaser or the general
partner of the Purchaser, notice from the Purchaser or such Affiliate of such
ownership and such loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note is, or
--------
is a nominee for, the Purchaser, an Affiliate of the Purchaser or the general
partner of the Purchaser or another holder of a Note with a minimum net worth of
at least $5,000,000, such Person's own unsecured agreement of indemnity shall be
deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
-17-
<PAGE>
5. Payment of Notes
----------------
5.1. Home Office Payment. The Company will pay to the Purchaser or
-------------------
any transferee thereof all sums becoming due on the Notes (including all sums
which become due on the Notes at the maturity thereof) at the address specified
in Section 13.6 or at the address specified by such transferee, by wire transfer
of immediately available funds, or at such other address or by such other method
as the Purchaser or transferee shall have designated by notice to the Company,
without presentment for notation of payment and without surrender. Before
selling or otherwise transferring any Note, the Purchaser or transferee will
make a notation thereon of the aggregate amount of all payments of principal, if
any, therefore made, and of the date to which interest has been paid.
5.2. Limitation on Interest. No provision of this Agreement or of
----------------------
any Note shall require the payment or permit the collection of interest, if
payable, in excess of the maximum rate which is permitted by law. If any such
excess interest is provided for herein or in any Note, or shall be adjudicated
to be so provided for, then the Company shall not be obligated to pay such
interest in excess of the maximum rate permitted by law, and the right to demand
payment of any such excess interest is hereby waived, any other provisions in
this Agreement or in any Note to the contrary notwithstanding.
5.3. No Prepayment. Except for redemptions in accordance with
-------------
Section9.4 or upon conversion pursuant to Section 10, neither the Company nor
any Subsidiary will prepay or otherwise acquire any Note unless it offers to
prepay or acquire Notes pro rata from each holder thereof.
5.4. Interest. Interest, if payable, on the principal amount of
--------
the Notes shall be due and payable as provided in the Notes.
6. Covenants of the Company
------------------------
A. The Company covenants that so long as the Purchaser (and/or its
Affiliates and Affiliates of the general partner of the Purchaser) collectively
hold not less than $10,000,000 in aggregate Liquidation Value or Stated Value of
Notes or Preferred Stock:
6.1. Financial Covenants. (a) The Company will not permit its
-------------------
Consolidated Tangible Net Worth to be less than the following amounts on the
last day of any fiscal quarter: (i) on or before December 31, 1997, $60 million;
(ii) from January 1, 1998 to and including December 31, 1998, $70 million and
(iii) from January 1, 1999 and thereafter, $75 million (it being understood
that, for the purposes of this paragraph(a), the
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<PAGE>
Notes and any other Subordinated Indebtedness of the Company shall be treated as
equity).
(b) The Company will not incur, create, assume or permit to
exist any Indebtedness, or permit any Subsidiary to incur, create, assume or
permit to exist any Indebtedness, if such Indebtedness (excluding the Notes)
would result in a ratio of Consolidated Total Indebtedness (excluding the Notes)
to Consolidated Tangible Net Worth (which for this purpose shall include the
principal amount of any Notes then outstanding) of more than 1.0 to 1.0.
(c) The Company will not exchange its $3.75 Convertible
Exchangeable Preferred Stock for its 7 1/2% Convertible Subordinated Debentures
due 2003.
(d) This Section 6.1 shall terminate and cease to be of
further force and effect from and after a Change of Control described in clause
(c)(iv) of the definition of Change of Control, provided that (i)no Default or
--------
Event of Default shall have occurred and be continuing, (ii)the Person with or
into which the Company is merged or consolidated is directly or through wholly
owned subsidiaries an operating business or is part of a consolidated group (not
including the Company) that operates a business, (iii)no Indebtedness is
incurred by the Company (or any of its Subsidiaries) in anticipation of such
merger or consolidation and (iv) the Company shall have paid in cash the Change
of Control Price, plus in each case accrued and unpaid interest or dividends, as
the case may be, to the date of payment, to each holder of Notes or Preferred
Stock who elects to have the Company redeem such holder's Notes or Preferred
Stock as a result of such Change of Control.
6.2. Limitation on Convertible Securities. (a) For so long as
------------------------------------
$10,000,000 in aggregate principal amount of Notes are outstanding, (i)the
Company will not issue any convertible debt securities ranking senior to the
Notes and (ii)the Company will not issue any other convertible debt securities
or any convertible equity securities ranking senior to the Preferred Stock with
respect to dividends or as to distribution of assets upon liquidation,
dissolution or winding up unless either (A)such convertible debt or equity
securities provide by their terms that they shall automatically convert into
equity securities of the Company ranking on a parity with or junior to the
Preferred Stock with respect to dividends or as to distribution of assets upon
liquidation, dissolution or winding up upon conversion of the Notes pursuant to
Section10.3 or (B)the Company irrevocably waives its right to convert the Notes
into Preferred Stock under Section10.3.
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<PAGE>
(b) For so long as any Preferred Stock is outstanding, the
Company will not issue (i)any convertible debt securities or (ii)any convertible
equity securities ranking senior to the Preferred Stock with respect to
dividends or as to distribution of assets upon liquidation, dissolution or
winding up; provided, however, that this paragraph (b) shall not restrict the
issuance of convertible debt securities if, on the issue date, (a) no Default or
Event of Default shall have occurred and be continuing and (b) the Current
Market Price of the Common Stock has exceeded the Conversion Price multiple by
200% for the preceding 60 consecutive Trading Days.
(c) For purposes of this Section 6.2, the issuance of units
comprising debt (including financial leases) or preferred stock and warrants
(other than Excepted Warrant Issues) shall be deemed to be an issuance of
convertible securities.
6.3. Merger. The Company will not merge with or into or
------
consolidate with any other Person or sell or convey all or substantially all of
its assets or property to any other Person unless the Company is the continuing
or surviving entity or the Person (if other than the Company) formed by such
merger or consolidation or into which the Company is merged or to which the
assets of the Company are sold or conveyed (the "Surviving Entity") shall
expressly assume the then outstanding principal amount of the Notes or Stated
Value of the Preferred Stock.
6.4. Dividends and Distributions. The Company will not, and will
---------------------------
not permit any Subsidiary to, declare or pay any dividend on, or make any other
distribution in respect of, or redeem, purchase or otherwise acquire any shares
of Common Stock or any other shares of capital stock of the Company ranking
junior to or on a parity with the Preferred Stock; provided, however, that
-------- -------
nothing in this Section 6.4 shall prevent the Company from (i)redeeming, at a
redemption price of $.01 per Right, the Rights issued pursuant to the Rights
Agreement, (ii)declaring or paying accrued and accumulated dividends on the
Company's outstanding $3.75 Convertible Exchangeable Preferred Stock, (iii)
declaring or paying a dividend in the stock of Metabasis Therapeutics, Inc.
("Metabasis") or Gensia Automedics, Inc. ("Automedics") in accordance with the
proposals disclosed by the Company to the Purchaser or (iv) declaring or paying
a dividend in the stock of any other Subsidiary, provided that (a) no Default or
--------
Event of Default shall have occurred and be continuing or result from the
payment of such dividend and (b) if such dividend will constitute a Change of
Control, the Company shall have paid in cash the Change of Control Price, plus
in each case accrued and unpaid interest or dividends, as the case may be, to
the date of payment, to each holder of Notes or Preferred Stock who elects to
have the Company redeem such holder's Notes or Preferred Stock as a result of
such dividend. This Section 6.4 in no way limits intercompany dividends between
the Company and any Subsidiary or between Subsidiaries with respect to dividends
or as to distributions of assets upon liquidation, dissolution or winding up.
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<PAGE>
6.5. Compliance with Laws. The Company will, and will cause each
--------------------
Subsidiary to, comply with all Applicable Laws with respect to the conduct of
its business and the ownership of its properties, including without limitation,
social security laws, workers' protection laws, environmental laws, human health
and equal employment opportunity laws, laws regarding the provision of
insurance, third party administration and primary health care services, good
manufacturing practices of the FDA, the Prescription Drug Marketing Act, the
Federal Controlled Substances Act of 1970, the Food, Drug and Cosmetic Act, any
federal or state Pharmacy Practice Acts, Controlled Substance Acts, Dangerous
Drugs Acts and Food, Drug and Cosmetic Acts, OSHA, the FCPA and all rules of
professional conduct applicable to the Company or any Subsidiary by which any of
its properties are bound or subject, provided that the Company shall not be
--------
deemed to be in violation of this Section 6.5 as a result of any failure to
comply with any provisions of such statutes, rules, regulations, and orders, the
noncompliance with which would not result in fines, penalties, injunctive relief
or other civil liabilities which, in the aggregate, would materially and
adversely affect the properties, business, results of operations, prospects or
condition (financial or otherwise) of the Company and the Subsidiaries taken as
a whole.
6.6. Limitation on Agreements. The Company will not, and will not
------------------------
permit any Subsidiary to, enter into any agreement, or any amendment,
modification, extension or supplement to any existing agreement, which
contractually prohibits the Company from paying interest, if any, payable on the
Notes or dividends on the Preferred Stock or redeeming the Notes or the
Preferred Stock.
6.7. Preservation of Franchises and Existence. Except as otherwise
----------------------------------------
permitted by the Agreement, the Company will (i) maintain its corporate
existence, rights and franchises in full force and effect, and (ii) cause the
Subsidiaries to maintain their respective corporate existences, rights and
franchises in full force and effect, provided that nothing in this Section6.7
shall prevent the Company or any Subsidiary from discontinuing its operations in
any particular state or at any particular location or locations within the
state, or prevent the corporate existence, rights and franchises of any
Subsidiary from being terminated if, in the opinion of the Board of Directors of
the Company, the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Subsidiaries taken as a whole or
implementing the Company's plans with respect to Metabasis or Automedics.
6.8. Insurance. (a) The Company will, and will cause each of the
---------
Subsidiaries to maintain, with insurers believed by the Company to be
responsible, such insurance, in such amounts and of such types as are
customarily carried under similar circumstances by companies engaged in the same
or a similar business or having similar properties similarly situated.
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<PAGE>
circumstances by companies engaged in the same or a similar business or having
similar properties similarly situated.
(b) The Company shall (i) provide, maintain and perform in the
same manner as prior to the date hereof the Company's existing indemnification
provisions with respect to present and future directors and officers of the
Company for all losses, claims, damages, expenses or liabilities arising out of
actions or omissions or alleged actions or omissions occurring after the Closing
Date to the extent permitted or required under applicable law and the Company's
Restated Certificate of Incorporation and By-Laws in effect at the date hereof
(to the extent consistent with applicable law); and (ii) maintain directors and
officers liability coverage, with limits, terms and conditions no less
advantageous than in effect on the date hereof. Such coverage will be maintained
with the current insurance carriers or insurance carriers of financial strength
equal to or greater than the financial strength of the current insurance
carriers. Evidence of such coverage will be provided to the individual officers
and directors upon request. Any new directors or officers of the Company will be
added to such policies.
6.9. Payment of Taxes and Other Charges. The Company will pay or
----------------------------------
discharge, and will cause each of the Subsidiaries to pay or discharge, before
the same shall become delinquent, (i) all taxes, assessments and other
governmental charges or levies imposed upon it or any of its properties or
income (including, without limitation, such as may arise under Section 4062,
4063, or 4064 of ERISA or any similar provision of law), and (ii) all claims or
demands of materialmen, mechanics, carriers, warehousemen, landlords and other
like persons which, in the case of either clause (i) or clause (ii), if unpaid,
might result in the creation of a material lien upon any of its properties,
provided, however, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith pursuant to
appropriate proceedings.
6.10. [Reserved].
----------
6.11. [Reserved].
----------
6.12. Financial Statements and Other Reports.
--------------------------------------
(i) The Company will, as soon as practicable and in any event
within 45 days after the end of each quarterly period (other than the last
quarterly period) in each fiscal year, furnish to the Purchaser statements of
consolidated net income and cash flows and a statement of changes in
consolidated stockholders' equity of the Company and its Subsidiaries for the
period from the beginning of the then current fiscal year to the end of such
quarterly period, and consolidated balance
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sheets of the Company and its Subsidiaries as of the end of such quarterly
period, setting forth in each case in comparative form figures for the
corresponding period or date in the preceding fiscal year, all in reasonable
detail and certified by an authorized financial officer of the Company, subject
to changes resulting from year-end adjustments; provided, however, that delivery
-------- -------
pursuant to clause (iii) below of a copy of the Quarterly Report on Form 10-Q of
the Company for such quarterly period filed with the Commission shall be deemed
to satisfy the requirements of this clause (i);
(ii) it will, as soon as practicable and in any event within 90
days after the end of each fiscal year, furnish to the Purchaser statements of
consolidated net income and cash flows and a statement of changes in
consolidated stockholders' equity of the Company and its Subsidiaries for such
year, and consolidated balance sheets of the Company and its Subsidiaries as of
the end of such year, setting forth in each case in comparative form the
corresponding figures from the preceding fiscal year, all in reasonable detail
and examined and reported on by independent public accountants of recognized
national standing selected by the Company; provided, however, that delivery
-------- -------
pursuant to clause (iii) below of a copy of the Annual Report on Form 10-K of
the Company for such fiscal year filed with the Commission shall be deemed to
satisfy the requirements of this clause (ii);
(iii) it will, promptly upon transmission thereof, furnish to
the Purchaser copies of all such financial statements, proxy statements, notices
and reports as it shall send to its stockholders and copies of all such
registration statements (without exhibits), other than registration statements
relating to employee benefit or dividend reinvestment plans, and all such
regular and periodic reports as it shall file with the Commission; and
(iv) it will promptly furnish to the Purchaser (a) copies of
(i) any compliance certificates furnished to lenders in respect of Indebtedness
of the Company and its Subsidiaries and (ii) any notices of default from lenders
in respect of any such Indebtedness and (b) notice of (i) the commencement of
any Litigation which, if determined adversely to the Company, would have a
Material Adverse Effect, (ii) the issuance by any governmental authority of any
injunction, order, restraint or other decision which has resulted in, or which
is likely, in the reasonable judgment of the Company or any such Subsidiary, to
have a Material Adverse Effect or (iii) any development in the business or
affairs of the Company or any of the Subsidiaries which has resulted in, or
which is likely, in the reasonable judgment of the Company or any such
Subsidiary, to result in a Material Adverse Effect.
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<PAGE>
Together with each delivery of financial statements required by clause
(ii) above, the Company will deliver to the Purchaser a certificate of the Chief
Financial Officer, Treasurer or other financial officer of the Company regarding
compliance by the Company with the covenants set forth in Sections 6.1 and 6.4.
6.13. Inspection of Property.
----------------------
The Company will permit representatives of the Purchaser to visit and
inspect, at such Purchaser's expense, any of the properties of the Company and
its Subsidiaries, to examine the corporate books and make copies or extracts
therefrom and to discuss the affairs, finances and accounts of the Company and
its Subsidiaries with the principal officers of the Company, all at such
reasonable times, upon reasonable notice and as often as the Purchaser may
reasonably request; provided, however, that the foregoing shall be subject to
-------- -------
compliance with reasonable safety, operating and production requirements and
shall not require the Company or any of its Subsidiaries to permit any
inspection which in the reasonable judgment of the Company would result in the
violation of any statute or regulation with respect to confidentiality or
security. The Purchaser agrees that the information received pursuant to this
Section 6.13 or Section 6.12(iv) is subject to Section 7.1 hereof.
6.14. Board Membership.
----------------
On the Closing Date, the Board of Directors of the Company will take
all necessary action to elect one person reasonably acceptable to the Board of
Directors nominated by the Purchaser to the Board of Directors as a Class II
director. At each subsequent annual meeting for the election of directors of
Class II the Purchaser will be entitled to propose (and the Company will
nominate and recommend) one person reasonably acceptable to the Board of
Directors as a member of the Company's Board of Directors. In the event of any
vacancy arising by reason of the resignation, death, removal or inability to
serve as the Purchaser's nominee, the Purchaser shall be entitled to designate a
successor to fill such vacancy until the next annual meeting for the election of
Class II directors. So long as Purchaser and its Affiliates and Affiliates of
the general partner of Purchaser own at least $10,000,000 in aggregate principal
amount of Notes or aggregate Stated Value of Preferred Stock, such member of the
Board of Directors shall be a member of the Company's executive committee, if
any, or any committee performing substantially similar functions and shall, if
requested by the Purchaser, be considered for membership on other committees of
the Board of Directors. The Company agrees that if such nominee is not elected,
(i) the Purchaser will be entitled to have observational rights at all meetings
of the Board of Directors and the Purchaser shall have the same access to
information concerning the business and operations of the Company and its
Subsidiaries and at the same time as directors of the Company, subject to the
provisions of Section 7.1, and shall be entitled to participate in discussions
and consult with the Board of Directors,
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<PAGE>
without voting, and (ii) the Company will nominate and recommend one person
proposed by the Purchaser at each subsequent annual meeting (without regard to
the Class of directors subject to election at such meeting) until a nominee
proposed by the Purchaser has been elected to the Board of Directors. If at any
time Purchaser and its Affiliates and Affiliates of the general partner of
Purchaser do not own at least $10,000,000 in aggregate principal amount of Notes
or aggregate Stated Value of Preferred Stock then any director appointed by
Purchaser shall immediately resign from the Board of Directors.
B. The Company covenants that, so long as the Purchaser
(and/or its Affiliates) owns any of the Securities:
6.15. Lost, Stolen, Damaged and Destroyed Stock Certificates.
------------------------------------------------------
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any
certificate for shares of Preferred Stock (which evidence shall be, in the case
of the Purchaser or any Affiliate of the Purchaser or the general partner of the
Purchaser, notice from the Purchaser or such Affiliate of such ownership and
such loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it provided that if the holder of such shares of
--------
Preferred Stock is, or is a nominee for, the Purchaser, an Affiliate of the
Purchaser or the general partner of the Purchaser or another holder of the
shares of Preferred Stock with a minimum net worth of at least $5,000,000, such
Person's own unsecured agreement of indemnity shall be deemed to be
satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
certificate, dated and paying dividends from the date to which dividends shall
have been paid on such lost, stolen, destroyed or mutilated certificate or dated
the date of such lost, stolen, destroyed or mutilated certificate if no dividend
shall have been paid thereon.
6.16. [Reserved].
----------
6.17. HSR.
---
If deemed necessary by Purchaser, the Company shall file its HSR Notification
not later than July 31, 1998. Notwithstanding the foregoing, the Company shall
not deliver any notice of redemption pursuant to Article 9 or any notice of
conversion pursuant to Article 10 unless (a) the Company shall have filed its
HSR Notification, (b) the applicable waiting period shall have expired or been
terminated and (c) the date fixed for redemption in accordance with Section 9.4
or conversion in accordance with Article 10 shall be a date
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<PAGE>
upon which the Purchaser shall not be prohibited from owning Voting Securities
under the HSR Act; provided, that if the condition set forth in clause (c) shall
not be satisfied and either the Company desires to have the ability to issue a
notice of conversion or a notice of redemption or the Purchaser desires to have
the ability to convert some or all of the Notes into Preferred Stock or Common
Stock, each of the Company and the Purchaser, upon notice from the party
desiring to exercise such right to the other party, shall as promptly as
possible file its HSR Notification.
6.18. Certain Tax Matters.
-------------------
(a) In the event (i) of a Final Determination (as defined below) that the
Purchaser is required to include in income for any taxable year amounts ("OID")
determined pursuant to the principles of Sections 1271-75 of the Code and the
regulations thereunder, including by application of Section 305(c) of the Code,
or any successor provisions thereto (collectively, the "OID Rules") with respect
to the Notes, the Warrants or the Preferred Stock (an "OID Inclusion") or
(ii) the OID Rules or any similar or corresponding state or local law is amended
to require an OID Inclusion for any taxable year, the Company shall pay to such
Purchaser with respect to each such OID Inclusion no later than the Payment Due
Time (as defined below), an additional payment (the "Gross-Up Payment") such
that the net amount of such Gross-Up Payment (plus the amount of any interest
paid with respect to the Notes) retained by such Purchaser after payment by such
Purchaser of any federal, state and local income tax actually imposed upon such
Gross-Up Payment (plus the amount of any interest paid with respect to the
Notes) shall equal the sum of (A) the amount of the OID Inclusion for such
taxable year (plus the amount of any interest paid with respect to the Notes)
multiplied by the maximum combined federal, state and local income tax rate for
an individual resident in New York City, after giving due allowance for the
deductibility of state and local income taxes (the "Applicable Tax Rate"),
(B) interest on the amount specified in subclause (A) at the rates in effect
from time to time for individual taxpayers resident in New York City with
respect to income tax deficiencies for all periods from the date with respect to
which the deficiency arose until the payment of the amount specified in
subclause (A), and (C) penalties, if any, actually payable by any direct or
indirect partner or member of the Purchaser with respect to the OID Inclusion to
the Internal Revenue Service or any other applicable taxing authority by reason
of such events.
(b) A "Final Determination" with respect to a federal tax
liability shall mean (i) a decision, judgment, decree or other order by any
court of competent jurisdiction, which decision, judgment, decree or other order
has become final, or (ii) a closing agreement entered into under Section 7121
(or any successor to such Section) of the Code or any other settlement agreement
entered into a connection with an administrative or judicial proceeding and
consented to by the Purchaser or any member of its consolidated group. The
"Payment Due Time" shall mean 5:00 p.m. Eastern time, of
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<PAGE>
the day two banking days before the date on which expires the period allowed by
applicable law for timely payment of the tax liability imposed on the related
OID Inclusion pursuant to an applicable Final Determination.
(c) In the event that the Purchaser is notified formally or
informally of any audit, examination or proceeding by the Internal Revenue
Service or other taxing authority with respect to the includability in income of
OID with respect to the Notes, Warrants or Preferred Stock, the Purchaser will
promptly notify the Company of such audit, examination or proceeding; provided,
--------
however, that the Purchaser's failure to give such notice or to keep the Company
- -------
fully informed concerning a Contest (as defined below) shall not affect the
Company's obligation to make Gross-Up Payments in accordance with this Section
6.18. Subject to the requirement that the Purchaser shall proceed in good faith
and shall pursue the issue diligently, the Purchaser shall have exclusive
control and responsibility to conduct any audit, examination, proceeding or
litigation (a "Contest") with respect to such treatment. The Purchaser shall
bear all costs and expenses in connection with such Contest.
(d) The Company expressly acknowledges that Affiliates of the
Purchaser who acquire Notes, Warrants or Preferred Stock as permitted by this
Agreement shall be entitled to the benefits of this Section 6.18. No other
subsequent holder shall be entitled to the benefits of this Section 6.18.
6.19. Certain Additional Payments Following Redemption
------------------------------------------------
under Certain Circumstances.
- ---------------------------
In the event that, within six months after the date of redemption of
the Notes pursuant to Article 9 or redemption of the Preferred Stock pursuant to
the Certificate of Designation, there shall be (i) a reorganization, merger or
consolidation, in each case, with respect to which all or substantially all of
the individuals and entities who were the respective beneficial owners of the
Company immediately prior to such reorganization, merger or consolidation do
not, following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 50% of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors of the corporation resulting from such reorganization, merger or
consolidation, (ii) an acquisition by any Person or "group" (as that term is
defined in Section 13(d) (3) of the Exchange Act) of more than 50% of the
capital stock, assets or property of the Company (determined by the net book
value of such assets or property as of the most recently prepared balance sheet
of the Company), (iii) a plan of liquidation approved by the Board of Directors,
or (iv) a public announcement of any of the transactions specified in (i)
through (iii) above and such transaction is consummated within six months after
the date of such public announcement, then the Company shall promptly pay to the
record holders of the Notes or the Preferred Stock on the date of such
redemption, an amount in respect of each share into which the Notes or the
Preferred
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<PAGE>
Stock was convertible as of the date of redemption equal to the excess, if any,
of (x) (in the case of a transaction described in clause (i) or (iii)) the Fair
Market Value of the consideration per share of Common Stock received or
receivable in such transaction by the Company or the holders of the Company's
capital stock or (y) (in the case of a transaction described in clause (ii)) the
Current Market Price for the five Trading Days immediately preceding the date of
consummation of the transaction over the redemption price or if higher than (x)
or (y), the consideration per share of Common Stock received by Rakepoll
Finance, any executive officer of the Company or any of their respective
Affiliates or Associates (calculated based upon the number of shares of Common
Stock into which, directly or indirectly, the Notes or Preferred Stock would
have been convertible had they been so converted on the date of redemption) of
the Notes or shares of Preferred Stock paid to such holders in accordance with
the terms of this Agreement or the Certificate of Designation, as the case may
be.
6.20. Notice of Breach.
----------------
As promptly as practicable, and in any event not later than (i) ten
Business Days after such breach in the case of a breach of Section 6.01(a) on
the last day of one of the first three fiscal quarters, (ii) fifteen Business
Days after such breach in the case of a breach of Section 6.01(a) on the last
day of a fiscal year and (iii) ten Business Days after executive officers of the
Company become aware of any other breach by the Company of any provision of this
Agreement, including, without limitation, any other provision of this Article 6,
the Company shall provide the Purchasers with written notice specifying the
nature of such breach and any actions proposed to be taken by the Company to
cure such breach.
6.21. Limitation on Transactions with Affiliates.
------------------------------------------
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly enter into any transaction or series of related
transactions (including, without limitation , the sale, purchase, exchange or
lease of assets, property or services) with or for the benefit of any Affiliate
of the Company (other than the Company or a wholly-owned Subsidiary) unless such
transaction or series of related transactions is entered into in good faith and
(a) such transaction or series of related transactions is on terms that are no
less favorable to the Company or such Subsidiary, as the case may be, than those
that would be available in a comparable transaction in arm's-length dealings
with an unrelated third party and (b) with respect to any transaction or series
of related transactions involving aggregate value in excess of $100,000, such
transaction or series of related transactions has been approved by a majority of
the Disinterested Directors of the Company, or in the event there is only one
Disinterested Director, by such Disinterested Director; provided, however, that
-------- -------
this provision shall not apply to any transaction with (i) an officer or
director of the Company entered into in the ordinary course of business
(including compensation and employee benefit arrangements with any officer,
director or
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<PAGE>
employee of the Company, including under any stock option or stock incentive
plans); or (ii) pursuant to the terms of any agreement or arrangement in
existence on the date of this Agreement listed on Schedule 2.19(b); or (iii)
pursuant to any Non-Disclosable Contract. The Company shall not amend or waive
its rights under, and shall not permit any Subsidiary to amend or waive its
rights under, any of the terms of the agreements referred to in clause (ii) of
the foregoing proviso without the prior written consent of a majority of the
Disinterested Directors of the Company.
