SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 23, 1999
THERMOGENESIS CORP.
(Exact name of registrant as specified in its charter)
Delaware 0-16375 94-3018487
- ------------------------------- --------------------- --------------------
(State or other jurisdiction of (Commission File No.) (I.R.S. Employer
incorporation or organization) Identification No.)
3146 Gold Camp Drive
Rancho Cordova, California 95670
(916) 858-5100
------------------------------------------------------------
(Address and telephone number of principal executive offices)
Item 5. Other Events
On January 4, 2000, THERMOGENESIS CORP. completed an offering of 4,040 shares of
Series B Convertible Preferred Stock and warrants to purchase 444,562 shares of
THERMOGENESIS CORP. common stock. The initial placement was made to the lead
investors, Advantage Fund II Ltd. and Koch Investment Group Limited, on December
22, 1999, and the final closing was held on January 4, 2000 with Clarion Capital
Corporation. The placement resulted in gross proceeds to THERMOGENESIS CORP. of
$4,040,000, before commissions and expenses payable in connection with the
placement.
Unless stockholder approval is obtained, the Series B Convertible Preferred
Stock is convertible into a maximum of 4,236,000 shares of THERMOGENESIS CORP.
common stock, in the aggregate. For the first six months from December 22, 1999,
the Series B Convertible Preferred Stock is convertible at a fixed conversion
price of $2.2719 per common share, which represents the average bid price of the
common stock for the ten days prior to December 22, 1999. Thereafter, the
conversion price is adjusted every six months to be the lesser of (a) 130% of
the fixed conversion price or (b) 90% of the average market price for the ten
days prior to such adjustment date. The Series B Convertible Preferred Stock is
entitled to dividends at the rate of 6% per annum which amount, at the option of
THERMOGENESIS CORP., may be added to the $1,000 per share conversion value of
the Series B Convertible Preferred Stock.
The conversion price is subject to further adjustment under certain
circumstances, provided such circumstances are outside of the Company's control,
as set forth in the Certificate of Designations of Series B Convertible
Preferred Stock attached to this current report, including the following events:
(i) no closing bid price for the common stock for five consecutive trading days;
(ii) delisting of the common stock from the Nasdaq SmallCap Market or any other
market or exchange; (iii) inability of the investors to sell shares of common
stock pursuant to an effective registration statement for 30 days or more, in
the aggregate; (iv)
<PAGE>2
certain business combination events where THERMOGENESIS CORP. stockholders do
not control 51% of the combined company, unless certain conditions are
satisfied; and (v) certain defaults by THERMOGENESIS CORP. in the performance of
its obligations to the institutions; and (iv) the adoption of any amendment to
THERMOGENESIS CORP.'s Certificate of Incorporation materially adverse to the
holders of the Series B Convertible Preferred Stock without the consent of the
majority of the shares of Series B Convertible Preferred Stock. If THERMOGENESIS
CORP. takes action to affect any of the foregoing, and such action is deemed to
be within its control, the Series B holders can require that THERMOGENESIS CORP.
redeem the shares at a premium.
THERMOGENESIS CORP. has the right to redeem the Series B Convertible Preferred
Stock at a premium and under some circumstances at the market price of its
common stock that the Series B Convertible Preferred Stock would otherwise be
convertible into.
The net proceeds from the offering will be used for general corporate purposes
and working capital.
The terms of the private placement are set forth in the form of Subscription
Agreement attached as Exhibit 10 to this current report. The Certificate of
Designations of Series B Convertible Preferred Stock is also attached as Exhibit
4.1 to this current report, and contains the rights, preferences, privileges and
restrictions of the Series B Convertible Preferred Stock. The Warrants issued in
connection with the placement are subject to the terms contained in the Form of
Warrant attached as Exhibit 4.2 to this current report. Under the Registration
Rights Agreement, entered into with each Series B investor and attached as
Exhibit 4.3, THERMOGENESIS CORP. has agreed to prepare and file with the
Securities and Exchange Commission a registration statement covering the resale
of the shares of common stock underlying the Series B Convertible Preferred
Stock and warrants.
In connection with the placement of THERMOGENESIS CORP.'s Series B Convertible
Preferred Stock, THERMOGENESIS CORP. paid a 6% commission and issued a warrant
to purchase 40,000 shares of common stock to Reedland Capital Partners, a
Division of Financial West Group. The warrants issued to Advantage Fund II Ltd.,
Koch Investment Group Limited, Clarion Capital Corporation, and Reedland are
exercisable for a period of five years at an exercise price of $2.72628.
Item 7. Financial Statements, Pro Forma Financial Information, and Exhibits
(c) EXHIBITS
Exhibit
Number Description
- ------- ------------
4.1 Certificate of Designations of Series B Convertible
Preferred Stock, dated December 22, 1999
4.2 Warrant [Form]
4.3 Registration Rights Agreement, dated December 22, 1999
[Form]
10. Subscription Agreement, dated December 22, 1999 [Form]
<PAGE>3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: January 4, 2000 THERMOGENESIS CORP.
a Delaware Corporation
/s/ PHILIP H. COELHO
--------------------------------
Philip H. Coelho, Chairman & CEO
THERMOGENESIS CORP.
CERTIFICATE OF DESIGNATIONS OF
SERIES B CONVERTIBLE PREFERRED STOCK
(Pursuant to Section 151 of the General Corporation
Law of the State of Delaware)
ThermoGenesis Corp., a Delaware corporation (the "Corporation"), in
accordance with the provisions of Section 103 of the General Corporation Law of
the State of Delaware, DOES HEREBY CERTIFY:
That pursuant to authority vested in the Board of Directors of the
Corporation by the Amended and Restated Certificate of Incorporation of the
Corporation, the Board of Directors of the Corporation, at a meeting duly called
and held on December 10, 1999, adopted a resolution providing for the creation
of a series of the Corporation's Preferred Stock, $.001 par value, which series
is designated as "Series B Convertible Preferred Stock," which resolution is as
follows:
RESOLVED, that pursuant to authority vested in the Board of Directors by
the Amended and Restated Certificate of Incorporation of the Corporation, the
Board of Directors does hereby provide for the creation of a series of the
Preferred Stock, $.001 par value (hereinafter called the "Preferred Stock"), of
the Corporation, and to the extent that the voting powers and the designations,
preferences and relative, participating, optional or other special rights
thereof and the qualifications, limitations or restrictions of such rights have
not been set forth in the Amended and Restated Certificate of Incorporation of
the Corporation, does hereby fix the same as follows:
SERIES B CONVERTIBLE PREFERRED STOCK
Section 1. Definitions. As used herein, the following terms shall have the
following meanings:
"Accrual Amount" means with respect to any share of Series B Convertible
Preferred Stock on any date the amount of all accrued but unpaid dividends,
including the amount of dividends not required to be paid in cash pursuant to
Section 5(b), on such share from the Issuance Date to the date of determination.
"Affiliate" means, with respect to any person, any other person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the subject person; for purposes
of this definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such person,
whether through the ownership of voting securities or by contract or otherwise.
<PAGE>
"Aggregated Person" means, with respect to any person, any person whose
beneficial ownership of shares of Common Stock would be aggregated with the
beneficial ownership of shares of Common Stock by such person for purposes of
Section 13(d) of the Exchange Act, and Regulation 13D-G thereunder.
"AMEX" means the American Stock Exchange, Inc.
"Average Market Price" for any date means the arithmetic average of the
Market Price for each of the Trading Days during the applicable Measurement
Period.
"Biannual Reset Date" means the date occurring every six months after the
Initial Reset Date on the same day of each sixth month as the Initial Reset Date
through the third anniversary of the Issuance Date (for example, if the Initial
Reset Date is June 9, 2000, Biannual Reset Dates shall occur on each December 9
and June 9 thereafter through December 9, 2002).
"Board of Directors" or "Board" means the Board of Directors of the
Corporation.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required by law
to remain closed.
"Common Stock" means the Common Stock, $.001 par value, of the Corporation.
"Control Notice" means a notice given by the Corporation to the holders of
shares of the Series B Convertible Preferred Stock, in accordance with Section
7(a)(5) or Section 11(b)(4), (i) stating that an Inconvertibility Day or an
Optional Redemption Event, as the case may be, has occurred by reason of events
which are not solely within the control of the Corporation and (ii) enclosing an
executed Control Opinion.
"Control Opinion" means a legal opinion of Bartel Eng Linn & Schroder, or
such other independent legal counsel selected by the Company and reasonably
acceptable to the Majority Holders (notice of which acceptance or nonacceptance
is given by the Majority Holders to the Company within two Business Days of
being advised of the name of such other counsel), addressed to the holders of
Series B Convertible Preferred Stock stating that an Inconvertibility Day or an
Optional Redemption Event, as the case may be, which is the subject of a Control
Notice has occurred by reason of events which are not solely within the control
of the Corporation.
"Conversion Agent" means American Securities Transfer & Trust, Inc., or its
duly appointed successor, as conversion agent for the Series B Convertible
Preferred Stock pursuant to the Transfer Agent Agreement.
"Conversion Amount" initially shall be equal to $1,000.00, subject to
adjustment as herein provided.
"Conversion Date" means, with respect to each conversion of shares of
Series B Convertible Preferred Stock pursuant to Section 10, the date on which
the Conversion Notice relating to such conversion is actually received by the
Conversion Agent, whether by mail, courier, personal service, telephone line
facsimile transmission or other means.
<PAGE>
"Conversion Notice" means a written notice, duly signed by or on behalf of
a holder of shares of Series B Convertible Preferred Stock, stating the number
of shares of Series B Convertible Preferred Stock to be converted in the form
specified in the Subscription Agreements.
"Conversion Price" means:
(1) for any Conversion Date during the period from the Issuance Date
through the day immediately prior to the Initial Reset Date, the Fixed
Conversion Price;
(2) for any Conversion Date during the Reset Period commencing on the
Initial Reset Date, the lesser of:
(a) 130% of the Fixed Conversion Price; and
(b) 90% of the Average Market Price during the Measurement Period for
the Initial Reset Date; and
(3) for any Conversion Date during each Reset Period commencing on each
successive Biannual Reset Date, the lesser of:
(a) 130% of the Fixed Conversion Price; and
(b) 90% of the Average Market Price during the Measurement Period for
such Biannual Reset Date;
provided, however, that the Conversion Price applicable to a particular
conversion shall be subject to reduction as provided in Section 10(b)(6).
"Conversion Rate" shall have the meaning provided in Section 10(a).
"Converted Market Price" means, for any share of Series B Convertible
Preferred Stock as of any date of determination, an amount equal to the product
obtained by multiplying (x) the number of shares of Common Stock which would, at
the time of such determination, be issuable on conversion in accordance with
Section 10(a) of one share of Series B Convertible Preferred Stock if a
Conversion Notice were given by the holder of such share of Series B Convertible
Preferred Stock on the date of such determination (determined without regard to
any limitation on conversion based on beneficial ownership contained in Section
10(a)) times (y) the Average Market Price of the Common Stock during the
Measurement Period for the date of such determination.
"Corporation Optional Redemption Notice" means a notice given by the
Corporation to the holders of shares of Series B Convertible Preferred Stock
pursuant to Section 9(a) which notice shall state (1) that the Corporation is
exercising its right to redeem all or a portion of the outstanding shares of
Series B Convertible Preferred Stock pursuant to Section 9(a), (2) the number of
shares of Series B Convertible Preferred Stock held by such holder which are to
be redeemed, (3) the Redemption Price per share of Series B Convertible
Preferred Stock to be redeemed or the formula for determining the same,
determined in accordance herewith, and (4) the applicable Redemption Date.
<PAGE>
"Current Price" means with respect to any date the arithmetic average of
the Market Price of the Common Stock on the 30 consecutive Trading Days
commencing 45 Trading Days before such date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Final Redemption Date" means the date of redemption of shares of Series B
Convertible Preferred Stock pursuant to Section 9(b), determined in accordance
therewith.
"Final Redemption Notice" means a notice given by the Corporation to each
holder of Series B Convertible Preferred Stock pursuant to Section 9(b), which
notice shall state (1) that the Corporation is exercising its right to redeem
all outstanding shares of Series B Convertible Preferred Stock pursuant to
Section 9(b), (2) the number of shares of Series B Convertible Preferred Stock
held by such holder which are to be redeemed, (3) the Final Redemption Price per
share of Series B Convertible Preferred Stock held by such holder which are to
be redeemed, determined in accordance herewith, and (4) the Final Redemption
Date.
"Final Redemption Price" means, for any share of Series B Convertible
Preferred Stock on any date, an amount equal to the sum of (i) $1,000 plus (ii)
an amount equal to the Accrual Amount on the share of Series B Convertible
Preferred Stock to be redeemed to the Final Redemption Date, plus (iii) an
amount equal to the accrued and unpaid interest on cash dividends in arrears on
such share of Series B Convertible Preferred Stock to the Final Redemption Date
(determined as provided in Section 5).
"Fixed Conversion Price" means $2.2719 (subject to equitable adjustments
from time to time on terms reasonably acceptable to the Majority Holders for
stock splits, stock dividends, combinations, recapitalizations,
reclassifications and similar events occurring or with respect to which "ex-"
trading commences on or after the date of filing of this Certificate of
Designations with the Secretary of State of the State of Delaware).
"Generally Accepted Accounting Principles" for any person means the
generally accepted accounting principles and practices applied by such person
from time to time in the preparation of its audited financial statements.
"Inconvertibility Day" means any Trading Day on which the Corporation would
not have been required to convert in accordance with Section 10(a) any shares of
Series B Convertible Preferred Stock as a consequence of the limitations set
forth in Section 7(a)(1) had all outstanding shares of Series B Convertible
Preferred Stock held by such holder on such Trading Day been converted into
Common Stock on such Trading Day (without regard to the limitation, if any, on
beneficial ownership by such holder contained in Section 10(a)).
"Inconvertibility Notice" shall have the meaning provided in Section
7(a)(2).
"Initial Reset Date" means June 22, 2000.
"Issuance Date" means the first date of original issuance of any shares of
Series B Convertible Preferred Stock.
<PAGE>
"Junior Dividend Stock" means, collectively, the Common Stock and any other
class or series of capital stock of the Corporation ranking junior as to
dividends to the Series B Convertible Preferred Stock.
"Junior Liquidation Stock" means the Common Stock or any other class or
series of the Corporation's capital stock ranking junior as to liquidation
rights to the Series B Convertible Preferred Stock.
"Junior Stock" shall have the meaning provided in Section 10(b)(8).
"Liquidation Preference" means, for each share of Series B Convertible
Preferred Stock, the sum of (i) an amount equal to the Accrual Amount thereon to
the date of final distribution to the holders of shares of Series B Convertible
Preferred Stock in connection with the liquidation, dissolution or winding up of
the Corporation plus (ii) accrued and unpaid interest on cash dividends in
arrears (computed in accordance with Section 5(a)) to the date of such
distribution plus (iii) $1,000.00.
"Majority Holders" means at any time the holders of shares of Series B
Convertible Preferred Stock which shares constitute a majority of the
outstanding shares of Series B Convertible Preferred Stock.
"Market Price" of the Common Stock on any date means the closing bid price
for one share of Common Stock on such date on the first applicable among the
following: (a) the national securities exchange on which the shares of Common
Stock are listed which constitutes the principal securities market for the
Common Stock, (b) the Nasdaq, if the Nasdaq constitutes the principal market for
the Common Stock on such date, or (c) the Nasdaq SmallCap, if the Nasdaq
SmallCap constitutes the principal securities market for the Common Stock on
such date, in any such case as reported by Bloomberg, L.P.; provided, however,
that if during any Measurement Period or other period during which the Market
Price is being determined:
(i) The Corporation shall declare or pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of
Common Stock or fix any record date for any such action, then the Market
Price for each day in such Measurement Period or such other period which
day is prior to the earlier of (1) the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution and
(2) the date on which ex-dividend trading in the Common Stock with respect
to such dividend or distribution begins shall be reduced by multiplying the
Market Price (determined without regard to this proviso) for each such day
in such Measurement Period or such other period by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding at the close of business on the earlier of (1) the record date
fixed for such determination and (2) the date on which ex-dividend trading
in the Common Stock with respect to such dividend or distribution begins
and the denominator of which shall be the sum of such number of shares and
the total number of shares constituting such dividend or other
distribution;
(ii) The Corporation shall issue rights or warrants to all holders of
its outstanding shares of Common Stock, or fix a record date for such
issuance, which rights or warrants entitle such holders (for a period
expiring within forty-five (45) days after the date fixed for the
determination of stockholders entitled to receive such rights or warrants)
to subscribe for or purchase shares of Common Stock at a price per share
less than the Market Price (determined without regard to this proviso) for
<PAGE>
any day in such Measurement Period or such other period which day is prior
to the end of such 45-day period, then the Market Price for each such day
shall be reduced so that the same shall equal the price determined by
multiplying the Market Price (determined without regard to this proviso) by
a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding at the close of business on the record date fixed for the
determination of stockholders entitled to receive such rights or warrants
plus the number of shares which the aggregate offering price of the total
number of shares so offered would purchase at such Market Price, and the
denominator of which shall be the number of shares of Common Stock
outstanding on the close of business on such record date plus the total
number of additional shares of Common Stock so offered for subscription or
purchase. In determining whether any rights or warrants entitle the holders
to subscribe for or purchase shares of Common Stock at less than the Market
Price (determined without regard to this proviso), and in determining the
aggregate offering price of such shares of Common Stock, there shall be
taken into account any consideration received for such rights or warrants,
the value of such consideration, if other than cash, to be determined in
good faith by a resolution of the Board of Directors of the Corporation;
(iii) The outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock or a record date for any such
subdivision shall be fixed, then the Market Price of the Common Stock for
each day in such Measurement Period or such other period which day is prior
to the earlier of (1) the day upon which such subdivision becomes effective
and (2) the date on which ex-dividend trading in the Common Stock with
respect to such subdivision begins shall be proportionately reduced, and
conversely, in case the outstanding shares of Common Stock shall be
combined into a smaller number of shares of Common Stock, the Market Price
for each day in such Measurement Period or such other period which day is
prior to the earlier of (1) the date on which such combination becomes
effective and (2) the date on which trading in the Common Stock on a basis
which gives effect to such combination begins, shall be proportionately
increased;
(iv) The Corporation shall, by dividend or otherwise, distribute to
all holders of its Common Stock shares of any class of capital stock of the
Corporation (other than any dividends or distributions to which clause (i)
of this proviso applies) or evidences of its indebtedness, cash or other
assets (including securities, but excluding any rights or warrants referred
to in clause (ii) of this proviso, dividends and distributions paid
exclusively in cash, and any capital stock, evidences of indebtedness, cash
or assets distributed upon a merger or consolidation) (the foregoing
hereinafter in this clause (iv) of this proviso called the "Securities"),
or fix a record date for any such distribution, then, in each such case,
the Market Price for each day in such Measurement Period or such other
period which day is prior to the earlier of (1) the record date for such
distribution and (2) the date on which ex-dividend trading in the Common
Stock with respect to such distribution begins shall be reduced so that the
same shall be equal to the price determined by multiplying the Market Price
(determined without regard to this proviso) by a fraction, the numerator of
which shall be the Market Price (determined without regard to this proviso)
<PAGE>
for such date less the fair market value (as determined in good faith by
resolution of the Board of Directors of the Corporation) on such date of
the portion of the Securities so distributed or to be distributed
applicable to one share of Common Stock and the denominator of which shall
be the Market Price (determined without regard to this proviso) for such
date; provided, however, that in the event the then fair market value (as
so determined) of the portion of the Securities so distributed applicable
to one share of Common Stock is equal to or greater than the Market Price
(determined without regard to this clause (iv) of this proviso) for any
such Trading Day, in lieu of the foregoing adjustment, adequate provision
shall be made so that the holders of shares of Series B Convertible
Preferred Stock shall have the right to receive upon conversion of the
shares of Series B Convertible Preferred Stock the amount of Securities the
holders of shares of Series B Convertible Preferred Stock would have
received had the number of shares of Common Stock to be issued in payment
of such dividends on the shares of Series B Convertible Preferred Stock
been issued, or had the holders of shares of Series B Convertible Preferred
Stock converted the shares of Series B Convertible Preferred Stock, in
either such case immediately prior to the record date for such
distribution. If the Board of Directors of the Corporation determines the
fair market value of any distribution for purposes of this clause (iv) by
reference to the actual or when issued trading market for any securities
comprising all or part of such distribution, it must in doing so consider
the prices in such market on the same day for which an adjustment in the
Market Price is being determined.
For purposes of this clause (iv) and clauses (i) and (ii) of this
proviso, any dividend or distribution to which this clause (iv) is
applicable that also includes shares of Common Stock, or rights or warrants
to subscribe for or purchase shares of Common Stock to which clause (i) or
(ii) of this proviso applies (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, assets, shares
of capital stock, rights or warrants other than such shares of Common Stock
or rights or warrants to which clause (i) or (ii) of this proviso applies
(and any Market Price reduction required by this clause (iv) with respect
to such dividend or distribution shall then be made) immediately followed
by (2) a dividend or distribution of such shares of Common Stock or such
rights or warrants (and any further Market Price reduction required by
clauses (i) and (ii) of this proviso with respect to such dividend or
distribution shall then be made), except that any shares of Common Stock
included in such dividend or distribution shall not be deemed "outstanding
at the close of business on the date fixed for such determination" within
the meaning of clause (i) of this proviso;
(v) The Corporation or any subsidiary of the Corporation shall (x) by
dividend or otherwise, distribute to all holders of its Common Stock cash
in (or fix any record date for any such distribution), or (y) repurchase or
reacquire shares of its Common Stock (other than an Option Share Surrender)
for, in either case, an aggregate amount that, combined with (1) the
aggregate amount of any other such distributions to all holders of its
Common Stock made exclusively in cash after the Issuance Date and within
the 12 months preceding the date of payment of such distribution, and in
respect of which no adjustment pursuant to this clause (v) has been made,
(2) the aggregate amount of any cash plus the fair market value (as
determined in good faith by a resolution of the Board of Directors of the
Corporation) of consideration paid in respect of any repurchase or other
reacquisition by the Corporation or any subsidiary of the Corporation of
any shares of Common Stock (other than an Option Share Surrender) made
after the Issuance Date and within the 12 months preceding the date of
payment of such distribution or making of such repurchase or reacquisition,
as the case may be, and in respect of which no adjustment pursuant to this
clause (v) has been made, and (3) the aggregate of any cash plus the fair
market value (as determined in good faith by a resolution of the Board of
Directors of the Corporation) of consideration payable in respect of any
Tender Offer by the Corporation or any of its subsidiaries for all or any
<PAGE>
portion of the Common Stock concluded within the 12 months preceding the
date of payment of such distribution or completion of such repurchase or
reacquisition, as the case may be, and in respect of which no adjustment
pursuant to clause (vi) of this proviso has been made (such aggregate
amount combined with the amounts in clauses (1), (2) and (3) above being
the "Combined Amount"), exceeds 10% of the product of the Market Price
(determined without regard to this proviso) for any day in such Measurement
Period or such other period which day is prior to the earlier of (A) the
record date with respect to such distribution and (B) the date on which
ex-dividend trading in the Common Stock with respect to such distribution
begins or the date of such repurchase or reacquisition, as the case may be,
times the number of shares of Common Stock outstanding on such date, then,
and in each such case, the Market Price for each such day shall be reduced
so that the same shall equal the price determined by multiplying the Market
Price (determined without regard to this proviso) for such day by a
fraction (i) the numerator of which shall be equal to the Market Price
(determined without regard to this proviso) for such day less an amount
equal to the quotient of (x) the excess of such Combined Amount over such
10% and (y) the number of shares of Common Stock outstanding on such day
and (ii) the denominator of which shall be equal to the Market Price
(determined without regard to this proviso) for such day; provided,
however, that in the event the portion of the cash so distributed or paid
for the repurchase or reacquisition of shares (determined per share based
on the number of shares of Common Stock outstanding) applicable to one
share of Common Stock is equal to or greater than the Market Price
(determined without regard to this clause (v) of this proviso) of the
Common Stock for any such day, then in lieu of the foregoing adjustment
with respect to such day, adequate provision shall be made so that the
holders of shares of Series B Convertible Preferred Stock shall have the
right to receive upon conversion of shares of Series B Convertible
Preferred Stock the amount of cash the holders of shares of Series B
Convertible Preferred Stock would have received had the holders of shares
of Series B Convertible Preferred Stock converted shares of Series B
Convertible Preferred Stock immediately prior to the record date for such
distribution or the payment date of such repurchase, as applicable; or
(vi) A Tender Offer made by the Corporation or any of its subsidiaries
for all or any portion of the Common Stock shall expire and such Tender
Offer (as amended upon the expiration thereof) shall require the payment to
stockholders (based on the acceptance (up to any maximum specified in the
terms of the Tender Offer) of Purchased Shares (as defined below)) of an
aggregate consideration having a fair market value (as determined in good
faith by resolution of the Board of Directors of the Corporation) that
combined together with (1) the aggregate of the cash plus the fair market
value (as determined in good faith by a resolution of the Board of
Directors of the Corporation), as of the expiration of such Tender Offer,
of consideration payable in respect of any other Tender Offers by the
Corporation or any of its subsidiaries for all or any portion of the Common
Stock expiring within the 12 months preceding the expiration of such Tender
Offer and in respect of which no adjustment pursuant to this clause (vi)
has been made, (2) the aggregate amount of any cash plus the fair market
value (as determined in good faith by a resolution of the Board of
Directors of the Corporation) of consideration paid in respect of any
repurchase or other reacquisition by the Corporation or any subsidiary of
the Corporation of any shares of Common Stock (other than an Option Share
Surrender) made after the Issuance Date and within the 12 months preceding
the expiration of such Tender Offer and in respect of which no adjustment
pursuant to clause (v) of this proviso has been made, and (3) the aggregate
amount of any distributions to all holders of Common Stock made exclusively
in cash within 12 months preceding the expiration of such Tender Offer and
in respect of which no adjustment pursuant to clause (v) of this proviso
<PAGE>
has been made, exceeds 10% of the product of the Market Price (determined
without regard to this proviso) for any day in such period times the number
of shares of Common Stock outstanding on such day, then, and in each such
case, the Market Price for such day shall be reduced so that the same shall
equal the price determined by multiplying the Market Price (determined
without regard to this proviso) for such day by a fraction, the numerator
of which shall be the number of shares of Common Stock outstanding on such
day multiplied by the Market Price (determined without regard to this
proviso) for such day and the denominator of which shall be the sum of (x)
the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance (up to any
maximum specified in the terms of the Tender Offer) of all shares validly
tendered and not withdrawn as of the last time tenders could have been made
pursuant to such Tender Offer (the "Expiration Time") (the shares deemed so
accepted, up to any such maximum, being referred to as the "Purchased
Shares") and (y) the product of the number of shares of Common Stock
outstanding (less any Purchased Shares) on such day times the Market Price
(determined without regard to this proviso) of the Common Stock on the
Trading Day next succeeding the Expiration Time. If the application of this
clause (vi) to any Tender Offer would result in an increase in the Market
Price (determined without regard to this proviso) for any day, no
adjustment shall be made for such Tender Offer under this clause (vi) for
such day.
"Maximum Share Amount" means 4,236,000 shares of Common Stock, or such
greater number of shares as permitted by the rules of the Nasdaq SmallCap or
such other securities market on which the Common Stock is then listed for
trading (such amount to be subject to equitable adjustment from time to time on
terms reasonably acceptable to the Majority Holders for stock splits, stock
dividends, combinations, capital reorganizations and similar events relating to
the Common Stock occurring or with respect to which "ex-" trading commences
after the date of filing this Certificate of Designations with the Secretary of
State of the State of Delaware).
"Measurement Period" means, with respect to any date, the period of ten
consecutive Trading Days ending on the Trading Day prior to such date.
"Nasdaq" means the Nasdaq National Market.
"Nasdaq SmallCap" means the Nasdaq SmallCap Market.
"1933 Act" means the Securities Act of 1933, as amended.
"NYSE" means the New York Stock Exchange, Inc.
"Option Share Surrender" means the surrender of shares of Common Stock to
the Corporation in payment of the exercise price or tax obligations incurred in
connection with the exercise of a stock option granted by the Corporation to any
of its employees, directors or consultants.
"Optional Redemption Event" means any one of the following events:
<PAGE>
(1) For any period of five consecutive Trading Days there shall be no
closing bid price of the Common Stock on the Nasdaq, the Nasdaq SmallCap, the
NYSE or the AMEX;
(2) The Common Stock ceases to be listed for trading on any of the Nasdaq,
the Nasdaq SmallCap, the NYSE or the AMEX;
(3) The inability for 30 or more days (whether or not consecutive) of any
holder of shares of Series B Convertible Preferred Stock to sell such shares of
Common Stock issued or issuable on conversion of shares of Series B Convertible
Preferred Stock pursuant to the Registration Statement for any reason on each of
such 30 days;
(4) The Corporation shall (A) default in the timely performance of the
obligation to issue shares of Common Stock upon conversion of shares of Series B
Convertible Preferred Stock as and when required by Section 10 or (B) fail or
default in the timely performance of any material obligation (other than as
specifically set forth elsewhere in this definition) to a holder of shares of
Series B Convertible Preferred Stock under the terms of this Certificate of
Designations or under the Subscription Agreements, the Registration Rights
Agreements, the Warrants or any other agreement or document entered into in
connection with the issuance of shares of Series B Convertible Preferred Stock,
as such instruments may be amended from time to time;
(5) (A) Any consolidation or merger of the Corporation with or into another
entity (other than a merger or consolidation of a subsidiary of the Corporation
into the Corporation or a wholly-owned subsidiary of the Corporation) where (i)
the surviving corporation of such consolidation or merger is not a Qualifying
Corporation and the shareholders of the Corporation immediately prior to such
transaction do not collectively own at least 51% of the outstanding voting
securities of such surviving corporation immediately following such transaction
or (ii) the common stock of such surviving corporation is not listed for trading
on the NYSE, the AMEX, the Nasdaq or the Nasdaq SmallCap; or (B) any sale or
other transfer of all or substantially all of the assets of the Corporation; or
(6) The taking of any action, including any amendment to the Corporation's
Certificate of Incorporation, without the consent of the Majority Holders which
materially and adversely affects the rights of any holder of shares of Series B
Convertible Preferred Stock.
"Optional Redemption Notice" means a notice from a holder of shares of
Series B Convertible Preferred Stock to the Corporation which states (1) that
the holder delivering such notice is thereby requiring the Corporation to redeem
shares of Series B Convertible Preferred Stock pursuant to Section 11, (2) in
general terms the Optional Redemption Event giving rise to such redemption, and
(3) the number of shares of Series B Convertible Preferred Stock held by such
holder which are to be redeemed.
"Optional Redemption Price" means the greater of (i) the Premium Price on
the applicable redemption date and (ii) the Converted Market Price on the
applicable redemption date.
<PAGE>
"Parity Dividend Stock" means any class or series of the Corporation's
capital stock ranking, as to dividends, on a parity with the Series B
Convertible Preferred Stock, including, without limitation, the Series A
Convertible Preferred Stock.
"Parity Liquidation Stock" means any class or series of the Corporation's
capital stock having parity as to liquidation rights with the Series B
Convertible Preferred Stock, including, without limitation, the Series A
Convertible Preferred Stock.
"Premium Percentage" means 120%.
"Premium Price" means, for any share of Series B Convertible Preferred
Stock as of any date of determination, the product obtained by multiplying (a)
the sum of (1) the Conversion Amount plus (2) an amount equal to the Accrual
Amount on such share of Series B Convertible Preferred Stock to the date of
determination, plus (3) an amount equal to the accrued and unpaid interest on
cash dividends in arrears (as provided in Section 5) to the date of
determination times (b) the Premium Percentage.
"Qualifying Corporation" means a corporation which (1) has total revenues
of at least $100,000,000 for its most recently completed fiscal year as reported
in its Annual Report on Form 10-K for such year as filed with the SEC or (2) has
a market capitalization of at least $500,000,000 determined on the date of the
first public announcement of any consolidation, merger or other business
combination transaction with the Corporation based on the arithmetic average of
the closing bid price of such corporation's common stock on the principal
securities market for such common stock for the five Trading Days prior to the
date of such announcement, as reported by Bloomberg, L.P.
"Redemption Date" means the date of a redemption of shares of Series B
Convertible Preferred Stock pursuant to Section 9(a), determined in accordance
therewith.
"Redemption Price" means the Premium Price on the applicable Redemption
Date.
"Registration Rights Agreements" means the several Registration Rights
Agreements entered into between the Corporation and the original holders of the
shares of Series B Convertible Preferred Stock, as amended or modified from time
to time in accordance with their respective terms.
"Registration Statement" means the Registration Statement required to be
filed by the Corporation with the SEC pursuant to Section 2(a) of the
Registration Rights Agreements.
"Reset Period" means the applicable six month period commencing on the
Initial Reset Date and on each Biannual Reset Date thereafter and ending on the
day immediately prior to the next Biannual Reset Date.
"SEC" means the United States Securities and Exchange Commission.
"SEC Effective Date" means the date the Registration Statement is first
declared effective by the SEC.
<PAGE>
"Senior Dividend Stock" means any class or series of capital stock of the
Corporation ranking senior as to dividends to the Series B Convertible Preferred
Stock.
"Senior Liquidation Stock" means any class or series of capital stock of
the Corporation ranking senior as to liquidation rights to the Series B
Convertible Preferred Stock.
"Series A Convertible Preferred Stock" means the Series A Convertible
Preferred Stock, $.001 par value, of the Corporation.
"Series B Convertible Preferred Stock" means the Series B Convertible
Preferred Stock, $.001 par value, of the Corporation.
"Share Limitation Redemption Date" means each date on which the Corporation
is required to redeem shares of Series B Convertible Preferred Stock as provided
in Section 7(a).
"Share Limitation Redemption Price" means (a) the greater of (i) the
Premium Price on the applicable Share Limitation Redemption Date and (ii) the
Converted Market Price on the applicable Share Limitation Redemption Date or (b)
if the Corporation shall have ever sought and failed to obtain, or abandoned its
efforts to obtain, the Stockholder Approval, thereafter the Share Limitation
Redemption Price shall be 105% of the price determined in accordance with clause
(a) of this definition on the applicable Share Limitation Redemption Date.