7. Covenants of the Purchaser
--------------------------
7.1. Nondisclosure of Confidential Information.
-----------------------------------------
(a) Without the prior written consent of the Company, any
information relating to the Company provided to the Purchaser in connection with
this Agreement, or to the persons nominated by the Purchaser to be elected to
the Board of Directors, which is either confidential, proprietary, or otherwise
not generally available to the public (but excluding information the Purchaser
has obtained independently from third-party sources without the Purchaser's
knowledge that the source has violated any fiduciary or other duty not to
disclose such information) (the "Confidential Information") will be kept
confidential by the Purchaser and its directors, officers, employees, and
representatives (collectively, "Representatives"), using the same standard of
care in safeguarding the Confidential Information as the Purchaser employs in
protecting its own proprietary information which such Purchaser desires not to
disseminate or publish, and will not be disclosed to any Person, except for
Representatives of the Purchaser who need to know such Confidential Information.
It is understood (i) that such Representatives shall be informed by the
Purchaser of the confidential nature of the Confidential Information, (ii) that
such Representatives shall be bound by the provisions of this Section 7.1 as a
condition of receiving the Confidential Information and (iii) that, in any
event, the Purchaser shall be responsible for any breach of this Agreement by
any of their Representatives.
(b) Without the prior consent of the Company, other than as
required by applicable law, the Purchaser will not, and will direct their
Representatives not to, disclose to any Person either the fact that the
Confidential Information has been made available to the Purchaser or that the
Purchaser has inspected any portion of the Confidential Information.
(c) If the Purchaser or its Representatives are requested or
required (by oral question, interrogatories, requests for information or
documents, subpoena, civil investigative demand or similar process) to disclose
any Confidential Information, such Purchaser will, as soon as practicable,
notify the Company of such request or requirement so that the Company may seek
an appropriate protective order. If, in the absence of a protective order, such
Purchaser or its Representatives are, in the opinion of such
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<PAGE>
Purchaser's counsel, compelled to disclose the Confidential Information or else
stand liable for contempt or suffer other censure or significant penalty, such
Purchaser may disclose only such of the Confidential Information to the party
compelling disclosure as is required by law. The Purchaser shall not be liable
for the disclosure of Confidential Information pursuant to the preceding
sentence. The Purchaser will, at the Company's expense, cooperate with the
Company's reasonable efforts to obtain a protective order or other reliable
assurance that confidential treatment will be accorded the Confidential
Information.
8. Events of Default and Remedies
------------------------------
8.1. Events of Default
-----------------
Each of the following shall constitute an Event of Default with
respect to the Notes under this Agreement:
(a) Nonpayment of Principal of the Notes. If the Company fails
------------------------------------
to pay the principal of or interest on or any other sum, if any, due on any
Note, when and as the same becomes due and payable, whether at the maturity
thereof, on a dated fixed for a redemption, or otherwise and fails to cure
such failure within five days; or
(b) Cross-Default. If (i) the Company or any Subsidiary (x)
-------------
fails to make any payment in respect of any Indebtedness, having an
aggregate principal amount (including undrawn committed or available
amounts and including amounts owing to all creditors under any combined or
syndicated credit arrangement) of more than $3,000,000 when due (whether by
scheduled maturity, required prepayment, acceleration, demand, or
otherwise) and such failure continues after the applicable grace or notice
period, if any, specified in the relevant document on the date of such
failure; or (y) fails to perform or observe any other condition or
covenant, or any other event shall occur or condition exist, under any
agreement or instrument relating to any such Indebtedness, and such failure
continues after the applicable grace or notice period, if any, specified in
the relevant document on the date of such failure if the effect of such
failure, event or condition is to cause, or to permit the holder or holders
of such Indebtedness or beneficiary or beneficiaries of such Indebtedness
(or a trustee or agent on behalf of such holder or holders or beneficiary
or beneficiaries) to cause such Indebtedness to be declared to be due and
payable prior to its stated maturity, or collateral in respect thereof to
be demanded; or (ii) there occurs under any Swap Contract an Early
Termination Date (as defined in and provided for in any such Swap Contract
that is in the form of an ISDA Master Agreement) or equivalent termination
event (as provided in any other Swap Contract) resulting from (1) any event
of default under such Swap Contract as to which the Company or any
Subsidiary is the
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<PAGE>
Defaulting Party (as defined in such Swap Contract) or (2) any Termination
Event (as so defined in such Swap Contract) as to which the Company or any
Subsidiary is an Affected Party (as so defined in such Swap Contract), and,
in either event, the Swap Termination Value owed by the Company or such
Subsidiary as a result thereof is greater than $3,000,000; or
(c) Voluntary Bankruptcy and Insolvency Proceedings. If the
-----------------------------------------------
Company or any Subsidiary shall file a petition in bankruptcy or for
reorganization or for an arrangement or any composition, readjustment,
liquidation, dissolution or similar relief pursuant to the Federal
Bankruptcy Code of 1978, as amended, or under any similar present or future
federal law or the law of any other jurisdiction or shall be adjudicated a
bankrupt or become insolvent, or consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Company or such Subsidiary
or for all or any substantial part of its respective property, or the
Company or any Subsidiary shall make an assignment for the benefit of its
creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or shall take any corporate action, as the
case may be, in furtherance of any of the foregoing; or
(d) Adjudication of Bankruptcy. If a petition or answer shall
--------------------------
be filed proposing the adjudication of the Company or any Subsidiary as a
bankrupt or its reorganization or arrangement, or any composition,
readjustment, liquidation, dissolution or similar relief with respect to it
pursuant to the Federal Bankruptcy Code of 1978, as amended, or under any
similar present or future federal law or the law of any other jurisdiction
applicable to the Company or such Subsidiary, and the Company or any
Subsidiary shall consent to or acquiesce in the filing thereof, or such
petition or answer shall not be discharged or denied within 90 days after
the filing thereof; or
(e) Receivership or Sequestration. If a decree or order is
-----------------------------
rendered by a court having jurisdiction (i) for the appointment of a
receiver or custodian or liquidator or trustee or sequestrator or assignee
(or similar official) in bankruptcy or insolvency of the Company or any
Subsidiary or of all or a substantial part of its property, or for the
winding-up or liquidation of its affairs, and such decree or order shall
have remained in force undischarged and unstayed for a period of 90 days,
or (ii) for the sequestration or attachment of any property of the Company
or any Subsidiary without its return to the possession of the Company or
such Subsidiary or its release from such sequestration or attachment within
90 days thereafter; or
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<PAGE>
(f) Covenant Defaults. If the Company shall have breached in
-----------------
any material respect any of the covenants set forth herein and such breach
shall continue for 90 days following (i) the date notice is required to be
given under Section 6.20(i) or (ii) with respect to breaches under 6.01(a)
and (ii) otherwise from the date of the breach.
8.2. Acceleration of Maturity.
------------------------
If any Event of Default shall have occurred and be continuing, the
holders of 66 2/3% of the outstanding principal amount of Notes may, by notice
to the Company, declare the entire outstanding principal balance of the Notes,
and all accrued and unpaid interest, if any, thereon, to be due and payable
immediately, and upon any such declaration the entire outstanding principal
balance of the Notes, and said accrued and unpaid interest, if any, shall become
and be immediately due and payable, without presentment, demand, protest or
other notice whatsoever, all of which are hereby expressly waived, anything in
the Notes or in this Agreement to the contrary notwithstanding; provided that if
--------
an Event of Default under clause (c), (d), or (e) of Section 8.1 with respect to
the Company shall have occurred, the outstanding principal amount of all of the
Notes, and all accrued and unpaid interest, if any, thereon, shall immediately
become due and payable, without any declaration and without presentment, demand,
protest or other notice whatsoever, all of which are hereby expressly waived,
anything in the Notes or this Agreement to the contrary notwithstanding; and
provided, further, that if an Event of Default under clause (a) of Section 8.1
- -------- -------
shall have occurred and be continuing with respect to any Note, the Purchaser or
Affiliate of the Purchaser (but not any transferee thereof other than an
Affiliate of such Purchaser) holding one or more Notes in an aggregate
outstanding principal amount of at least $1,000,000 may, by notice to the
Company, declare the entire outstanding principal of such Notes and all accrued
and unpaid interest, if any, thereon, to be due and payable immediately, and
upon any such declaration the entire outstanding principal of such Notes and
said accrued and unpaid interest, if any, shall become and be immediately due
and payable, without presentment, demand, protest or other notice whatsoever,
all of which are hereby expressly waived, anything in such Notes or in this
Agreement to the contrary notwithstanding.
8.3. Other Remedies.
--------------
If any Event of Default shall have occurred and be continuing, from and
including the date of such Event of Default to but not including the date such
Event of Default is cured or waived, any holder may enforce its rights by suit
in equity, by action at law, or by any other appropriate proceedings, whether
for the specific performance (to the extent permitted by law) of any covenant or
agreement contained in this Agreement or the Notes or in aid of the exercise of
any power granted in this Agreement or the Notes, and any holder may enforce the
payment of any Note held by such holder and any of its other
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<PAGE>
legal or equitable rights. From the date that a Default or Event of Default
shall have occurred and during the continuance of any Default or Event of
Default, the Company shall pay interest on the outstanding principal of, and
premium, if any, on the Notes and (to the extent legally enforceable) on any
overdue installment of interest, if any, at the rate of 11.75% per annum until
such overdue amount is paid or until such Default or Event of Default is cured
or waived.
8.4. Conduct No Waiver; Collection Expenses.
--------------------------------------
No course of dealing on the part of any holder, nor any delay or failure on
the part of any holder to exercise any of its rights, shall operate as a waiver
of such right or otherwise prejudice such holder's rights, powers and remedies.
If the Company fails to pay, when due, the principal or the premium, if any, or
the interest, if any, on any Note, the Company will pay to each holder, to the
extent permitted by law, on demand, all costs and expenses incurred by such
holder in the collection of any amount due in respect of any Note hereunder,
including reasonable legal fees incurred by such holder in enforcing its rights
hereunder.
8.5. Annulment of Acceleration.
-------------------------
If a declaration is made in accordance with Section 8.2, then and in
every such case, the holders of at least 66 2/3% of the outstanding principal
amount of the Notes may, by an instrument delivered to the Company, annul such
declaration and the consequences thereof, provided that at the time such
--------
declaration is annulled:
(a) no judgment or decree has been entered for the payment of
any monies due on the Notes or pursuant to this Agreement;
(b) all arrears of interest on the Notes and all other sums
payable on the Notes and pursuant to this Agreement (except any principal
of or interest or premium on the Notes which has become due and payable by
reason of such declaration) shall have been duly paid; and
(c) every other Event of Default shall have been duly waived or
otherwise made good or cured;
provided, however, that only the Purchaser or Affiliate of the Purchaser (but
- -------- -------
not any transferee thereof other than an Affiliate of such Purchaser) of the
Note or Notes making the declaration permitted by the last proviso of Section
8.2 may annul such declaration; and provided, further, that no such annulment
-------- -------
shall extend to or affect any subsequent Event of Default or impair any right
consequent thereon.
8.6. Remedies Cumulative.
-------------------
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<PAGE>
No right or remedy conferred upon or reserved to the holders of Notes
under this Agreement is intended to be exclusive of any other right or remedy,
and every right and remedy shall be cumulative and in addition to every other
right and remedy given hereunder or now and hereafter existing under applicable
law. Every right and remedy given by this Agreement or by applicable law to the
holders of Notes may be exercised from time to time and as often as may be
deemed expedient by the holders.
8.7. Limitations.
-----------
Notwithstanding the foregoing provisions of this Article 8, the
exercise of remedies by the holders of the Notes is subject to the provisions of
Article 11 hereof.
9. Redemption
----------
9.1. Optional Redemption.
-------------------
The Company shall have the right, at its sole option and election
made in accordance with Section 9.4, to redeem the Notes and the Preferred
Stock, on or after 18 months following the Closing Date, in whole but not in
part, if the Current Market Price per share of the Common Stock shall exceed the
Conversion Price multiplied by 350% for at least 90 consecutive Trading Days,
subject to the final paragraph of this Section 9.1, at a redemption price equal
to the Liquidation Value (the "Redemption Price"), plus an amount equal to all
accrued and unpaid interest, if any, to the date of redemption, in cash.
In the event that at any time a Change of Control has occurred
prior to a redemption pursuant to this Section 9.1, the Redemption Price of each
Note until the expiration of the 90-day period referred to in Section 9.4(b)
shall equal the Change of Control Price (as defined in Section 9.3 below).
9.2. Mandatory Redemption.
--------------------
On May 1, 2004, the Company shall redeem all outstanding Notes, by
paying therefor the Liquidation Value, in cash, plus all accrued and unpaid
interest to the date of redemption.
9.3. Change of Control.
-----------------
In the event that there occurs a Change of Control, any record holder of
Notes, in accordance with the procedures set forth in Section 9.4(b), may
require the Company to redeem any or all of the Notes held by such holder for,
at such holder's option, an amount equal to (i) the greater of (A) 100% of the
Liquidation Value of the Notes and (B)(I) 135% of the Liquidation Value of the
Notes if such Change of Control occurs on or before the first anniversary of the
Closing Date and (II) 150% of the Liquidation Value of such Notes if the Change
of Control occurs thereafter, less, in the case of each of clause (B)(I) and
----
(B)(II), the Warrant Value attributable to the Notes held by such holder
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<PAGE>
or (ii) the form and amount of consideration that such holder would have
received had such holder converted such Notes into Common Stock and had such
holder received the higher of (A) the same consideration per share of Common
Stock received or receivable on a per share basis by Rakepoll Finance, any
executive officer of the Company or any of their respective Affiliates or
Associates (the "Affiliated Holders") and (B) the same consideration per share
of Common Stock received or receivable by the non-Affiliated Holders in
connection with such Change of Control (the "Change of Control Price"), plus, in
the case of each of clause (i) and clause (ii) all accrued and unpaid interest,
if any, on the Notes being redeemed to the date of redemption, in cash. For
purposes of this Section 9.3, the Warrant Value attributable to a Note shall be
equal to the Warrant Value on the date of the Change of Control multiplied by a
fraction the numerator of which shall be the Liquidation Value of the Note and
the denominator of which shall be $20,000,000.
9.4. Redemption Procedures.
---------------------
(a) Notice of any redemption of Notes pursuant to Section 9.1 or 9.2 shall be
mailed at least 30 but not more than 60 days prior to the date fixed for
redemption to each holder of Notes to be redeemed, at such holder's address as
it appears in the Note Register. In order to facilitate the redemption of
Notes, the Board of Directors may fix a record date for the determination of
Notes to be redeemed.
(b) Promptly following a Change of Control (but in no event
more than five Business Days thereafter), the Company shall mail to each holder
of Notes, at such holder's address as it appears on the transfer books of the
Company, notice of such Change of Control, which notice shall set forth each
holder's right to require the Company to redeem any or all Notes held by it. The
Company shall thereafter during a period of 90 days from the date of such notice
(or the date the Company was required to give such notice) redeem any Notes, in
whole or in part, at the option of the holder, upon at least five days' written
notice to the Company by such holder specifying (i) the principal amount of
Notes to be redeemed and (ii) the redemption date.
(c) On the date of any redemption being made pursuant to
Section 9.1, 9.2 or 9.3 which is specified in a notice given pursuant to this
Section 9.4, the Company shall wire transfer to such holder the Redemption Price
or Change of Control Price, as the case may be, for the principal amount of
notes so redeemed, together with an amount equal to all accrued and unpaid
interest, if any, thereon to the date of redemption.
10. Conversion
----------
10.1. Holder's Option to Convert into Preferred Stock.
-----------------------------------------------
The Notes shall be converted, in whole but not in part, at the
direction of the holders of not less than 66-2/3% of all outstanding Notes at
any time after the Closing
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<PAGE>
into shares of Preferred Stock, at a conversion ratio of one share of Preferred
Stock for each $100 of outstanding principal amount of Notes (the "Preferred
Ratio").
10.2. Holder's Option to Convert into Common Stock.
--------------------------------------------
(a) Subject to the provisions for adjustment hereinafter set forth,
any Note or any portion of the outstanding principal amount of such Note shall
be convertible at the option of the holder at any time after the Closing into
shares of Common Stock at a conversion ratio for each $100 of outstanding
principal amount of Notes equal to the Conversion Ratio.
(b) Following notice of redemption by the Company pursuant to
Section 9.1, subject to the provisions for adjustment hereinafter set forth, any
Note or any portion of the outstanding principal amount of such Note shall be
convertible at the option of the holder into shares of Common Stock at a
conversion ratio for each $100 of outstanding principal amount of Notes equal to
the Conversion Ratio in effect on the date of such notice of redemption.
10.3. Company's Option to Convert.
---------------------------
Provided that (a) no Default or Event of Default shall have occurred
and be continuing and (b) (i) the Current Market Price of the Common Stock has,
since the Closing, exceeded the Conversion Price multiplied by 200% for at least
60 consecutive Trading Days, or (ii) the Company shall have filed reports with
the Commission on Forms 10-Q or 10-K reporting positive Consolidated Net Income
(after payment of all accrued and accumulated preferred stock dividends
currently due, including any and all preferred stock dividend arrearages, which
amounts shall have been paid prior to exercise of such option to convert) for
two consecutive fiscal quarters ending on or after March 31, 1997, the Notes
shall be convertible at the option of the Company, in whole but not in part, at
any time into shares of Preferred Stock, at the Preferred Ratio.
10.4. Exercise of Conversion Privilege.
--------------------------------
(a) Any conversion by the holders of Notes into Common Stock shall
be in an aggregate outstanding principal amount equal to at least $100,000,
unless the amount so converted shall be such holder's entire outstanding
principal amount of Notes. Conversion of the Notes may be effected by any holder
thereof upon the surrender to the Company at the office of the Company
designated for notices in accordance with Section 13.6 or at the office of any
agent or agents of the Company, as may be designated by the Board of Directors
(the "Transfer Agent"), of the Notes to be converted, accompanied by a written
notice stating that such holder elects to convert all or a specified portion of
the outstanding principal amount of such Notes in accordance with the provisions
of this Article 10 and specifying the name or names in which such holder wishes
the certificate or certificates for shares of Preferred Stock or Common Stock,
as
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<PAGE>
the case may be, to be issued; provided that, in the case of the conversion
-------- ----
of the Notes into Preferred Stock in accordance with Section 10.3, the Company
shall provide each holder written notice stating that such holder's Notes have
been converted pursuant to Section 10.3, and each holder shall thereupon
promptly surrender to the Transfer Agent the Notes so converted specifying the
name or names in which such holder wishes the certificates for shares of
Preferred Stock to be issued. In case any holder's notice shall specify a name
or names other than that of such holder, such notice shall be accompanied by
payment of all transfer taxes payable upon the issuance of shares of Preferred
Stock or Common Stock in such name or names. Other than such taxes, the Company
will pay any and all issue and other taxes (other than taxes based on income)
that may be payable in respect of any issue or delivery of shares of Preferred
Stock or Common Stock on conversion of Notes pursuant hereto. As promptly as
practicable, and in any event within five Business Days after the surrender of
such Notes and the receipt of such notice relating thereto and, if applicable,
payment of all transfer taxes (or the demonstration to the satisfaction of the
Company that such taxes have been paid), the Company shall deliver or cause to
be delivered (i) certificates representing the number of validly issued, fully
paid and nonassessable full shares of Preferred Stock or Common Stock, as the
case may be, to which the holder of the Notes being converted shall be entitled
and (ii) if less than the entire outstanding principal amount of any Note
surrendered is being converted, a new Note in the principal amount which remains
outstanding upon such partial conversion. Such conversion shall be deemed to
have been made at the close of business on the date of giving such notice so
that the rights of the holder thereof as to the Note or Notes (or portion
thereof) being converted shall cease except for the right to receive shares of
Preferred Stock or Common Stock, as the case may be, in accordance herewith, and
the person entitled to receive the shares of Preferred Stock or Common Stock
shall be treated for all purposes as having become the record holder of such
shares of Preferred Stock or Common Stock at such time, so long as such holder's
Notes are delivered to the Company within two Business Days after the date of
the giving of notice. In any other case of conversion at the holder's option,
the date of delivery of the Notes shall be deemed to be the date of conversion.
(b) In case any Notes are to be redeemed pursuant to
Section 9.1, such right of conversion shall cease and terminate as to the Notes
to be redeemed at the close of business on the Business Day preceding the date
fixed for redemption unless the Company shall default in the payment of the
Redemption Price or the Change of Control Price, as the case may be.
(c) The Conversion Ratio shall be subject to adjustment from
time to time in certain instances as hereinafter provided.
10.5. Fractions of Shares; Interest.
-----------------------------
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<PAGE>
In connection with the conversion of any Note into Common Stock, no
fractions of shares shall be issued, but in lieu thereof the Company shall pay a
cash adjustment in respect of such fractional interest in an amount equal to
such fractional interest multiplied by the Current Market Price per share of
Common Stock on the Trading Day on which such Note is deemed to have been
converted. If more than one Note shall be surrendered for conversion by the
same holder at the same time, the number of full shares of Common Stock issuable
on conversion thereof shall be computed on the basis of the aggregate
outstanding principal amount of Notes so surrendered. Promptly upon conversion,
the Company shall pay to holders of Notes so converted an amount equal to any
accrued and unpaid interest on the Notes surrendered for conversion to the date
of such conversion, together with cash in lieu of any fractional share of Common
Stock.
10.6. Reservation of Stock.
--------------------
(a) The Company shall at all times reserve and keep available for
issuance upon the conversion of the Notes and exercise of the Warrants, free
from any preemptive rights, such number of its authorized but unissued shares of
Preferred Stock and Common Stock as will from time to time be sufficient to
permit the conversion of the entire outstanding principal amount of the Notes
into Preferred Stock or Common Stock and permit the exercise of all of the
Warrants, and shall take all action required to increase the authorized number
of shares of Preferred Stock or Common Stock, if necessary, to permit the
conversion of the entire outstanding principal amount of the Notes and permit
the exercise of all of the Warrants.
(b) If the Company shall issue shares of Common Stock upon
conversion of the Notes as contemplated by this Article 10, or upon exercise of
the Warrants, the Company shall issue together with each such share of Common
Stock one Right (or other securities in lieu thereof), or any rights issued to
holders of Common Stock in addition thereto or in replacement therefor, whether
or not such rights shall be exercisable at such time, but only if such rights
are issued and outstanding and held by other holders of Common Stock at such
time and have not expired.
10.7. Adjustment of Conversion Ratio.
------------------------------
The Conversion Ratio will be subject to adjustment from time to time
as follows:
(a) In case the Company shall at any time or from time to time
after May 1, 1997 (A) pay a dividend, or make a distribution, on the outstanding
shares of Common Stock in shares of Common Stock, (B) subdivide the outstanding
shares of Common Stock, (C) combine the outstanding shares of Common Stock into
a smaller number of shares or (D) issue by reclassification of the shares of
Common Stock any
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<PAGE>
shares of capital stock of the Company, then, and in each such case, the
Conversion Ratio in effect immediately prior to such event or the record date
therefor, whichever is earlier, shall be adjusted so that the holder of any Note
thereafter surrendered for conversion into Common Stock shall be entitled to
receive, for each $100 of outstanding principal amount of Notes, the number of
shares of Common Stock or other securities of the Company which such holder
would have owned or have been entitled to receive after the happening of any of
the events described above, had such Notes been surrendered for conversion
immediately prior to the happening of such event or the record date therefor,
whichever is earlier. An adjustment made pursuant to this clause (a) shall
become effective (x) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the determination
of holders of shares of Common Stock entitled to receive such dividend or
distribution, or (y) in the case of such subdivision, reclassification or
combination, at the close of business on the day upon which such corporate
action becomes effective. No adjustment shall be made pursuant to this clause
(a) in connection with any transaction to which Section 10.8 applies.
(b) In case the Company shall issue shares of Common Stock (or
rights, warrants or other securities convertible into or exchangeable for shares
of Common Stock) after May 1, 1997 at a price per share (or having a conversion
price per share) less than the Conversion Price as of the date of issuance of
such shares (or, in the case of convertible or exchangeable securities, less
than the Conversion Price as of the date of issuance of the rights, warrants or
other securities in respect of which shares of Common Stock were issued), then,
and in each such case, the Conversion Ratio and the Conversion Price shall be
adjusted so that the holder of each Note shall be entitled to receive, for each
$100 of outstanding principal amount of Notes, upon the conversion thereof into
Common Stock, the number of shares of Common Stock determined by multiplying
(A) the Conversion Ratio in effect on the day immediately prior to such date by
(B) a fraction, the numerator of which shall be the sum of (1) the number of
shares of Common Stock outstanding on such date and (2) the number of additional
shares of Common Stock issued (or into which the convertible securities may
convert), and the denominator of which shall be the sum of (x) the number of
shares of Common Stock outstanding on such date and (y) the number of shares of
Common Stock purchasable at the then applicable Conversion Price per share with
the aggregate consideration receivable by the Company for the total number of
shares of Common Stock so issued (or into which the rights, warrants or other
convertible securities may convert). An adjustment made pursuant to this
Section 10.7(b) shall be made on the next Business Day following the date on
which any such issuance is made and shall be effective retroactively to the
close of business on the date of such issuance. For purposes of this
Section 10.7(b), the aggregate consideration receivable by the Company in
connection with the issuance of shares of Common Stock or of rights, warrants or
other securities convertible into shares of Common Stock shall be deemed to be
equal to the sum of the aggregate offering price
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<PAGE>
(before deduction of underwriting discounts or commissions and expenses payable
to third parties) of all such Common Stock, rights, warrants and convertible
securities plus the minimum aggregate amount, if any, payable upon exercise or
conversion of any such rights, warrants and convertible securities into shares
of Common Stock. If Common Stock is sold as a unit with other securities or
rights of value, the aggregate consideration received for such Common Stock
shall be deemed to be net of the Fair Market Value of such other securities and
rights of value. If Common Stock is issued in consideration of the release of a
claim brought by a shareholder against the Company, whether before or after the
Closing Date, on the basis of events or circumstances occurring prior to the
Closing Date ("Pre-Closing Shareholder Claims"), the consideration for such
Common Stock shall be deemed to be $0. The issuance or reissuance of any shares
of Common Stock (whether treasury shares or newly issued shares) pursuant to
(i) a dividend or distribution on, or subdivision, combination or
reclassification of, the outstanding shares of Common Stock requiring an
adjustment in the conversion ratio pursuant to Section 10.7(a), (ii) shares
issued as Stock Milestone Payments or Combination Milestone Payments pursuant to
Section 5.06 of the Development and Marketing Agreement dated June 13, 1991 with
Gensia Clinical Partners as in effect on the date hereof or pursuant to any
acquisition of BIOFA A.B. on terms approved by the full Board of Directors or
(iii) any restricted stock or stock option plan or program of the Company
involving the grant of options or rights at below the applicable Conversion
Price (but the Company will in no event issue options or rights exercisable at
less than 85% of Current Market Price at the date of grant) so long as the
granting of such options or rights has been approved by the full Board of
Directors or a committee of the Board of Directors on which the director
designated by the Purchaser is a member, or (iv) any option, warrant, right, or
convertible security outstanding as of the date hereof (other than the Rights or
similar securities) shall not be deemed to constitute an issuance of Common
Stock or convertible securities by the Company to which this Section 10.7(b)
applies. Upon the expiration unexercised of any options, warrants or rights to
convert any convertible securities for which an adjustment has been made
pursuant to this Section 10.7(b), the adjustments shall forthwith be reversed to
effect such rate of conversion as would have been in effect at the time of such
expiration or termination had such options, warrants or rights or convertible
securities, to the extent outstanding immediately prior to such expiration or
termination, never been issued. Nothing herein shall limit the right of any
holder to an anti-dilution adjustment in the event that there shall occur a
"flip-in" or "flip-over" event under the Rights Agreement or any similar plan or
agreement of the Company. No adjustment shall be made pursuant to this
Section 10.7(b)in connection with any transaction to which Section 10.8 applies.