"Stockholder Approval" shall mean the approval by a majority of the votes
cast by the holders of shares of Common Stock (in person or by proxy) at a
meeting of the stockholders of the Corporation (duly convened at which a quorum
was present), or a written consent of holders of shares of Common Stock entitled
to such number of votes given without a meeting, of the issuance by the
Corporation of 20% or more of the Common Stock of the Corporation outstanding on
the Issuance Date for less than the greater of the book or market value of such
Common Stock on conversion of the Series B Convertible Preferred Stock, as and
to the extent required under Rule 4310(c)(25)(H) of the Nasdaq SmallCap as in
effect from time to time or any successor, replacement or similar provision
thereof or of any other market on which the Common Stock is listed for trading.
"Subscription Agreements" means the several Subscription Agreements by and
between the Corporation and the original holders of shares of Series B
Convertible Preferred Stock pursuant to which the shares of Series B Convertible
Preferred Stock were issued.
"Tender Offer" means a tender offer or exchange offer.
"Trading Day" means a day on whichever of (x) the national securities
exchange, (y) the Nasdaq or (z) the Nasdaq SmallCap which at the time
constitutes the principal securities market for the Common Stock is open for
general trading.
"Transfer Agent Agreement" means the Transfer Agent Agreement, dated as of
December 22, 1999, by and among the Corporation, the Conversion Agent and the
original holders of the Series B Convertible Preferred Stock for the benefit of
the holders from time to time of shares of Series B Convertible Preferred Stock.
<PAGE>
"Warrants" means the Common Stock Purchase Warrants issued by the
Corporation in connection with the issuance of the shares of Series B
Convertible Preferred Stock.
Section 2. Designation and Amount. The shares of such series shall be
designated as "Series B Convertible Preferred Stock", and the number of shares
constituting the Series B Convertible Preferred Stock shall be 4,080, and shall
not be subject to increase. The Corporation shall not issue any shares of Series
B Convertible Preferred Stock other than pursuant to the Subscription
Agreements, unless such issuance shall have been approved by the Majority
Holders. Any shares of Series B Convertible Preferred Stock which are redeemed
by the Corporation and retired and any shares of Series B Convertible Preferred
Stock which are converted in accordance with Section 10 shall be restored to the
status of authorized, unissued and undesignated shares of the Corporation's
class of Preferred Stock and shall not be subject to issuance, and may not
thereafter be outstanding, as shares of Series B Convertible Preferred Stock.
Section 3. Series B Convertible Preferred Stock Capital. In accordance with
Section 154 of the General Corporation Law of the State of Delaware, the amount
to be represented in the Series B Convertible Preferred Stock capital of the
Corporation at all times for each outstanding share of Series B Convertible
Preferred Stock shall be the greater of (i) the Premium Price and (ii) the
Converted Market Price. The Corporation shall take such action by resolution of
the Board of Directors and otherwise as may be required to maintain the amount
required by this Section 3 to be represented in capital of the Corporation for
the Series B Convertible Preferred Stock capital not less frequently than
quarterly.
Section 4. Rank. All Series B Convertible Preferred Stock shall rank (i)
senior to the Common Stock, now or hereafter issued, as to payment of dividends
and distribution of assets upon liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, (ii) on a parity with the Series
A Convertible Preferred Stock both as to payment of dividends and as to
distribution of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, (iii) senior to any additional
series of the class of Preferred Stock which series the Board of Directors may
from time to time authorize, both as to payment of dividends and as to
distributions of assets upon liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, and (iv) senior to any additional
class of preferred stock (or series of preferred stock of such class) which the
Board of Directors or the stockholders may from time to time authorize in
accordance herewith.
Section 5. Dividends and Distributions. (a) The holders of shares of Series
B Convertible Preferred Stock shall be entitled to receive, when, as, and if
declared by the Board of Directors out of funds legally available for such
purpose, dividends at the rate of $60.00 per annum per share, and no more, which
shall be fully cumulative, shall accrue without interest (except as otherwise
provided herein as to dividends in arrears) from the date of original issuance
of each share of Series B Convertible Preferred Stock and shall be payable
quarterly on February 1, May 1, August 1 and November 1 of each year commencing
February 1, 2000 (except that if any such date is a Saturday, Sunday, or legal
holiday, then such dividend shall be payable on the next succeeding day that is
not a Saturday, Sunday, or legal holiday) to holders of record as they appear on
the stock books of the Corporation on such record dates, not more than 20 nor
less than 10 days preceding the payment dates for such dividends, as shall be
fixed by the Board. Dividends on the Series B Convertible Preferred Stock shall
be paid in cash or, in lieu of paying such dividends and subject to the
limitations in Section 5(b) hereof, the amount of such dividends shall be
<PAGE>
included in the Accrual Amount for each share, at the option of the Corporation
as hereinafter provided. The amount of the dividends payable per share of Series
B Convertible Preferred Stock for each quarterly dividend period shall be
computed by dividing the annual dividend amount by four. The amount of dividends
payable for the initial dividend period and any period shorter than a full
quarterly dividend period shall be computed on the basis of a 360-day year of
twelve 30-day months. Dividends required to be paid in cash pursuant to Section
5(b) which are not paid on a payment date, whether or not such dividends have
been declared, will bear interest at the rate of 14% per annum until paid (or
such lesser rate as shall be the maximum rate allowable by applicable law). No
dividends or other distributions, other than the dividends payable solely in
shares of any Junior Dividend Stock, shall be paid or set apart for payment on
any shares of Junior Dividend Stock, and no purchase, redemption, or other
acquisition shall be made by the Corporation of any shares of Junior Dividend
Stock (except for Option Share Surrenders), unless and until all accrued and
unpaid cash dividends on the Series B Convertible Preferred Stock and interest
on dividends in arrears at the rate specified herein shall have been paid or
declared and set apart for payment.
If at any time any dividend on any Senior Dividend Stock shall be in
arrears, in whole or in part, no dividend shall be paid or declared and set
apart for payment on the Series B Convertible Preferred Stock unless and until
all accrued and unpaid dividends with respect to the Senior Dividend Stock,
including the full dividends for the then current dividend period, shall have
been paid or declared and set apart for payment, without interest. No full
dividends shall be paid or declared and set apart for payment on any Parity
Dividend Stock for any period unless all accrued but unpaid dividends (and
interest on dividends in arrears at the rate specified herein) have been, or
contemporaneously are, paid or declared and set apart for such payment on the
Series B Convertible Preferred Stock. No full dividends shall be paid or
declared and set apart for payment on the Series B Convertible Preferred Stock
for any period unless all accrued but unpaid dividends have been, or
contemporaneously are, paid or declared and set apart for payment on the Parity
Dividend Stock for all dividend periods terminating on or prior to the date of
payment of such full dividends. When dividends are not paid in full upon the
Series B Convertible Preferred Stock and the Parity Dividend Stock, all
dividends paid or declared and set apart for payment upon shares of Series B
Convertible Preferred Stock (and interest on dividends in arrears at the rate
specified herein) and the Parity Dividend Stock shall be paid or declared and
set apart for payment pro rata, so that the amount of dividends paid or declared
and set apart for payment per share on the Series B Convertible Preferred Stock
and the Parity Dividend Stock shall in all cases bear to each other the same
ratio that accrued and unpaid dividends per share on the shares of Series B
Convertible Preferred Stock and the Parity Dividend Stock bear to each other.
Any references to "distribution" contained in this Section 5 shall not be
deemed to include any stock dividend or distributions made in connection with
any liquidation, dissolution, or winding up of the Corporation, whether
voluntary or involuntary.
(b) If (x) prior to any dividend payment date the Corporation notifies the
holders of Series B Convertible Preferred Stock that the dividends with respect
to such date will be paid in cash or (y) on any dividend payment date the
Corporation is not in compliance in all material respects with its obligations
to the holders of the Series B Convertible Preferred Stock (including, without
limitation, its obligations under the Subscription Agreements, the Registration
Rights Agreements, the Warrants and this Certificate of Designations), such
dividends must be timely paid in cash. If clauses (x) or (y) of the foregoing
sentence do not apply on any dividend payment date, the Corporation may, but
shall not be required to, pay the applicable dividends in cash. The amount of
<PAGE>
any dividends not paid in cash shall be included in the Accrual Amount for each
share of Series B Convertible Preferred Stock.
(c) Neither the Corporation nor any subsidiary of the Corporation shall
redeem, repurchase or otherwise acquire in any one transaction or series of
related transactions any shares of Common Stock, Parity Dividend Stock, Parity
Liquidation Stock, Junior Dividend Stock or Junior Liquidation Stock if the
number of shares so repurchased, redeemed or otherwise acquired in such
transaction or series of related transactions (excluding any Option Share
Surrender) is more than either (x) 5% of the number of shares of Common Stock,
Parity Dividend Stock, Parity Liquidation Stock, Junior Dividend Stock or Junior
Liquidation Stock, as the case may be, outstanding immediately prior to such
transaction or series of related transactions or (y) 1% of the number of shares
of Common Stock, Parity Dividend Stock, Parity Liquidation Stock, Junior
Dividend Stock or Junior Liquidation Stock, as the case may be, outstanding
immediately prior to such transaction or series of related transactions if such
transaction or series of related transactions is with any one person or group of
affiliated persons, unless the Corporation or such subsidiary offers to purchase
for cash from each holder of shares of Series B Convertible Preferred Stock at
the time of such redemption, repurchase or acquisition the same percentage of
such holder's shares of Series B Convertible Preferred Stock as the percentage
of the number of outstanding shares of Common Stock, Parity Dividend Stock,
Parity Liquidation Stock, Junior Dividend Stock or Junior Liquidation Stock, as
the case may be, to be so redeemed, repurchased or acquired at a purchase price
per share of Series B Convertible Preferred Stock equal to the greater of (i)
the Premium Price in effect on the date of purchase pursuant to this Section
5(c) and (ii) the Converted Market Price on the date of purchase pursuant to
this Section 5(c).
(d) Neither the Corporation nor any subsidiary of the Corporation shall (1)
make any Tender Offer for outstanding shares of Common Stock, unless the
Corporation contemporaneously therewith makes an offer, or (2) enter into an
agreement regarding a Tender Offer for outstanding shares of Common Stock by any
person other than the Corporation or any subsidiary of the Corporation, unless
such person agrees with the Corporation to make an offer, in either such case to
each holder of outstanding shares of Series B Convertible Preferred Stock to
purchase for cash at the time of purchase in such Tender Offer the same
percentage of shares of Series B Convertible Preferred Stock held by such holder
as the percentage of outstanding shares of Common Stock offered to be purchased
in such Tender Offer at a price per share of Series B Convertible Preferred
Stock equal to the greater of (i) the Premium Price in effect on the date of
purchase pursuant to this Section 5(d) and (ii) the Converted Market Price on
the date of purchase pursuant to this Section 5(d).
Section 6. Liquidation Preference. In the event of a liquidation,
dissolution, or winding up of the Corporation, whether voluntary or involuntary,
the holders of Series B Convertible Preferred Stock shall be entitled to receive
out of the assets of the Corporation, whether such assets constitute stated
capital or surplus of any nature, an amount per share of Series B Convertible
Preferred Stock equal to the Liquidation Preference, and no more, before any
payment shall be made or any assets distributed to the holders of Junior
Liquidation Stock; provided, however, that such rights shall accrue to the
holders of Series B Convertible Preferred Stock only in the event that the
Corporation's payments with respect to the liquidation preference of the holders
of Senior Liquidation Stock are fully met. After the liquidation preferences of
the Senior Liquidation Stock are fully met, the entire assets of the Corporation
available for distribution shall be distributed ratably among the holders of the
Series B Convertible Preferred Stock and any Parity Liquidation Stock in
proportion to the respective preferential amounts to which each is entitled (but
<PAGE>
only to the extent of such preferential amounts). After payment in full of the
liquidation price of the shares of the Series B Convertible Preferred Stock and
the Parity Liquidation Stock, the holders of such shares shall not be entitled
to any further participation in any distribution of assets by the Corporation.
Neither a consolidation or merger of the Corporation with another corporation
nor a sale or transfer of all or part of the Corporation's assets for cash,
securities, or other property in and of itself will be considered a liquidation,
dissolution or winding up of the Corporation.
Section 7. Certain Redemption Rights.
(a) Redemption Based on Maximum Share Amount. (1) Notwithstanding any other
provision herein, unless the Stockholder Approval shall have been obtained from
the stockholders of the Corporation or waived by the Nasdaq, the Nasdaq SmallCap
or other securities market on which the Common Stock is then listed, so long as
the Common Stock is listed on the Nasdaq, the Nasdaq SmallCap, the NYSE or the
AMEX the Corporation shall not be required to issue upon conversion of shares of
Series B Convertible Preferred Stock pursuant to Section 10 more than the
Maximum Share Amount. The Maximum Share Amount shall be allocated among the
shares of Series B Convertible Preferred Stock at the time of initial issuance
thereof pro rata based on the initial issuance of 4,000 shares of Series B
Convertible Preferred Stock. Each certificate for shares of Series B Convertible
Preferred Stock initially issued shall bear a notation as to the number of
shares constituting the portion of the Maximum Share Amount allocated to the
shares of Series B Convertible Preferred Stock represented by such certificate
for purposes of conversion thereof. Upon surrender of any certificate for shares
of Series B Convertible Preferred Stock for transfer or re-registration thereof
(or, at the option of the holder, for conversion pursuant to Section 10(a) of
less than all of the shares of Series B Convertible Preferred Stock represented
thereby), the Corporation shall make a notation on the new certificate issued
upon such transfer or re-registration or evidencing such unconverted shares, as
the case may be, as to the remaining number of shares of Common Stock from the
Maximum Share Amount remaining available for conversion of the shares of Series
B Convertible Preferred Stock evidenced by such new certificate. If any
certificate for shares of Series B Convertible Preferred Stock is surrendered
for split-up into two or more certificates representing an aggregate number of
shares of Series B Convertible Preferred Stock equal to the number of shares of
Series B Convertible Preferred Stock represented by the certificate so
surrendered (as reduced by any contemporaneous conversion of shares of Series B
Convertible Preferred Stock represented by the certificate so surrendered), each
certificate issued on such split-up shall bear a notation of the portion of the
Maximum Share Amount allocated thereto determined by pro rata allocation from
among the remaining portion of the Maximum Share Amount allocated to the
certificate so surrendered. If any shares of Series B Convertible Preferred
Stock represented by a single certificate are converted in full pursuant to
Section 10, all of the portion of the Maximum Share Amount allocated to such
shares of Series B Convertible Preferred Stock which remains unissued after such
conversion shall be re-allocated pro rata to the outstanding shares of Series B
Convertible Preferred Stock held of record by the holder of record at the close
of business on the date of such conversion of the shares of Series B Convertible
Preferred Stock so converted, and if there shall be no other shares of Series B
Convertible Preferred Stock held of record by such holder at the close of
business on such date, then such portion of the Maximum Share Amount shall be
allocated pro rata among the shares of Series B Convertible Preferred Stock
outstanding on such date.
(2) The Corporation shall promptly, but in no event later than five
Business Days after the occurrence, give notice to each holder of shares of
Series B Convertible Preferred Stock (by telephone line facsimile transmission
<PAGE>
at such number as such holder has specified in writing to the Corporation for
such purposes or, if such holder shall not have specified any such number, by
overnight courier or first class mail, postage prepaid, at such holder's address
as the same appears on the stock books of the Corporation) and any holder of
shares of Series B Convertible Preferred Stock may at any time after the
occurrence give notice to the Corporation, in either case, if on any ten Trading
Days within any period of 20 consecutive Trading Days the Corporation would not
have been required to convert shares of Series B Convertible Preferred Stock of
such holder in accordance with Section 10(a) as a consequence of the limitations
set forth in Section 7(a)(1) had the shares of Series B Convertible Preferred
Stock held by such holder been converted in full into Common Stock on each such
day, determined without regard to the limitation, if any, on such holder
contained in the proviso to the second sentence of Section 10(a) (any such
notice, whether given by the Corporation or a holder, an "Inconvertibility
Notice"). If the Corporation shall have given or been required to give any
Inconvertibility Notice, or if a holder shall have given any Inconvertibility
Notice, then within ten Trading Days after such Inconvertibility Notice is given
or was required to be given, the holder receiving or giving, as the case may be,
such Inconvertibility Notice shall have the right by written notice to the
Corporation (which written notice may be contained in the Inconvertibility
Notice given by such holder) to direct the Corporation to redeem the portion of
such holder's outstanding shares of Series B Convertible Preferred Stock (which,
if applicable, shall be all of such holder's outstanding shares of Series B
Convertible Preferred Stock) as shall not, on the Business Day prior to the date
of such redemption, be convertible into shares of Common Stock by reason of the
limitations set forth in Section 7(a)(1) (determined without regard to the
limitation, if any, on beneficial ownership of Common Stock by such holder
contained in the proviso to the second sentence of Section 10(a)), within five
Business Days after such holder so directs the Corporation, at a price per share
equal to the Share Limitation Redemption Price. If a holder of shares of Series
B Convertible Preferred Stock directs the Corporation to redeem outstanding
shares of Series B Convertible Preferred Stock and, prior to the date the
Corporation is required to redeem such shares of Series B Convertible Preferred
Stock, the Corporation would have been able, within the limitations set forth in
Section 7(a)(1), to convert all of such holder's shares of Series B Convertible
Preferred Stock (determined without regard to the limitation, if any, on
beneficial ownership of shares of Common Stock by such holder contained in the
proviso to the second sentence of Section 10(a)) on any ten Trading Days within
any period of 15 consecutive Trading Days commencing after the period of 20
consecutive Trading Days which gave rise to the applicable Inconvertibility
Notice from the Corporation or such holder of shares of Series B Convertible
Preferred Stock, as the case may be, had all of such holder's shares of Series B
Convertible Preferred Stock been surrendered for conversion into Common Stock on
each of such ten Trading Days within such 15 Trading Day period, then the
Corporation shall not be required to redeem any shares of Series B Convertible
Preferred Stock by reason of such Inconvertibility Notice.