(c) In case the Company shall at any time or from time to time
after May 1, 1997 declare, order, pay or make a dividend or other distribution
(including, without limitation, any distribution of stock or other securities or
property or rights or
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<PAGE>
warrants to subscribe for securities of the Company or any of its Subsidiaries
by way of dividend, including any distribution of shares or assets of Metabasis
or Automedics and any payment or granting of anything of value in consideration
of the release of a Pre-Closing Shareholder Claim, on its Common Stock, other
than dividends or distributions of shares of Common Stock which are referred to
in Section 10.7(a) or issuances of Common Stock which are referred to in Section
10.7(b), then, and in each such case, the Conversion Ratio and the Conversion
Price shall be adjusted so that the holder of each Note shall be entitled to
receive, upon the conversion thereof, for each $100 of outstanding principal
amount of Notes, the number of shares of Common Stock determined by multiplying
(1) the applicable Conversion Ratio on the day immediately prior to the record
date fixed for the determination of stockholders entitled to receive such
dividend or distribution by (2) a fraction, the numerator of which shall be the
Current Market Price of the Common Stock for the period of 20 Trading Days
preceding such record date, and the denominator of which shall be such Current
Market Price of the Common Stock less the Fair Market Value per share of Common
Stock (as determined in good faith by the Board of Directors and supported by an
opinion from an investment banking firm of recognized national standing
acceptable to holders of a majority of the Notes) of such dividend or
distribution. No adjustment shall be made pursuant to this Section 10.7(c) in
connection with any transaction to which Section 10.8 applies.
(d) For purposes of this Section 10.7, the number of shares of
Common Stock at any time outstanding shall not include any shares of Common
Stock then owned or held by or for the account of the Company.
(e) The term "dividend," as used in this Section 10.7, shall
mean a dividend or other distribution upon stock of the Company as well as any
consideration granted to a shareholder for the release of a claim against the
Company.
(f) Anything in this Section 10.7 to the contrary
notwithstanding, the Company shall not be required to give effect to any
adjustment in the Conversion Ratio unless and until the net effect of one or
more adjustments (each of which shall be carried forward), determined as above
provided, shall have resulted in a change of the Conversion Ratio by at least
one one-hundredth of one share of Common Stock, and when the cumulative net
effect of more than one adjustment so determined shall be to change the
Conversion Ratio by at least one one-hundredth of one share of Common Stock,
such change in Conversion Ratio shall thereupon be given effect.
(g) The certificate of any firm of independent public
accountants of recognized national standing selected by the Board of Directors
(which may be the firm of independent public accountants regularly employed by
the Company) shall be presumptively correct for any computation made under this
Section 10.7.
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<PAGE>
(h) If the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the number of shares of Common
Stock issuable upon exercise of the right of conversion granted by this
Section 10.7 or in the Conversion Ratio or Conversion Price then in effect shall
be required by reason of the taking of such record.
(i) In the case of any event which requires an adjustment to
the Conversion Ratio pursuant to this Section 10.7, the Conversion Price shall
also be appropriately adjusted to reflect such event.
(j) If any event occurs as to which the provisions of this
Section 10.7 are not strictly applicable or if strictly applicable would not
fairly protect the rights of the holders of the Notes in accordance with the
essential intent and principles of such provisions, the Board of Directors shall
make an adjustment in the application of such provisions, in accordance with
such essential intent and principles, so as to protect such rights of the
holders of the Notes.
10.8. Merger or Consolidation.
-----------------------
In the case of any consolidation or merger of the Company with or into
another corporation, or in case of any sale or conveyance to another corporation
of all or substantially all of the assets or property of the Company (each of
the foregoing being referred to as a "Transaction") occurring in each case at
any time, each Note then outstanding shall thereafter be convertible into, in
lieu of the Common Stock issuable upon such conversion prior to consummation of
such Transaction, the kind and amount of shares of stock and other securities
and property receivable (including cash) upon the consummation of such
Transaction by a holder of that number of shares of Common Stock into which the
principal balance of such Note was convertible immediately prior to such
Transaction. In case securities or property other than Common Stock shall be
issuable or deliverable upon conversion as aforesaid, then all references in
this Article 10 shall be deemed to apply, so far as appropriate and nearly as
may be, to such other securities or property.
10.9. Notice of Certain Corporate Actions.
-----------------------------------
In case at any time or from time to time the Company shall pay any
stock dividend or make any other non-cash distribution to the holders of its
Common Stock, or shall offer for subscription pro rata to the holders of its
Common Stock any additional shares of stock of any class or any other right, or
there shall be any capital reorganization or reclassification of the Common
Stock or consolidation or merger of the Company with
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<PAGE>
or into another corporation, or any sale or conveyance to another corporation of
the property of the Company as an entirety or substantially as an entirety, or
there shall be a voluntary or involuntary dissolution, liquidation or winding up
of the Company, then, in any one or more of said cases the Company shall give at
least 20 days' prior written notice (the time of mailing of such notice shall be
deemed to be the time of giving thereof) to the registered holders of the Notes
at the addresses of each as shown in the Note Register of the date on which (i)
a record shall be taken for such stock dividend, distribution or subscription
rights or (ii) such reorganization, reclassification, consolidation, merger,
sale or conveyance, dissolution, liquidation or winding up shall take place, as
the case may be, provided that in the case of any Transaction to which
Section 10.7 applies the Company shall give at least 30 days' prior written
notice as aforesaid. Such notice shall also specify the date as of which the
holders of the Common Stock of record shall participate in said dividend,
distribution or subscription rights or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale or conveyance or
participate in such dissolution, liquidation or winding up, as the case may be.
Failure to give such notice shall not invalidate any action so taken.
10.10. Reports as to Adjustments.
-------------------------
Upon any adjustment of the Conversion Ratio then in effect and any
increase or decrease in the number of shares of Common Stock issuable upon the
operation of the conversion provisions set forth in this Article 10, then, and
in each such case, the Company shall promptly deliver to the Transfer Agent of
the Notes and Common Stock, a certificate signed by the President or a Vice
President and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Company setting forth in reasonable detail the event
requiring the adjustment and the method by which such adjustment was calculated
and specifying the Conversion Ratio then in effect following such adjustment and
the increased or decreased number of shares issuable upon the conversion granted
by this Section 10, and shall set forth in reasonable detail the method of
calculation of each and a brief statement of the facts requiring such
adjustment. Where appropriate, such notice to holders of the Notes may be given
in advance and included as part of the notice required under the provisions of
Section 10.9.
11. Subordination of Notes
----------------------
11.1. Subordination of Notes to Senior Indebtedness.
---------------------------------------------
The Indebtedness evidenced by the Notes and all renewals and
extensions thereof, all obligations of the Company under this Agreement, the
Certificate of Designation, and all other instruments and agreements arising out
of or relating to any or all of the foregoing and all renewals and extensions
thereof (collectively called the "Junior Indebtedness") shall at all times be
wholly subordinate and junior in right of
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<PAGE>
payment to any and all Senior Indebtedness of the Company (including any claims
by the holders of such Senior Indebtedness for interest accruing after any
assignment for the benefit of creditors by the Company or the institution by or
against the Company of any proceedings under the Bankruptcy Code or any law for
the relief of or relating to debtors, or any other claim by such holders for any
such interest which would have accrued in the absence of such assignment or the
institution of such proceedings) in the manner and with the force and effect
hereafter set forth:
(a) In the event of any liquidation, dissolution or winding up
of the Company, or of any execution, sale, receivership, insolvency,
bankruptcy, liquidation, readjustment, reorganization or other similar
proceeding relative to the Company or its property, all sums owing on all
Senior Indebtedness of the Company (including cash collateral and amounts
not yet due and payable) shall first be paid in full before any payment is
made upon the Junior Indebtedness; and in any such event any payment or
distribution of any kind or character, whether in cash, property, or
securities which shall be made upon or in respect of the Junior
Indebtedness shall be paid over to the holders of the Senior Indebtedness
of the Company, pro rata, for application in payment thereof unless and
until such Senior Indebtedness shall have been paid or satisfied in full.
In case of any assignment for the benefit of creditors by the Company or in
case any proceedings under the Bankruptcy Code or any other law for the
relief of or relating to debtors are instituted by or against the Company,
or in case of the appointment of any receiver for the Company's business or
assets, or in case of any dissolution or winding up of the affairs of the
Company, the Company and any assignee, trustee in bankruptcy, receiver,
debtor in possession or other person or persons in charge are hereby
directed to pay to the holders of the Senior Indebtedness of the Company
the full amount of such holders' claims against the Company (including
interest to the date of payment) before making any payments to the holders
of Junior Indebtedness, and insofar as may be necessary for that purpose,
the Purchaser hereby assign and transfer to the holders of Senior
Indebtedness of the Company all rights to any payments, dividends or other
distributions.
(b) In the event that all or any part of the Junior
Indebtedness is declared or becomes due and payable because of the
occurrence of any Event of Default or otherwise than at the option of the
Company (other than pursuant to its terms at its final maturity), under
circumstances when the foregoing clause (a) shall not be applicable, the
holders of the Junior Indebtedness shall be entitled to payments only after
there shall first have been paid in full all Senior Indebtedness of the
Company or payment shall have been provided therefor in a manner
satisfactory to the holders of such Senior Indebtedness.
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<PAGE>
(c) Upon the occurrence of an event which is, or with the lapse of
time or notice or both would be, an event which gives any holder of any
Senior Indebtedness of the Company the right to demand payment, cash
collateral, accelerate the maturity, or terminate any commitment to further
extend credit, no payment shall be made on any Junior Indebtedness if
either:
(i) notice of such default in writing or by telegram has been
given to the Company by any holder of any Senior Indebtedness of the
Company, provided that judicial proceedings shall be commenced with
respect to such default (x) within 180 days thereafter if such default
consists of the nonpayment of principal, interest, or any other sum
due on such Senior Indebtedness, or (y) within 180 days after the
earlier of (i) the giving of such notice or (ii) the date on which
such holder is entitled to institute judicial proceedings, or
(ii) judicial proceedings shall be pending in respect of such
default.
The holder of any portion of Senior Indebtedness of the Company shall not be
entitled to give notice pursuant to this clause (c) more than once with respect
to any default which was specified in such notice and which has continued
without interruption since the date such notice was given, nor shall such holder
be entitled to give a separate notice with respect to any default not so
specified which (to the knowledge of the holder giving notice) was existing on
the date such notice was given pursuant to this clause (c) and which has
continued without interruption from the date such notice was given. Upon
receipt of any notice from any holder of any Senior Indebtedness pursuant to
this clause (c), the Company shall forthwith send a copy thereof to each holder
of Junior Indebtedness and each holder of its Senior Indebtedness at the time
outstanding.
(d) All payments, cash, or noncash distributions made to the holders
of Junior Indebtedness which should have been made to the holders of Senior
Indebtedness of the Company shall be received and held by the former in trust
for the benefit of the latter, and the holders of Junior Indebtedness shall
forthwith remit such payments, cash, or noncash distributions to the holders of
the Senior Indebtedness of the Company, pro rata, in the form in which it was
received, together with such endorsements or documents as may be necessary to
effectively negotiate or transfer the same to the holders of the Senior
Indebtedness of the Company.
(e) Each holder of Senior Indebtedness of the Company is hereby
authorized by the Purchaser to:
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(i) renew, compromise, extend, accelerate or otherwise change
the time of payment, or any other terms, of any Senior Indebtedness of
the Company held by such holder;
(ii) increase or decrease the rate of interest payable thereon
or any part thereof;
(iii) exchange, enforce, waive or release any security therefor;
(iv) apply such security and direct the order or manner of sale
thereof in such manner as such holder may at its discretion determine;
and/or
(v) release the Company or any guarantor of any Senior
Indebtedness of the Company from liability.
If any such action is taken, the Company shall promptly notify the Purchaser and
any holder of Junior Indebtedness. Notwithstanding anything set forth in this
Section 11.1, nothing set forth herein shall restrict holders of the Notes and
Preferred Stock from exercising their rights of conversion hereunder.
11.2. Proofs of Claim of Holders of Senior Indebtness; Voting
-------------------------------------------------------
The Purchaser undertakes and agrees for the benefit of each holder of
Senior Indebtedness of the Company to execute, verify, deliver and file any
proofs of claim relating to the Junior Indebtedness which any holder of such
Senior Indebtedness may at any time require in order to prove and realize upon
any rights or claims pertaining to the Junior Indebtedness and to effectuate the
full benefit of the subordination contained herein. Upon failure of the
Purchaser to file the required proof or proofs of claim prior to 30 days before
the expiration of the time to file claims in such proceeding, each holder of
Senior Indebtedness of the Company is hereby irrevocably appointed by the
Purchaser to be such Purchaser's agent to file the appropriate claim or claims
and if such holder of Senior Indebtedness elects at its sole discretion to file
such claim or claims (i) to accept or reject any plan of reorganization or
arrangement on behalf of the Purchaser, and (ii) to otherwise vote the
Purchaser's claim in respect of the Junior Indebtedness in any manner deemed
appropriate for the benefit and protection of the holders of the Senior
Indebtedness of the Company.
11.3. Rights of Holders of Senior Indebtedness Unimpaired.
---------------------------------------------------
No right of any holder of any Senior Indebtedness to enforce
subordination as herein provided shall at any time or in any way be affected or
impaired
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<PAGE>
by any failure to act on the part of the Company or the holders of Senior
Indebtedness, or by any noncompliance by the Company with any of the terms,
provisions and covenants of this Agreement, regardless of any knowledge thereof
that any such holder of Senior Indebtedness may have or be otherwise charged
with.
11.4. Effects of Event of Default.
---------------------------
The Company agrees, for the benefit of the holders of Senior
Indebtedness, that in the event that a Note is declared due and payable before
its maturity because of the occurrence of an Event of Default, (i) the Company
will give prompt notice in writing of such happening to the holders of Senior
Indebtedness and (ii) all Senior Indebtedness shall forthwith become immediately
due and payable upon demand, regardless of the expressed maturity thereof.
11.5. Company's Obligations Unimpaired.
--------------------------------
The provisions of this Article 11 are solely for the purpose of
defining the relative rights of the holders of Senior Indebtedness on the one
hand, and the Purchaser on the other hand, and nothing herein shall impair, as
between the Company and the Purchaser, the obligation of the Company which is
unconditional and absolute, to pay the principal, premium, if any, and interest,
if payable, on the Notes in accordance with this Agreement and the terms of the
Notes, nor shall anything herein prevent the Purchaser from exercising all
remedies otherwise permitted by applicable law or under this Agreement or the
Notes upon the occurrence of an Event of Default, subject to the rights of the
holders of Senior Indebtedness as herein provided for.
11.6. Subrogation.
-----------
Subject to the payment in full of Senior Indebtedness, holders of the
Notes shall be subrogated to the rights of the holders of Senior Indebtedness to
receive payments or distributions of cash, property or securities made on the
Senior Indebtedness until the Senior Indebtedness shall be paid in full; and,
for the purposes of such subrogation, payments or distributions to the holders
of Senior Indebtedness of any cash, property or securities to which any holder
of Notes would be entitled except for the provisions of this Agreement shall, as
between the Company and its creditors other than the holders of Senior
Indebtedness and holders of the Notes, be deemed to be a payment by the Company
to or on account of the Notes, it being understood that the provisions of this
Agreement are and are intended solely for the purpose of defining the relative
rights of the holders of the Notes on the one hand, and the holders of Senior
Indebtedness, on the other hand. The purpose of this Section 11.6 is to grant
to holders of the Notes the same rights against the Company with respect to the
aggregate amount of such payments or distributions as the holders of Senior
Indebtedness would have against the Company if such aggregate amount were
considered overdue Senior Indebtedness.
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12. Interpretation
--------------
12.1. Definitions.
-----------
"Adjustment Period" shall mean the period of five consecutive Trading
-----------------
Days preceding the date as of which the Fair Market Value of a security is to be
determined.
"Affiliate" and "Associate" shall have the respective meanings
--------- ---------
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
"Applicable Tax Rate" shall have the meaning set forth in
-------------------
Section 6.18(a).
"Beneficially Own" or "Beneficial Owners" with respect to any
---------------- -----------------
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to
any agreement, arrangement or understanding, whether or not in writing.
"Board of Directors" shall mean the board of directors of the Company.
------------------
"Business Day" shall mean any day other than a Saturday, Sunday, or a
------------
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Capitalized Lease" shall mean, with respect to any person, any lease
-----------------
or any other agreement for the use of property which, in accordance with
generally accepted accounting principals, should be capitalized on the lessee's
or user's balance sheet.
"Capitalized Lease Obligation" of any person shall mean and include,
----------------------------
as of any date as of which the amount thereof is to be determined, the amount of
the liability capitalized or disclosed (or which should be disclosed) in a
balance sheet of such person in respect of a Capitalized Lease of such person.
"Change of Control" shall mean:
-----------------
(a) A "person" or "Group" (within the meaning of Sections 13(d)
and 14(d)(2) of the Exchange Act becoming, in the transaction or series of
related transactions, the Beneficial Owner of Voting Securities entitled to
exercise more than 60% of the total voting power of all outstanding Voting
Securities of the Company (including any Voting Securities that are not then
outstanding of which such person or Group is deemed the Beneficial Owner);
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<PAGE>
(b) liquidation of the Company;
(c) a reorganization, merger or consolidation, in each case,
with respect to which (i) all or substantially all the individuals and entities
who were the respective Beneficial Owners of the voting securities of the
Company immediately prior to such reorganization, merger or consolidation do
not, following such reorganization, merger or consolidation Beneficially Own,
directly or indirectly, more than 50.1% of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors of the corporation resulting from such reorganization, merger or
consolidation, or (ii) the shares of the surviving corporation held by such
holders are not, and immediately upon issuance will not be, listed on a national
securities exchange or quoted on the Nasdaq Stock Market, or (iii) the shares of
the Surviving Corporation held by such holders are or will be subject to any
right of repurchase by the issuer thereof or any third-party or are otherwise
subject to any encumbrance as a result of such transaction, or (iv) immediately
after the consummation of such reorganization, merger or consolidation, the
surviving corporation would be in violation of any covenant set forth in Section
6.1 hereof;
(d) the sale or other disposition of assets or property of the
Company in one transaction or series of related transactions having a book value
greater than 50% of the book value of the Company's total assets immediately
preceding such transaction;
(e) a "Fundamental Change" within the meaning of paragraph (c)
of Section C8 of Article IV of the Company's Restated Certificate of
Incorporation;
(f) the Company shall propose, declare or pay a dividend or
other distribution in stock of any Subsidiary other than Metabasis or Automedics
and the Fair Market Value of such stock plus the Fair Market Value of all other
stock of Subsidiaries (other than Metabasis or Automedics) distributed since the
date of this Agreement to shareholders of the Company (such Fair Market Value in
the case of prior distributions to be determined as of their respective dates of
distribution) exceeds 10% of the Company's consolidated total assets as of the
end of the most recently ended fiscal quarter; or
(g) the Company merges with or into or consolidates with any
other Person and the Surviving Entity is organized under the laws of a
jurisdiction other than the United States or any State thereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
----
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<PAGE>
"Commission" shall mean the Securities and Exchange Commission.
----------
"Consolidated" or "consolidated", when used with reference to any
------------ ------------
financial term in this Agreement (but not when used with respect to any tax
return or tax liability), shall mean the aggregate for two or more persons of
the amounts signified by such term for all such persons, with inter-company
items eliminated and, with respect to earnings, after eliminating the portion of
earnings properly attributable to minority interests, if any, in the capital
stock of any such person or attributable to shares of preferred stock of any
such person not owned by any other such person.
"Consolidated Net Income (Loss)" of any Person shall mean, for any
------------------------------
period, the Consolidated net income (or loss) of such Person and its
Subsidiaries for such period on a Consolidated basis as determined in accordance
with generally accepted accounting principles, adjusted, to the extent included
in calculating such net income (or loss), by excluding, without duplication, (i)
all extraordinary gains (less all fees and expenses relating thereto), (ii) the
portion of net income (or loss) of such Person and its Subsidiaries on a
Consolidated basis allocable to minority interests in unconsolidated Persons to
the extent that cash dividends or distributions have not actually been received
by such Person or one of its Consolidated Subsidiaries, (iii) net income (or
loss) of any Person combined with such Person or any of its Subsidiaries on a
"pooling of interests" basis attributable to any period prior to the date of
combination, (iv) any gain or loss, net of taxes, realized upon the termination
of any employee pension benefit plan, (v) net gains (or losses) (less all fees
and expenses relating thereto) in respect of dispositions of assets other than
in the ordinary course of business, (vi) the net income of any Subsidiary to the
extent that the declaration of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or its stockholders, (vii) any restoration to income of any
contingency reserve, except to the extent provision for such reserve was made
out of income accrued at any time following the date of this Agreement, or
(viii) any gain arising from the acquisition of any securities, or the
extinguishment, under generally accepted accounting principles, of any
Indebtedness of such Person.
"Consolidated Tangible Net Worth" shall mean the consolidated
-------------------------------
stockholders' equity of the Company and its Subsidiaries, less the amount of
assets constituting good will, determined in accordance with generally accepted
accounting principles consistently applied; provided, however, that in the event
-------- -------
of any distribution or issuance of the capital stock of Metabasis, the
consolidated tangible net worth of Metabasis at the time of such distribution or
issuance shall subsequently be added to (or
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<PAGE>
subtracted from in the case of a deficit) any calculation of the Consolidated
Tangible Net Worth of the Company for purposes of Article 6.
"Consolidated Total Indebtedness" shall mean consolidated Indebtedness
-------------------------------
of the Company and its Subsidiaries, determined in accordance with generally
accepted accounting principles consistently applied.
"Contingent Warrant" shall have the meaning given such term in the
------------------
Warrant.
"Conversion Price" shall mean $3.78, subject to adjustment as provided
----------------
in Article 10.
"Conversion Ratio" shall mean the ratio obtained by dividing each $100
----------------
of outstanding principal amount of Notes by the Conversion Price, subject to
adjustment as provided in Article 10.
"Current Market Price", when used with reference to shares of Common
--------------------
Stock or other securities on any date, shall mean the closing price per share of
Common Stock or such other securities on such date and, when used with reference
to shares of Common Stock or other securities for any period shall mean the
average of the daily closing prices per share of Common Stock or such other
securities for such period. The closing price for each day shall be the last
quoted bid price in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System or such other
system then in use, or, if on any such date the Common Stock or such other
securities are not quoted by any such organization, the closing bid price as
furnished by a professional market maker making a market in the Common Stock or
such other securities selected by the Board of Directors of the Company. If the
Common Stock is listed or admitted to trading on a national securities exchange,
the closing price shall be the closing bid price, regular way, as reported in
the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange or, if
the Common Stock or such other securities are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Common Stock or such other securities
are listed or admitted to trading. If the Common Stock or such other securities
are not publicly held or so listed or publicly traded, "Current Market Price"
shall mean the Fair Market Value per share of Common Stock or of such other
securities as determined in good faith by the Board of Directors of the Company
based on an opinion of an independent investment banking firm acceptable to
holders of a majority
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<PAGE>
of the Notes, which opinion may be based on such assumptions as such firm shall
deem to be necessary and appropriate.
"Current Warrant Price" shall have the meaning given such term in the
---------------------
Warrant.
"Default" shall mean any event which, with or without the passage of
-------
time, would be an Event of Default.
"Disinterested Director" shall mean, with respect to any transaction
----------------------
or series of related transactions, a member of the Board of Directors who does
not have any material direct or indirect financial interest in or with respect
to such transaction or series of related transactions.
"Employee Benefit Plan" shall mean each plan, program, policy, payroll
---------------------
practice, contract, agreement or other arrangement providing for compensation,
severance, termination pay, performance awards, stock or stock-related awards,
fringe benefits or other employee benefits of any kind, whether formal or
informal, funded or unfunded, written or oral and whether or not legally
binding, including, without limitation, each "employee benefit plan," within the
meaning of Section 3(3) of ERISA and each "multiemployer plan" within the
meaning of Sections 3(37) or 4001(a)(3) of ERISA, pursuant to which the Company,
any Subsidiary or any ERISA Affiliate has or may have any liability, contingent
or otherwise.
"Environmental Laws" shall mean, at any date, all provisions of
------------------
federal, state, local or foreign law (including applicable principles of common
and civil law), statutes, ordinances, rules, regulations, published standards
and directives that have the force and effect of Laws, permits, licenses,
judgments, writs, injunctions, decrees and orders enacted, promulgated or issued
by any Public Authority, and all indemnity agreements and other contractual
obligations, as in effect at such date, relating to (i) the protection of the
environment, including the air, surface and subsurface soils, surface waters,
groundwaters and natural resources, and (ii) occupational health and safety and
exposure of persons to Hazardous Materials. Environmental Laws shall include
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. (S)(S)9601 et seq., and any other Laws imposing or creating liability
------
with respect to Hazardous Materials.
"Environmental Liability" shall mean any liabilities, obligations,
-----------------------
costs, losses, payments or damages, including compensatory and punitive damages,
incurred (i) to contain, remove, clean up, assess, abate or otherwise remedy any
actual or alleged release or threatened release of Hazardous Materials, any
actual or alleged contamination
-52-
<PAGE>
(by Hazardous Materials) of air, surface or subsurface soil, groundwater or
surface water, or any personal injury or damage to natural resources or property
resulting from any such release or contamination, pursuant to the requirements
of any Environmental Law or in response to any claim by any Public Authority or
other Third Party under any Environmental Law; (ii) to modify facilities or
processes or take any other remedial action in response to any claim by any
Public Authority of non-compliance with any Environmental Law; (iii) as a result
of the imposition of any civil or criminal fine or penalty by any Public
Authority for the violation or alleged violation of any Environmental Law; or
(iv) as a result of any action, suit, proceeding or claim by any Third Party
under any Environmental Law. The term "Environmental Liability" shall include:
(i) reasonable fees of counsel and consultants (but not any corporate allocation
for management time or for the use of similar in-house services or facilities)
and (ii) the costs and expenses of any investigation undertaken to ascertain the
existence or extent of any potential or actual Environmental Liability.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended.
"ERISA Affiliate" shall mean each business or entity which is a member
---------------
of a "controlled group of corporations," under "common control" or an
"affiliated service group" with the Company or its Subsidiaries within the
meaning of Sections 414(b), (c) or (m) of the Code, or required to be aggregated
with the Company or its Subsidiaries under Section 414(o) of the Code, or is
under "common control" with the Company or its Subsidiaries, within the meaning
of Section 4001(a)(14) of ERISA.