(3) Notwithstanding the giving of any Inconvertibility Notice by the
Corporation to the holders of Series B Convertible Preferred Stock pursuant to
Section 7(a)(2) or the giving or the absence of any notice by the holders of the
Series B Convertible Preferred Stock in response thereto or any redemption of
shares of Series B Convertible Preferred Stock pursuant to Section 7(a)(2),
thereafter the provisions of Section 7(a)(2) shall continue to be applicable on
any occasion unless the Stockholder Approval shall have been obtained from the
stockholders of the Corporation or waived by the Nasdaq, the Nasdaq SmallCap, or
other securities market on which the Common Stock is listed for trading.
<PAGE>
(4) On each Share Limitation Redemption Date (or such later date as a
holder of shares of Series B Convertible Preferred Stock shall surrender to the
Corporation the certificate(s) for the shares of Series B Convertible Preferred
Stock being redeemed pursuant to this Section 7(a)), the Corporation shall make
payment in immediately available funds of the applicable Share Limitation
Redemption Price to such holder of shares of Series B Convertible Preferred
Stock to be redeemed to or upon the order of such holder as specified by such
holder in writing to the Corporation at least one Business Day prior to such
Share Limitation Redemption Date. Upon redemption of less than all of the shares
of Series B Convertible Preferred Stock evidenced by a particular certificate,
promptly, but in no event later than three Business Days after surrender of such
certificate to the Corporation, the Corporation shall issue a replacement
certificate for the shares of Series B Convertible Preferred Stock evidenced by
such certificate which have not been redeemed. Only whole shares of Series B
Convertible Preferred Stock may be redeemed.
(5) (A) Notwithstanding any other provision of this Certificate of
Designations, if an Inconvertibility Day occurs by reason of events which are
not solely within the control of the Corporation, the Corporation shall have the
right to give a Control Notice to the holders of Series B Convertible Preferred
Stock at any time after such Inconvertibility Day occurs and prior to the
earlier of (1) the date on which all holders of shares of Series B Convertible
Preferred Stock who had the right (other than as limited by this Section
7(a)(5)) to require redemption of any shares of Series B Convertible Preferred
Stock by reason of the occurrence of such Inconvertibility Day no longer have
such right and (2) the applicable Share Limitation Redemption Date by reason of
the earliest notice given by any holder of shares of Series B Convertible
Preferred Stock directing the Corporation to redeem such shares in accordance
with Section 7(a)(2) by reason of such Inconvertibility Day. For purposes of the
Control Notice given pursuant to this Section 7(a)(5), an Inconvertibility Day
shall be deemed to have occurred by reason of events which are not solely within
the control of the Corporation if a requirement of the Corporation to redeem, or
a right of any holder of shares of Series B Convertible Preferred Stock to
require redemption of, shares of Series B Convertible Preferred Stock by reason
thereof would result in the Corporation being required to classify the Series B
Convertible Preferred Stock as redeemable preferred stock on a balance sheet of
the Corporation prepared in accordance with Generally Accepted Accounting
Principles and Regulation S-X of the SEC. If the Corporation timely gives a
Control Notice to the holders of shares of Series B Convertible Preferred Stock,
then in lieu of payment of the Share Limitation Redemption Price pursuant to a
redemption notice given by any holder of shares of Series B Convertible
Preferred Stock in accordance with Section 7(a)(2) by reason of such
Inconvertibility Day and commencing on such Inconvertibility Day the Conversion
Price for all outstanding shares of Series B Convertible Preferred Stock will be
80% of the amount the Conversion Price would otherwise be. Such adjustment of
the Conversion Price shall continue in effect until the earliest of (x) the date
which is 90 days after the Stockholder Approval shall have been obtained from
the stockholders of the Corporation or waived by the Nasdaq SmallCap or other
securities market on which the Common Stock is then listed, (y) the date any
further adjustments are made following a failure to obtain the Stockholder
Approval as provided below, and (z) the date when shares of Series B Convertible
Preferred Stock are no longer outstanding. On or after the date the Corporation
gives such Control Notice, upon notice from the Majority Holders, the
Corporation promptly shall call a special meeting of its stockholders, to be
held not later than 60 days after such notice is given, to seek the Stockholder
Approval for the issuance of all shares of Common Stock issuable upon conversion
of the Series B Convertible Preferred Stock in accordance with Section 10 and
shall use its best efforts to obtain the Stockholder Approval. The Corporation
shall prepare and file with the SEC within 20 days after such notice is given
<PAGE>
preliminary proxy materials which set forth a proposal to seek such Stockholder
Approval. The Corporation shall provide the Majority Holders an opportunity to
consult with the Corporation regarding the content of such proxy materials
insofar as it relates to the Stockholder Approval by providing copies of such
preliminary proxy materials and any revised preliminary proxy materials to the
Majority Holders a reasonable period of time prior to their filing with the SEC.
The Corporation shall furnish to each holder of shares of Series B Convertible
Preferred Stock a copy of its definitive proxy materials for such special
meeting and any amendments or supplements thereto promptly after the same are
mailed to stockholders or filed with the SEC. Upon the earlier of (i) the
failure to obtain the Stockholder Approval at the special meeting or (ii) the
failure to hold the special meeting within such 60-day period, the Corporation
shall so notify the holders of shares of Series B Convertible Preferred Stock
and, if requested by notice to the Corporation from the Majority Holders,
commencing on the Business Day following the Corporation's receipt of such
notice, the Conversion Price of the outstanding shares of Series B Convertible
Preferred Stock will be 60% of the amount the Conversion Price would otherwise
be without regard to other adjustments pursuant to this Section 7(a)(5) or
Section 11(b)(4).
(B) If and for so long as an adjustment of the Conversion Price is
simultaneously required by this Section 7(a)(5) and by Section 11(b)(4), the
applicable Conversion Price shall be the lower of the two amounts required by
each such section.
(C) The rights of holders of shares of Series B Convertible Preferred Stock
to require redemption of their shares and exercise other rights pursuant to
Sections 7(a)(1) through 7(a)(4) by reason of an Inconvertibility Day as to
which the Corporation does not have a right to give a Control Notice, or fails
to exercise such right on a timely basis, shall not be limited by the operation
of this Section 7(a)(5).
(b) No Other Redemption at Option of Holders. The shares of Series B
Convertible Preferred Stock shall not be subject to redemption by the
Corporation at the option of the Holders except as provided in Section 7(a) and
Section 11.
Section 8. No Sinking Fund. The shares of Series B Convertible Preferred
Stock shall not be subject to the operation of a purchase, retirement or sinking
fund.
Section 9. Optional Redemption.
(a) Corporation Optional Redemption. If (1) the Corporation shall be in
compliance in all material respects with its obligations to the holders of
shares of Series B Convertible Preferred Stock (including, without limitation,
its obligations under the Subscription Agreements, the Registration Rights
Agreements, the Warrants and the provisions of this Certificate of
Designations), (2) on the date the Corporation Optional Redemption Notice is
given and at all times until the Redemption Date, the Registration Statement is
effective and available for use by each holder of shares of Series B Convertible
Preferred Stock for the resale of shares of Common Stock acquired by such holder
upon conversion of all shares of Series B Convertible Preferred Stock held by
such holder and (3) no Optional Redemption Event shall have occurred with
respect to which, on the date a Corporation Optional Redemption Notice is to be
given or on the Redemption Date, any holder of shares of Series B Convertible
Preferred Stock (A) shall be entitled to exercise optional redemption rights
under Section 11 by reason of such Optional Redemption Event or (B) shall have
exercised optional redemption rights under Section 11 by reason of such Optional
Redemption Event and the Corporation shall not have paid the Optional Redemption
Price to such holder, then the Corporation shall have the right, exercisable by
<PAGE>
giving a Corporation Optional Redemption Notice not less than 30 days or more
than 50 days prior to the Redemption Date to all holders of record of the shares
of Series B Convertible Preferred Stock, at any time to redeem all or from time
to time to redeem any part of the outstanding shares of Series B Convertible
Preferred Stock in accordance with this Section 9(a). If the Corporation shall
redeem less than all outstanding shares of Series B Convertible Preferred Stock,
such redemption shall be made as nearly as practical pro rata from all holders
of shares of Series B Convertible Preferred Stock. Any Corporation Optional
Redemption Notice under this Section 9(a) shall be given to the holders of
record of the shares of Series B Convertible Preferred Stock at their addresses
appearing on the records of the Corporation; provided, however, that any failure
or defect in the giving of such notice to any such holder shall not affect the
validity of notice to or the redemption of shares of Series B Convertible
Preferred Stock of any other holder. On the Redemption Date (or such later date
as a holder of shares of Series B Convertible Preferred Stock surrenders to the
Corporation the certificate(s) for shares of Series B Convertible Preferred
Stock to be redeemed pursuant to this Section 9(a)), the Corporation shall make
payment of the applicable Redemption Price to each holder of shares of Series B
Convertible Preferred Stock to be redeemed in immediately available funds to
such account as specified by such holder in writing to the Corporation at least
one Business Day prior to the Redemption Date. A holder of shares of Series B
Convertible Preferred Stock to be redeemed pursuant to this Section 9(a) shall
be entitled to convert such shares of Series B Convertible Preferred Stock in
accordance with Section 10 (x) through the day prior to the Redemption Date and
(y) if the Corporation shall fail to pay the Redemption Price of any share of
Series B Convertible Preferred Stock when due, at any time after the due date
thereof until such date as the Corporation pays the Redemption Price of such
share of Series B Convertible Preferred Stock. No share of Series B Convertible
Preferred Stock as to which the holder exercises the right of conversion
pursuant to Section 10 or the optional redemption right pursuant to Section 11
may be redeemed by the Corporation pursuant to this Section 9(a) on or after the
date of exercise of such conversion right or optional redemption right, as the
case may be, regardless of whether the Corporation Optional Redemption Notice
shall have been given prior to, or on or after, the date of exercise of such
conversion right or optional redemption right, as the case may be.
(b) Final Redemption. The Corporation shall have the right to redeem all,
but not less than all, outstanding shares of Series B Convertible Preferred
Stock at any time on or after the date which is 1,096 days after the Issuance
Date so long as (1) the Corporation shall be in compliance in all material
respects with its obligations to the holders of the Series B Convertible
Preferred Stock (including, without limitation, its obligations under the
Subscription Agreements, the Registration Rights Agreements, the Warrants and
this Certificate of Designations) and (2) no Optional Redemption Event shall
have occurred with respect to which on the date a Final Redemption Notice is to
be given or on the Final Redemption Date, any holder of shares of Series B
Convertible Preferred Stock (a) shall be entitled to exercise optional
redemption rights under Section 11 by reason of such Optional Redemption Event
or (b) shall have exercised optional redemption rights under Section 11 by
reason of such Optional Redemption Event and the Corporation shall not have paid
the Optional Redemption Price to such holder. In order to exercise its rights
under this Section 9(b), the Corporation shall give a Final Redemption Notice
not less than 30 Trading Days or more than 50 Trading Days prior to the Final
Redemption Date to all holders of record of the shares of Series B Convertible
Preferred Stock. Any Final Redemption Notice shall be given to the holders of
record of the shares of Series B Convertible Preferred Stock by telephone line
facsimile transmission to such number as shown on the records of the Corporation
for such purpose; provided, however, that any failure or defect in the giving of
such notice to any such holder shall not affect the validity of notice to or the
<PAGE>
redemption of shares of Series B Convertible Preferred Stock of any other
holder. On the Final Redemption Date (or such later date as a holder of shares
of Series B Convertible Preferred Stock surrenders to the Corporation the
certificate(s) for shares of Series B Convertible Preferred Stock to be redeemed
pursuant to this Section 9(b)), the Corporation shall make payment of the
applicable Final Redemption Price to each holder of shares of Series B
Convertible Preferred Stock to be redeemed in immediately available funds to
such account as specified by such holder in writing to the Corporation at least
one Business Day prior to the Final Redemption Date. A holder of shares of
Series B Convertible Preferred Stock to be redeemed pursuant to this Section
9(b) shall be entitled to convert such shares of Series B Convertible Preferred
Stock in accordance with Section 10 (x) through the day prior to the Final
Redemption Date and (y) if the Corporation shall fail to pay the Final
Redemption Price of any share of Series B Convertible Preferred Stock when due,
at any time after the due date thereof until such date as the Corporation pays
the Final Redemption Price of such share of Series B Convertible Preferred Stock
to such holder. No share of Series B Convertible Preferred Stock as to which a
holder exercises the right of conversion pursuant to Section 10 or the optional
redemption right pursuant to Section 11 may be redeemed by the Corporation
pursuant to this Section 9(b) on or after the date of exercise of such
conversion right or optional redemption right, as the case may be, regardless of
whether the Final Redemption Notice shall have been given prior to, or on or
after, the date of exercise of such conversion right or optional redemption
right, as the case may be.
(c) No Other Optional Redemption. The shares of Series B Convertible
Preferred Stock shall not be subject to redemption at the option of the
Corporation except as provided in Sections 9(a) and 9(b).
Section 10. Conversion.
(a) Conversion at Option of Holder. The holders of the Series B Convertible
Preferred Stock may at any time on or after the Issuance Date convert at any
time all or from time to time any part of their shares of Series B Convertible
Preferred Stock into fully paid and nonassessable shares of Common Stock and
such other securities and property as herein provided. Each share of Series B
Convertible Preferred Stock may be converted at the office of the Conversion
Agent or at such other additional office or offices, if any, as the Board of
Directors may designate, into such number of fully paid and nonassessable shares
of Common Stock (calculated as to each conversion to the nearest 1/100th of a
share) determined by dividing (x) the sum of (i) the Conversion Amount, (ii) an
amount equal to the Accrual Amount on the share of Series B Convertible
Preferred Stock being converted to the applicable Conversion Date, and (iii)
accrued but unpaid interest on the dividends required to be paid in cash on the
share of Series B Convertible Preferred Stock being converted in arrears to the
applicable Conversion Date at the rate provided in Section 5 by (y) the
Conversion Price for such Conversion Date (the "Conversion Rate"); provided,
however, that in no event shall any holder of shares of Series B Convertible
Preferred Stock be entitled to convert any shares of Series B Convertible
Preferred Stock in excess of that number of shares of Series B Convertible
Preferred Stock upon conversion of which the sum of (1) the number of shares of
Common Stock beneficially owned by such holder and all Aggregated Persons of
such holder (other than shares of Common Stock deemed beneficially owned through
the ownership of (x) unconverted shares of Series B Convertible Preferred Stock
and (y) the unconverted or unexercised portion of any instrument, including
without limitation the Warrants, which contains limitations similar to those set
forth in this sentence) and (2) the number of shares of Common Stock issuable
upon the conversion of the number of shares of Series B Convertible Preferred
Stock with respect to which the determination in this proviso is being made,
<PAGE>
would result in beneficial ownership by such holder and all Aggregated Persons
of such holder of more than 4.9% of the outstanding shares of Common Stock. For
purposes of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and Regulation 13D-G thereunder, except as otherwise provided in clause (1)
of the proviso to the immediately preceding sentence.
(b) Other Provisions. (1) Notwithstanding anything in this Section 10(b) to
the contrary, no change in the Conversion Amount pursuant to this Section 10(b)
shall actually be made until the cumulative effect of the adjustments called for
by this Section 10(b) since the date of the last change in the Conversion Amount
would change the Conversion Amount by more than 1%. However, once the cumulative
effect would result in such a change, then the Conversion Amount shall actually
be changed to reflect all adjustments called for by this Section 10(b) and not
previously made. Notwithstanding anything in this Section 10(b), no change in
the Conversion Amount shall be made that would result in the price at which a
share of Series B Convertible Preferred Stock is converted being less than the
par value of the Common Stock into which shares of Series B Convertible
Preferred Stock are at the time convertible.