"Event of Default" shall mean each of the happenings or circumstances
----------------
enumerated in Section 8.1.
"Excepted Warrant Issues" shall mean (i) an issue of units comprising
-----------------------
debt or preferred stock and warrants exercisable for Common Stock of the Company
in which, on the issue date, the product of (a) the number of shares of Common
Stock of the Company issuable upon exercise of the warrants multiplied by
(b) the Current Market Price of the Common Stock of the Company does not exceed
25% of the cash consideration paid for such units and (ii) the grant of warrants
exercisable for Common Stock of the Company to the lessor of equipment to the
Company under a financing lease which finances the acquisition of such equipment
by the Company (or which refinances such a lease) and which is principally
secured by a first priority security interest in such equipment.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, or any successor federal statute, and the rules and regulations of the
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<PAGE>
Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934, as
amended, shall include reference to the comparable section, if any, of any such
successor federal statute.
"Fair Market Value" shall mean, as to shares of Common Stock or any
-----------------
other class of capital stock or securities of the Company or any other issuer
which are publicly traded, the average of the Current Market Prices of such
shares of securities for each day of the Adjustment Period. The "Fair Market
Value" of any security which is not publicly traded or of any other property
shall mean the fair value thereof as determined by an independent investment
banking or appraisal firm experienced in the valuation of such securities or
property selected in good faith by the Board of Directors of the Company or a
committee thereof, or, if no such investment banking or appraisal firm is in the
good faith judgment of the Board of Directors or such committee available to
make such determination, as determined in good faith by the Board of Directors
of the Company or such committee.
"Fee Letter" shall mean the letter dated March 17, 1997, from the
----------
Purchaser to the Company.
"Gensia Disclosure Schedule" shall mean the disclosure schedule dated
--------------------------
February 28, 1997 delivered by the Company to Rakepoll Finance pursuant to the
Stock Exchange Agreement.
"Governing Instruments" shall mean, collectively, this Agreement, the
---------------------
Notes, the Warrant Agreement and the Certificate of Designation.
"Guarantee" by any Person shall mean all obligations (other than
---------
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of any Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such Indebtedness or obligation, (y) to
maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, (iii) to lease property or to purchase securities or other
property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of such Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of any computations made under this
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<PAGE>
Agreement, a Guarantee in respect of any Indebtedness for borrowed money shall
be deemed to be Indebtedness equal to the principal amount of the Indebtedness
for borrowed money which has been guaranteed, and a Guarantee in respect of any
other obligation or liability or any dividend shall be deemed to be Indebtedness
equal to the maximum aggregate amount of such obligation, liability or dividend.
"Hazardous Material" shall mean any substance regulated by any
------------------
Environmental Law or which may now or in the future form the basis for any
Environmental Liability.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
-------
of 1976, as amended, and the rules and regulations thereunder.
"Indebtedness" shall mean, with respect to any person, (i) all
------------
obligations of such person for borrowed money, or with respect to deposits or
advances of any kind, (ii) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (iii) all obligations of such person
under conditional sale or other title retention agreements relating to property
purchased by such person, (iv) all obligations of such person issued or assumed
as the deferred purchase price of property or services (other than accounts
payable to suppliers and similar accrued liabilities incurred in the ordinary
course of business and paid in a manner consistent with industry practice),
(v) all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any lien or security interest on property owned or acquired by such person
whether or not the obligations secured thereby have been assumed, (vi) all
Capitalized Lease Obligations of such person, (vii) all Guarantees of such
person, (viii) all obligations (including but not limited to reimbursement
obligations) relating to the issuance of letters of credit for the account of
such person, (ix) all obligations arising out of foreign exchange contracts, and
(x) all Swap Contracts.
"Liquidation Value" shall mean the outstanding principal amount of any
-----------------
Note.
"Multiemployer Plan" shall mean each Employee Benefit Plan which is a
------------------
"multiemployer plan" within the meaning of Sections 3(37) or 4001(a)(3) of
ERISA.
"Non-Disclosable Contracts" shall mean Contracts to which the Company
-------------------------
or any Subsidiary is a party with or for the benefit of any officer, director or
Affiliate of the Company or any Subsidiary or Associate thereof meeting none of
the disclosure requirements nor any of the exhibit filing requirements for an
annual, quarterly or periodic report on Form 10-K, 10-Q or 8-K of the Company
covering reporting periods
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<PAGE>
that include any of the date of this Agreement, the Closing Date, the date such
Contract is entered into or the date or dates of the Company's performance under
such Contract.
"OSHA" shall have the meaning set forth in Section 2.6.
----
"Outstanding" or "outstanding" shall mean when used with reference to
----------- -----------
the Notes at a particular time, all Notes therefore issued as provided in this
Agreement, except (i) Notes therefore reported as lost, stolen, damaged or
destroyed, or surrendered for transfer, exchange or replacement, in respect to
which replacement Notes have been issued, (ii) Notes therefore paid in full, and
(iii) Notes therefore canceled by the Company except that, for the purpose of
determining whether holders of the requisite principal amount of Notes have made
or concurred in any waiver, consent, approval, notice or other communication
under this Agreement, Notes registered in the name of, or owned beneficially by,
the Company or any Subsidiary of any thereof, shall not be deemed to be
outstanding.
"Person" shall mean any individual, firm, corporation, partnership or
------
other entity, and shall include any successor (by merger or otherwise) of such
entity.
"Pension Plan" shall mean each Employee Benefit Plan (other than a
------------
Multiemployer Plan) which is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA and which is subject to Title IV of ERISA.
"Preferred Ratio" shall have the meaning set forth in Section 10.1.
---------------
"Public Authority" shall mean any supranational, national, regional,
----------------
state or local government court, governmental agency, authority, board, bureau,
instrumentality or regulatory body.
"Rakepoll Disclosure Schedule" shall mean the disclosure schedule
----------------------------
dated February 28, 1997 delivered by Rakepoll Finance to the Company pursuant to
the Stock Exchange Agreement.
"Rights" shall mean the rights to purchase Preferred Stock issued
------
pursuant to the Rights Agreement.
"Rights Agreement" shall mean the Gensia Stockholders Rights
----------------
Agreement, dated March 16, 1992, as amended, between the Company and ChaseMellon
Shareholder Services, L.L., as successor in interest to First Interstate Bank.
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<PAGE>
"Securities Act" shall mean the Securities Act of 1933, as amended, or
--------------
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Senior Indebtedness" shall mean and include, as of any date as of
-------------------
which the amount thereof is to be determined, the principal of and premium, if
any, and interest due on (a) any Indebtedness, whether outstanding on the date
of this Agreement or thereafter created, incurred or assumed, except for any
such Indebtedness that by the terms of the instrument or instruments by which
such Indebtedness was created or incurred expressly provides that it (i) is
subordinated in right of payment to the Notes or (ii) ranks pari passu in right
of payment with the Notes and (b) any amendments, renewals, extensions,
modifications and refundings of any such Indebtedness.
"Stated Value" with respect to a share of Preferred Stock shall mean
------------
$100.00 per share.
"Stock Exchange Agreement" shall mean the Stock Exchange Agreement,
------------------------
dated November 12, 1996, as amended, between the Company and Rakepoll Finance.
"Subordinated Indebtedness" shall mean all Indebtedness which is not
-------------------------
Senior Indebtedness.
"Subsidiary" of any Person shall mean any corporation or other entity
----------
of which a majority of the voting power or the voting equity securities or
equity interest is owned, directly or indirectly, by such Person.
"Swap Contract" shall mean any agreement whether or not in writing,
-------------
relating to any transaction that is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap or
option, bond, note or bill option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap, cross-
currency rate swap, swaption, currency option or any other similar transaction
(including any option to enter into any of the foregoing) or any combination of
the foregoing, and, unless the context otherwise clearly requires, any master
agreement relating to or governing any or all of the foregoing.
"Swap Termination Value" shall mean, in respect of any one or more
----------------------
Swap Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in subclause (a) the amount(s) determined as
the mark-to-market value(s) for such Swap
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<PAGE>
Contracts, as determined by the Company based upon one or more mid-market or
other readily available quotations provided by any recognized dealer in such
Swap Contracts.
"Third Party" shall mean a person who or which is neither the Company
-----------
or its Subsidiaries nor the Purchaser.
"Trading Day" shall mean a Business Day or, if the Common Stock is
-----------
listed or admitted to trading on any national securities exchange, a day on
which such exchange is open for the transaction of business.
"Voting Securities" shall mean at any time shares of any class of
-----------------
capital stock of the Company which are then entitled to vote generally in the
election of directors.
"Warrant Value" shall mean at any time an amount (not less than $0)
-------------
equal to the product of (i) the number of shares of Common Stock previously
issued upon exercise of the Contingent Warrants multiplied by (ii) an amount
equal to the difference between (A) the weighted average of the Current Market
Prices of such shares of Common Stock on the respective exercise dates of such
previously exercised Contingent Warrants less (B) the weighted average of the
----
Current Warrant Prices of such previously exercised Contingent Warrants on their
respective dates of exercise.
12.2. Accounting Principles.
---------------------
The character or amount of any asset, liability, capital account or
reserve and of any item of income or expense required to be determined pursuant
to this Agreement, and any consolidation or other accounting computation
required to be made pursuant to this Agreement, and the construction of any
definition in this Agreement containing a financial term, shall be determined or
made, as the case may be, in accordance with United States generally accepted
accounting principles, to the extent applicable, unless such principles are
inconsistent with the express requirements of this Agreement.
13. Miscellaneous
-------------
13.1. Payments.
--------
The Company agrees that, so long as the Purchaser shall hold any
Convertible Securities, it will make all cash payments thereon in immediately
available funds in such manner as the Purchaser may reasonably request in
writing.
13.2. Severability.
------------
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<PAGE>
If any term, provision, covenant or restriction of this Agreement or
any exhibit hereto is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement and such exhibits shall remain in full force and
effect and shall in no way be affected, impaired or invalidated. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such which may be hereafter declared invalid, void or
unenforceable.
13.3. Specific Enforcement.
--------------------
The Purchaser, on the one hand, and the Company, on the other,
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction to prevent breaches of the provisions
of this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state thereof having jurisdiction, this
being in addition to any other remedy to which they may be entitled at law or
equity.
13.4. Entire Agreement.
----------------
This Agreement (including the documents set forth in the exhibits
hereto) and the Fee Letter between the parties contains the entire understanding
of the parties with respect to the transactions contemplated hereby.
13.5. Counterparts.
------------
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more of the counterparts have been signed by each party and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
13.6. Notices and Other Communications.
--------------------------------
All notices, consents, requests, instructions, approvals, financial
statements, proxy statements, reports and other communications provided for
herein shall be rapidly given, if in writing and delivered personally, by
telecopy or sent by registered mail, postage prepaid, if to:
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<PAGE>
THE COMPANY:
Gensia Sicor Inc.
9360 Towne Centre Drive
San Diego, CA 92121
Attention:
With a copy to:
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Attention: Thomas E. Sparks, Jr.
THE PURCHASER:
Health Care Capital Partners L.P.
One East Putnam Avenue
Greenwich, CT 06830
Attention: Robert Thompson
With a copy to:
Gary Cooperstein, Esq.
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
or to such other address as any party may, from time to time, designate in a
written notice given in a like manner.
13.7. Amendments.
----------
This Agreement may be amended as to the Purchaser and its successors
and assigns, and the Company may take any action herein prohibited, or omit to
perform any act required to be performed by it, if the Company shall obtain the
written consent of the Purchaser and/or such successors and assigns who are the
registered holders of not less than 66 2/3% of the outstanding principal amount
of the Notes or Stated Value of the Preferred Stock then held by the Purchaser
and its successors or assigns. This Agreement may not be waived, changed,
modified, or discharged orally, but only by an agreement in writing signed by
the party or parties against whom enforcement of any waiver, change,
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<PAGE>
modification or discharge is sought or by parties with the right to consent to
such waiver, change, modification or discharge on behalf of such party.
13.8. Cooperation.
-----------
The Purchaser and the Company agree to take, or cause to be taken, all
such further or other actions as shall reasonably be necessary to make effective
and consummate the transactions contemplated by this Agreement.
13.9. Successors and Assigns.
----------------------
All covenants and agreements contained herein shall bind and inure to
the benefit of the parties hereto and their respective successors and assigns,
it being understood however that the covenants set forth in Sections 6.12(iii)
and (iv), 6.14 and 13.10 shall not inure to the benefit of any assignee of the
Purchaser other than Affiliates of the Purchaser. Neither this Agreement nor
any rights hereunder may be transferred prior to the Closing Date without the
consent of the other party, except that the Purchaser may assign any of its
rights and obligations hereunder to any fund for which Ferrer Freeman Thompson &
Co. LLC is the general partner.
13.10. Expenses and Remedies.
---------------------
(a) Subject to paragraph (d), the Company agrees to pay the
Purchaser for all of its out-of-pocket expenses, including reasonable
outside legal, accounting and consulting fees of the Purchaser, incurred in
connection with this Agreement and the consummation of all transactions
contemplated hereby, and all costs and expenses relating to any future
amendment or supplement to this Agreement or any of the Securities (or any
proposal by the Company for such amendment or supplement) whether or not
consummated or any waiver or consent with respect thereto (or any proposal
for such waiver or consent) whether or not consummated, and all costs and
expenses of the Purchaser relating to the enforcement of this Agreement,
the Registration Rights Agreement, the Warrant Agreement or any of the
Securities. The Company shall be entitled to credit the underwriting
deposit previously paid by it to the Purchaser pursuant to the Fee Letter
against such expense reimbursement obligation.
(b) The Company further agrees to indemnify and save
harmless the Purchaser and its officers, directors, partners, employees,
trustees and agents, each person who controls the Purchaser within the
meaning of the Securities Act or the Exchange Act, from and against any and
all costs, expenses, damages or other liabilities resulting from any breach
of this Agreement by the Company (including the breach of any covenant or
representation or warranty made by the Company) or any legal,
administrative or other proceedings arising out of the transactions
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<PAGE>
contemplated hereby (other than such costs, expenses, damages or other
liabilities resulting, directly or indirectly, (i) from the breach by such
Purchaser of any of its agreements contained herein or (ii) from the gross
negligence or willful misconduct of such Purchaser or any of its officers,
directors, partners, employees or agents, or any person who controls such
Purchaser within the meaning of the Securities Act or the Exchange Act;
provided, however, that, if and to the extent that such indemnification is
-------- -------
unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of such indemnified liability
which shall be permissible under applicable laws.
(c) The indemnified party under this Section 13.10 will,
promptly after the receipt of notice of the commencement of any action
against such indemnified party in respect of which indemnity may be sought
from the Company on account of an indemnity agreement contained in this
Section 13.10, notify the Company in writing of the commencement thereof.
The omission of any indemnified party so to notify the Company of any such
action shall not relieve the Company from any liability which it may have
to such indemnified party except to the extent the Company shall have been
materially prejudiced by the omission of such indemnified party so to
notify the Company, pursuant to this Section 13.10. In case any such action
shall be brought against any indemnified party and it shall notify the
Company of the commencement thereof, the Company shall be entitled to
participate therein and, to the extent that it may wish, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified
party, and after notice from the Company to such indemnified party of its
election so to assume the defense thereof, the Company will not be liable
to such indemnified party under this Section 13.10 for any legal or other
expense subsequently incurred by such indemnified party in connection with
the defense thereof nor for any settlement thereof entered into without the
consent of the Company; provided, however, that (i) if the Company shall
-------- -------
elect not to assume the defense of such claim or action or (ii) if the
indemnified party reasonably determines (x) that there may be a conflict
between the positions of the Company and of the indemnified party in
defending such claim or action or (y) that there may be legal defenses
available to such indemnified party different from or in addition to those
available to the Company, then separate counsel for the indemnified party
shall be entitled to participate in and conduct the defense, in the case of
(i) and (ii)(x), or such different defenses, in the case of (ii)(y), and
the Company shall be liable for any reasonable legal or other expenses
incurred by the indemnified party in connection with the defense.
(d) If the Closing shall fail to occur solely as a result of the
failure of the Purchaser to receive funding from its limited partners
pursuant to the Purchaser's capital call following the satisfaction of all
other conditions to
-62-
<PAGE>
Purchaser's obligations hereunder, (i) the Company shall be entitled to a
refund of (A) the underwriting deposit paid pursuant to the Fee Letter, and
(B) the transaction fee paid pursuant to Section 1.6, and (ii) Purchaser
shall pay the Company for all of its out-of-pocket expenses, including
reasonable outside legal and accounting fees. Further, the Company shall
not be required to pay the costs, expenses and fees referred to in
paragraph (a) of this Section 13.10.
13.11. Survival of Representations and Warranties.
------------------------------------------
All representations and warranties contained herein or made in writing
by any party in connection herewith shall survive the execution and delivery of
this Agreement and the issuance and delivery of the Securities, regardless of
any investigation made by or on behalf of any party.
13.12. Transfer of Securities.
----------------------
The Purchaser understands and agrees that the Securities have not been
registered under the Securities Act or the securities laws of any state and that
they may be sold or otherwise disposed of only in one or more transactions
registered under the Securities Act and, where applicable, such laws or
transactions as to which an exemption from the registration requirements of the
Securities Act and, where applicable, such laws are available. The Purchaser
acknowledges that, except as provided in the Registration Rights Agreement, the
Purchaser has no right to require the Company to register the Securities. The
Purchaser understands and agrees that each Note or certificate representing the
Securities shall bear the following legend:
"[THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE] [THIS NOTE HAS]
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS."
13.13. Governing Law.
-------------
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware.
13.14. Term.
----
Unless an Event of Default shall have occurred and be continuing, this
Agreement shall terminate on May 1, 2004, except that Sections 6.18 and 13.10
shall survive the termination of this Agreement.
-63-
<PAGE>
13.15. Publicity.
---------
Each of the parties hereto agrees that it will make no statement
regarding the transactions contemplated hereby unless such statement has been
approved by both of the parties hereto. Notwithstanding the foregoing, each of
the parties hereto may, in documents required to be filed by it with the
Commission or other regulatory bodies, make such statements with respect to the
transactions contemplated hereby as each may be advised is legally necessary
upon advice of its counsel.
13.16. Signatures.
----------
This Agreement shall be effective upon delivery of original signature
pages or facsimile copies thereof executed by each of the parties hereto.
-65-
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchaser have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized.
GENSIA SICOR INC.
By: /s/John Sayward
-----------------
HEALTH CARE CAPITAL PARTNERS L.P.
By: FERRER FREEMAN THOMPSON
& CO. LLC., its General Partner
By: /s/Robert T. Thompson
-----------------------
Name: Robert T. Thompson
Title: Member
-65-
<PAGE>
EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
between
GENSIA SICOR INC.
and
HEALTH CARE CAPITAL PARTNERS L.P.
Dated as of May 19, 1997
<PAGE>
REGISTRATION RIGHTS AGREEMENT, dated as of May 19, 1997, between
Gensia Sicor Inc., a Delaware corporation (the "Company"), Health Care Capital
Partners, L.P. ("HCCP") and Health Care Executive Partners, L.P. ("HCEP").
1. Background. Pursuant to a Securities Purchase Agreement, dated as of
----------
May 1, 1997 (the "Purchase Agreement"), between the Company and HCCP, HCCP and,
through a subsequent permitted assignment, HCEP, have purchased from the Company
$20,000,000 principal amount of the Company's 2.675% Subordinated Convertible
Notes due May 1, 2004 (the "Notes") and warrants (the "Warrants") to purchase
shares of the Company's Common Stock, par value $.01 per share ("Common Stock").
Subject to the terms and conditions set forth in the Purchase Agreement and
certain related documents, the Notes are convertible into shares of Series A
Convertible Preferred Stock, par value $.01 per share, of the Company
("Preferred Stock") and the Notes and the Preferred Stock are convertible into,
and the Warrants are exercisable for, shares of Common Stock. The shares of
Common Stock are referred to herein as the "Registrable Securities." The Notes,
Preferred Stock and Warranties are referred to herein as the "Convertible
Securities."
2. Registration Under Securities Act, etc.
--------------------------------------
2.1. Registration on Request.
-----------------------
(a) Request. Subject to Section 2.7 hereof, at any time and from time
-------
to time after August 28, 1998, upon the written request of holders (the
"Initiating Holders") of Registrable Securities representing not less than 25%
of the number of shares of Common Stock issuable upon conversion of the Notes
and exercise of the Warrants (excluding Contingent Warrants not then exercisable
or which have expired) that the Company effect the registration under the
Securities Act of all or part of such Initiating Holders' Registrable
Securities, provided that in no event shall the Company be obligated to register
shares of Common Stock pursuant to such request having a Current Market Value on
the date of such request less than $5 million, the Company will promptly, and in
any event within ten days, give written notice of such requested registration to
all registered holders of Registrable Securities, and thereupon the Company will
use its best efforts to effect the registration under the Securities Act of
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holders, and
(ii) all other Registrable Securities which the Company has been
requested to register by the holders thereof (such holders together with
the Initiating Holders are hereinafter referred to as the "Selling
Holders") by written request given to the Company within ten days after the
giving of such written
<PAGE>
notice by the Company, all to the extent requisite to permit the
disposition of the Registrable Securities so to be registered.
(b) Registration of Other Securities. Whenever the Company shall
--------------------------------
effect a registration pursuant to this Section 2.1 in connection with an
underwritten offering by one or more Selling Holders of Registrable Securities,
no securities other than Registrable Securities shall be included among the
securities covered by such registration unless the Selling Holders of not less
than a majority of all Registrable Securities to be covered by such registration
shall have consented in writing to the inclusion of such other securities.
(c) Registration Statement Form. Registrations under this Section 2.1
---------------------------
shall be on such appropriate registration form of the Commission as shall be
selected by the Company.
(d) Effective Registration Statement. A registration requested
--------------------------------
pursuant to this Section 2.1 shall not be deemed to have been effected
(i) unless a registration statement with respect thereto has been declared
effective by the Commission, (ii) if after it has become effective, such
registration is interfered with by any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court for any
reason other than an act or omission of the Selling Holders and has not
thereafter become effective, or (iii) if the conditions to closing specified in
the underwriting agreement, if any, entered into in connection with such
registration are not satisfied or waived, other than by reason of a failure on
the part of the Selling Holders.
(e) Selection of Underwriters. The underwriter or underwriters of
-------------------------
each underwritten offering of the Registrable Securities so to be registered
shall be selected by the Company; provided, however, that such underwriter shall
be reasonably satisfactory to the Selling Holders who hold more than 50% of the
Registrable Securities so to be registered.
(f) Priority in Requested Registration. If the managing underwriter
----------------------------------
of any underwritten offering shall advise the Company in writing (with a copy to
each Selling Holder of Registrable Securities requesting registration) that, in
its opinion, the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering within a
price range reasonably related to the then current market value of the
securities, the Company will include in such registration, to the extent of the
number which the Company is so advised can be sold in such offering, Registrable
Securities requested to be included in such registration, pro rata among the
Selling Holders requesting such registration on the basis of the percentage of
the Registrable Securities then held by, or issuable upon exercise or conversion
of Convertible Securities then held by, such Selling Holders. In connection
with any such
-2-
<PAGE>
registration to which this Section 2.1(f) is applicable, no securities other
than Registrable Securities shall be covered by such registration unless the
written consent of Selling Holders holding at least a majority of the
Registrable Securities included in such registration shall have been obtained.
(g) Limitations on Registration on Request. Notwithstanding anything
--------------------------------------
in this Section 2.1 to the contrary, in no event will the Company be required to
effect, in the aggregate pursuant to this Section 2.1, without regard to the
holder of Registrable Securities making such request, (1) more than three
registrations during the term of this Agreement or (2) more than two
registrations in any twelve month period.
2.2. Incidental Registration.
-----------------------
(a) Right to Include Registrable Securities. If the Company proposes
---------------------------------------
to register any of its securities under the Securities Act by registration on
Forms S-1, S-2 or S-3 or any successor or similar form(s) (except registrations
on such Forms or similar form(s) solely for registration of securities in
connection with an employee benefit plan or dividend reinvestment plan or a
merger or consolidation and registrations effected pursuant to Section 6.1 of
the Shareholder's Agreement dated as of November 12, 1996, as amended, between
the Company and Rakepoll Finance unless the written consent of Holders (as
defined in such Shareholder's Agreement) holding at least a majority of the
Registrable Securities (as defined in such Shareholder's Agreement) included in
such registration shall have been obtained to the inclusion of the Registrable
Securities in such registration), whether or not for sale for its own account,
it will, subject to Section 2.9 hereof, each such time give prompt written
notice to all registered holders of Registrable Securities of its intention to
do so and of such holders' rights under this Section 2.2. Upon the written
request of any such holder (a "Requesting Holder") made as promptly as
practicable and in any event within 30 days after the receipt of any such notice
(which request shall specify the Registrable Securities intended to be disposed
of by such Requesting Holder), the Company will, subject to Section 2.9 hereof,
use its best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the Requesting Holders thereof; provided, however, that if, at any time after
giving written notice of its intention to register any securities and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to each Requesting Holder of Registrable
Securities and (i) in the case of a determination not to register, shall be
relieved of its obligation to register any Registrable Securities in connection
with such registration (but not from any obligation of the Company to pay the
Registration Expenses in connection therewith), without prejudice, however, to
the rights of any holder or holders of Registrable Securities entitled to do so
to request that such registration be effected as a registration under
-3-
<PAGE>
Section 2.1 and (ii) in the case of a determination to delay registering, shall
be permitted to delay registering any Registrable Securities, for the same
period as the delay in registering such other securities. No registration
effected under this Section 2.2 shall relieve the Company of its obligation to
effect any registration upon request under Section 2.1. The Company will pay
all Registration Expenses in connection with registration of Registrable
Securities requested pursuant to this Section 2.2.
(b) Priority in Incidental Registrations. If the managing underwriter
------------------------------------
of any underwritten offering shall inform the Company by letter of its belief
that the number or type of Registrable Securities requested to be included in
such registration would materially adversely affect such offering, then the
Company will include in such registration, to the extent of the number and type
which the Company is so advised can be sold in (or during the time of) such
offering, (i) first, all securities proposed by the Company to be sold for its
-----
own account or which the Company is required to register on behalf of any third
party exercising rights similar to those granted in section 2.1(a), (ii) second,
------
such Registrable Securities and all other securities of the Company requested to
be included in such registration by third parties exercising rights similar to
those granted in Section 2.2(a) pro rata among such holders on the basis of the
estimated gross proceeds of the securities of such holders requested to be so
included, and (iii) third, any other securities of the Company requested to be
-----
included in such registration.
2.3. Registration on Form S-3. If at any time after August 28, 1998,
------------------------
(a) any holder of Registrable Securities requests in writing that the Company
file a registration statement on Form S-3 or any successor thereto for a public
offering of all or any portion of the Registrable Securities held by such
requesting holder and (b) the Company is a registrant entitled to use Form S-3
or any successor thereto, then, subject to Section 2.9 hereof, the Company shall
use its best efforts to register under the Securities Act on Form S-3 or any
successor thereto, for public sale in accordance with the method of disposition
specified in such request, including, without limitation, pursuant to Rule 415
under the Securities Act, the Registrable Securities specified in such request.
Whenever the Company is required by this Section 2.3 to use its best efforts to
effect the registration of Registrable Securities, each of the limitations,
procedures and requirements of Section 2.1(b), (e) and (f) (including but not
limited to the requirement that the Company notify all holders from whom a
request has not been received and provide them with the opportunity to
participate in the offering) shall apply to such registration. Notwithstanding
the foregoing, the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.3: (i) if
the holders, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public (net of any underwriters' discounts or commissions) of less than
$5,000,000; (ii) if the Company has, within the twelve-month period preceding
the date of such request, already effected two registrations on Form S-3 on
behalf of the
-4-
<PAGE>
holders; or (iii) in any jurisdiction in which the Company would be required to
qualify to do business or to execute a general consent to service of process in
effecting such registration qualification or compliance.
2.4. Registration Procedures. (a) If and whenever the Company is
-----------------------
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Section 2.1, 2.2 and 2.3, the
Company will as expeditiously as possible:
(i) prepare and (as soon as practicable, and in any event
within 45 days after (a) receipt by the Company of a request under Section
2.1 or 2.3 or (b) the end of the period within which requests for
registration may be given to the Company under Section 2.2) file with the
Commission the requisite registration statement to effect such registration
and thereafter use its best efforts to cause such registration statement to
become effective; provided, however, that the Company may discontinue any
-------- -------
registration of its securities which are not Registrable Securities (and,
under the circumstances specified in Section 2.2(a), its securities which
are Registrable Securities) at any time prior to the effective date of the
registration statement relating thereto;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities covered by
such registration statement for such period as shall be required for the
disposition of all of such Registrable Securities, provided, that such
-------- ----
period need not exceed (a) 180 days in the case of registration required by
Section 2.1 or 2.2 or (b) two years in the case of registration required by
Section 2.3;
(iii) furnish to each seller of Registrable Securities covered
by such registration statement and the managing underwriter, if any, such
number of conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits),
such number of copies of the prospectus contained in such registration
statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as such seller may reasonably request;
(iv) use its best efforts (x) to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities or blue sky laws of such States of
the United States of America
-5-
<PAGE>
where an exemption is not available and as the sellers of Registrable
Securities covered by such registration statement shall reasonably request,
(y) to keep such registration or qualification in effect for so long as
such registration statement remains in effect, and (z) to take any other
action which may be reasonably necessary or advisable to enable such
sellers to consummate the disposition in such jurisdictions of the
securities to be sold by such sellers; provided, however, that the Company
-------- -------
shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not
but for the requirements of this subdivision (iv) be obligated to be so
qualified or to consent to general service of process in any such
jurisdiction;
(v) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved by
such other federal or state governmental agencies or authorities as may be
necessary in the opinion of counsel to the Company and counsel to the
seller or sellers thereof to consummate the disposition of such Registrable
Securities;
(vi) furnish to each seller of Registrable Securities a signed
counterpart of
(x) an opinion of counsel for the Company, and
(y) a "comfort" letter signed by the independent public
accountants who have certified the Company's financial statements
included or incorporated by reference in such registration statement
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountant's comfort letter, with respect to events subsequent to the date
of such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountant's comfort letters delivered to the
underwriters in underwritten public offerings of securities (and dated the
dates such opinions and comfort letters are customarily dated) and, in the
case of the accountant's comfort letter, such other financial matters, and
in the case of the legal opinion, such other legal matters, as the sellers
of more than 50% of the Registrable Securities covered by such registration
statement, or the underwriters, may reasonably request;
(vii) notify each seller of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, upon discovery that,
or upon the happening of any event as a result of which, in the judgment of
the Company, the prospectus included in such registration statement, as
then in effect, includes an untrue
-6-
<PAGE>
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading, in the light of the circumstances under which they were made,
and at the request of any such seller promptly prepare and furnish to it a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, in the judgment of the Company, as
thereafter delivered to the purchasers of such securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under
which they were made;
(viii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months, but not more than
eighteen months, beginning with the first full calendar month after the
effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 promulgated thereunder;
(ix) provide and cause to be maintained a transfer agent and
registrar (which, in each case, may be the Company) for all Registrable
Securities covered by such registration statement from and after a date not
later than the effective date of such registration; and
(x) use its best efforts to list all Registrable Securities
covered by such registration statement on any national securities exchange
on which Registrable Securities of the same class and, if applicable,
series, covered by such registration statement are then listed.
(b) The Company may require each seller of Registrable Securities as
to which any registration is being effected to furnish the Company such
information regarding such seller and the distribution of such securities as the
Company may from time to time reasonably request in writing.
(c) Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities that upon receipt of any notice from the Company of
the happening of any event of the kind described in subdivision (vii) of this
Section 2.4, such holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
Section 2.4 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's
-7-
<PAGE>
possession, of the prospectus relating to such Registrable Securities current at
the time of receipt of such notice; provided, however, that any period during
which a holder must discontinue disposition of Registrable Securities shall not
be included in determining whether such registration has been effective for the
period required by Section 2.4(a)(ii).
2.5. Underwritten Offerings.
----------------------
(a) Requested Underwritten Offerings. If requested by the
--------------------------------
underwriters for any underwritten offering by holders of Registrable Securities
pursuant to a registration requested under Section 2.1 or 2.3, the Company will
enter into an underwriting agreement with such underwriters for such offering,
such agreement to be reasonably satisfactory in substance and form to the
Company, each such holder and the underwriters and to contain such
representations and warranties by the Company and such other terms as are
generally prevailing in agreements of that type, including, without limitation,
indemnities to the effect and to the extent provided in Section 2.8. The
holders of the Registrable Securities proposed to be distributed by such
underwriters will cooperate with the Company in the negotiation of the
underwriting agreement and will give consideration to the reasonable suggestions
of the Company regarding the form thereof. Any such holder of Registrable
Securities shall not be required to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such holder, such holder's Registrable
Securities, such holder's intended method of distribution and any other
representations required by law.
(b) Incidental Underwritten Offerings. If the Company proposes to
---------------------------------
register any of its securities under the Securities Act as contemplated by
Section 2.2 and such securities are to be distributed by or through one or more
underwriters, the Company will, subject to Section 2.9 hereof, if requested by
any Requesting Holder of Registrable Securities arrange for such underwriters to
include all the Registrable Securities to be offered and sold by such Requesting
Holder among the securities of the Company to be distributed by such
underwriters. Any such Requesting Holder of Registrable Securities shall not be
required to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or agreements
regarding such Requesting Holder, such Requesting Holder's Registrable
Securities and such Requesting Holder's intended method of distribution or any
other representations required by law.
(c) Holdback Agreements. If any registration of Registrable
-------------------
Securities shall be in connection with an underwritten public offering, each
holder of Registrable Securities agrees not to effect any public sale or
distribution, including any sale pursuant to Rule 144 under the Securities Act,
of any Registrable Securities, and not to effect any such public sale or
distribution of any other equity security of the Company or of any
-8-
<PAGE>
security convertible into or exchangeable or exercisable for any equity security
of the Company (in each case, other than as part of such underwritten public
offering) for such customary period of time (not exceeding 120 days) as may be
reasonably requested by the underwriter of such offering beginning on the
effective date of such registration statement (except as part of such
registration) provided that each holder of Registrable Securities has received
written notice of such registration at least 15 days prior to such effective
date.
If any registration of Registrable Securities shall be in connection
with an underwritten public offering, the Company agrees (i) not to effect any
public sale or distribution of any of its equity securities or of any security
convertible into or exchangeable or exercisable for any equity security of the
Company (other than any such sale or distribution of such securities in
connection with any merger or consolidation by the Company or any subsidiary of
the Company of the capital stock or substantially all the assets of any other
person or in connection with an employee stock option or other benefit plan)
during the 15 days prior to, and during the 90-day period beginning on, the
effective date of such registration statement (except as part of such
registration) and (ii) that any agreement entered into after the date of this
Agreement pursuant to which the Company issues or agrees to issue any privately
placed equity securities shall contain a provision under which holders of such
securities agree not to effect any public sale or distribution of any such
securities during the period referred to in the foregoing clause (i), including
any sale pursuant to Rule 144 under the Securities Act (except as part of such
registration, if permitted).
2.6. Preparation; Reasonable Investigation. In connection with the
-------------------------------------
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, their underwriters, if
any, and their respective counsel and accountants the opportunity to participate
in the preparation of such registration statement, each prospectus included
therein or filed with the Commission, and, to the extent practicable, each
amendment thereof or supplement thereto, and give each of them such access to
its books and records (to the extent customarily given to underwriters of the
Company's securities) and such opportunities to discuss the business of the
Company with its officers and the independent public accountants who have
certified its financial statements as shall be necessary, in the opinion of such
holders' and such underwriters' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
2.7. Company Right to Postpone Registration. The Company shall be
--------------------------------------
entitled to postpone for a reasonable period of time (but not exceeding 90 days
and no more than once in any twelve month period) the filing of any registration
statement otherwise required to be prepared and filed by it pursuant to this
Agreement if the
-9-
<PAGE>
Company determines, in its reasonable judgment, that such registration and
offering would interfere with any financing, acquisition, corporate
reorganization or other material transaction involving the Company or any of its
Affiliates or would require premature disclosure thereof and promptly gives the
holders of Registrable Securities requesting registration thereof pursuant to
Section 2.1 or 2.3 written notice of such delay. If the Company shall so
postpone the filing of a registration statement, such holders of Registrable
Securities requesting registration thereof pursuant to Section 2.1 or 2.3 shall
have the right to withdraw the request for registration by giving written notice
to the Company within 30 days after receipt of the notice of postponement and,
in the event of such withdrawal, such request shall not be counted for purposes
of the requests for registration to which holders of Registrable Securities are
entitled pursuant to Section 2.1 or 2.3 hereof.
2.8. Indemnification.
---------------
(a) Indemnification by the Company. In the event of any registration
------------------------------
of any securities of the Company under the Securities Act, the Company will, and
hereby does, indemnify and hold harmless, in the case of any registration
statement filed pursuant to Section 2.1, 2.2 or 2.3, each seller of any
Registrable Securities covered by such registration statement, its directors,
officers, partners, agents and affiliates and each other Person who participates
as an underwriter in the offering or sale of such securities and each other
Person, if any, who controls such seller or any such underwriter within the
meaning of the Securities Act, insofar as losses, claims, damages or liabilities
(or actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein 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,
and the Company will reimburse such seller and each such director, officer,
partner, agent or affiliate, underwriter and controlling Person for any legal or
any other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, liability, action or proceeding; provided,
--------
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability (or action or proceeding in respect thereof)
or expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument executed by or on behalf of such
seller or underwriter, as the case may be, specifically stating that it is for
use in the preparation thereof; and provided, further, that the Company shall
-------- -------
not be liable to any
-10-
<PAGE>
Person who participates as an underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter within the
meaning of the Securities Act, in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of such Person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in such
final prospectus so long as such final prospectus, and any amendments or
supplements thereto, have been furnished to such underwriter. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such seller or any such director, officer, partner, agent or
affiliate or controlling Person and shall survive the transfer of such
securities by such seller.
(b) Indemnification by the Sellers. As a condition to including any
------------------------------
Registrable Securities in any registration statement, the Company shall have
received an undertaking satisfactory to it from each holder joining in such
registration, severally and not jointly, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 2.8) the Company, and each director of the Company, each officer of the
Company and each other Person, if any, who controls the Company within the
meaning of the Securities Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such seller specifically stating that it is for use
in the preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement; provided, however, that
-------- -------
the liability of such indemnifying party under this Section 2.8(b) shall be
limited to the amount of proceeds received by such indemnifying party in the
offering giving rise to such liability. Such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling Person and shall survive
the transfer of such securities by such seller.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
-----------------------
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 2.8, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
-------- -------
give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this Section 2.8,
-11-
<PAGE>
except to the extent that the indemnifying party is actually prejudiced by such
failure to give notice. In case any such action is brought against an
indemnified party, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties is
reasonably likely to exist in respect of such claim, the indemnifying party
shall be entitled to participate in and, to assume the defense thereof, jointly
with any other indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable costs of
investigation unless in such indemnified party's reasonable judgment a conflict
of interest between such indemnified and indemnifying parties arises in respect
of such claim after the assumption of the defense thereof and the indemnified
party notifies the indemnifying party of such indemnified party's judgment and
the basis therefor. No indemnifying party shall be liable for any settlement of
any action or proceeding effected without its written consent, which consent
shall not be unreasonably withheld. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect of such claim or litigation.
(d) Contribution. If the indemnification provided for in this
------------
Section 2.8 shall for any reason be held by a court to be unavailable to an
indemnified party under subparagraph (a) or (b) hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under subparagraph (a) or (b) hereof, the indemnified
party and the indemnifying party under subparagraph (a) or (b) hereof shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating the
same), (i) in such proportion as is appropriate to reflect the relative fault of
the Company and the prospective sellers of Registrable Securities covered by the
registration statement which resulted in such loss, claims, damage or liability,
or action in respect thereof, with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as shall be appropriate to reflect the relative benefits received by
the Company and such prospective sellers from the offering of the securities
covered by such registration statement. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. Such prospective sellers' obligations to
contribute as provided in this subparagraph (d) are
-12-
<PAGE>
several in proportion to the relative value of their respective Registrable
Securities covered by such registration statement and not joint. In addition, no
Person shall be obligated to contribute hereunder any amounts in payment for any
settlement of any action or claim effected without such Person's consent, which
consent shall not be unreasonably withheld.
(e) Other Indemnification. Indemnification and contribution similar
---------------------
to that specified in the preceding subdivisions of this Section 2.8 (with
appropriate modifications) shall be given by the Company and each seller of
Registrable Securities with respect to any required registration or other
qualification of securities under any federal or state law or regulation of any
governmental authority other than the Securities Act.
(f) Indemnification Payments. The indemnification and contribution
------------------------
required by this Section 2.8 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 expense, loss, damage or liability is incurred.
2.9. Limitations on Registrations of Registrable Securities. The
------------------------------------------------------
Company shall not be required to effect any registration of Registrable
Securities pursuant to Section 2.1, 2.2 or 2.3 hereof if it shall deliver to the
holder or holders requesting such registration an opinion of counsel (which
opinion and counsel shall be reasonably satisfactory to such holder or holders)
to the effect that all Registrable Securities held by such holder may be sold in
the public market without registration under the Securities Act and any
applicable state Securities laws.
2.10 Expenses. The Company will pay the Registration Expenses in
--------
connection with any registration requested pursuant to Section 2.1, 2.2 or 2.3.
3. Definitions. As used herein, unless the context otherwise requires,
------------
the following terms have the following respective meanings:
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include a reference to the comparable section, if any, of any such similar
Federal statute.
-13-
<PAGE>
"Person" means a corporation, an association, a partnership, an
organization, a business, an individual, a governmental or political subdivision
thereof or a governmental agency.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation, all
registration, filing and NASD fees, all listing fees, all fees and expenses of
complying with securities or blue sky laws (including, without limitation,
reasonable fees and disbursements of counsel for the underwriters in connection
with blue sky qualifications of the Registrable Securities), all word
processing, duplicating and printing expenses, messenger and delivery expenses,
the fees and disbursements of counsel for the Company and of its independent
public accountants, including the expenses of "cold comfort" letters required by
or incident to such performance and compliance, any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities and the
reasonable fees and expenses of one counsel to the Selling Holders (selected by
Selling Holders representing at least 50% of the Registrable Securities covered
by such registration); provided, however, that Registration Expenses shall
-------- -------
exclude, and the sellers of the Registrable Securities being registered shall
pay, underwriters' fees and underwriting discounts and commissions, expenses
incurred in connection with promotional efforts or "roadshows" and transfer
taxes in respect of the Registrable Securities being registered.
"Registrable Securities" has the meaning set forth in Section 1
hereof. As to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (a) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (b) they shall have been sold
as permitted by, and in compliance with, Rule 144 (or successor provision)
promulgated under the Securities Act, (c) they shall have been otherwise
transferred, new certificates for them not bearing a legend restricting further
transfer under the Securities Act shall have been delivered by the Company and
subsequent public distribution of them shall not require registration of them
under the Securities Act, or (d) they shall have ceased to be outstanding.
"Securities Act" means the Securities Act of 1933, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time. References to a particular section
of the Securities Act of 1933 shall include a reference to the comparable
section, if any, of any such similar federal statute.
"Selling Holders" has the meaning set forth in Section 2.1(a)(ii).
-14-
<PAGE>
4. Rule 144. The Company shall take all actions reasonably necessary to
--------
enable holders of Registrable Securities to sell such securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission including, without limiting the generality of the foregoing,
using its best efforts to file on a timely basis all reports required to be
filed by the Exchange Act. Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written statement as to
whether it has complied with such requirements.
5. Amendments and Waivers. This Agreement may be amended with the
----------------------
consent of the Company and the Company may take any action herein prohibited, or
omit to perform any act herein required to be performed by it, only if the
Company shall have obtained the written consent to such amendment, action or
omission to act, of the beneficial owner or owners of at least 66-2/3% of the
Registrable Securities. Each beneficial owner of any Registrable Securities at
the time or thereafter outstanding shall be bound by any consent authorized by
this Section 5, whether or not such Registrable Securities shall have been
marked to indicate such consent.
6. Nominees for Beneficial Owners. In the event that any Registrable
------------------------------
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election in writing delivered to the
Company, be treated as the holder of such Registrable Securities for purposes of
any request or other action by any holder or holders of Registrable Securities
pursuant to this Agreement or any determination of any number or percentage of
Registrable Securities held by any holder or holders of Registrable Securities
contemplated by this Agreement. If the beneficial owner of any Registrable
Securities so elects, the Company may require assurances reasonably satisfactory
to it of such owner's beneficial ownership of such Registrable Securities.
7. Notices. All communications provided for hereunder shall be sent by
-------
courier or other overnight delivery service, shall be effective upon receipt,
and shall be addressed as follows:
(a) if to HCCP or HCEP, addressed to it in the manner set forth in the
Purchase Agreement, or at such other address as HCCP shall have furnished to the
Company in writing;
(b) if to any other holder of Registrable Securities, at the address
that such holder shall have furnished to the Company in writing, or, until any
such other holder so furnishes to the Company an address, then to and at the
address of the last holder of such Registrable Securities who has furnished an
address to the Company; or
-15-
<PAGE>
(c) if to the Company, addressed to it in the manner set forth in the
Purchase Agreement, or at such other address as the Company shall have furnished
to each holder of Registrable Securities at the time outstanding.
8. Assignment; Calculation of Percentage Interests in
--------------------------------------------------
Registrable Securities.
- ----------------------
(a) This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and, with respect to the Company, its
respective successors and assigns and, with respect to HCCP and HCEP, any
beneficial owner of any Registrable Securities, subject to the provisions
respecting the minimum numbers of percentages of shares of Registrable
Securities required in order to be entitled to certain rights, or take certain
actions, contained herein. HCCP and HCEP (and not any other holder of
Registrable Securities or any other Person) shall be permitted, in connection
with a transfer or disposition of Registrable Securities permitted by the
Purchase Agreement, to impose conditions or constraints on the ability of the
transferee, as a holder of Registrable Securities, to request a registration
pursuant to Section 2.1 or 2.3 and shall provide the Company with copies of such
conditions or constraints and the identity of such transferees.
(b) For purposes of this Agreement, all references to a percentage of
the Registrable Securities shall be calculated based upon the number of
Registrable Securities outstanding at the time such calculation is made,
assuming the conversion of all Notes and shares of Preferred Stock into, and the
exercise of all Warrants for, shares of Common Stock.
9. Descriptive Headings. The descriptive headings of the several
--------------------
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
10. Governing Law. This Agreement shall be construed and enforced in
-------------
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Delaware.
11. No Inconsistent Agreements. The Company will not hereafter enter into
--------------------------
any agreement with respect to its securities which (a) is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement or (b)
grants registration rights to any security holder unless at the time holders of
the Registrable Securities have or are granted without further consideration no
less favorable registration rights. Except as disclosed on Schedule 11 hereto,
the Company has not previously entered into any agreement with respect to any of
its equity securities granting any registration rights to any person.
-16-
<PAGE>
12. Recapitalizations, etc. In the event that any capital stock or other
-----------------------
securities are issued in respect of, in exchange for, or in substitution of, any
Registrable Securities by reason of any reorganization, recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the shares of Registrable Securities or any other
change in the Company's capital structure, appropriate adjustments shall be made
in this Agreement so as to fairly and equitably preserve, as far as practicable,
the original rights and obligations of the parties hereto under this Agreement.
13. Attorneys' Fees. In any action or proceeding brought to enforce any
---------------
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the prevailing party to such action or proceeding shall be
entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
14. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
-17-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
GENSIA SICOR INC.
By:/s/ John Saywood
__________________________________
Name: John Saywood
Title: Vice President, Finance,
Chief Financial Officer
and Treasurer
HEALTH CARE CAPITAL PARTNERS, L.P.
By: FERRER FREEMAN THOMPSON & CO. LLC,
its General Partner
By:/s/ Robert T. Thompson
__________________________________
Name: Robert T. Thompson
Title: Member
HEALTH CARE EXECUTIVE PARTNERS, L.P.
By: FERRER FREEMAN THOMPSON & CO. LLC,
its General Partner
By:/s/ Robert T. Thompson
__________________________________
Name: Robert T. Thompson
Title: Member
-18-
<PAGE>
EXHIBIT 4.4
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
GENSIA SICOR INC.
2.675% Subordinated Convertible Notes
due May 1, 2004
No. 1 San Diego, CA
[$20,000,000.00]/1/ _______, 1997
GENSIA SICOR INC. (the "Company"), a Delaware corporation, for value
received, hereby promises to pay to [HEALTH CARE CAPITAL PARTNERS, L.P.], or
registered assigns, the principal amount of TWENTY MILLION AND 00/100 DOLLARS
[$20,000,000.00] on May 1, 2004, with interest (computed on the basis of a 360-
day year of twelve 30-day months) on the unpaid balance of such principal amount
at the rate of 2.675% per annum from the date hereof, payable quarterly, in
arrears, on the last business day of March, June, September and December, until
such unpaid balance shall become due and payable (whether at maturity or at a
date fixed for redemption or by declaration or otherwise). During the
continuance of any Default or Event of Default, the Company shall pay interest
on the outstanding principal of, and any other amounts (other than interest), if
any, due on the Notes and (to the extent legally enforceable) on any overdue
installment of interest, at the rate of 11.75% per annum (computed on the same
basis as above) until such overdue amount is paid or until such Default or Event
of Default is cured. All payments on this Note shall be made in lawful money of
the United States of America at the address specified by the holder hereof for
such purpose in the Purchase Agreement, in the manner set forth in the Purchase
Agreement.
This Note is one of the Company's 2.675% Convertible Subordinated
Notes due May 1, 2004 originally issued in the aggregate principal amount of
$20,000,000.00 pursuant to the Purchase Agreement. The registered holder of
this Note is entitled to the benefits of such Purchase Agreement and may enforce
the agreements of the Company
______________________________
/1/ Registered holders and denomination of each Note to be determined.
Aggregate amount of Notes issued to total $20,000,000.
<PAGE>
contained therein and exercise the remedies provided for thereby or otherwise
available in respect thereof.
This Note is convertible, upon the terms and subject to the conditions
specified in the Purchase Agreement.
This Note is expressly subordinated to the extent and in the manner
provided in Section 11 of the Purchase Agreement to all Senior Indebtedness (as
defined therein) of the Company.
This Note is a registered Note and, as provided in the Purchase
Agreement, is transferable only upon surrender of this Note for registration of
transfer, duly endorsed, or accompanied by a written instrument of transfer duly
executed, by the registered holder hereof or his attorney duly authorized in
writing. The Company may treat the person in whose name this Note is registered
as the owner hereof for the purpose of receiving payment and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
This Note is subject to redemption, in whole or in part, all as
specified in the Purchase Agreement.
In case an Event of Default, as defined in the Purchase Agreement,
shall occur and be continuing, the unpaid balance of the principal, interest and
any other amounts payable on this Note may be declared and become due and
payable in the manner and with the effect provided in the Purchase Agreement.
THIS NOTE IS MADE AND DELIVERED IN NEW YORK, NEW YORK, AND SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
GENSIA SICOR INC.
By _________________________
Title:
-2-
<PAGE>
EXHIBIT 4.5
WARRANT
To Purchase Shares of Common Stock of
GENSIA SICOR INC.
Warrant No. [_]
No. of Shares of Common Stock: 2,645,503
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. DEFINITIONS.................................................................... 1
2. EXERCISE OF WARRANT............................................................ 6
2.1. Manner of Exercise...................................................... 6
2.2. Payment of Taxes........................................................ 7
2.3. Fractional Shares....................................................... 7
3. TRANSFER, DIVISION AND COMBINATION............................................. 7
3.1. Transfer................................................................ 7
3.2. Division and Combination................................................ 8
3.3. Expenses................................................................ 8
3.4. Maintenance of Books.................................................... 8
4. ADJUSTMENTS.................................................................... 8
4.1. Stock Dividends, Subdivisions and Combinations.......................... 8
4.2. Certain Other Distributions............................................. 9
4.3. Issuance of Additional Shares of Common Stock........................... 10
4.4. Issuance of Warrants or Other Rights.................................... 10
4.5. Issuance of Convertible Securities...................................... 11
4.6. Superseding Adjustment.................................................. 12
4.7. Other Provisions Applicable to Adjustments under this Section........... 13
4.8. Reorganization, Reclassification, Merger, Consolidation or Disposition
of Assets............................................................... 15
4.9. Other Action Affecting Common Stock..................................... 16
4.10. Certain Limitations..................................................... 16
5. NOTICES TO WARRANT HOLDERS..................................................... 16
5.1. Notice of Adjustments; Change in Warrant Status......................... 16
5.2. Notice of Corporate Action.............................................. 17
6. RIGHTS OF HOLDERS.............................................................. 18
6.1. No Impairment........................................................... 18
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY........................................ 19
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS............................. 19
9. RESTRICTIONS ON TRANSFERABILITY................................................ 19
9.1. Restrictive Legend...................................................... 19
9.2. Registration Rights..................................................... 20
10. LOSS OR MUTILATION............................................................. 20
11. LIMITATION OF LIABILITY........................................................ 20
12. MISCELLANEOUS.................................................................. 20
12.1. Nonwaiver and Expenses.................................................. 20
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
12.2. Notice Generally..................................................... 20
12.3. Remedies............................................................. 21
12.4. Successors and Assigns............................................... 21
12.5. Amendment............................................................ 21
12.6. Severability......................................................... 22
12.7. Headings............................................................. 22
12.8. Governing Law........................................................ 22
SIGNATURES...................................................................... 23
EXHIBITS
Exhibit A.................................................................. A-1
Exhibit B.................................................................. B-1
</TABLE>
-ii-
<PAGE>
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT
BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE
EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
No. of Shares of Common Stock: 2,645,503 Warrant No. [_]
WARRANT
To Purchase Shares of Common Stock of
GENSIA SICOR INC.