(2) The holders of shares of Series B Convertible Preferred Stock at the
close of business on the record date for any dividend payment to holders of
Series B Convertible Preferred Stock shall be entitled to receive the dividend
payable on such shares on the corresponding dividend payment date
notwithstanding the conversion thereof after such dividend payment record date
or the Corporation's default in payment of the dividend due on such dividend
payment date; provided, however, that the holder of shares of Series B
Convertible Preferred Stock surrendered for conversion during the period between
the close of business on any record date for a dividend payment and the opening
of business on the corresponding dividend payment date must pay to the
Corporation, within five days after receipt by such holder, an amount equal to
the dividend payable on such shares on such dividend payment date if such
dividend is paid by the Corporation to such holder. A holder of shares of Series
B Convertible Preferred Stock on a record date for a dividend payment who (or
whose transferee) tenders any of such shares for conversion into shares of
Common Stock on or after such dividend payment date will receive the dividend
payable by the Corporation on such shares of Series B Convertible Preferred
Stock on such date, and the converting holder need not make any payment of the
amount of such dividend in connection with such conversion of shares of Series B
Convertible Preferred Stock. Except as provided above, no adjustment shall be
made in respect of cash dividends on Common Stock or Series B Convertible
Preferred Stock that may be accrued and unpaid at the date of surrender of
shares of Series B Convertible Preferred Stock.
(3) (A) The right of the holders of Series B Convertible Preferred Stock to
convert their shares shall be exercised by giving (which may be done by
telephone line facsimile transmission) a Conversion Notice to the Conversion
Agent, with a copy to the Corporation. If a holder of Series B Convertible
Preferred Stock elects to convert any shares of Series B Convertible Preferred
Stock in accordance with Section 10(a), such holder shall not be required to
surrender the certificate(s) representing such shares of Series B Convertible
Preferred Stock to the Corporation unless all of the shares of Series B
Convertible Preferred Stock represented thereby are so converted. Each holder of
shares of Series B Convertible Preferred Stock and the Corporation shall
maintain records showing the number of shares so converted and the dates of such
conversions or shall use such other method, satisfactory to such holder and the
Corporation, so as to not require physical surrender of such certificates upon
each such conversion. In the event of any dispute or discrepancy, such records
<PAGE>
of the Corporation shall be controlling and determinative in the absence of
manifest error. Notwithstanding the foregoing, if any shares of Series B
Convertible Preferred Stock evidenced by a particular certificate therefor are
converted as aforesaid, the holder of Series B Convertible Preferred Stock may
not transfer the certificate(s) representing such shares of Series B Convertible
Preferred Stock unless such holder first physically surrenders such
certificate(s) to the Corporation, whereupon the Corporation will forthwith
issue and deliver upon the order of such holder of shares of Series B
Convertible Preferred Stock new certificate(s) of like tenor, registered as such
holder of shares of Series B Convertible Preferred Stock (upon payment by such
holder of shares of Series B Convertible Preferred Stock of any applicable
transfer taxes) may request, representing in the aggregate the remaining number
of shares of Series B Convertible Preferred Stock represented by such
certificate(s). Each holder of shares of Series B Convertible Preferred Stock,
by acceptance of a certificate for such shares, acknowledges and agrees that (1)
by reason of the provisions of this paragraph, following conversion of any
shares of Series B Convertible Preferred Stock represented by such certificate,
the number of shares of Series B Convertible Preferred Stock represented by such
certificate may be less than the number of shares stated on such certificate,
and (2) the Corporation may place a legend on the certificates for shares of
Series B Convertible Preferred Stock which refers to or describes the provisions
of this paragraph.
(B) The Corporation shall pay any transfer tax arising in connection with
any conversion of shares of Series B Convertible Preferred Stock except that the
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery upon conversion of
shares of Common Stock or other securities or property in a name other than that
of the holder of the shares of the Series B Convertible Preferred Stock being
converted, and the Corporation shall not be required to issue or deliver any
such shares or other securities or property unless and until the person or
persons requesting the issuance thereof shall have paid to the Corporation the
amount of any such tax or shall have established to the satisfaction of the
Corporation that such tax has been paid. The number of shares of Common Stock to
be issued upon each conversion of shares of Series B Convertible Preferred Stock
shall be the number set forth in the applicable Conversion Notice which number
shall be conclusive absent manifest error. The Corporation shall notify a holder
who has given a Conversion Notice of any claim of manifest error within one
Trading Day after such holder gives such Conversion Notice and no such claim of
error shall limit or delay performance of the Corporation's obligation to issue
upon such conversion the number of shares of Common Stock which are not in
dispute. A Conversion Notice shall be deemed for all purposes to be in proper
form unless the Corporation notifies a holder of shares of Series B Convertible
Preferred Stock being converted within one Trading Day after a Conversion Notice
has been given (which notice shall specify all defects in the Conversion Notice)
and any Conversion Notice containing any such defect shall nonetheless be
effective on the date given if the converting holder promptly corrects all such
defects.
(4) The Corporation (and any successor corporation) shall take all action
necessary so that a number of shares of the authorized but unissued Common Stock
(or common stock in the case of any successor corporation) sufficient to provide
for the conversion of the Series B Convertible Preferred Stock outstanding upon
the basis hereinbefore provided are at all times reserved by the Corporation (or
any successor corporation), free from preemptive rights, for such conversion,
subject to the provisions of the next succeeding paragraph. If the Corporation
shall issue any securities or make any change in its capital structure which
would change the number of shares of Common Stock into which each share of the
<PAGE>
Series B Convertible Preferred Stock shall be convertible as herein provided,
the Corporation shall at the same time also make proper provision so that
thereafter there shall be a sufficient number of shares of Common Stock
authorized and reserved, free from preemptive rights, for conversion of the
outstanding Series B Convertible Preferred Stock on the new basis. If at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all of the outstanding shares of Series B
Convertible Preferred Stock, the Corporation promptly shall seek, and use its
best efforts to obtain and complete, such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
(5) In case of any consolidation or merger of the Corporation with any
other corporation (other than a wholly-owned subsidiary of the Corporation) in
which the Corporation is not the surviving corporation, or in case of any sale
or transfer of all or substantially all of the assets of the Corporation, or in
the case of any share exchange pursuant to which all of the outstanding shares
of Common Stock are converted into other securities or property, the Corporation
shall make appropriate provision or cause appropriate provision to be made so
that each holder of shares of Series B Convertible Preferred Stock then
outstanding shall have the right thereafter to convert such shares of Series B
Convertible Preferred Stock into the kind of shares of stock and other
securities and property receivable upon such consolidation, merger, sale,
transfer, or share exchange by a holder of shares of Common Stock into which
such shares of Series B Convertible Preferred Stock could have been converted
immediately prior to the effective date of such consolidation, merger, sale,
transfer, or share exchange and on a basis which preserves the economic benefits
of the conversion rights of the holders of shares of Series B Convertible
Preferred Stock on a basis as nearly as practical as such rights exist hereunder
prior thereto. If, in connection with any such consolidation, merger, sale,
transfer, or share exchange, each holder of shares of Common Stock is entitled
to elect to receive securities, cash, or other assets upon completion of such
transaction, the Corporation shall provide or cause to be provided to each
holder of Series B Convertible Preferred Stock the right to elect the
securities, cash, or other assets into which the Series B Convertible Preferred
Stock held by such holder shall be convertible after completion of any such
transaction on the same terms and subject to the same conditions applicable to
holders of the Common Stock (including, without limitation, notice of the right
to elect, limitations on the period in which such election shall be made, and
the effect of failing to exercise the election). The Corporation shall not
effect any such transaction unless the provisions of this paragraph have been
complied with. The above provisions shall similarly apply to successive
consolidations, mergers, sales, transfers, or share exchanges.
(6) If a holder shall have given a Conversion Notice for shares of Series B
Convertible Preferred Stock, the Corporation shall issue and deliver to such
person certificates for the Common Stock issuable upon such conversion within
three Trading Days after such Conversion Notice is given and the person
converting shall be deemed to be the holder of record of the Common Stock
issuable upon such conversion, and all rights with respect to the shares
surrendered shall forthwith terminate except the right to receive the Common
Stock or other securities, cash, or other assets as herein provided. If a holder
shall have given a Conversion Notice as provided herein, the Corporation's
obligation to issue and deliver the certificates for Common Stock shall be
absolute and unconditional, irrespective of any action or inaction by the
converting holder to enforce the same, any waiver or consent with respect to any
provision thereof, the recovery of any judgment against any person or any action
to enforce the same, any failure or delay in the enforcement of any other
obligation of the Corporation to such holder, or any setoff, counterclaim,
<PAGE>
recoupment, limitation or termination, or any breach or alleged breach by such
holder or any other person of any obligation to the Corporation or any violation
or alleged violation of law by such holder or any other person, and irrespective
of any other circumstance which might otherwise limit such obligation of the
Corporation to the holder in connection with such conversion. If the Corporation
fails to issue and deliver the certificates for the Common Stock to the holder
converting shares of Series B Convertible Preferred Stock pursuant to the first
sentence of this paragraph within three Trading Days after such Conversion
Notice is given, in addition to any other liabilities the Corporation may have
hereunder and under applicable law (1) the Corporation shall pay or reimburse
such holder on demand for all out-of-pocket expenses including, without
limitation, reasonable fees and expenses of legal counsel incurred by such
holder as a result of such failure, (2) for each Trading Day thereafter on which
the Corporation so fails to deliver such certificates, the Conversion Price
applicable to such conversion shall be reduced by an amount equal to one percent
of the amount that the Conversion Price would otherwise be, and (3) such holder
may by written notice (which may be given by mail, courier, personal service or
telephone line facsimile transmission) or oral notice (promptly confirmed in
writing) given at any time prior to delivery to such holder of the certificates
for the shares of Common Stock issuable upon such conversion of shares of Series
B Convertible Preferred Stock, rescind such conversion, whereupon such holder
shall have the right to convert such shares of Series B Convertible Preferred
Stock thereafter in accordance herewith.
(7) No fractional shares of Common Stock shall be issued upon conversion of
Series B Convertible Preferred Stock but, in lieu of any fraction of a share of
Common Stock to purchase fractional shares of Common Stock which would otherwise
be issuable in respect of the aggregate number of such shares surrendered for
conversion at one time by the same holder, the Corporation shall pay in cash an
amount equal to the product of (i) the arithmetic average of the Market Price of
one share of Common Stock on the three consecutive Trading Days ending on the
Trading Day immediately preceding the Conversion Date times (ii) such fraction
of a share.
(8) The Conversion Amount shall be adjusted from time to time under certain
circumstances, subject to the provisions of Section 10(b)(1), as follows:
(i) In case the Corporation shall issue rights or warrants on a pro rata
basis to all holders of the Common Stock entitling such holders to subscribe for
or purchase Common Stock on the record date referred to below at a price per
share less than the Current Price for such record date, then in each such case
the Conversion Amount in effect on such record date shall be adjusted in
accordance with the following formula:
C1 = C x O + N
------
O + N x P
-----
M
where
C1 = the adjusted Conversion Amount
C = the current Conversion Amount
O = the number of shares of Common Stock outstanding on the record
date.
<PAGE>
N = the number of additional shares of Common Stock issuable
pursuant to the exercise of such rights or warrants.
P = the offering price per share of the additional shares (which
amount shall include amounts received by the Corporation in
respect of the issuance and the exercise of such rights or
warrants).
M = the Current Price per share of Common Stock on the record date.
Such adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants. If
any or all such rights or warrants are not so issued or expire or terminate
before being exercised, the Conversion Amount then in effect shall be readjusted
appropriately.
(ii) In case the Corporation shall, by dividend or otherwise, distribute to
all holders of its Junior Stock (as hereinafter defined) evidences of its
indebtedness or assets (including securities, but excluding any warrants or
subscription rights referred to in subparagraph (i) above and any dividend or
distribution paid in cash out of the retained earnings of the Corporation), then
in each such case the Conversion Amount then in effect shall be adjusted in
accordance with the formula
C1 = C x M
-----
M - F
where
C1 = the adjusted Conversion Amount
C = the current Conversion Amount
M = the Current Price per share of Common Stock on the record date
mentioned below.
F = the aggregate amount of such cash dividend and/or the fair
market value on the record date of the assets or securities to be
distributed divided by the number of shares of Common Stock
outstanding on the record date. The Board of Directors shall
determine such fair market value, which determination shall be
conclusive.
Such adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution.
For purposes of this subparagraph (ii), "Junior Stock" shall include any class
of capital stock ranking junior as to dividends or upon liquidation to the
Series B Convertible Preferred Stock.
(iii) All calculations hereunder shall be made to the nearest cent or to
the nearest 1/100 of a share, as the case may be.
(iv) If at any time as a result of an adjustment made pursuant to Section
10(b)(5), the holder of any Series B Convertible Preferred Stock thereafter
surrendered for conversion shall become entitled to receive securities, cash, or
<PAGE>
assets other than Common Stock, the number or amount of such securities or
property so receivable upon conversion shall be subject to adjustment from time
to time in a manner and on terms nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in subparagraphs (i) to
(iii) above.
(9) Except as otherwise provided above in this Section 10, no adjustment in
the Conversion Amount shall be made in respect of any conversion for share
distributions or dividends theretofore declared and paid or payable on the
Common Stock.
(10) Whenever the Conversion Amount is adjusted as herein provided, the
Corporation shall send to each holder and each transfer agent, if any, for the
Series B Convertible Preferred Stock and the transfer agent for the Common
Stock, a statement signed by the Chairman of the Board, the President, or any
Vice President of the Corporation and by its Treasurer or its Secretary or an
Assistant Secretary stating the adjusted Conversion Amount determined as
provided in this Section 10, and any adjustment so evidenced, given in good
faith, shall be binding upon all stockholders and upon the Corporation. Whenever
the Conversion Amount is adjusted, the Corporation will give notice by mail to
the holders of record of Series B Convertible Preferred Stock, which notice
shall be made within 15 days after the effective date of such adjustment and
shall state the adjustment and the Conversion Amount. Notwithstanding the
foregoing notice provisions, failure by the Corporation to give such notice or a
defect in such notice shall not affect the binding nature of such corporate
action of the Corporation.
(11) Whenever the Corporation shall propose to take any of the actions
specified in Section 10(b)(5) or in subparagraphs (i) or (ii) of Section
10(b)(8) which would result in any adjustment in the Conversion Amount under
this Section 10(b), the Corporation shall cause a notice to be mailed at least
20 days prior to the date on which the books of the Corporation will close or on
which a record will be taken for such action, to the holders of record of the
outstanding Series B Convertible Preferred Stock on the date of such notice.
Such notice shall specify the action proposed to be taken by the Corporation and
the date as of which holders of record of the Common Stock shall participate in
any such actions or be entitled to exchange their Common Stock for securities or
other property, as the case may be. Failure by the Corporation to mail the
notice or any defect in such notice shall not affect the validity of the
transaction.
(c) Notice to Holder Prior to Certain Actions. In case on or after the
Issuance Date:
(i) the Corporation shall declare a dividend (or any other
distribution) on its Common Stock (other than in cash out of retained
earnings); or
(ii) the Corporation shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any
share of any class or any other rights or warrants; or
(iii) the Board of Directors shall authorize any reclassification of
the Common Stock (other than a subdivision or combination of its
outstanding Common Stock, or a change in par value, or from par value to no
par value, or from no par value to par value), or any consolidation or
merger or other business combination transaction to which the Corporation
<PAGE>
is a party and for which approval of any stockholders of the Corporation is
required, or the sale or transfer of all or substantially all of the assets
of the Corporation; or
(iv) there shall be pending the voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation;
the Corporation shall give the Holders as promptly as possible but in any event
at least ten Trading Days prior to the applicable date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined, or (y) the date
on which such reclassification, consolidation, merger, other business
combination transaction, sale, transfer, dissolution, liquidation or winding-up
is expected to become effective or occur, and the date as of which it is
expected that holders of Common Stock of record who shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, other business combination
transaction, sale, transfer, dissolution, liquidation or winding-up shall be
determined. Such notice shall not include any information which would be
material non-public information for purposes of the 1934 Act. Failure to give
such notice, or any defect therein, shall not affect the legality or validity of
such dividend, distribution, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up. In the case of any such action
of which the Corporation gives such notice to the Holders or is required to give
such notice to the Holders, the Holders shall be entitled to give a Conversion
Notice which is contingent on the completion of such action.
Section 11. Redemption at Option of Holders.
(a) Redemption Right. If an Optional Redemption Event occurs, then, in
addition to any other right or remedy of any holder of shares of Series B
Convertible Preferred Stock, each holder of shares of Series B Convertible
Preferred Stock shall have the right, at such holder's option, to require the
Corporation to redeem all of such holder's shares of Series B Convertible
Preferred Stock, or any portion thereof, on the date which is five Business Days
after the date such holder gives the Corporation an Optional Redemption Notice
with respect to such Optional Redemption Event at any time while any of such
holder's shares of Series B Convertible Preferred Stock are outstanding, at a
price equal to the Optional Redemption Price.
(b) Notices; Method of Exercising Optional Redemption Rights, Etc. (1) On
or before the fifth Business Day after the occurrence of an Optional Redemption
Event, the Corporation shall give to each holder of outstanding shares of Series
B Convertible Preferred Stock a notice of the occurrence of such Optional
Redemption Event and of the redemption right set forth herein arising as a
result thereof. Such notice from the Corporation shall set forth:
(i) the date by which the optional redemption right must be exercised, and
(ii) a description of the procedure (set forth below) which each such
holder must follow to exercise such holder's optional redemption right.