THIS IS TO CERTIFY THAT HEALTH CARE CAPITAL PARTNERS L.P. ("HCCP"), or
registered assigns, is entitled, at any time prior to the Expiration Date (as
hereinafter defined), to purchase from Gensia Sicor Inc., a Delaware corporation
(the "Company"), 2,645,503 shares of Common Stock (as hereinafter defined and
subject to adjustment as provided herein), in whole or in part, at a purchase
price of $4.347 per share, all on the terms and conditions and pursuant to the
provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than Warrant Stock.
"Adjustment Period" shall mean the period of five consecutive Trading
Days preceding the date as of which the Fair Market Value of a security is to be
determined.
"Board of Directors" shall mean the board of directors of the Company.
"Business Day" shall mean any day that is not a Saturday or Sunday or
a day on which banks are required or permitted to be closed in the State of New
York.
<PAGE>
"Certificate of Designation" shall mean the Certificate of Designation
establishing the Preferred Stock, dated as of the Closing Date.
"Closing Date" shall have the meaning set forth in the Purchase
Agreement.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, $.01 par value, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is not preferred
as to dividends or assets over any other class of stock of the Company and which
is not subject to redemption and (ii) shares of common stock of any successor or
acquiring corporation (as defined in Section 4.8) received by or distributed to
the holders of Common Stock of the Company in the circumstances contemplated by
Section 4.8.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable or
exercisable, with or without payment of additional consideration in cash or
property, for Additional Shares of Common Stock, either immediately or upon the
occurrence of a specified date or a specified event.
"Current Market Price" when used with reference to shares of Common
Stock or other securities on any date, shall mean the closing price per share of
Common Stock or such other securities on such date and, when used with reference
to shares of Common Stock or other securities for any period shall mean the
average of the daily closing prices per share of Common Stock or such other
securities for such period. The closing price for each day shall be the last
quoted bid price in the over-the-counter market, as reported by the Nasdaq Stock
Market or such other system then in use, or, if on any such date the Common
Stock or such other securities are not quoted by any such organization, the
closing bid price as furnished by a professional market maker making a market in
the Common Stock or such other securities selected by the Board of Directors of
the Company. If the Common Stock is listed or admitted to trading on a national
securities exchange, the closing price shall be the closing bid price, regular
way, as reported in the principal consolidated transaction reporting
-2-
<PAGE>
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Common Stock or such other securities are not listed
or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Common Stock
or such other securities are listed or admitted to trading. If the Common Stock
or such other securities are not publicly held or so listed or publicly traded,
"Current Market Price" shall mean the Fair Market Value per share of Common
Stock or of such other securities as determined in good faith by the Board of
Directors of the Company based on an opinion of an independent investment
banking firm acceptable to holders of a majority of the Notes, which opinion may
be based on such assumptions as such firm shall deem to be necessary and
appropriate.
"Current Warrant Price" shall mean, in respect of a share of Common
Stock at any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date or $4.347.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
Reference to a particular section of the Exchange Act shall include reference to
the comparable section, if any, of such successor federal statute.
"Expiration Date" shall mean May 1, 2004.
"Fair Market Value" shall mean, as to shares of Common Stock or any
other class of capital stock or securities of the Company or any other issuer
which are publicly traded, the average of the Current Market Prices of such
shares of securities for each day of the Adjustment Period. The "Fair Market
Value" of any security which is not publicly traded or of any other property
shall mean the fair value thereof as determined by an independent investment
banking or appraisal firm experienced in the valuation of such securities or
property selected in good faith by the Board of Directors of the Company or a
committee thereof and acceptable to the Majority Holders.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, (i) all shares of Common Stock outstanding at such date and (ii) all
shares of Common Stock issuable in respect of this Warrant, and other options or
warrants to purchase, or securities convertible into, shares of Common Stock
outstanding on such date, the exercise or conversion price of which is less than
the Current Market Price on such date.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
"Holder" shall mean the Person in whose name this Warrant is
registered on the books of the Company maintained for such purpose. "Holders"
shall mean, collectively, each Holder of a Warrant, in the event of any division
of this Warrant.
-3-
<PAGE>
"Majority Holders" shall mean the holders of Warrants exercisable for
in excess of 50% of the aggregate number of shares of Warrant Stock then
purchasable upon exercise of all Warrants.
"Notes" shall mean the 2.675% Subordinated Convertible Notes due 2004,
purchased by HCCP pursuant to the Purchase Agreement and convertible into either
Common Stock or Preferred Stock.
"Other Property" shall have the meaning set forth in Section 4.8.
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company or any subsidiary thereof, and shall include all shares
issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock. For the purposes of Sections
4.3, 4.4, 4.5, 4.6 and 4.7, Common Stock Outstanding shall include all shares of
Common Stock issuable in respect of options or warrants to purchase, or
securities convertible into, shares of Common Stock, the exercise or conversion
price of which is less than the Current Market Price as of any date on which the
number of shares of Common Stock Outstanding is to be determined.
"Permitted Issuances" shall mean the issuance or reissuance of any
shares of Common Stock (whether treasury shares or newly issued shares) pursuant
to (i) a dividend or distribution on, or subdivision, combination or
reclassification of, the outstanding shares of Common Stock requiring an
adjustment in the conversion ratio pursuant to Section 4.1(a) or (ii) shares
issued as Stock Milestone Payments or Combination Milestone Payments pursuant to
Section 5.06 of the Development and Marketing Agreement dated June 13, 1991 with
Gensia Clinical Partners as in effect on the date hereof or pursuant to any
acquisiton of BIOFA A.B. on terms approved by the full Board of Directors or
(iii) any restricted stock or stock option plan or program of the Company
involving the grant of options or rights at below the Current Warrant Price (but
the Company will in no event grant options or rights exercisable at less than
85% of Current Market Price) so long as the granting of such options or rights
has been approved by the full Board of Directors or a committee of the Board of
Directors on which the director designated by the Purchaser is a member, or
(iv) any option, warrant, right, or convertible security outstanding as of the
date hereof (other than the rights under the Gensia Stockholder Rights Agreement
dated March 16, 1997 or similar securities).
"Person" shall mean any individual, firm, corporation, partnership or
other entity, and shall include any successor by merger or otherwise of such
entity.
-4-
<PAGE>
"Preferred Stock" shall mean the Company's Series A Preferred Stock,
par value $.01, issuable upon conversion of the Notes.
"Purchase Agreement" shall mean the Securities Purchase Agreement,
dated May 1, 1997, between the Company and HCCP.
"Registration Rights Agreement" shall mean the registration rights
agreement, dated as of the Closing Date, between the Company and HCCP.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Trading Day" means a Business Day or, if the Common Stock is listed
or admitted to trading on any national securities exchange, a day on which such
exchange is open for the transaction of business.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof, which would constitute a sale thereof
within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
"Warrants" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, any thereof. All
Warrants shall at all times be identical as to terms and conditions and date,
except as to the number of shares of Common Stock for which they may be
exercised.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock purchased by the
holders of the Warrants upon the exercise thereof.
-5-
<PAGE>
2. EXERCISE OF WARRANT
-------------------
2.1. Manner of Exercise. At any time or from time to time from and
------------------
after the Closing Date and until 5:00 P.M., New York time, on the Expiration
Date, Holder may exercise this Warrant, on any Business Day, for all or any part
of the number of shares of Common Stock purchasable hereunder; provided,
--------
however, that this Warrant shall not be exercisable as to 50% of the Warrant
- -------
Stock until (a) after the third anniversary of the Closing Date and (b) then
only if on or before the third anniversary of the Closing Date (i) the Current
Market Price shall not have exceeded the Current Warrant Price by 250% or more
for 90 consecutive Trading Days and (ii) there shall not have occurred a Change
of Control, as defined in the Purchase Agreement (such contingently exercisable
portion of the Warrant, the "Contingent Warrant"). From and after the third
anniversary of the Closing Date, any portion of the Contingent Warrant which is
then exercisable and has not previously been exercised shall expire upon the
occurrence of a Change of Control.
In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at its principal office at 9360 Towne Centre Drive, San
Diego, California 92121 (i) a written notice of Holder's election to exercise
this Warrant, which notice shall specify the number of shares of Common Stock to
be purchased, (ii) payment of the Warrant Price and (iii) this Warrant. Such
notice shall be substantially in the form appearing at the end of this Warrant
as Exhibit A, duly executed by Holder. Upon receipt of the items specified in
the second preceding sentence, the Company shall execute or cause to be executed
and deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate or certificates so delivered shall
be in such denomination or denominations as Holder shall request in the notice
and shall be registered in the name of Holder or, subject to Section 9, such
other name as shall be designated in the notice. This Warrant shall be deemed to
have been exercised and such certificate or certificates shall be deemed to have
been issued, and Holder or any other Person so designated shall be deemed to
have become a holder of record of such shares for all purposes, as of the date
the notice, together with the Warrant Price and this Warrant, are received by
the Company as described above. If this Warrant shall have been exercised in
part, the Company shall, at the time of delivery of the certificate or
certificates representing Warrant Stock, deliver to Holder a new Warrant
evidencing the right of Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant, or, at the request of Holder, appropriate
notation may be made on this Warrant and the same returned to Holder.
-6-
<PAGE>
Payment of the Warrant Price shall be made at the option of Holder
(i) by certified or official bank check or (ii) by the surrender of this Warrant
to the Company, with a duly executed exercise notice marked to reflect "Net
Issue Exercise," and, in either case, specifying the number of shares of Common
Stock to be purchased, during normal business hours on any Business Day. Upon a
Net Issue Exercise, Holder shall be entitled to receive shares of Common Stock
equal to the value of this Warrant (or the portion thereof being exercised by
Net Issue Exercise) by surrender of this Warrant to the Company together with
notice of such election, in which event the Company shall issue to Holder a
number of shares of the Company's Common Stock computed as of the date of
surrender of this Warrant to the Company using the following formula:
X = Y x (A-B)
---------
A
Where X = the number of shares of Common Stock to be issued to Holder;
Y = the number of shares of Common Stock otherwise purchasable under this
Warrant (at the date of such calculation);
A = the Current Market Price of one share of the Company's Common Stock
(at the date of such calculation);
B = the Current Warrant Price (as adjusted to the date of such
calculation).
2.2. Payment of Taxes. All shares of Common Stock issuable upon the
----------------
exercise of this Warrant shall be validly issued, fully paid and nonassessable
and without any preemptive rights. The Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issue or delivery thereof.
2.3. Fractional Shares. The Company shall not be required to issue a
-----------------
fractional share of Common Stock upon exercise of this Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such
fraction in an amount equal to the same fraction of the Current Market Price per
share of Common Stock on the date of exercise.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Section 9, transfer of
--------
this Warrant and all rights hereunder, in whole or in part, shall be registered
on the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Company referred to in Section 2.1,
together with a written
-7-
<PAGE>
assignment of this Warrant substantially in the form of Exhibit B hereto duly
executed by Holder and funds sufficient to pay any transfer taxes payable upon
the making of such transfer. Upon such surrender and, if required, such payment,
the Company shall, subject to Section 9, execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denomination
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be canceled. A Warrant, if properly assigned in
compliance with Section 9, may be exercised by a new Holder for the purchase of
shares of Common Stock without having a new Warrant issued.
3.2. Division and Combination. Subject to Section 9, this Warrant may
------------------------
be divided into multiple Warrants or combined with other Warrants upon
presentation hereof at the aforesaid office or agency of the Company, together
with a written notice specifying the names and denominations in which new
Warrants are to be issued, signed by Holder. Subject to compliance with Section
3.1 and with Section 9, as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
3.3. Expenses. The Company shall prepare, issue and deliver at its
--------
own expense (other than transfer taxes) the new Warrant or Warrants under this
Section 3.
3.4. Maintenance of Books. The Company agrees to maintain, at its
--------------------
aforesaid office, books for the registration and the registration of transfer of
the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable and/or the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give each Holder notice of any event
described below which requires an adjustment pursuant to this Section 4 at the
time of such event.
4.1. Stock Dividends, Subdivisions and Combinations. If at any time
----------------------------------------------
the Company shall:
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution
of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
-8-
<PAGE>
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
per share shall be adjusted to equal (A) the Current Warrant Price multiplied by
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
4.2. Certain Other Distributions. If the Company shall at any time or
---------------------------
from time to time after May 1, 1997 declare, order, pay or make a dividend or
other distribution of:
(a) cash,
(b) any evidences of its indebtedness, any shares of its stock or any
other securities or property of any nature whatsoever by way of dividend,
including any distribution of shares or assets of Metabasis Therapeutics,
Inc. or Gensia Automedics, Inc., and any payment or granting of anything of
value in consideration of the release of a claim brought by a shareholder
against the Company, whether before or after the Closing Date, on the basis
of events or circumstances occurring prior to the Closing Date ("Pre-
Closing Shareholder Claims") (other than cash, Convertible Securities or
Additional Shares of Common Stock), or
(c) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock),
then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
adjustment by a fraction (A) the numerator of which shall be the Current Market
Price per share of Common Stock for the period of 20 Trading Days preceding such
record and (B) the denominator of which shall be such Current Market Price per
share of Common Stock less the Fair Market Value per share of Common Stock of
any such dividend or distribution and (ii) the Current Warrant Price shall be
adjusted to equal (A) the Current Warrant Price multiplied
-9-
<PAGE>
by the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment. A
reclassification of the Common Stock (other than a change in par value, or from
par value to no par value or from no par value to par value) into shares of
Common Stock and shares of any other class of stock shall be deemed a
distribution by the Company to the holders of its Common Stock of such shares of
such other class of stock within the meaning of this Section 4.2 and, if the
outstanding shares of Common Stock shall be changed into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such change
shall be deemed a subdivision or combination, as the case may be, of the
outstanding shares of Common Stock within the meaning of Section 4.1.
4.3. Issuance of Additional Shares of Common Stock. If at any time
---------------------------------------------
the Company shall (except as hereinafter provided) issue or sell any Additional
Shares of Common Stock, other than Permitted Issuances, in exchange for
consideration in an amount per Additional Share of Common Stock less than the
Current Warrant Price at the time the Additional Shares of Common Stock are
issued, then (i) the Current Warrant Price as to the number of shares for which
this Warrant is exercisable prior to such adjustment shall be reduced to a price
determined by dividing (A) an amount equal to the sum of (x) the number of
shares of Common Stock Outstanding immediately prior to such issue or sale
multiplied by the then existing Current Warrant Price, plus (y) the
consideration, if any, received by the Company upon such issue or sale, by (B)
the total number of shares of Common Stock Outstanding immediately after such
issue or sale; and (ii) the number of shares of Common Stock for which this
Warrant is exercisable shall be adjusted to equal the product obtained by
multiplying the Current Warrant Price in effect immediately prior to such issue
or sale by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such issue or sale and dividing the product
thereof by the Current Warrant Price resulting from the adjustment made pursuant
to clause (i) above.
4.4. Issuance of Warrants or Other Rights. If at any time the Company
------------------------------------
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any warrants or other rights to subscribe for or
purchase any Additional Shares of Common Stock or any Convertible Securities,
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable upon the
exercise of such Warrants or other rights or upon conversion or exchange of such
Convertible Securities shall be less than the Current Warrant Price in effect
immediately prior to the time of such issue or sale, then the number of shares
for which this Warrant is exercisable and the Current Warrant Price shall be
adjusted as provided in Section 4.3 on the basis that the maximum number of
Additional Shares of Common
-10-
<PAGE>
Stock issuable pursuant to all such warrants or other rights or necessary to
effect the conversion or exchange of all such Convertible Securities shall be
deemed to have been issued and outstanding and the Company shall have received
all of the consideration payable therefor, if any, as of the date of the actual
issuance of the number of shares for which this Warrant is exercisable and such
warrants or other rights. No further adjustments of the Current Warrant Price
shall be made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such warrants or other rights or upon the actual
issue of such Common Stock upon such conversion or exchange of such Convertible
Securities. Notwithstanding the foregoing, no adjustment shall be required under
this Section 4.4 solely by reason of the issuance of stock purchase rights under
a stockholder rights plan of the Company, provided that the adjustments required
by this Section 4.4 shall be made if any "flip-in" or "flip-over" event shall
occur under such stockholder rights plan.
4.5. Issuance of Convertible Securities. If at any time the Company
----------------------------------
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange shall be less than the Current Warrant Price in effect immediately
prior to the time of such issue or sale, then the number of shares for which
this Warrant is exercisable and the Current Warrant Price shall be adjusted as
provided in Section 4.3 on the basis that the maximum number of Additional
Shares of Common Stock necessary to effect the conversion or exchange of all
such Convertible Securities shall be deemed to have been issued and outstanding
and the Company shall have received all of the consideration payable therefor,
if any, as of the date of actual issuance of such Convertible Securities. No
adjustment of the number of shares for which this Warrant is exercisable and the
Current Warrant Price shall be made under this Section 4.5 upon the issuance of
any Convertible Securities which are issued pursuant to the exercise of any
warrants or other subscription or purchase rights therefor, if any such
adjustment shall previously have been made upon the issuance of such warrants or
other rights pursuant to Section 4.4. No further adjustments of the number of
shares for which this Warrant is exercisable and the Current Warrant Price shall
be made upon the actual issue of such Common Stock upon conversion or exchange
of such Convertible Securities and, if any issue or sale of such Convertible
Securities is made upon exercise of any warrant or other right to subscribe for
or to purchase any such Convertible Securities for which adjustments of the
number of shares for which this Warrant is exercisable and the Current Warrant
Price have been or are to be made pursuant to other provisions of this Section
4, no further adjustments of the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be made by reason of such issue
or sale.
-11-
<PAGE>
4.6. Superseding Adjustment. If, at any time after any adjustment of
----------------------
the number of shares of Common Stock for which this Warrant is exercisable and
the Current Warrant Price shall have been made pursuant to Section 4.4 or
Section 4.5 as the result of any issuance of warrants, rights or Convertible
Securities,
(a) such warrants or rights, or the right of conversion or exchange
in such other Convertible Securities, shall expire, and all or a portion of
such warrants or rights, or the right of conversion or exchange with
respect to all or a portion of such other Convertible Securities, as the
case may be, shall not have been exercised, or
(b) the consideration per share for which shares of Common Stock are
issuable pursuant to such warrants or rights, or the terms of such other
Convertible Securities, shall be increased solely by virtue of provisions
therein contained for an automatic increase in such consideration per share
upon the occurrence of a specified date or event,
then for each outstanding Warrant such previous adjustment shall be rescinded
and annulled and the Additional Shares of Common Stock which were deemed to have
been issued by virtue of the computation made in connection with the adjustment
so rescinded and annulled shall no longer be deemed to have been issued by
virtue of such computation. Thereupon, a recomputation shall be made of the
effect of such rights or options or other Convertible Securities on the basis of
(c) treating the number of Additional Shares of Common Stock or other
property, if any, theretofore actually issued or issuable pursuant to the
previous exercise of any such warrants or rights or any such right of
conversion or exchange, as having been issued on the date or dates of any
such exercise and for the consideration actually received and receivable
therefor, and
(d) treating any such warrants or rights or any such other
Convertible Securities which then remain outstanding as having been granted
or issued immediately after the time of such increase of the consideration
per share for which shares of Common Stock or other property are issuable
under such warrants or rights or other Convertible Securities; whereupon a
new adjustment of the number of shares of Common Stock for which this
Warrant is exercisable and the Current Warrant Price shall be made, which
new adjustment shall supersede the previous adjustment so rescinded and
annulled.
4.7. Other Provisions Applicable to Adjustments under this Section.
-------------------------------------------------------------
The following provisions shall be applicable to the making of adjustments of the
number of
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<PAGE>
shares of Common Stock for which this Warrant is exercisable and the Current
Warrant Price provided for in this Section 4:
(a) Computation of Consideration. To the extent that any Additional
----------------------------
Shares of Common Stock or any Convertible Securities or any warrants or
other rights to subscribe for or purchase any Additional Shares of Common
Stock or any Convertible Securities shall be issued for cash consideration,
the consideration received by the Company therefor shall be the amount of
the cash received by the Company therefor, or, if such Additional Shares of
Common Stock or Convertible Securities are offered by the Company for
subscription, the subscription price, or, if such Additional Shares of
Common Stock or Convertible Securities are sold to underwriters or dealers
for public offering without a subscription offering, the initial public
offering price (in any such case subtracting any amounts paid or receivable
for accrued interest or accrued dividends and without taking into account
any compensation, discounts or expenses paid or incurred by the Company for
and in the underwriting of, or otherwise in connection with, the issuance
thereof). To the extent that such issuance shall be for a consideration
other than cash, then, except as herein otherwise expressly provided, the
amount of such consideration shall be deemed to be the Fair Market Value of
such consideration at the time of such issuance. In case any Additional
Shares of Common Stock or any Convertible Securities or any warrants or
other rights to subscribe for or purchase such Additional Shares of Common
Stock or Convertible Securities shall be issued in connection with any
merger in which the Company issues any securities, the amount of
consideration therefor shall be deemed to be the Fair Market Value of such
portion of the assets and business of the nonsurviving corporation as such
Board in good faith shall determine to be attributable to such Additional
Shares of Common Stock, Convertible Securities, warrants or other rights,
as the case may be. The consideration for any Additional Shares of Common
Stock issuable pursuant to any warrants or other rights to subscribe for or
purchase the same shall be the consideration received by the Company for
issuing such warrants or other rights plus the additional consideration
payable to the Company upon exercise of such warrants or other rights. The
consideration for any Additional Shares of Common Stock issuable pursuant
to the terms of any Convertible Securities shall be the consideration
received by the Company for issuing warrants or other rights to subscribe
for or purchase such Convertible Securities, plus the consideration paid or
payable to the Company in respect of the subscription for or purchase of
such Convertible Securities, plus the additional consideration, if any,
payable to the Company upon the exercise of the right of conversion or
exchange in such Convertible Securities. In case of the issuance at any
time of any Additional Shares of Common Stock or Convertible Securities in
payment or satisfaction of any dividends upon any class of stock other than
Common Stock, the Company
-13-
<PAGE>
shall be deemed to have received for such Additional Shares of Common Stock
or Convertible Securities a consideration equal to the amount of such
dividend so paid or satisfied. If Additional Shares of Common Stock are
sold as a unit with other securities or rights of value, the aggregate
consideration received for such Additional Shares of Common Stock shall be
deemed to be net of the Fair Market Value of such other securities or
rights of value. If Additional Shares of Common Stock or warrants, rights
or Convertible Securities are issued in consideration for the release of
Pre-Closing Shareholder Claims, the consideration for such Additional
Shares of Common Stock or warrants, rights or Convertible Securities shall
be deemed to be $0.
(b) When Adjustments to Be Made. The adjustments required by this
---------------------------
Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur, except that any adjustment of the
number of shares of Common Stock for which this Warrant is exercisable that
would otherwise be required may be postponed (except in the case of a
subdivision or combination of shares of the Common Stock, as provided for
in Section 4.1) up to, but not beyond the date of exercise if such
adjustment either by itself or with other adjustments not previously made
results in an increase or decrease of less than 1% of the shares of Common
Stock for which this Warrant is exercisable immediately prior to the making
of such adjustment. Any adjustment representing a change of less than such
minimum amount (except as aforesaid) which is postponed shall be carried
forward and made as soon as such adjustment, together with other
adjustments required by this Section 4 and not previously made, would
result in a minimum adjustment or on the date of exercise. For the purpose
of any adjustment, any specified event shall be deemed to have occurred at
the close of business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments under this Section
--------------------
4, fractional interests in Common Stock shall be taken into account to the
nearest 1/100th o f a share.
(d) When Adjustment Not Required. If the Company shall take a record
----------------------------
of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and
shall, thereafter and before the distribution to stockholders thereof,
legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be
required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.
-14-
<PAGE>
(e) Escrow of Warrant Stock. If, after any property becomes
-----------------------
distributable pursuant to this Section 4 by reason of the taking of any
record of the holders of Common Stock, but prior to the occurrence of the
event for which such record is taken, Holder exercises this Warrant, any
Additional Shares of Common Stock issuable upon exercise by reason of such
adjustment shall be deemed the last shares of Common Stock for which this
Warrant is exercised (notwithstanding any other provision to the contrary
herein) and such shares or other property shall be held in escrow for
Holder by the Company to be issued to Holder when and to the extent that
the event actually takes place, upon payment of the then Current Warrant
Price. Notwithstanding any other provision to the contrary herein, if the
event for which such record was taken fails to occur or is rescinded, then
such escrowed shares shall be canceled by the Company and escrowed property
returned.
(f) Challenge to Good Faith Determination. Whenever the Board of
-------------------------------------
Directors of the Company shall be required to make a determination in good
faith of the fair value of any item under this Section 4, such
determination may be challenged in good faith by the Majority Holders, and
any dispute shall be resolved by an investment banking firm of recognized
national standing selected by the Company and acceptable to the Majority
Holders.
4.8. Reorganization, Reclassification, Merger, Consolidation or
----------------------------------------------------------
Disposition of Assets. In case the Company shall reorganize its capital,
- ---------------------
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of this Warrant and payment of the Warrant Price, the number of shares
of common stock of the successor or acquiring corporation or of the Company, if
it is the surviving corporation, and Other Property receivable upon or as a
result of such reorganization, reclassification, merger, consolidation or
disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event. In case of
any such reorganization, reclassification, merger, consolidation or disposition
of assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Warrant to
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<PAGE>
be performed and observed by the Company and all the obligations and liabilities
hereunder, subject to such modifications as may be deemed appropriate (as
determined by resolution of the Board of Directors of the Company) in order to
provide for adjustments of shares of the Common Stock for which this Warrant is
exercisable which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 4. For purposes of this Section 4.8,
"common stock of the successor or acquiring corporation" shall include stock of
such corporation of any class which is not preferred as to dividends or assets
over any other class of stock of such corporation and which is not subject to
redemption and shall also include any evidences of indebtedness, shares of stock
or other securities which are convertible into or exchangeable for any such
stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe for
or purchase any such stock. The foregoing provisions of this Section 4.8 shall
similarly apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.
4.9. Other Action Affecting Common Stock. In case at any time or
-----------------------------------
from time to time the Company shall take any action in respect of its Common
Stock, other than any action described in this Section 4, then the number of
shares of Common Stock or other stock for which this Warrant is exercisable
and/or the purchase price thereof shall be adjusted in such manner as may be
equitable in the circumstances.
4.10. Certain Limitations. Notwithstanding anything herein to the
-------------------
contrary, the Company agrees not to enter into any transaction which, by reason
of any adjustment hereunder, would cause the Current Warrant Price to be less
than the par value per share of Common Stock.
5. NOTICES TO WARRANT HOLDERS
5.1. Notice of Adjustments; Change in Warrant Status. (a) Whenever
-----------------------------------------------
the number of shares of Common Stock for which this Warrant is exercisable, or
whenever the price at which a share of such Common Stock may be purchased upon
exercise of the Warrants, shall be adjusted pursuant to Section 2.1 or Section
4, the Company shall forthwith prepare a certificate to be executed by the chief
financial officer of the Company setting forth, in reasonable detail, the event
requiring the adjustment and the method by which such adjustment was calculated
(including a description of the basis on which the Board of Directors of the
Company determined the Fair Market Value of any evidences of indebtedness,
shares of stock, other securities or property or warrants or other subscription
or purchase rights referred to in Section 4.2 or 4.7(a)), specifying the number
of shares of Common Stock for which this Warrant is exercisable and (if such
adjustment was made pursuant to Section 4.8 or 4.9) describing the number and
kind of any other shares of stock or Other Property for which this Warrant is
exercisable, and any change in the purchase price or prices thereof, after
giving effect to such adjustment or
-16-
<PAGE>
change. The Company shall promptly cause a signed copy of such certificate to be
delivered to each Holder in accordance with Section 13.2. The Company shall keep
at its principal office copies of all such certificates and cause the same to be
available for inspection at said office during normal business hours by any
Holder or any prospective purchaser of a Warrant designated by a Holder thereof.
5.2. Notice of Corporate Action. If at any time
--------------------------
(a) the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend (other than a
cash dividend payable out of earnings or earned surplus legally available
for the payment of dividends under the laws of the jurisdiction of
incorporation of the Company) or other distribution, or any right to
subscribe for or purchase any evidences of its indebtedness, any shares of
stock of any class or any other securities or property, or to receive any
other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or
other disposition of all or substantially all the property, assets or
business of the Company to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 20 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently
-17-
<PAGE>
given if addressed to Holder at the last address of Holder appearing on the
books of the Company and delivered in accordance with Section 13.2.
6. RIGHTS OF HOLDERS
6.1 No Impairment. The Company shall not by any action, including,
-------------
without limitation, amending its Certificate of Incorporation or comparable
governing instruments 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 of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder against impairment.
Without limiting the generality of the foregoing, the Company will (a) not
increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (b) take all such action 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, and (c) use its best efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its obligations
under this Warrant.
Upon the request of Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form reasonably
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Closing Date, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such number
of its authorized but unissued shares of Common Stock as will be sufficient to
permit the exercise in full of all outstanding Warrants. All shares of Common
Stock which shall be so issuable, when issued upon exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant, shall be duly and
validly issued and fully paid and nonassessable, and not subject to preemptive
rights.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action
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<PAGE>
which may be necessary in order that the Company may validly and legally issue
fully paid and non-assessable shares of such Common Stock at such adjusted
Current Warrant Price.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of a record of such holders, the Company will in each such
case take such a record and will take such record as of the close of business on
a Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Stock. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 9.
9.1. Restrictive Legend. Except as otherwise provided in this Section
------------------
9, each Warrant and each certificate for Warrant Stock initially issued upon the
exercise of a Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with the legend required by Section 13.12 of the Purchase Agreement:
9.2. Registration Rights. The holders of Warrants and Warrant Stock
-------------------
shall have the registration rights set forth in the Registration Rights
Agreement.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it, and in
case of mutilation upon surrender and cancellation hereof, the Company will
execute and deliver in lieu hereof a new Warrant of like tenor to such Holder;
provided, in the case of mutilation, no indemnity shall be required if this
- --------
Warrant in identifiable form is surrendered to the Company for cancellation.
-19-
<PAGE>
11. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of such Holder for
the purchase price of any Common Stock or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
12. MISCELLANEOUS
12.1. Nonwaiver and Expenses. No course of dealing or any delay or
----------------------
failure to exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Holder's rights, powers or remedies.
If the Company fails to make, when due, any payments provided for hereunder, or
fails to comply with any other provision of this Warrant, the Company shall pay
to Holder such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees, including those of
appellate proceedings, incurred by Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
12.2. Notice Generally. Any notice, demand, request, consent,
----------------
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid, or
by telecopy and confirmed by telecopy answerback, addressed as follows:
(a) If to any Holder or holder of Warrant Stock, at its last known
address appearing on the books of the Company maintained for such purpose.
(b) If to the Company at
9360 Towne Centre Drive
San Diego, California 92121
Attention:
Telecopy Number:
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback, or three (3) Business Days after the same shall
-20-
<PAGE>
have been deposited in the United States mail. Failure or delay in delivering
copies of any notice, demand, request, approval, declaration, delivery or other
communication to the person designated above to receive a copy shall in no way
adversely affect the effectiveness of such notice, demand, request, approval,
declaration, delivery or other communication.
12.3. Remedies. Each holder of Warrant and Warrant Stock, in addition
--------
to being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under of this
Warrant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Warrant and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
12.4. Successors and Assigns. Subject to the provisions of Sections 3
----------------------
.1, this Warrant and the rights evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and assigns
of Holder. The provisions of this Warrant are intended to be for the benefit of
all Holders from time to time of this Warrant and, with respect to Section 9
hereof, holders of Warrant Stock, and shall be enforceable by any such Holder or
holder of Warrant Stock.
12.5. Amendment. This Warrant and all other Warrants may be modified
---------
or amended or the provisions hereof waived with the written consent of the
Company and the Majority Holders, provided that no such Warrant may be modified
--------
or amended to reduce the number of shares of Common Stock for which such Warrant
is exercisable or to increase the price at which such shares may be purchased
upon exercise of such Warrant (before giving effect to any adjustment as
provided therein) without the prior written consent of the Holder thereof.
12.6. Severability. Wherever possible, each provision of this Warrant
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
12.7. Headings. The headings used in this Warrant are for the
--------
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
12.8. Governing Law. This Warrant shall be governed by the laws of
-------------
the State of Delaware, without regard to the provisions thereof relating to
conflict of laws.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: _____________, 1997
GENSIA SICOR INC.
By: _______________________
Name:
Title:
Attest:
By:___________________________
Name:
Title:
-22-
<PAGE>
EXHIBIT A
EXERCISE FORM
[To be executed only upon exercise of Warrant]
Net Issue Exercise _____No ______Yes
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of _____ Shares of Common Stock of Gensia Sicor
Inc. and herewith makes payment therefor, all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
shares of Common Stock hereby purchased (and any securities or other property
issuable upon such exercise) be issued in the name of and delivered to
_____________ whose address is ________________ and, if such shares of Common
Stock shall not include all of the shares of Common Stock issuable as provided
in this Warrant, that a new Warrant of like tenor and date for the balance of
the shares of Common Stock issuable hereunder be delivered to the undersigned.
(Name of Registered Owner)
_______________________________________
(Signature of Registered Owner)
_______________________________________
(Street Address)
_______________________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
-1-
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of Common Stock
- ---------------------------- -----------------------------
and does hereby irrevocably constitute and appoint ________________ attorney-in-
fact to register such transfer on the books of Gensia Sicor Inc. maintained for
the purpose, with full power of substitution in the premises.
Dated:_______________ Print Name:_____________________________
Signature:______________________________
Witness:________________________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
-1-
<PAGE>
EXHIBIT 10.2
AGREEMENT
THIS AGREEMENT, made as of the 15th day of April, 1997 (the "Effective
Date"), by and between ALCO CHEMICALS LTD., a corporation organized under the
laws of Guernsey, Channel Islands, with a branch office at Via San Salvatore 7,
CH-6902 Lugano, Switzerland ("Alco"), and SICOR DE MEXICO S.A. DE C.V., a
corporation organized under the laws of Mexico with offices at Av. San Rafael
No. 35, Parque Industrial Lerma, C.P. 52000 Lerma, Edo. De Mexico ("Company"),
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS,Company sells and distributes certain bulk pharmaceutical products
("Products"); and
WHEREAS, Company desires to utilize the services of Alco in assisting
Company in the marketing and selling of the Products; and
WHEREAS, Alco has personnel with expertise and commercial know-how, and is
in a position to perform the services set forth herein;
NOW, THEREFORE, in consideration of the above premises and the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
Sale of Products
----------------
1.1 Definitions.
-----------
(a) "Territory" shall mean all the countries of the world except
Italy.
(b) "Net Sales" shall mean, with respect to any Product, the invoiced
sales price of such Product billed to independent customers by Company (other
than sales to its subsidiaries, divisions or affiliates), less credits,
allowances and rebates for such Product which was spoiled, damaged, out-dated or
returned and less (i) freight and insurance costs incurred in transporting such
Product to such customers; (ii) cash, quantity and other trade discounts; (iii)
customs duties and surcharges and other governmental charges incurred in
connection with the exportation or importation of such Product; and (iv) rebates
given or liabilities incurred resulting from any mandated rebate program.
1.2 Services to be Performed by Alco. In accordance with the terms and
--------------------------------
conditions set forth herein, Alco shall:
<PAGE>
(a) identify drug substances of interest to potential customers of
Company in the Territory and which could be produced by affiliates of Company;
(b) work with sales agents and distributors in countries in the
Territory to select final dosage form manufacturers who could develop compounds
utilizing drug substances produced by Company's affiliates, and participate in
negotiating supply agreements with such finished dosage form manufacturers;
(c) act as an interface between Company's customers, its sales agents
and distributors, and affiliates of Company producing drug substances;
(d) assist Company in coordinating and assigning priorities to
various new product development projects of Company;
(e) visit customers of Company with local sales agents and
distributors;
(f) assist Company in maintaining good relationships with its
customers, distributors and sales agents, including discussing pricing issues
and new product possibilities;
(g) promptly advise Company of any safety issue of which Alco becomes
aware regarding the Products;
(h) comply with all applicable laws and regulations relating to the
performance of Alco's obligations hereunder, and conduct its business in a
manner that will reflect favorably on the Company, the Products and the good
name, goodwill and reputation thereof; and
(i) not make any representation or warranty regarding the Products or
Company, except for those warranties regarding Products made by Company in a
writing accompanying the Products or as expressly authorized by Company in
writing.
1.3 Company's Responsibilities. Company shall comply with all applicable
--------------------------
laws and regulations relating to the performance of Company's obligations
hereunder, and shall promptly advise Alco of any safety issue of which Company
becomes aware regarding the Products, maintain incident and complaint files,
notify Alco of all incidents and complaints which relate or may relate to the
Products, and provide Alco with copies of all correspondence with the United
States Food and Drug Administration ("FDA") or any other health authority
regarding Product safety or any request for recall of the Product.
1.4 Orders and Sales. Alco promptly shall forward to Company all orders
----------------
for Products received from potential or actual customers in the Territory. All
such orders shall be in such form as Company shall reasonably determine and
shall not be binding until accepted by Company. Orders shall be accepted by
Company for booking and selling all Products in the Territory.
<PAGE>
1.5 Status of Parties. The parties desire to create a relationship of
-----------------
independent contractors, and in no way intend to create a relationship of
employer and employee, of principal and agent or of joint venturers or partners.
At all times during the performance of their respective obligations under this
agreement, the parties are acting and performing as independent contractors.
Alco at all times shall be solely responsible for providing its own place of
work and all supplies necessary for performing any of its obligations hereunder.
Alco may, at its sole expense, employ such employees as Alco deems necessary or
desirable to perform such obligations hereunder. Company shall neither direct
not supervise Alco's employees in the performance of such obligations. Neither
party shall have, nor shall represent itself to any other person or entity as
having, any right, power or authority to create any obligation or liability,
express or implied, on behalf of or in the name of the other party in any manner
or for any purpose whatsoever. Except as expressly provided herein, neither
party shall use the other party's name on its stationery, advertising, or the
like in a manner which might suggest that one party is the other party's agent.
ARTICLE II
Administration
--------------
2.1 Reports. Alco shall furnish to Company such reports on the activities
-------
undertaken by Alco with respect to the Products as Company may reasonably
require. Company shall furnish to Alco regular updates on the market
development and sales support activities undertaken by Company.
2.2 Audits. Alco shall have the right, upon reasonable written notice to
------
Company, to designate a certified public accountant of internationally-
recognized standing reasonably acceptable to Company to have access during
ordinary working hours to such records as may be necessary to audit Company's
dollar sales of Products in the Territory. Such accountant shall not disclose
to Alco any information relating to the business of Company except to inform
Alco of the correctness of any calculations pursuant to section 3.1 hereof and
the amount of any discrepancy.
<PAGE>
ARTICLE III
Compensation and Other Terms
----------------------------
3.1 Fee. In exchange for Alco's performance of the services set forth
---
herein, Company shall pay to Alco a fee equal to four percent (4%) of Company's
Net Sales in the Territory, other than sales to Company's subsidiaries,
divisions or affiliates, of the Products, provided that at such time during any
calendar year as the total fees payable to Alco pursuant hereto exceed
$1,000,000, the amount of the fee set forth herein shall be reduced to two
percent (2%) during the remainder of such calendar year.
3.2 Payment. Alco shall be paid the fee set forth in section 3.1 hereof
-------
on a calendar quarterly basis based on the Net Sales of Products shipped by
Company for that calendar quarter. Company shall pay to Alco such fee on or
before the forty-fifth (45th) day following the close of such calendar quarter,
and shall accompany each such payment with a statement setting forth the Net
Sales in the Territory for the respective calendar quarter and the calculation
of the fee due with respect thereto.
3.3 Intent of the Parties. It is the intent of the parties that the fee
---------------------
payable hereunder shall not impose or result in an economic hardship on the
parties. In the event an economic hardship should result, the parties shall
meet and determine a new fee schedule in order to eliminate such hardship.
ARTICLE IV
Term and Termination
--------------------
4.1 Termination Date. Except as otherwise set forth in this Article IV,
----------------
the term of this agreement shall be five (5) years from the Effective Date.
Notwithstanding the foregoing, Company may terminate this Agreement on one
hundred eighty (180) days' notice to Alco in the event (a) of a change on
control of Alco or (b) Mr. Carlo Salvi is no longer actively involved in the
management of Alco.
4.2 Breach; Default. This agreement may be terminated by one party hereto
---------------
in the event of a material breach thereof by the other party or upon written
notice by one party to the other, if the other party files or has filed against
it a petition under the Bankruptcy Act, makes an assignment for the benefit of
creditors, has a receiver appointed for it or any of its assets. In such event,
the party intending to terminate this agreement shall advise the other party in
writing, setting forth in sufficient detail the breach claimed to be the basis
of the termination and requesting that the alleged breach be cured by the other
party within thirty (30) days of the receipt of the notice. Should the other
party fail to cure the alleged breach within such period, the terminating party
shall so notify the other party and this agreement shall be deemed terminated
thirty (30) days after receipt of such termination notification.
4.3 Effects of Termination. Termination or expiration of this agreement
----------------------
shall not
<PAGE>
relieve the parties of the obligation to pay any amounts owing between them, and
shall not terminate any rights or obligations arising prior to or upon such
termination or expiration. The provisions of Articles V and VI shall survive the
termination or expiration of this agreement.
ARTICLE V
Trade Secrets and Confidential Information
------------------------------------------
5.1 Each party may receive various trade secrets of the other party and
other information of the other party of a confidential nature, including but not
limited to specific commercial and technical information concerning the
Products. Each party shall not disclose to anyone, directly or indirectly,
either during the term of this agreement or for a period of five (5) years
thereafter, any of such trade secrets or other confidential information
(including but not limited to marketing plans and programs, market research
information and sales data) of the other party or use such information of the
other party other than in the course of its performance hereunder. The
obligation to protect such confidential information shall not apply to any
information that: (1) is already in the lawful possession of, or is
independently developed by the party receiving such information (the "Receiving
Party") by persons without access to or use of such information; (2) becomes
publicly available other than through breach of this provision; (3) is received
by the Receiving Party from a third party with authorization to make such
disclosure; or (4) is released with the written consent of the party disclosing
such information. Notwithstanding the foregoing, the Recipient shall have the
right to disclose any such information to the extent required by law, regulation
or order of a court of competent jurisdiction, provided that the Recipient shall
give prior written notice to the other party and sufficient opportunity to
object thereto or to request confidential treatment.
5.2 Except as may be required by applicable laws and regulations or a
court of competent jurisdiction, as required to meet credit or other financing
arrangements, or as required or appropriate in the reasonable judgment of either
party to satisfy the disclosure requirements of any applicable securities law or
regulation, neither party shall make any public release or other disclosure with
respect to this agreement or the terms hereof without the prior consent of the
other party.
ARTICLE VI
Indemnity
---------
6.1 Company's Indemnity Obligations. Company agrees to defend, indemnify
-------------------------------
and hold Alco, Alco's affiliates and their employees and agents harmless from
all losses, liabilities, damages and expenses (including reasonable attorneys'
fees and costs) incurred as a result of any claim, demand, action or other
proceeding by a third party arising as a result of actions of Company or its
employees causing (a) actual or asserted violations of any applicable law or
regulation by virtue of which Products distributed or sold shall be alleged or
<PAGE>
determined to be adulterated, misbranded, mislabeled, misrepresented or
otherwise not in compliance with any applicable law or regulation; (b) claims
for bodily injury, death or property damage attributable to the design,
manufacturing, marketing, distribution, sale or use of Products, or (c) a
Product recall ordered by a governmental agency or required by a confirmed
Product failure as reasonably determined by the Company.
6.2 Alco's Indemnity Obligations. Alco, its affiliates and their
----------------------------
employees and agents shall not be entitled to the indemnities set forth in
section 6.1 above where the loss, liability, damage or expense for which
indemnification is sought was caused by the negligence, breach of contract or
willful misconduct of Alco. Further, should Company be found responsible for
losses, liabilities, damages or expenses caused by such negligence, breach of
contract or willful misconduct by Alco or its affiliates and not attributable to
other causes for which Company is responsible, Alco shall defend, indemnify and
hold Company, its affiliates and their employees harmless from all such losses,
liabilities, damages and expenses.
6.3 Patent Indemnification. Company shall indemnify and hold Alco, its
----------------------
affiliates and their employees harmless from and against any and all losses,
liabilities, damages and expenses (including reasonable attorneys' fees and
costs) which Alco may incur, suffer or be required to pay by reason of any
patent infringement suit brought against Alco because of Alco's performance of
services for Company pursuant to this agreement.
6.4 Procedure. A party or any of its affiliates or their employees or
---------
agents (the "Indemnitee") that intends to claim indemnification under this
Article VI shall promptly notify the other party (the "Indemnitor") of any
claim, demand, action or other proceeding in respect of which the Indemnitee
intends to claim such indemnification, and the Indemnitor shall assume the
defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an Indemnitee shall have the right to retain its own counsel, with
the fees and expenses to be paid by the Indemnitor, if representation of such
Indemnitee by the counsel retained by the Indemnitor would be inappropriate due
to actual or potential differing interests between such Indemnitee and any other
party represented by such counsel in such proceedings. The indemnity agreement
in this Article VI shall not apply to amounts paid in settlement of any claim,
demand, action or other proceeding if such settlement is effected without the
consent of the Indemnitor, which consent shall not be withheld unreasonably.
The failure to deliver notice to the Indemnitor within a reasonable time after
the commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such Indemnitor of any liability to the Indemnitee
under this Article VI, but the omission so to deliver notice to the Indemnitor
will not relieve it of any liability that it may have to any Indemnitee
otherwise than under this Article VI. The Indemnitee under this Article VI, its
employees and agents, shall cooperate fully with the Indemnitor and its legal
representatives in the investigation of any action, claim or liability covered
by this indemnification.
6.5 Affiliate Status. For purposes of this Article VI, Alco and Company
----------------
shall not
<PAGE>
be considered affiliates of each other.
ARTICLE VII
General
-------
7.1 Force Majeure. Neither party shall be liable for failure to perform
-------------
or delay in performing any provision of this agreement to the extent performance
in the customary manner shall be prevented, hindered or delayed in whole or in
part by riots, earthquakes, floods, or any event which shall not reasonably be
within such party's control and which such party is not able to overcome by the
exercise of reasonable measures or which such party is able to overcome only at
substantial expense.
7.2 Entire Agreement. This agreement constitutes the entire understanding
----------------
between the parties with respect to the Products, and supersedes and replaces
all prior representations, understandings and agreements, whether written or
oral, contract provisions and rights relating to the subject matter hereof.
7.3 Amendments. No provision of this agreement may be amended, revoked or
----------
waived except by writing, signed by an authorized officer of the respective
party. Any waiver on the part of either party of any breach or any right or
interest hereunder shall not imply the waiver of any subsequent breach or waiver
of any other right or interest.
7.4 Notices. Any notice required or permitted to be given hereunder shall
-------
be deemed sufficient if given in writing by any lawful means to the party to
whom such notice is required or
permitted to be given. Any such notice shall be considered given when received.
All notices to Alco shall be addressed as follows:
Alco Chemicals Ltd.
Via San Salvatore 7
CH-6902 Lugano, Switzerland
Attention: Director of Marketing and Sales
All notices to Company shall be addressed as follows:
Genchem Pharma Ltd.
9360 Towne Centre Drive
San Diego, California 92121, U.S.A.
Either party may change the address to which notice to it is to be given by
written notice to the other party.
7.5 Applicable Law. This agreement shall be governed by, and construed in
--------------
<PAGE>
accordance with, the laws of California, without reference to the conflicts of
law principles thereof.
7.6 Titles and Headings. Titles and headings of sections of this
-------------------
agreement are for convenience of reference only and shall not affect the
construction of any provision of this agreement.
7.7 Assignment. This agreement may not be assigned by either party
----------
without the prior written consent of the other party, except that Company may
assign this agreement without such consent to an affiliate, or to a purchaser of
substantially all of its business or assets to which this Agreement pertains, or
in connection with its merger, consolidation, change in control or similar
transaction.
IN WITNESS WHEREOF, the parties have caused this agreement to be executed
and delivered as of the date first above written.
SICOR DE MEXICO S.A. DE C.V. ALCO CHEMICALS LTD.
By /s/ Gianni Morisoli By: /s/ Carlos Salvi
___________________ --------------------
<PAGE>
EXHIBIT 10.3
[Confidential Treatment Requested. Confidential Portions of This Document Have
Been Redacted and Filed Separately With The Commission.]
AGREEMENT
THIS AGREEMENT, made as of the 15th day of April, 1997 (the "Effective
Date"), by and between ALCO CHEMICALS LTD., a corporation organized under the
laws of Guernsey, Channel Islands, with a branch office at Via San Salvatore 7,
CH-6902 Lugano, Switzerland ("Alco"), and GENCHEM PHARMA LTD., a corporation
organized under the laws of Delaware with offices at 9360 Towne Centre Drive,
San Diego, California 92121 ("Company"),
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Company sells and distributes the products ("Products") described
in Exhibit A hereto; and
WHEREAS, Company desires to utilize the services of Alco in assisting
Company in the marketing and selling of the Products; and
WHEREAS, Alco has personnel with expertise and commercial know-how, and is
in a position to perform the services set forth herein;
NOW, THEREFORE, in consideration of the above premises and the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
Sale of Products
----------------
1.1 Definitions.
-----------
(a) "Territory" shall mean all the countries of the world except
Italy.
(b) "Net Sales" shall mean, with respect to any Product, the invoiced
sales price of such Product billed to independent customers by Company (other
than sales to its subsidiaries, divisions or affiliates), less credits,
allowances and rebates for such Product which was spoiled, damaged, out-dated or
returned and less (i) freight and insurance costs incurred in transporting such
Product to such customers; (ii) cash, quantity and other trade discounts; (iii)
customs duties and surcharges and other governmental charges incurred in
connection with the exportation or importation of such Product; and (iv) rebates
given or liabilities incurred resulting from any mandated rebate program.
1.2 Services to be Performed by Alco. In accordance with the terms and
--------------------------------
conditions set forth herein, Alco shall:
<PAGE>
(a) identify drug substances of interest to potential customers of
Company in the Territory and which could be produced by affiliates of Company;
(b) work with sales agents and distributors in countries in the
Territory to select final dosage form manufacturers who could develop compounds
utilizing drug substances produced by Company's affiliates, and participate in
negotiating supply agreements with such finished dosage form manufacturers;
(c) act as an interface between Company's customers, its sales agents
and distributors, and affiliates of Company producing drug substances;
(d) assist Company in coordinating and assigning priorities to
various new product development projects of Company;
(e) visit customers of Company with local sales agents and
distributors;
(f) assist Company in maintaining good relationships with its
customers, distributors and sales agents, including discussing pricing issues
and new product possibilities;
(g) promptly advise Company of any safety issue of which Alco becomes
aware regarding the Products;
(h) comply with all applicable laws and regulations relating to the
performance of Alco's obligations hereunder, and conduct its business in a
manner that will reflect favorably on the Company, the Products and the good
name, goodwill and reputation thereof; and
(i) not make any representation or warranty regarding the Products or
Company, except for those warranties regarding Products made by Company in a
writing accompanying the Products or as expressly authorized by Company in
writing.
1.3 Company's Responsibilities. Company shall comply with all applicable
--------------------------
laws and regulations relating to the performance of Company's obligations
hereunder, and shall promptly advise Alco of any safety issue of which Company
becomes aware regarding the Products, maintain incident and complaint files,
notify Alco of all incidents and complaints which relate or may relate to the
Products, and provide Alco with copies of all correspondence with the United
States Food and Drug Administration ("FDA") or any other health authority
regarding Product safety or any request for recall of the Product.
1.4 Orders and Sales. Alco promptly shall forward to Company all orders
----------------
for Products received from potential or actual customers in the Territory. All
such orders shall be in such form as Company shall reasonably determine and
shall not be binding until accepted by Company. Orders shall be accepted by
Company for booking and selling all Products in the Territory.
<PAGE>
1.5 Status of Parties. The parties desire to create a relationship of
-----------------
independent contractors, and in no way intend to create a relationship of
employer and employee, of principal and agent or of joint venturers or partners.
At all times during the performance of their respective obligations under this
agreement, the parties are acting and performing as independent contractors.
Alco at all times shall be solely responsible for providing its own place of
work and all supplies necessary for performing any of its obligations hereunder.
Alco may, at its sole expense, employ such employees as Alco deems necessary or
desirable to perform such obligations hereunder. Company shall neither direct
not supervise Alco's employees in the performance of such obligations. Neither
party shall have, nor shall represent itself to any other person or entity as
having, any right, power or authority to create any obligation or liability,
express or implied, on behalf of or in the name of the other party in any manner
or for any purpose whatsoever. Except as expressly provided herein, neither
party shall use the other party's name on its stationery, advertising, or the
like in a manner which might suggest that one party is the other party's agent.
ARTICLE II
Administration
--------------
2.1 Reports. Alco shall furnish to Company such reports on the activities
-------
undertaken by Alco with respect to the Products as Company may reasonably
require. Company shall furnish to Alco regular updates on the market
development and sales support activities undertaken by Company.
2.2 Audits. Alco shall have the right, upon reasonable written notice to
------
Company, to designate a certified public accountant of internationally-
recognized standing reasonably acceptable to Company to have access during
ordinary working hours to such records as may be necessary to audit Company's
dollar sales of Products in the Territory. Such accountant shall not disclose
to Alco any information relating to the business of Company except to inform
Alco of the correctness of any calculations pursuant to section 3.1 hereof and
the amount of any discrepancy.