No failure of the Corporation to give such notice or defect therein shall limit
the right of any holder of shares of Series B Convertible Preferred Stock to
exercise the optional redemption right or affect the validity of the proceedings
<PAGE>
for the redemption of such holder's shares of Series B Convertible Preferred
Stock.
(2) To exercise its optional redemption right, each holder of outstanding
shares of Series B Convertible Preferred Stock shall deliver to the Corporation
on or before the 30th day after the notice required by Section 11(b)(1) is given
to such holder (or if no such notice has been given by the Corporation to such
holder, within 40 days after such holder first learns of such Optional
Redemption Event) an Optional Redemption Notice to the Corporation. An Optional
Redemption Notice may be revoked by such holder giving such Optional Redemption
Notice by giving notice of such revocation to the Corporation at any time prior
to the time the Corporation pays the Optional Redemption Price to such holder.
(3) If a holder of shares of Series B Convertible Preferred Stock shall
have given an Optional Redemption Notice, on the date which is five Business
Days after the date such Optional Redemption Notice is given (or such later date
as such holder surrenders such holder's certificates for the shares of Series B
Convertible Preferred Stock to be redeemed) the Corporation shall make payment
in immediately available funds of the applicable Optional Redemption Price to
such account as specified by such holder in writing to the Corporation at least
one Business Day prior to the applicable redemption date.
(4) Notwithstanding any other provision of this Certificate of
Designations, if an Optional Redemption Event occurs by reason of events which
are not solely within the control of the Corporation, the Corporation shall have
the right to give a Control Notice to the holders of shares of Series B
Convertible Preferred Stock at any time after such Optional Redemption Event
occurs and prior to the earlier of (1) the date on which all holders of shares
of Series B Convertible Preferred Stock who had the right (other than as limited
by this Section 11(b)(4)) to require redemption of any shares of Series B
Convertible Preferred Stock by reason of the occurrence of such Optional
Redemption Event no longer have such right and (2) the applicable redemption
date by reason of the earliest Optional Redemption Notice given by any holder of
shares of Series B Convertible Preferred Stock by reason of such Optional
Redemption Event. If the Corporation timely gives such Control Notice to the
holders of shares of Series B Convertible Preferred Stock, then in lieu of
payment of the Optional Redemption Price by reason of any such Optional
Redemption Event and commencing on the first date on which such Optional
Redemption Event occurs the following adjustments shall take effect (subject to
the provisions of Section 7(a)(5)(B)):
(A) In the case of an Optional Redemption Event described in clauses
(1), (2), (3), (4) or (6) of the definition of the term Optional Redemption
Event, for so long as such Optional Redemption Event continues and for a
period of 60 days thereafter the Conversion Price will be 70% of the amount
which the Conversion Price would otherwise be.
(B) In the case of an Optional Redemption Event described in clause
(5) of the definition of the term Optional Redemption Event, for so long as
any shares of Preferred Stock are outstanding the Conversion Price will be
70% of the amount which the Conversion Price would otherwise be.
For purposes of the Control Notice given pursuant to this Section 11(b)(4), an
Optional Redemption Event shall be deemed to have occurred by reason of events
which are not solely within the control of the Corporation if a requirement of
the Corporation to redeem, or a right of any holder of shares of Series B
<PAGE>
Convertible Preferred Stock to require redemption of, shares of Series B
Convertible Preferred Stock by reason thereof would result in the Corporation
being required to classify the Series B Convertible Preferred Stock as
redeemable preferred stock on a balance sheet of the Corporation prepared in
accordance with Generally Accepted Accounting Principles and Regulation S-X of
the SEC, and, in the case of an Optional Redemption Event described in clause
(5) of the definition of the term Optional Redemption Event, the Board or the
stockholders of the Corporation do not have the right to approve or disapprove
the transactions resulting in such event.
(c) Other. (1) In connection with a redemption pursuant to this Section 11
of less than all of the shares of Series B Convertible Preferred Stock evidenced
by a particular certificate, promptly, but in no event later than three Business
Days after surrender of such certificate to the Corporation, the Corporation
shall issue and deliver to such holder a replacement certificate for the shares
of Series B Convertible Preferred Stock evidenced by such certificate which have
not been redeemed.
(2) An Optional Redemption Notice given by a holder of shares of Series B
Convertible Preferred Stock shall be deemed for all purposes to be in proper
form unless the Corporation notifies such holder in writing within three
Business Days after such Optional Redemption Notice has been given (which notice
shall specify all defects in such Optional Redemption Notice), and any Optional
Redemption Notice containing any such defect shall nonetheless be effective on
the date given if such holder promptly undertakes to correct all such defects.
No such claim of error shall limit or delay performance of the Corporation's
obligation to redeem all shares of Series B Convertible Preferred Stock not in
dispute whether or not such holder makes such undertaking.
Section 12. Voting Rights; Certain Restrictions.
(a) Voting Rights. Except as otherwise required by law or expressly
provided herein, shares of Series B Convertible Preferred Stock shall not be
entitled to vote on any matter.
(b) Certificate of Incorporation; Certain Stock. The affirmative vote or
consent of the Majority Holders, voting separately as a class, will be required
for (1) any amendment, alteration, or repeal, whether by merger or consolidation
or otherwise, of the Corporation's Certificate of Incorporation if the
amendment, alteration, or repeal materially and adversely affects the powers,
preferences, or special rights of the Series B Convertible Preferred Stock, or
(2) the creation and issuance of any Senior Dividend Stock or Senior Liquidation
Stock; provided, however, that any increase in the authorized Preferred Stock of
the Corporation or the creation and issuance of any stock which is both Junior
Dividend Stock and Junior Liquidation Stock shall not be deemed to affect
materially and adversely such powers, preferences, or special rights and any
such increase or creation and issuance may be made without any such vote by the
holders of Series B Convertible Preferred Stock except as otherwise required by
law.
(c) Repurchases of Series B Convertible Preferred Stock. The Corporation
shall not repurchase or otherwise acquire any shares of Series B Convertible
Preferred Stock (other than pursuant to Sections 7(a), 9(a), 9(b) or 11) unless
the Corporation offers to repurchase or otherwise acquire simultaneously a pro
rata portion of each holder's shares of Series B Convertible Preferred Stock for
cash at the same price per share.
<PAGE>
(d) Other. So long as any shares of Series B Convertible Preferred Stock
are outstanding:
(1) Payment of Obligations. The Corporation will pay and discharge, and
will cause each subsidiary of the Corporation to pay and discharge, when due all
their respective obligations and liabilities which are material to the
Corporation and its subsidiaries taken as a whole, including, without
limitation, tax liabilities, except where the same may be contested in good
faith by appropriate proceedings.
(2) Maintenance of Property; Insurance. (A) The Corporation will keep, and
will cause each subsidiary of the Corporation to keep, all material property
useful and necessary in its business in good working order and condition,
ordinary wear and tear excepted.
(B) The Corporation will maintain, and will cause each subsidiary of the
Corporation to maintain, with financially sound and responsible insurance
companies, insurance against loss or damage by fire or other casualty and such
other insurance, including but not limited to, product liability insurance, in
such amounts and covering such risks as is reasonably adequate for the conduct
of their businesses and the value of their properties.
(3) Conduct of Business and Maintenance of Existence. The Corporation will
continue, and will cause each subsidiary of the Corporation to continue, to
engage in business of the same general type as conducted by the Corporation and
its operating subsidiaries at the time this Certificate of Designations is filed
with the Secretary of State of the State of Delaware, and will preserve, renew
and keep in full force and effect, and will cause each subsidiary of the
Corporation to preserve, renew and keep in full force and effect, their
respective corporate existence and their respective material rights, privileges
and franchises necessary or desirable in the normal conduct of business.
(4) Compliance with Laws. The Corporation will comply, and will cause each
subsidiary of the Corporation to comply, in all material respects with all
applicable laws, ordinances, rules, regulations, decisions, orders and
requirements of governmental authorities and courts (including, without
limitation, environmental laws) except (i) where compliance therewith is
contested in good faith by appropriate proceedings or (ii) where non-compliance
therewith could not reasonably be expected to have a material adverse effect on
the business, condition (financial or otherwise), operations, performance,
properties or prospects of the Corporation and its subsidiaries taken as a
whole.
(5) Investment Company Act. The Corporation will not be or become an
open-end investment trust, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act of 1940, as amended, or any successor provision.
(6) Transactions with Affiliates. The Corporation will not, and will not
permit any subsidiary of the Corporation, directly or indirectly, to pay any
funds to or for the account of, make any investment (whether by acquisition of
stock or indebtedness, by loan, advance, transfer of property, guarantee or
other agreement to pay, purchase or service, directly or indirectly, any
indebtedness, or otherwise) in, lease, sell, transfer or otherwise dispose of
any assets, tangible or intangible, to, or participate in, or effect any
transaction in connection with, any joint enterprise or other joint arrangement
with, any Affiliate of the Corporation, except, on terms to the Corporation or
<PAGE>
such subsidiary no less favorable than terms that could be obtained by the
Corporation or such subsidiary from a person that is not an Affiliate of the
Corporation, as determined in good faith by the Board of Directors.
Section 13. Outstanding Shares. For purposes of this Certificate of
Designations, all authorized and issued shares of Series B Convertible Preferred
Stock shall be deemed outstanding except (i) from the applicable Conversion
Date, each share of Series B Convertible Preferred Stock converted into Common
Stock, unless the Corporation shall default in its obligation to issue and
deliver shares of Common Stock upon such conversion as and when required by
Section 10; (ii) from the date of registration of transfer, all shares of Series
B Convertible Preferred Stock held of record by the Corporation or any
subsidiary or Affiliate of the Corporation (other than any original holder of
shares of Series B Convertible Preferred Stock) and (iii) from the applicable
Redemption Date, Share Limitation Redemption Date, Final Redemption Date or date
of redemption pursuant to Section 11, all shares of Series B Convertible
Preferred Stock which are redeemed or repurchased, so long as in each case the
Redemption Price, the Share Limitation Redemption Price, the Final Redemption
Price, the Optional Redemption Price or other repurchase price, as the case may
be, of such shares of Series B Convertible Preferred Stock shall have been paid
by the Corporation as and when due hereunder.
Section 14. Miscellaneous.
(a) Notices. Any notices required or permitted to be given under the terms
of this Certificate of Designations shall be in writing and shall be delivered
personally (which shall include telephone line facsimile transmission) or by
courier and shall be deemed given upon receipt, if delivered personally or by
courier (a) in the case of the Corporation, addressed to the Corporation at 3146
Gold Camp Drive, Rancho Cordova, California 95670, Attention: Chief Executive
Officer (telephone line facsimile transmission number (916) 858-8728), or (b) in
the case of any holder of shares of Series B Convertible Preferred Stock, at
such holder's address or telephone line facsimile transmission number shown on
the stock books maintained by the Corporation with respect to the Series B
Convertible Preferred Stock or such other address as the Corporation shall have
provided by notice to the holders of shares of Series B Convertible Preferred
Stock in accordance with this Section or any holder of shares of Series B
Convertible Preferred Stock shall have provided to the Corporation in accordance
with this Section.
(b) Replacement of Certificates. Upon receipt by the Corporation of
evidence reasonably satisfactory to the Corporation of the ownership of and the
loss, theft, destruction or mutilation of any certificate for shares of Series B
Convertible Preferred Stock and (1) in the case of loss, theft or destruction,
of indemnity from the record holder of the certificate for such shares of Series
B Convertible Preferred Stock reasonably satisfactory in form to the Corporation
(and without the requirement to post any bond or other security) or (2) in the
case of mutilation, upon surrender and cancellation of the certificate for such
shares of Series B Convertible Preferred Stock, the Corporation will execute and
deliver to such holder a new certificate for such shares of Series B Convertible
Preferred Stock without charge to such holder.
(c) Overdue Amounts. Except as otherwise specifically provided in Section 5
with respect to dividends in arrears on the Series B Convertible Preferred
Stock, whenever any amount which is due to any holder of shares of Series B
Convertible Preferred Stock is not paid to such holder when due, such amount
shall bear interest at the rate of 14% per annum (or such other rate as shall be
the maximum rate allowable by applicable law) until paid in full.
<PAGE>
IN WITNESS WHEREOF, ThermoGenesis Corp. has caused this
Certificate of Designations to be signed by , its , as of the ____ day of
December, 1999.
THERMOGENESIS CORP.
By:
-----------------
Title:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE RESOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR AN OPINION OF COUNSEL THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT.
Right to Purchase Shares of
Common Stock of ThermoGenesis Corp.
THERMOGENESIS CORP.
Common Stock Purchase Warrant
No. W-
THERMOGENESIS CORP., a Delaware corporation (the "Company"),
hereby certifies that, for value received, [NAME OF HOLDER] or registered
assigns (the "Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company at any time or from time to time after the date
hereof, and before 5:00 p.m., New York City time, on the Expiration Date (such
capitalized term and all other capitalized terms used herein having the meanings
provided herein), fully paid and nonassessable shares of Common Stock at a
purchase price per share equal to the Purchase Price. The number of such shares
of Common Stock and the Purchase Price are subject to adjustment as provided in
this Warrant.
As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
"Common Stock" includes the Company's Common Stock, $.001 par
value per share, as authorized on the date hereof, and any other
securities into which or for which the Common Stock may be converted or
exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
"Company" shall include ThermoGenesis Corp., a Delaware
corporation, and any corporation that shall succeed to or assume the
obligations of ThermoGenesis Corp. hereunder in accordance with the
terms hereof.
"Expiration Date" means December 22, 2004.
"Issuance Date" means the first date of original issuance of
this Warrant.
"1934 Act" means the Securities Exchange Act of 1934, as
amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person
(corporate or otherwise) which the Holder at any time shall be entitled
to receive, or shall have received, on the exercise of this Warrant, in
lieu of or in addition to Common Stock, or which at any time shall be
issuable or shall have been issued in exchange for or in replacement of
<PAGE>
Common Stock or Other Securities pursuant to Section 4.
"Purchase Price" shall mean $2.72628 per share, subject to
adjustment as provided in this Warrant.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of December 22, 1999 by and between the Company and
the original Holder of this Warrant, as amended from time to time in
accordance with its terms.
"Subscription Agreement" means the Subscription Agreement,
dated as of December 22, 1999, by and between the Company and the
original Holder of this Warrant, as amended from time to time in
accordance with its terms.
"Trading Day" means a day on which the principal securities
market for the Common Stock is open for general trading of securities.
1. Exercise of Warrant.
1.1 Exercise. (a) Subject to the limitation on exercise in
Section 1.1(b), this Warrant may be exercised by the Holder hereof in full or in
part at any time or from time to time during the exercise period specified in
the first paragraph hereof until the Expiration Date by surrender of this
Warrant and the subscription form annexed hereto (duly executed by the Holder),
to the Company's transfer agent and registrar for the Common Stock, with a copy
to the Company, and by making payment, in cash or by certified or official bank
check payable to the order of the Company, in the amount obtained by multiplying
(a) the number of shares of Common Stock designated by the Holder in the
subscription form by (b) the Purchase Price then in effect. On any partial
exercise the Company will forthwith issue and deliver to or upon the order of
the Holder hereof a new Warrant or Warrants of like tenor, in the name of the
Holder hereof or as the Holder (upon payment by the Holder of any applicable
transfer taxes) may request, providing in the aggregate on the face or faces
thereof for the purchase of the number of shares of Common Stock for which such
Warrant or Warrants may still be exercised.
(b) Notwithstanding any other provision of this Warrant, in no
event shall the Holder be entitled at any time to purchase a number of shares of
Common Stock on exercise of this Warrant in excess of that number of shares upon
purchase of which the sum of (1) the number of shares of Common Stock
beneficially owned by the Holder and all persons whose beneficial ownership of
shares of Common Stock would be aggregated with the Holder's beneficial
ownership of shares of Common Stock for purposes of Section 13(d) of the 1934
Act and Regulation 13D-G thereunder, (each such person other than the Holder an
"Aggregated Person" and all such persons other than the Holder, collectively,
the "Aggregated Persons") (other than shares of Common Stock deemed beneficially
owned through the ownership by the Holder and all Aggregated Persons of the
Holder of the unexercised portion of this Warrant and the unexercised or
unconverted portion of any other security of the Company which contains similar
provisions) and (2) the number of shares of Common Stock issuable upon exercise
of the portion of this Warrant with respect to which the determination in this
sentence is being made, would result in beneficial ownership by the Holder and
all Aggregated Persons of the Holder of more than 4.9% of the outstanding shares
of Common Stock. For purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the 1934 Act
<PAGE>
and Regulation 13D-G thereunder, except as otherwise provided in clause (1) of
the immediately preceding sentence.