<PAGE>
ARTICLE III
Compensation and Other Terms
----------------------------
3.1 Fee. In exchange for Alco's performance of the services set forth
---
herein, Company shall pay to Alco a fee equal to four percent (4%) of Company's
Net Sales in the Territory, other than sales to Company's subsidiaries,
divisions or affiliates, of the Products set forth in Exhibit A, provided that
at such time during any calendar year as the total fees payable to Alco pursuant
hereto exceed $1,000,000, the amount of the fee set forth herein shall be
reduced to two percent (2%) during the remainder of such calendar year.
3.2 Payment. Alco shall be paid the fee set forth in section 3.1 hereof
-------
on a calendar quarterly basis based on the Net Sales of Products shipped by
Company for that calendar quarter. Company shall pay to Alco such fee on or
before the forty-fifth (45th) day following the close of such calendar quarter,
and shall accompany each such payment with a statement setting forth the Net
Sales in the Territory for the respective calendar quarter and the calculation
of the fee due with respect thereto.
3.3 Intent of the Parties. It is the intent of the parties that the fee
---------------------
payable hereunder shall not impose or result in an economic hardship on the
parties. In the event an economic hardship should result, the parties shall
meet and determine a new fee schedule in order to eliminate such hardship.
ARTICLE IV
Term and Termination
--------------------
4.1 Termination Date. Except as otherwise set forth in this Article IV,
----------------
the term of this agreement shall be five (5) years from the Effective Date.
Notwithstanding the foregoing, Company may terminate this Agreement on one
hundred eighty (180) days' notice to Alco in the event (a) of a change on
control of Alco or (b) Mr. Carlo Salvi is no longer actively involved in the
management of Alco.
4.2 Breach; Default. This agreement may be terminated by one party hereto
---------------
in the event of a material breach thereof by the other party or upon written
notice by one party to the other, if the other party files or has filed against
it a petition under the Bankruptcy Act, makes an assignment for the benefit of
creditors, has a receiver appointed for it or any of its assets. In such event,
the party intending to terminate this agreement shall advise the other party in
writing, setting forth in sufficient detail the breach claimed to be the basis
of the termination and requesting that the alleged breach be cured by the other
party within thirty (30) days of the receipt of the notice. Should the other
party fail to cure the alleged breach within such period, the terminating party
shall so notify the other party and this agreement shall be deemed terminated
thirty (30) days after receipt of such termination notification.
4.3 Effects of Termination. Termination or expiration of this agreement
----------------------
shall not
<PAGE>
relieve the parties of the obligation to pay any amounts owing between them, and
shall not terminate any rights or obligations arising prior to or upon such
termination or expiration. The provisions of Articles V and VI shall survive the
termination or expiration of this agreement.
ARTICLE V
Trade Secrets and Confidential Information
------------------------------------------
5.1 Each party may receive various trade secrets of the other party and
other information of the other party of a confidential nature, including but not
limited to specific commercial and technical information concerning the
Products. Each party shall not disclose to anyone, directly or indirectly,
either during the term of this agreement or for a period of five (5) years
thereafter, any of such trade secrets or other confidential information
(including but not limited to marketing plans and programs, market research
information and sales data) of the other party or use such information of the
other party other than in the course of its performance hereunder. The
obligation to protect such confidential information shall not apply to any
information that: (1) is already in the lawful possession of, or is
independently developed by the party receiving such information (the "Receiving
Party") by persons without access to or use of such information; (2) becomes
publicly available other than through breach of this provision; (3) is received
by the Receiving Party from a third party with authorization to make such
disclosure; or (4) is released with the written consent of the party disclosing
such information. Notwithstanding the foregoing, the Recipient shall have the
right to disclose any such information to the extent required by law, regulation
or order of a court of competent jurisdiction, provided that the Recipient shall
give prior written notice to the other party and sufficient opportunity to
object thereto or to request confidential treatment.
5.2 Except as may be required by applicable laws and regulations or a
court of competent jurisdiction, as required to meet credit or other financing
arrangements, or as required or appropriate in the reasonable judgment of either
party to satisfy the disclosure requirements of any applicable securities law or
regulation, neither party shall make any public release or other disclosure with
respect to this agreement or the terms hereof without the prior consent of the
other party.
ARTICLE VI
Indemnity
---------
6.1 Company's Indemnity Obligations. Company agrees to defend, indemnify
-------------------------------
and hold Alco, Alco's affiliates and their employees and agents harmless from
all losses, liabilities, damages and expenses (including reasonable attorneys'
fees and costs) incurred as a result of any claim, demand, action or other
proceeding by a third party arising as a result of actions of Company or its
employees causing (a) actual or asserted violations of any applicable law or
regulation by virtue of which Products distributed or sold shall be alleged or
<PAGE>
determined to be adulterated, misbranded, mislabeled, misrepresented or
otherwise not in compliance with any applicable law or regulation; (b) claims
for bodily injury, death or property damage attributable to the design,
manufacturing, marketing, distribution, sale or use of Products, or (c) a
Product recall ordered by a governmental agency or required by a confirmed
Product failure as reasonably determined by the Company.
6.2 Alco's Indemnity Obligations. Alco, its affiliates and their
----------------------------
employees and agents shall not be entitled to the indemnities set forth in
section 6.1 above where the loss, liability, damage or expense for which
indemnification is sought was caused by the negligence, breach of contract or
willful misconduct of Alco. Further, should Company be found responsible for
losses, liabilities, damages or expenses caused by such negligence, breach of
contract or willful misconduct by Alco or its affiliates and not attributable to
other causes for which Company is responsible, Alco shall defend, indemnify and
hold Company, its affiliates and their employees harmless from all such losses,
liabilities, damages and expenses.
6.3 Patent Indemnification. Company shall indemnify and hold Alco, its
----------------------
affiliates and their employees harmless from and against any and all losses,
liabilities, damages and expenses (including reasonable attorneys' fees and
costs) which Alco may incur, suffer or be required to pay by reason of any
patent infringement suit brought against Alco because of Alco's performance of
services for Company pursuant to this agreement.
6.4 Procedure. A party or any of its affiliates or their employees or
---------
agents (the "Indemnitee") that intends to claim indemnification under this
Article VI shall promptly notify the other party (the "Indemnitor") of any
claim, demand, action or other proceeding in respect of which the Indemnitee
intends to claim such indemnification, and the Indemnitor shall assume the
defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an Indemnitee shall have the right to retain its own counsel, with
the fees and expenses to be paid by the Indemnitor, if representation of such
Indemnitee by the counsel retained by the Indemnitor would be inappropriate due
to actual or potential differing interests between such Indemnitee and any other
party represented by such counsel in such proceedings. The indemnity agreement
in this Article VI shall not apply to amounts paid in settlement of any claim,
demand, action or other proceeding if such settlement is effected without the
consent of the Indemnitor, which consent shall not be withheld unreasonably.
The failure to deliver notice to the Indemnitor within a reasonable time after
the commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such Indemnitor of any liability to the Indemnitee
under this Article VI, but the omission so to deliver notice to the Indemnitor
will not relieve it of any liability that it may have to any Indemnitee
otherwise than under this Article VI. The Indemnitee under this Article VI, its
employees and agents, shall cooperate fully with the Indemnitor and its legal
representatives in the investigation of any action, claim or liability covered
by this indemnification.
6.5 Affiliate Status. For purposes of this Article VI, Alco and Company
----------------
shall not
<PAGE>
be considered affiliates of each other.
ARTICLE VII
General
-------
7.1 Force Majeure. Neither party shall be liable for failure to perform
-------------
or delay in performing any provision of this agreement to the extent performance
in the customary manner shall be prevented, hindered or delayed in whole or in
part by riots, earthquakes, floods, or any event which shall not reasonably be
within such party's control and which such party is not able to overcome by the
exercise of reasonable measures or which such party is able to overcome only at
substantial expense.
7.2 Entire Agreement. This agreement constitutes the entire understanding
----------------
between the parties with respect to the Products, and supersedes and replaces
all prior representations, understandings and agreements, whether written or
oral, contract provisions and rights relating to the subject matter hereof.
7.3 Amendments. No provision of this agreement may be amended, revoked or
----------
waived except by writing, signed by an authorized officer of the respective
party. Any waiver on the part of either party of any breach or any right or
interest hereunder shall not imply the waiver of any subsequent breach or waiver
of any other right or interest.
7.4 Notices. Any notice required or permitted to be given hereunder shall
-------
be deemed sufficient if given in writing by any lawful means to the party to
whom such notice is required or permitted to be given. Any such notice shall be
considered given when received. All notices to Alco shall be addressed as
follows:
Alco Chemicals Ltd.
Via San Salvatore 7
CH-6902 Lugano, Switzerland
Attention: Director of Marketing and Sales
All notices to Company shall be addressed as follows:
Genchem Pharma Ltd.
9360 Towne Centre Drive
San Diego, California 92121, U.S.A.
Either party may change the address to which notice to it is to be given by
written notice to the other party.
7.5 Applicable Law. This agreement shall be governed by, and construed in
--------------
<PAGE>
accordance with, the laws of California, without reference to the conflicts of
law principles thereof.
7.6 Titles and Headings. Titles and headings of sections of this
-------------------
agreement are for convenience of reference only and shall not affect the
construction of any provision of this agreement.
7.7 Assignment. This agreement may not be assigned by either party
----------
without the prior written consent of the other party, except that Company may
assign this agreement without such consent to an affiliate, or to a purchaser of
substantially all of its business or assets to which this Agreement pertains, or
in connection with its merger, consolidation, change in control or similar
transaction.
IN WITNESS WHEREOF, the parties have caused this agreement to be executed
and delivered as of the date first above written.
GENCHEM PHARMA LTD. ALCO CHEMICALS LTD.
By /s/ Peter MacDonald By: /s/ Carlo Salvi
------------------- --------------------
<PAGE>
EXHIBIT A
Products
--------
[CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
EXHIBIT 10.4
------------
AGREEMENT
---------
THIS AGREEMENT, made as of the 1st day of January, 1997 (the "Effective
Date"), by and between ALCO CHEMICALS LTD. (Swiss Branch), with an office at Via
-------------------
San Salvatore n. 7, CH-6902 Lugano, Switzerland ("Alco"), and SICO S.P.A., a
-----------
corporation organized under the laws of Italy with offices at Via Terrazzano n.
77, Rho, Italy ("Company"),
W I T N E S S E T H
WHEREAS, the Company sells and distributes certain bulk pharmaceutical
products ("Products"), and
WHEREAS, Company desires to utilize the services of Alco in assisting
Company in the marketing and selling of the Products; and
WHEREAS, Alco has personnel with expertise and commercial know how, and is
in a position to perform the services set forth herein;
NOW, THEREFORE, in consideration of the above premises and the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
-1-
<PAGE>
ARTICLE I
---------
Sale of Products
----------------
I.1 Definitions.
-----------
(a) "Territory" shall mean all the countries of the world except Italy.
(b) "Net Sales" shall mean, with respect to any Product, the invoiced sales
price of such Product billed to independent customers in the Territory by
Company (other than sales to its subsidiaries, divisions or affiliates), less
credits, allowances and rebates for such Product which was spoiled, damaged,
out-dated or returned and less (i) cash, quantity and other trade discounts;
(ii) customer's duties and surcharges and other governmental charges incurred in
connection with the exportation or importation of such Product if any; and (iii)
rebates given or liabilities incurred resulting from any mandated rebate
program.
I.2 Services to be Performed by Alco. In accordance with the terms and
--------------------------------
conditions set forth herein. Alco shall:
(a) Identify drug substances of interest to potential customers of
Company in the Territory and which would be produced by affiliates of
Company;
(b) Work with sales agents and distributors in
-2-
<PAGE>
countries in the Territory to select final dosage form manufacturers who
could develop compounds utilizing drug substances produced by Company's
affiliates, and participate in negotiating supply agreements with such
finished dosage form manufacturers;
(c) act as an interface between Company's customers, its sales agents
and distributors, and affiliates of Company producing drug substances;
(d) Assist Company in coordinating and assigning priorities to
various new product development projects of Company;
(e) Visit customers of Company with local sales agents and
distributors;
(f) Assist Company in maintaining good relationships with its
customers distributors and sales agents, including discussing pricing
issues and new product possibilities;
(g) Promptly advise Company of any safety issue of which Alco becomes
aware regarding the Products;
(h) Comply with all applicable laws and regulations relating to the
performance of Alco's obligations hereunder, and conduct it in a manner
that will reflect favorably on the Company, the
-3-
<PAGE>
Products and the good name, goodwill and reputation hereof;
(i) Assist the Company in the administration of the order for the
Products from all customers of the Company (including Italian customers);
(i) assist the Company in debt collection from customers in the Territory;
and
(j) Not make any representation or warranty regarding the products of
Company, except for those warranties regarding products made by Company in
a writing accompanying the Products or as expressly authorized by Company
in writing.
I.3 Exclusivity. The Company hereby covenants and agrees not to appoint
-----------
any other party to perform part or all the services which are contemplated by
cl. 1.2 hereinbefore with respect to any of the Products from time to time
manufactured, distributed, developed or under development by the Company.
This clause shall not prevent the Company to appoint agents or distributors
in the Territory provided however that the Company procures that any such agents
or distributors shall have to act in accordance with Alco and allow Alco to
perform the services pursuant to cl. 1.2 above.
I.4 Company's Responsibilities. Company shall comply with
--------------------------
-4-
<PAGE>
all applicable laws and regulations relating to the performance of Company's
obligations hereunder, and shall promptly advise Alco of any safety issue of
which Company becomes aware regarding the products, maintain incident and
complaint files, notify Alco of all incidents and complaints which relate or may
relate to the Products, and provide Alco with copies of all correspondence with
the United States Food and Drug Administration ("FDA") or any other health
authority regarding Product safety or any request for recall of the Product.
I.5 Orders and Sales. Alco promptly shall forward to Company all orders
----------------
for Products received from potential or actual customers in the Territory. All
such orders shall be in such form as Company shall reasonably determine and
shall not be binding until accepted by Company. Orders shall be accepted by
Company for booking and selling all Products in the Territory.
I.6 Status of Parties. The parties desire to create a relationship of
-----------------
independent contractors, and in no way intend to create a relationship of
employer and employee, of principal and agent or of joint ventures or partners.
At all times during the performance of their respective obligations under this
agreement, the parties are acting and performing as independent contractors.
Alco at all times shall be solely responsible for providing its own place of
work and all supplies necessary for performing any of its obligation hereunder.
Alco may, at its sole expense, employ such employees as Alco deems necessary or
desirable to perform such obligations hereunder. Company shall
-5-
<PAGE>
neither direct nor supervise Alco's employees in the performance of such
obligations. Neither party shall have, nor shall represent itself to any other
person or entity as having, any right, power or authority to create any
obligation or liability, express or implied, on behalf of or in the name of the
other party in any manner or for any purpose whatsoever. Except as expressly
provided herein, neither party shall use the other party's name on its
stationery, advertising, or the like in a manner which might suggest that one
party is the other party's agent.
ARTICLE II
----------
Administration
--------------
II.1 Reports. Alco shall furnish to Company such reports on the activities
-------
undertaken by Alco with respect to the Products as Company may reasonably
require.
II.2 Audits. Alco shall have the right, upon reasonable written notice to
------
Company, to designate a certified public accountant of internationally-
recognized standing reasonably acceptable to Company to have access during
ordinary working hours to such record as may be necessary to audit Company's
dollar sales of Products in the Territory. Such accountant shall not disclose
to Alco any information relating to the business of Company expect to inform
Alco of the correctness of any calculations pursuant to section 3.1. hereof and
the amount of any discrepancy.
-6-
<PAGE>
ARTICLE III
-----------
Compensation and Other Terms
----------------------------
III.1 Fee. In exchange for Alco's obligation to perform the services set
---
forth in cl. 1.2 above:
(i) Company shall pay to Alco a fee equal to four percent (4%) of
Company's Net Sales in the Territory, other than sales to Company's
subsidiaries, divisions or affiliates, of the Products ("Fee"); and
(ii) The Fee shall be due on all Net Sales in the Territory with
respect to all Products manufactured and/or distributed by the Company even
if:
(A) It has not been possible or necessary for the development of
Sicor business for Alco to perform any of the services set forth in cl. 1.2
above; and/or
(B) It has not been possible or necessary for the development of
Sicor business to perform any services with respect to certain Products
(for avoidance of doubt even those Products shall however be included in
the Company's Net Sales); and/or
(C) Sales made by agents or distributors of the Company result in
obligations of the Company to pay
-7-
<PAGE>
such agents or distributors any fees.
III.2 Payment. Alco shall be paid the fee set forth in section 3.1 hereof
-------
on a calendar quarterly basis based on the Net Sales of Products shipped by
Company for that calendar quarter. Company shall pay to Alco such fee on or
before the ninetieth (90th) day following the close of such calendar quarter,
and shall accompany each such payment with a statement setting forth the Net
Sales in the Territory for the respective calendar quarter and the calculation
of the fee due with respect thereto.
III.3 Intent of the Parties. It is the intent of the Parties that the fee
---------------------
payable hereunder shall not impose or result in an economic hardship on the
parties. In the event an economic hardship should result, the parties shall
meet and determine a new fee schedule in order to eliminate such hardship.
ARTICLE IV
----------
Termination of Existing Agreements
----------------------------------
IV.1 Mutual Consent to Terminate. The parties hereof covenant and
---------------------------
agree to terminate and actually hereby terminate by mutual consent effective as
of January 1, 1997.
(i) the existing agency agreement dated as of January 1, 1994 and
amendments thereof;
-8-
<PAGE>
(ii) the existing distribution agreements with respect to
a- Etoposide;
b- Budesonide;
c- Cyclosporin;
d-Difluprednate.
IV.2 The parties hereof covenant and agree to mutually use their best
endeavors to procure as soon as practicable any eventually required customer or
third party consents to assign and further covenant and agree to assign any
ongoing supply agreements entered into by Alco with any customers for the
Company's Products, alternatively at the Company's entire discretion.
(i) to the Company;
(ii) to any distributors or dealers of the Company.
IV.3 Any such assignment shall have an effective date as of January 1,
1997 provided that it shall be practicable; however if any such assignment shall
not be practicable effective as of January 1, 1997, Alco covenants and agrees to
credit the Company or, upon at the Company's entire discretion, to any Company's
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<PAGE>
distributors, dealers or assignees any Net Profit Alco derives from any not
assigned sales exceeding 4% of its Net Sales with respect to any Products.
ARTICLE V
---------
Term and Termination
--------------------
V.1 Termination Date. Except as otherwise set forth in this Article
----------------
V, the term of this agreement shall be five (5) years from the Effective Date.
Notwithstanding the foregoing, Company may terminate this Agreement on one
hundred eighty (180) days' notice to Alco in the event (a) of a change on
control of Alco or (b) the current management of Alco is no longer active in
managing the business.
V.2 Breach Default. This agreement may be terminated by one party
--------------
hereto in the event of a material breach thereof by the other party or upon
written notice by one party to the other, if the other party files or has filed
against it a petition under the Bankruptcy Act, makes an event, the party
intending to terminate this agreement shall advise the other party in writing,
setting forth in sufficient detail the breach claimed to be the basis of the
termination and requesting that the alleged breach be cured by the other party
within thirty (30) days of the receipt of the notice. Should the other party
fail to cure the alleged breach within such period, the terminating party shall
so notify the other party and this agreement shall be deemed terminated thirty
(30) days after receipt of such
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<PAGE>
termination notification.
V.3 Effects of Termination. Termination or expiration of this
----------------------
agreement shall not relieve the parties of the obligation to pay any amounts
owing between them, and shall not terminate any rights or obligations arising
prior to or upon such termination or expiration. The provisions of Articles VI
and VII shall survive the termination or expiration of this agreement.
ARTICLE VI
----------
Trade Secrets and Confidential Information
------------------------------------------
VI.1 Each party may receive various trade secrets of the other party
and other information of the other party of a confidential nature, including but
not limited to specific commercial and technical information concerning the
Products. Each party shall not disclose to anyone, directly or indirectly,
either during the term of this agreement or for a period of five (5) years
thereafter, any of such trade secrets or other confidential information
(including but not limited to marketing plans and programs, market research
information and sales data) of the other party or use such information of the
other party other than in the course of its performance hereunder. The
obligation to protect such confidential information shall not apply to any
information that: (1) is already in the lawful possession of, or is
independently developed by the party receiving such information (the "Receiving
Party") by persons
-11-
<PAGE>
without access to or use of such information; (2) becomes publicly available
other than through breach of this provision; (3) is received by the Receiving
Party from a third party with authorization to make such disclosure; or (4) is
released with the written consent of the party disclosing such information.
Notwithstanding the foregoing, the Recipient shall have the right to
disclose any such information to the extent required by law, regulation or order
of a court of competent jurisdiction, provided that the recipient shall give
prior written notice to the other party and sufficient opportunity to object
hereto or to request confidential treatment.
VI.2 Except as may be required by applicable laws and regulations or a
court of competent jurisdiction, as required to meet credit or other financing
arrangements, or as required or appropriate in the reasonable judgment of either
party to satisfy the disclosure requirements of any applicable securities law or
regulation, neither party shall make any public release or other disclosure with
respect to this agreement or the terms hereof without the prior consent of the
other party.
ARTICLE VII
-----------
Indemnity
---------
VII.1 Company's Indemnity Obligations. Company agrees to defend,
-------------------------------
indemnify and hold Alco, Alco's affiliates and their employees and agents
harmless from all losses, liabilities,
-12-
<PAGE>
damages and expenses (including reasonable attorneys' fees and costs) incurred
as a result of any claim, demand, action or other proceeding by a third party
arising as a result of action of Company or its employees causing (a) actual or
asserted violations of any applicable law or regulation by virtue of which
Products distributed or sold shall be alleged or determined to be adulterated,
misbranded, mislabelled, misrepresented or otherwise not in compliance with any
applicable law or regulation; (b) claims for bodily injury, death or property
damage attributable to the design, manufacturing, marketing, distribution, sale
or use of Products, or (c) a Product recall ordered by a governmental agency or
required by a confirmed Product failure as reasonably determined by the Company.
VII.2 Alco's Indemnity Obligations. Alco, its affiliates and their
----------------------------
employees and agents shall not be entitled to the indemnities set forth in
section 7.1 above where the loss, liability, damage or expense for which
indemnification is sought was caused by the negligence, breach of contract or
willful misconduct of Alco. Further, should Company be found responsible for
losses, liabilities, damages or expenses caused by such negligence, breach of
contract or willful misconduct by Alco or its affiliates and not attributable to
other causes for which Company is responsible, Alco shall defend, indemnify and
hold Company, its affiliates and their employees harmless from all such losses,
liabilities, damages and expenses.
-13-
<PAGE>
VII.3 Patent Indemnification. Company shall indemnify and hold Alco,
----------------------
its affiliates and their employees harmless from and against any and all losses,
liabilities, damages and expenses (including reasonable attorneys' fees and
costs) which Alco may incur, suffer or be required to pay by reason of any
patent infringement suit brought against Alco because of Alco's performance of
services for Company pursuant to this Agreement.
VII.4 Procedure. A party or any of its affiliates or their employees
---------
or agents (the "Indemnitee") that intends to claim indemnification under this
Article VII shall promptly notify the other party (the "Indemnitor") of any
claim, demand, sanction or other proceeding in respect of which the Indemnitee
intends to claim such indemnification, and the Indemnitor shall assume the
defence thereof with counsel mutually satisfactory to the parties; provided,
however, that an Indemnitee shall have the right to retain its own counsel, with
the fees and expenses to be paid by the Indemnitor, if representation of such
Indemnitee by the counsel retained by the Indemnitor would be inappropriate due
to actual or potential differing interests between such Indemnitee and any other
party represented by such counsel in such proceedings. The indemnity agreement
in this Article VII shall not apply to amounts paid in settlement of any claim,
demand, action or other proceeding if such settlement is effected without the
consent of the Indemnitor, which consent shall not be withheld unreasonably. The
failure to deliver notice to the Indemnitor within a reasonable time after the
commencement of any such action, if
-14-
<PAGE>
prejudicial to its ability to defend such action, shall relieve such Indemnitor
of any liability to the Indemnitee under this Article VII, but the omission so
to deliver notice to the Indemnitor will not relieve it of any liability that it
may have to any Indemnitee otherwise than under this Article VII. The Indemnitee
under this Article VII, its employees, and agents, shall cooperate fully with
the Indemnitor and its legal representatives in the investigation of any action,
claim or liability covered by this indemnification.
VII.5 Affiliate Status. For purposes of this Article VII, Alco and
----------------
Company shall not be considered affiliates of each other.
ARTICLE VIII
------------
General
-------
VIII.1 Force Majeure. Neither party shall be liable for failure to
-------------
perform or delay in performing any provision of this agreement to the extent
performance in the customary manner shall be prevented, hindered or delayed in
whole or in part by riots, earthquakes, floods, or any event which shall not
reasonably be within such party's control and which such party is no able to
overcome by the exercise of reasonable measures or which such party is able to
overcome only at substantial expense.
VIII.2 Entire Agreement. This agreement constitutes the
----------------
-15-
<PAGE>
entire understanding between the parties with respect to the Products, and
supersedes and replaces all prior representations, understandings and
agreements, whether written or oral, contract provision and rights relating to
the subject mater hereof.
VIII.3 Amendments. No provision of this agreement may be amended,
----------
revoked or waived except by writing, signed by an authorized officer of the
respective party. Any waiver on the part of either party of any breach or any
right or interest hereunder shall not imply the waiver of any subsequent breach
or waiver of any other right or interest.
VIII.4 Notices. Any notice required or permitted to be given hereunder
-------
shall be deemed sufficient if given in writing by any lawful means to the party
o whom such notice is required or permitted to be given. Any such notice
shall be considered given when received. All notices to Alco shall be addressed
as follows:
ALCO CHEMICALS LTD
Via San Salvatore n. 7
CH-6902 Lugano - Switzerland
Attention: Director of Marketing and Sales
All notices to Company shall be addressed as follows:
SICOR S.P.A.
Via Terrazzano, 77
-16-
<PAGE>
Rho, Italy
Attention: Managing Director
-----------------
Either party may change the address to which notice to it is to be
given by written notice to the other party.
VIII.5 Applicable Law. This agreement shall be governed by, and
--------------
construed in accordance with, the laws of Switzerland (or Italy), without
----------------------
reference to the conflicts of law principles thereof.
VIII.6 Titles and Headings. Titles and headings of sections of this
-------------------
agreement are for convenience of reference only and shall not affect the
construction of any provision of this agreement.
VIII.7 Assignment. This agreement may not be assigned by either party
----------
without the prior written consent of the other party, except that the Company
may assign this agreeement without such consent to an affiliate, or to a
purchaser of substantially all of its business or assets to which this Agreement
pertains, or in connection with its merger, consolidation, change in control or
similar transaction.
IN WITNESS WHEREOF, the parties have caused this agreement to be
executed and delivered as of the date above first written.
SICOR S.p.A. ALCO CHEMICALS LTD.
/s/ Gianpollo Colla /s/ Carlo Salvi
-17-
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