1.2 Net Issuance. Notwithstanding anything to the contrary
contained in Section 1.1, the Holder may elect to exercise this Warrant in whole
or in part by receiving shares of Common Stock equal to the net issuance value
(as determined below) of this Warrant, or any part hereof, upon surrender of
this Warrant to the Company's transfer agent and registrar for the Common Stock
together with the subscription form annexed hereto (duly executed by the
Holder), in which event the Company shall issue to the Holder a number of shares
of Common Stock computed using the following formula:
X = Y (A-B)
--------
A
where:
X = the number of shares of Common Stock to be issued to the Holder
Y = the number of shares of Common Stock as to which this Warrant
is to be exercised
A = the current fair market value of one share of Common Stock
calculated as of the last Trading Day immediately preceding the
exercise of this Warrant
B = the Purchase Price
As used herein, current fair market value of Common Stock as
of a specified date shall mean with respect to each share of Common Stock the
closing sale price of the Common Stock on the principal securities market on
which the Common Stock may at the time be listed or, if there have been no sales
on any such exchange on such day, the average of the highest bid and lowest
asked prices on the principal securities market at the end of such day, or, if
on such day the Common Stock is not so listed, the average of the representative
bid and asked prices quoted in the Nasdaq System as of 4:00 p.m., New York City
time, or, if on such day the Common Stock is not quoted in the Nasdaq System,
the average of the highest bid and lowest asked price on such day in the
domestic over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case averaged
over a period of five consecutive Trading Days consisting of the day as of which
the current fair market value of a share of Common Stock is being determined (or
if such day is not a Trading Day, the Trading Day next preceding such day) and
the four consecutive Trading Days prior to such day. If on the date for which
current fair market value is to be determined the Common Stock is not listed on
any securities exchange or quoted in the Nasdaq System or the over-the-counter
market, the current fair market value of Common Stock shall be the highest price
per share which the Company could then obtain from a willing buyer (not a
current employee or director) for shares of Common Stock sold by the Company,
from authorized but unissued shares, as determined in good faith by the Board of
Directors of the Company, unless prior to such date the Company has become
subject to a merger, acquisition or other consolidation pursuant to which the
Company is not the surviving party, in which case the current fair market value
of the Common Stock shall be deemed to be the value received by the holders of
the Company's Common Stock for each share thereof pursuant to the Company's
acquisition.
<PAGE>
2. Delivery of Stock Certificates, etc., on Exercise. As soon
as practicable after the exercise of this Warrant, and in any event within three
Trading Days thereafter, the Company at its expense (including the payment by it
of any applicable issue or stamp taxes) will cause to be issued in the name of
and delivered to the Holder hereof, or as the Holder (upon payment by the Holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of fully paid and nonassessable shares of Common Stock (or Other
Securities) to which the Holder shall be entitled on such exercise, in such
denominations as may be requested by the Holder, plus, in lieu of any fractional
share to which the Holder would otherwise be entitled, cash equal to such
fraction multiplied by the then current fair market value (as determined in
accordance with subsection 1.2) of one full share, together with any other stock
or other securities and property (including cash, where applicable) to which the
Holder is entitled upon such exercise pursuant to Section 1 or otherwise. Upon
exercise of this Warrant as provided herein, the Company's obligation to issue
and deliver the certificates for Common Stock shall be absolute and
unconditional, irrespective of the absence of any action by the Holder to
enforce the same, any waiver or consent with respect to any provision thereof,
the recovery of any judgment against any person or any action to enforce the
same, any failure or delay in the enforcement of any other obligation of the
Company to the Holder, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by the Holder or any other person
of any obligation to the Company, and irrespective of any other circumstance
which might otherwise limit such obligation of the Company to the Holder in
connection with such exercise. If the Company fails to issue and deliver the
certificates for the Common Stock to the Holder pursuant to the first sentence
of this paragraph as and when required to do so, in addition to any other
liabilities the Company may have hereunder and under applicable law, the Company
shall pay or reimburse the Holder on demand for all out-of-pocket expenses
including, without limitation, reasonable fees and expenses of legal counsel
incurred by the Holder as a result of such failure.
3. Adjustment for Dividends in Other Stock, Property, etc.;
Reclassification, etc. In case at any time or from time to time after the
Issuance Date, all the holders of Common Stock (or Other Securities) shall have
received, or (on or after the record date fixed for the determination of
stockholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or property
(other than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of
earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which are provided
for in Section 5), then and in each such case the Holder, on the exercise hereof
as provided in Section 1, shall be entitled to receive the amount of stock and
other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this Section 3) which the Holder would hold on the
date of such exercise if on the date thereof the Holder had been the holder of
<PAGE>
record of the number of shares of Common Stock called for on the face of this
Warrant and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and all such other or
additional stock and other securities and property (including cash in the case
referred to in subdivisions (b) and (c) of this Section 3) receivable by the
Holder as aforesaid during such period, giving effect to all adjustments called
for during such period by Section 4. Notwithstanding anything in this Section 3
to the contrary, no adjustments pursuant to this Section 3 shall actually be
made until the cumulative effect of the adjustments called for by this Section 3
since the date of the last adjustment actually made would change the amount of
stock or other securities and property which the Holder would hold by more than
1%.
4. Exercise upon Reorganization, Consolidation, Merger, etc.
In case at any time or from time to time after the Issuance Date, the Company
shall (a) effect a reorganization, (b) consolidate with or merge into any other
person, (c) effect an exchange of outstanding shares of the Company for
securities of any other person or (d) transfer all or substantially all of its
properties or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company, then, in each such case, as a
condition of such reorganization, consolidation, merger, share exchange, sale or
conveyance, (i) the Company shall give at least 30 days notice to the Holder of
such pending transaction whereby the Holder shall have the right to exercise
this Warrant prior to any such reorganization, consolidation, merger, share
exchange, sale or conveyance and (ii) if the Holder does not so exercise this
Warrant in full, the Company shall cause effective provisions to be made so that
the Holder shall have the right thereafter, by exercising this Warrant (in lieu
of the shares of Common Stock of the Company purchasable and receivable upon
exercise of the rights represented hereby immediately prior to such transaction)
to purchase the kind and amount of shares of stock and other securities and
property (including cash) receivable upon such reorganization, consolidation,
merger, share exchange, sale or conveyance by a holder of the number of shares
of Common Stock that might have been received upon exercise of this Warrant
immediately prior to such reorganization, consolidation, merger, share exchange,
sale or conveyance. Any exercise of this Warrant pursuant to notice under this
Section shall be conditioned upon the closing of such reorganization,
consolidation, merger, sale or conveyance which is the subject of the notice and
the exercise of this Warrant shall not be deemed to have occurred until
immediately prior to the closing of such transaction.
5. Adjustment for Extraordinary Events. In the event that
after the Issuance Date the Company shall (i) issue additional shares of Common
Stock as a dividend or other distribution on outstanding Common Stock, (ii)
subdivide or reclassify its outstanding shares of Common Stock, or (iii) combine
its outstanding shares of Common Stock into a smaller number of shares of Common
Stock, then, in each such event, the Purchase Price shall, simultaneously with
the happening of such event, be adjusted by multiplying the Purchase Price in
effect immediately prior to such event by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such event and the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such event, and the product so obtained
shall thereafter be the Purchase Price then in effect. The Purchase Price, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 5. The Holder shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive that number of shares of Common Stock determined by multiplying the
number of shares of Common Stock which would be issuable on such exercise
immediately prior to such issuance by a fraction of which (i) the numerator is
the Purchase Price in effect immediately prior to such issuance and (ii) the
denominator is the Purchase Price in effect on the date of such exercise.
<PAGE>
6. Further Assurances. The Company will take all action that
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of stock, free from all taxes,
liens and charges with respect to the issue thereof, on the exercise of all or
any portion of this Warrant from time to time outstanding.
7. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend on, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other
right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any transfer of all or substantially all of the assets of
the Company to or consolidation or merger of the Company with or into
any other person (other than a wholly-owned subsidiary of the Company),
or
(c) any voluntary or involuntary dissolution, liquidation
or winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to the
Holder, at least ten days prior to such record date, a notice specifying (i) the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock (or Other
Securities) shall be entitled to exchange their shares of Common Stock (or Other
Securities) for securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up, and (iii) the amount and character of
any stock or other securities, or rights or options with respect thereto,
proposed to be issued or granted, the date of such proposed issue or grant and
the persons or class of persons to whom such proposed issue or grant is to be
offered or made. Such notice shall also state that the action in question or the
record date is subject to the effectiveness of a registration statement under
the 1933 Act, or a favorable vote of stockholders if either is required. Such
notice shall be mailed at least ten days prior to the date specified in such
notice on which any such action is to be taken or the record date, whichever is
earlier.
8. Reservation of Stock, etc., Issuable on Exercise of
Warrants. The Company will at all times reserve and keep available out of its
authorized but unissued shares of capital stock, solely for issuance and
delivery on the exercise of this Warrant, a sufficient number of shares of
Common Stock (or Other Securities) to effect the full exercise of this Warrant
and the exercise, conversion or exchange of any other warrant or security of the
Company exercisable for, convertible into, exchangeable for or otherwise
entitling the holder to acquire shares of Common Stock (or Other Securities),
and if at any time the number of authorized but unissued shares of Common Stock
(or Other Securities) shall not be sufficient to effect such exercise,
conversion or exchange, the Company shall take such action as may be necessary
to increase its authorized but unissued shares of Common Stock (or Other
Securities) to such number as shall be sufficient for such purposes.
<PAGE>
9. Transfer of Warrant. This Warrant shall inure to the
benefit of the successors to and assigns of the Holder. This Warrant and all
rights hereunder, in whole or in part, are registrable at the office or agency
of the Company referred to below by the Holder hereof in person or by his duly
authorized attorney, upon surrender of this Warrant properly endorsed.
10. Register of Warrants. The Company shall maintain, at the
principal office of the Company (or such other office as it may designate by
notice to the Holder hereof), a register in which the Company shall record the
name and address of the person in whose name this Warrant has been issued, as
well as the name and address of each successor and prior owner of such Warrant.
The Company shall be entitled to treat the person in whose name this Warrant is
so registered as the sole and absolute owner of this Warrant for all purposes.
11. Exchange of Warrant. This Warrant is exchangeable, upon
the surrender hereof by the Holder hereof at the office or agency of the Company
referred to in Section 10, for one or more new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares of Common Stock which may be subscribed for and purchased hereunder,
each of such new Warrants to represent the right to subscribe for and purchase
such number of shares as shall be designated by said Holder hereof at the time
of such surrender.
12. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
13. Warrant Agent. In accordance with the Transfer Agent
Agreement, dated as of December 22, 1999, by and among the Company, American
Securities Transfer & Trust, Inc., as Transfer Agent and Registrar (the
"Transfer Agent"), and the original Holder of this Warrant and the other common
stock purchase warrants of like tenor issued by the Company in connection with
the issuance of this Warrant, the Company has appointed the Transfer Agent as
the exercise agent for purposes of issuing shares of Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1. The Company
may, by notice to the Holder, appoint an agent having an office in the United
States of America for the purpose of exchanging this Warrant pursuant to Section
11 and replacing this Warrant pursuant to Section 12, or either of the
foregoing, and thereafter any such exchange or replacement, as the case may be,
shall be made at such office by such agent.
14. Remedies. The Company stipulates that the remedies at law
of the Holder in the event of any default or threatened default by the Company
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate, and that such terms may be specifically enforced
by a decree for the specific performance of any agreement contained herein or by
an injunction against a violation of any of the terms hereof or otherwise.
15. No Rights or Liabilities as a Stockholder. This Warrant
shall not entitle the Holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision of this Warrant, in the absence of
<PAGE>
affirmative action by the Holder hereof to purchase Common Stock, and no mere
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of the Holder for the Purchase Price or as a stockholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
16. Notices, etc. All notices and other communications from
the Company to the registered Holder or from the registered Holder to the
Company shall be delivered personally (which shall include telephone line
facsimile transmission with answer back confirmation) or by courier and shall be
effective upon receipt, addressed to each party at the address or telephone line
facsimile transmission number for each party set forth in the Subscription
Agreement or at such other address or telephone line facsimile transmission
number as a party shall have provided to the other party in accordance with this
provision.
17. Transfer Restrictions. By acceptance of this Warrant, the
Holder represents to the Company that this Warrant is being acquired for the
Holder's own account and for the purpose of investment and not with a view to,
or for sale in connection with, the distribution thereof, nor with any present
intention of distributing or selling this Warrant or the Common Stock issuable
upon exercise of this Warrant. The Holder acknowledges and agrees that this
Warrant and, except as otherwise provided in the Registration Rights Agreement,
the shares of Common Stock issuable upon exercise of this Warrant (if any) have
not been (and at the time of acquisition by the Holder, will not have been or
will not be), registered under the 1933 Act or under the securities laws of any
state, in reliance upon certain exemptive provisions of such statutes. The
Holder further recognizes and acknowledges that because this Warrant and, except
as provided in the Registration Rights Agreement, the Common Stock issuable upon
exercise of this Warrant (if any) are unregistered, they may not be eligible for
resale, and may only be resold in the future pursuant to an effective
registration statement under the 1933 Act and any applicable state securities
laws, or pursuant to a valid exemption from such registration requirements.
Unless the shares of Common Stock issuable upon exercise of this Warrant have
theretofore been registered for resale under the 1933 Act, the Company may
require, as a condition to the issuance of Common Stock upon the exercise of
this Warrant (i) in the case of an exercise in accordance with Section 1.1
hereof, a confirmation as of the date of exercise of the Holder's
representations pursuant to this Section 17, or (ii) in the case of an exercise
in accordance with Section 1.2 hereof, an opinion of counsel reasonably
satisfactory to the Company that the shares of Common Stock to be issued upon
such exercise may be issued without registration under the 1933 Act.
18. Legend. Unless theretofore registered for resale under the
1933 Act, each certificate for shares issued upon exercise of this Warrant shall
bear the following legend:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be resold, transferred or assigned
in the absence of an effective registration statement for the
securities under the Securities Act of 1933, as amended, or an opinion
of counsel that registration is not required under said Act.
19. Amendment; Waiver. This Warrant and any terms hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. Notwithstanding any other provision of this Warrant or
the Subscription Agreement, in addition to the requirements of the immediately
preceding sentence, any amendment of (x) Section 1.1(b), (y) the definition of
<PAGE>
the term Aggregated Person or (z) this sentence shall require approval by the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock, present in person or represented by proxy at a duly convened
meeting of stockholders of the Company, and entitled to vote, or the consent
thereto in writing by holders of a majority of the outstanding shares of Common
Stock, and the stockholders of the Company are hereby expressly made third party
beneficiaries of this sentence.
20. Miscellaneous. This Warrant shall be construed and
enforced in accordance with and governed by the internal laws of the State of
California. The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed on its behalf by one of its officers thereunto duly authorized.
Dated: December __, 1999 THERMOGENESIS CORP.
By:
------------------
Title:
---------------
<PAGE>
FORM OF SUBSCRIPTION
THERMOGENESIS CORP.
(To be signed only on exercise of Warrant)
TO: American Securities Transfer & Trust, Inc., CC: ThermoGenesis Corp.
as Exercise Agent 3146 Gold Camp Drive
12039 West Alameda Parkway Rancho Cordova, California
Suite Z-2 95670
Lakewood, Colorado 80228
1. The undersigned Holder of the attached original, executed Warrant
hereby elects to exercise its purchase right under such Warrant with respect to
______________ shares of Common Stock, as defined in the Warrant, of
ThermoGenesis Corp., a Delaware corporation (the "Company").
2. The undersigned Holder (check one):
o (a) elects to pay the aggregate purchase price for such shares
of Common Stock (the "Exercise Shares") (i) by lawful money of
the United States or the enclosed certified or official bank
check payable in United States dollars to the order of the
Company in the amount of $___________, or (ii) by wire
transfer of United States funds to the account of the Company
in the amount of $____________, which transfer has been made
before or simultaneously with the delivery of this Form of
Subscription pursuant to the instructions of the Company;
or
o (b) elects to receive shares of Common Stock having a value
equal to the value of the Warrant calculated in accordance
with Section 1.2 of the Warrant.
3. Please issue a stock certificate or certificates representing the
appropriate number of shares of Common Stock in the name of the undersigned or
in such other name as is specified below:
Name: _________________
Address: _________________
_________________
Dated: ____________ ___, _______
---------------------------------------
(Signature must conform to name of
Holder as specified on the face of the
Warrant)
(Address)
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of December 22, 1999
(this "Agreement"), is made by and between THERMOGENESIS CORP., a Delaware
corporation (the "Company"), and the person named on the signature page hereto
(the "Initial Investor").
W I T N E S S E T H:
WHEREAS, in connection with the Subscription Agreement, dated as
of December 22, 1999, between the Initial Investor and the Company (the
"Subscription Agreement"), the Company has agreed, upon the terms and subject to
the conditions of the Subscription Agreement, to issue and sell to the Initial
Investor shares (the "Preferred Shares") of Series B Convertible Preferred
Stock, $.001 par value (the "Series B Preferred Stock"), of the Company as
provided in the Subscription Agreement, which Preferred Shares are convertible
into shares (the "Conversion Shares") of Common Stock, $.001 par value (the
"Common Stock"), of the Company, and to issue common stock purchase warrants
(the "Warrants") to purchase shares (the "Warrant Shares") of Common Stock; and
WHEREAS, to induce the Initial Investor to execute and deliver
the Subscription Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws with respect to the Conversion
Shares and the Warrant Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have the
following meanings:
"Certificate of Designations" means the Certificate of
Designations of the Series B Convertible Preferred Stock establishing and
designating the Series B Preferred Stock and fixing the rights and preferences
of such series as filed by the Company with the Secretary of State of the State
of Delaware.
"Computation Date" means, if a Registration Event occurs, any of
(1) the date which is 30 days after such Registration Event occurs, if any
Registration Event is continuing on such date, (2) each date which is 30 days
after a Computation Date, if any Registration Event is continuing on such date,
and (3) the date on which all Registration Events cease to continue.
"Investor" or "Investors" means the Initial Investor and any
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
<PAGE>
"Majority Holders" means those persons who hold a majority of the
shares of Series B Preferred Stock which are then outstanding, including such
shares originally issued pursuant to the Subscription Agreement and the Other
Subscription Agreement.
"Nasdaq" means the Nasdaq SmallCap Market.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the SEC.
"Registrable Securities" means the Conversion Shares and the
Warrant Shares.
"Registration Event" shall mean (1) the Company fails to file the
Registration Statement which is required to be filed by the Company pursuant to
Section 2(a) with the SEC within 30 days after the Closing Date, (2) the
Registration Statement covering the Registrable Securities which is required to
be filed by the Company pursuant to the first sentence of Section 2(a) hereof is
not effective within 120 days after the Closing Date, (3) the Company fails to
submit a request for acceleration of the effective date of the Registration
Statement in accordance with Section 3(a), (4) the Registration Statement
required to be filed by the Company pursuant to Section 2(a) shall cease to be
available for use by any Investor who is named therein as a selling stockholder
for any reason (including, without limitation, by reason of an SEC stop order, a
material misstatement or omission in such Registration Statement or the
information contained in such Registration Statement having become outdated),
(5) the Common Stock ceases to be listed for trading on any of the New York
Stock Exchange, the American Stock Exchange, Inc., the Nasdaq National Market or
the Nasdaq, or (6) a holder of shares of Series B Preferred Stock having become
unable to convert any shares of Series B Preferred Stock in accordance with
Section 10(a) of the Certificate of Designations (other than by reason of the
4.9% limitation on beneficial ownership set forth therein or a redemption or
repurchase thereof).
"Registration Period" means the period from the Closing Date to
the earliest of (i) the date which is five years after the SEC Effective Date,
(ii) the date on which each Investor may sell all Registrable Securities owned
by such Investor or which such Investor has any right to acquire without
registration under the 1933 Act pursuant to subsection (k) of Rule 144, without
restriction on the manner of sale or the volume of securities which may be sold
in any period and without the requirement for the giving of any notice to, or
the making of any filing with, the SEC and (iii) the date on which the Investors
no longer beneficially own or have any right to acquire any Registrable
Securities.
"Registration Statement" means a registration statement of the
Company under the 1933 Act, including any amendment thereto.
<PAGE>
"Rule 144" means Rule 144 promulgated under the 1933 Act or any
other similar rule or regulation of the SEC that may at any time permit a holder
of any securities to sell securities of the Company to the public without
registration under the 1933 Act.
"SEC" means the Securities and Exchange Commission.
"SEC Effective Date" means the date the Registration Statement is
declared effective by the SEC.
"SEC Filing Date" means the date the Registration Statement is
first filed with the SEC pursuant to Section 2(a).
(b) Capitalized terms defined in the introductory paragraph or
the recitals to this Agreement shall have the respective meanings therein
provided. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Subscription Agreement.
2. Registration.
(a) Mandatory Registration. (1) The Company shall prepare, and on
or prior to the date which is 30 days after the Closing Date, file with the SEC
a Registration Statement on Form S-3 which, on the date of filing with the SEC,
covers the resale by the Initial Investor of a number of shares of Common Stock
at least equal to the sum of (x) a number of shares of Common Stock equal to
175% of the number of shares of Common Stock issuable upon conversion of the
Preferred Shares, determined as if the Preferred Shares, together with 24 months
of accrued and unpaid dividends thereon, were converted in full at the Fixed
Conversion Price (as defined in the Certificate of Designations) on the SEC
Filing Date plus (y) the number of Warrant Shares (in each case determined
without regard to the limitations on beneficial ownership contained in the
proviso to the second sentence of Section 10(a) of the Certificate of
Designations and Section 1.1(b) of the Warrants). If at any time the number of
shares of Common Stock included in the Registration Statement required to be
filed as provided in the first sentence of this Section 2(a) shall be
insufficient to cover 125% of the number of shares of Common Stock issuable on
conversion in full of the unconverted Preferred Shares plus the number of
Warrant Shares issuable upon exercise of the unexercised portion of the
Warrants, then promptly, but in no event later than 20 days after such
insufficiency shall occur, the Company shall file with the SEC an additional
Registration Statement on Form S-3 (which shall not constitute a post-effective
amendment to the Registration Statement filed pursuant to the first sentence of
this Section 2(a)), covering such number of shares of Common Stock as shall be
sufficient to permit such conversion and exercise. For all purposes of this
Agreement such additional Registration Statement shall be deemed to be the
Registration Statement required to be filed by the Company pursuant to Section
2(a) of this Agreement, and the Company and the Investors shall have the same
rights and obligations with respect to such additional Registration Statement as
they shall have with respect to the initial Registration Statement required to
be filed by the Company pursuant to this Section 2(a). The Registration
Statement shall not include securities to be sold for the account of any selling
securityholder other than the Investors and the investors contemplated by the
registration rights agreement entered into by the Company in connection with the
Other Subscription Agreement.
<PAGE>
(2) Prior to the SEC Effective Date or during any time subsequent
to the SEC Effective Date when the Registration Statement for any reason is not
available for use by any Investor for the resale of any of Registrable
Securities, the Company shall not file any other registration statement or any
amendment thereto with the SEC under the 1933 Act or request the acceleration of
the effectiveness of any other registration statement previously filed with the
SEC, other than any registration statement on Form S-4 or Form S-8.
(b) Certain Offerings. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering,
Investors who hold a majority in interest of the Registrable Securities subject
to such underwritten offering shall have the right to select one legal counsel
and an investment banker or bankers and manager or managers to administer the
offering, which investment banker or bankers or manager or managers shall be
reasonably satisfactory to the Company. The Investors who hold the Registrable
Securities to be included in such underwriting shall pay all underwriting
discounts and commissions and other fees and expenses of such investment banker
or bankers and manager or managers so selected in accordance with this Section
2(b) (other than fees and expenses relating to registration of Registrable
Securities under federal or state securities laws, which are payable by the
Company pursuant to Section 5 hereof) with respect to their Registrable
Securities and the fees and expenses of such legal counsel so selected by the
Investors.
(c) Payments by the Company. If a Registration Event occurs, on
each Computation Date the Company shall pay each Investor an amount in cash
equal to 1.5% of the aggregate subscription price paid by such Investor for the
Preferred Shares pursuant to the Subscription Agreement (pro rated for any
period of less than 30 days). Each such payment shall be made by wire transfer
in immediately available funds on each Computation Date to such account as shall
be specified for such purpose by each Investor. Any such amount which is not
paid when due shall bear interest at the rate of 14% per annum (or such other
rate as shall be the maximum rate allowable by applicable law) until paid in
full. With respect to any Preferred Shares as to which an Investor exercises a
right to require redemption by the Company and which are timely redeemed
thereafter in accordance with the Certificate of Designations (without the
Company exercising its rights under Sections 7(a)(5) or 11(b)(4) of the
Certificate of Designations), no payments pursuant to this Section 2(c) shall
accrue and be due for the period commencing on the date such Investor gives a
redemption notice in connection with such exercise.
(d) Piggy-Back Registrations. If at any time the Company shall
determine to prepare and file with the SEC a Registration Statement relating to
an offering for its own account or the account of others under the 1933 Act of
any of its equity securities, other than on Form S-4 or Form S-8 or their then
equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each Investor who is entitled to registration rights under this Section
2(d) written notice of such determination and, if within ten (10) days after
receipt of such notice, such Investor shall so request in writing, the Company
shall include in such Registration Statement all or any part of the Registrable
Securities such Investor requests to be registered, except that if, in
connection with any underwritten public offering for the account of the Company,
<PAGE>
the managing underwriter(s) thereof shall impose a limitation on the number of
shares of Common Stock which may be included in the Registration Statement
because, in such underwriter(s)' judgment, such limitation is necessary to
effect an orderly public distribution, then the Company shall be obligated to
include in such Registration Statement only such limited portion of the
Registrable Securities with respect to which such Investor has requested
inclusion hereunder. Any exclusion of Registrable Securities shall be made pro
rata among the Investors seeking to include Registrable Securities, in
proportion to the number of Registrable Securities sought to be included by such
Investors; provided, however, that the Company shall not exclude any Registrable
Securities unless the Company has first excluded all outstanding securities the
holders of which are not entitled by right to inclusion of securities in such
Registration Statement; and provided further, however, that, after giving effect
to the immediately preceding proviso, any exclusion of Registrable Securities
shall be made pro rata with holders of other securities having the right to
include such securities in the Registration Statement, based on the number of
securities for which registration is requested except to the extent such pro
rata exclusion of such other securities is prohibited under any written
agreement entered into by the Company with the holder of such other securities
prior to the date of this Agreement, in which case such other securities shall
be excluded, if at all, in accordance with the terms of such agreement. No right
to registration of Registrable Securities under this Section 2(d) shall be
construed to limit any registration required under Section 2(a) hereof. The
obligations of the Company under this Section 2(d) may be waived by Investors
holding a majority in interest of the Registrable Securities and shall expire
after the Company has afforded the opportunity for the Investors to exercise
registration rights under this Section 2(d) for two registrations; provided,
however, that any Investor who shall have had any Registrable Securities
excluded from any Registration Statement in accordance with this Section 2(d)
shall be entitled to include in an additional Registration Statement filed by
the Company the Registrable Securities so excluded. Notwithstanding any other
provision of this Agreement, if the Registration Statement required to be filed
pursuant to Section 2(a) of this Agreement shall have been ordered effective by
the SEC and the Company shall have maintained the effectiveness of such
Registration Statement as required by this Agreement and if the Company shall
otherwise have complied in all material respects with its obligations under this
Agreement, then the Company shall not be obligated to register any Registrable
Securities on such Registration Statement referred to in this Section 2(d).
(e) Eligibility for Form S-3. The Company meets the requirements
for the use of Form S-3 for registration of the Registrable Securities for
resale by the Investors. The Company shall file all reports required to be filed
by the Company with the SEC in a timely manner so as to maintain such
eligibility for the use of Form S-3.
3. Obligations of the Company. In connection with the
registration of the Registrable Securities, the Company shall:
(a) prepare promptly, and file with the SEC not later than 30
days after the Closing Date, a Registration Statement with respect to the number
of Registrable Securities provided in Section 2(a), and thereafter to use its
best efforts to cause each Registration Statement relating to Registrable
Securities to become effective as soon as possible after such filing, and keep
the Registration Statement effective pursuant to Rule 415 at all times during
the Registration Period; submit to the SEC, within three Business Days after the
<PAGE>
Company learns that no review of the Registration Statement will be made by the
staff of the SEC or that the staff of the SEC has no further comments on the
Registration Statement, as the case may be, a request for acceleration of
effectiveness of the Registration Statement to a time and date not later than 48
hours after the submission of such request; notify the Investors of the
effectiveness of the Registration Statement on the date the Registration
Statement is declared effective; and the Company represents and warrants to, and
covenants and agrees with, the Investors that the Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein), at the time it is first filed with the SEC, at the time it is ordered
effective by the SEC and at all times during which it is required to be
effective hereunder (and each such amendment and supplement at the time it is
filed with the SEC and at all times during which it is available for use in
connection with the offer and sale of the Registrable Securities) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
(b) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the 1933 Act with respect to the disposition of all Registrable
Securities of the Company covered by the Registration Statement until such time
as all of such Registrable Securities have been disposed of in accordance with
the intended methods of disposition by the seller or sellers thereof as set
forth in the Registration Statement;
(c) furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel, (1) promptly after
the same is prepared and publicly distributed, filed with the SEC or received by
the Company, one copy of the Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or supplement
thereto, each letter written by or on behalf of the Company to the SEC or the
staff of the SEC and each item of correspondence from the SEC or the staff of
the SEC relating to such Registration Statement (other than any portion of any
thereof which contains information for which the Company has sought confidential
treatment) and (2) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(d) use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such
securities or blue sky laws of such jurisdictions as the Investors who hold a
majority in interest of the Registrable Securities being offered reasonably
request, (ii) prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at all
times until the end of the Registration Period, (iii) take such other actions as
may be necessary to maintain such registrations and qualifications in effect at
all times during the Registration Period and (iv) take all other actions
reasonably necessary or advisable to qualify the Registrable Securities for sale
<PAGE>
in such jurisdictions; provided, however, that the Company shall not be required
in connection therewith or as a condition thereto (I) to qualify to do business
in any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (II) to subject itself to general taxation in any such
jurisdiction, (III) to file a general consent to service of process in any such
jurisdiction, (IV) to provide any undertakings that cause more than nominal
expense or burden to the Company or (V) to make any change in its Certificate of
Incorporation or by-laws, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders;
(e) in the event that the Registrable Securities are being
offered in an underwritten offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering;
(f) as promptly as practicable after becoming aware of such event
or circumstance, notify each Investor of any event or circumstance of which the
Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, file such supplement or amendment with the SEC at
such time as shall permit the Investors to sell Registrable Securities pursuant
to the Registration Statement as promptly as practicable, and deliver a number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request;
(g) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the SEC of any stop order or other suspension of effectiveness of
the Registration Statement at the earliest possible time;
(h) permit a single firm of counsel designated as selling
stockholders' counsel by the Investors who hold a majority in interest of the
Registrable Securities being sold to review and comment on the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing with the SEC;
(i) make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 under the 1933 Act) covering a twelve-month period beginning not later
than the first day of the Company's fiscal quarter next following the effective
date of the Registration Statement;
(j) in connection with any underwritten offering, at the request
of the Investors who hold a majority in interest of the Registrable Securities
being sold, furnish on the date that Registrable Securities are delivered to an
underwriter for sale in connection with the Registration Statement (i) a letter,
dated such date, from the Company's independent certified public accountants in
form and substance as is customarily given by independent certified public
<PAGE>
accountants to underwriters in an underwritten public offering, addressed to the
underwriters; and (ii) an opinion, dated such date, from counsel representing
the Company for purposes of such Registration Statement, in form and substance
as is customarily given in an underwritten public offering, addressed to the
underwriter(s) and the Investors;
(k) make available for inspection by any Investor, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by any such
Investor or underwriter (collectively, the "Inspectors"), all pertinent
financial and other records, pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably necessary to
enable each Investor to exercise its due diligence responsibility, and cause the
Company's officers, directors and employees to supply all information which any
Inspector may reasonably request for purposes of such due diligence; provided,
however, that each Inspector shall hold in confidence and shall not make any
disclosure (except to an Investor) of any Record or other information which the
Company determines in good faith to be confidential, and of which determination
the Inspectors are so notified, unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (ii) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction or (iii)
the information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(k). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at the Company's own expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential. The Company shall hold in confidence and shall not make any
disclosure of information concerning an Investor provided to the Company
pursuant to Section 4(e) hereof unless (i) disclosure of such information is
necessary to comply with federal or state securities laws, (ii) the disclosure
of such information is necessary to avoid or correct a misstatement or omission
in any Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other order from a court or governmental body of
competent jurisdiction or (iv) such information has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company agrees that it shall, upon learning that disclosure
of such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to such Investor and allow such Investor, at such Investor's own expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, such information;
(l) use its best efforts (i) to cause all the Registrable
Securities covered by the Registration Statement to be listed on the Nasdaq or
such other principal securities market on which securities of the same class or
series issued by the Company are then listed or traded or (ii) if securities of
the same class or series as the Registrable Securities are not then listed on
<PAGE>
Nasdaq or any such other securities market, to cause all of the Registrable
Securities covered by the Registration Statement to be listed on the New York
Stock Exchange, the American Stock Exchange or the Nasdaq National Market;
(m) provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
(n) cooperate with the Investors who hold Registrable Securities
being offered and the managing underwriter or underwriters, if any, to
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legends) representing Registrable Securities to be offered pursuant
to the Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the managing underwriter or
underwriters, if any, or the Investors may reasonably request and registered in
such names as the managing underwriter or underwriters, if any, or the Investors
may request; and, within three Business Days after a Registration Statement
which includes Registrable Securities is ordered effective by the SEC, the
Company shall deliver to the transfer agent for the Registrable Securities (with
copies to the Investors whose Registrable Securities are included in such
Registration Statement) an instruction substantially in the form attached hereto
as Exhibit 1 and shall cause legal counsel selected by the Company to deliver to
the Investors an opinion of such counsel in the form attached hereto as Exhibit
2 (with a copy to the Company's transfer agent);
(o) during the period the Company is required to maintain
effectiveness of the Registration Statement pursuant to Section 3(a), the
Company shall not bid for or purchase any Common Stock or any right to purchase
Common Stock or attempt to induce any person to purchase any such security or
right if such bid, purchase or attempt would in any way limit the right of the
Investors to sell Registrable Securities by reason of the limitations set forth
in Regulation M under the 1934 Act; and
(p) take all other reasonable actions necessary to expedite and
facilitate disposition by the Investors of the Registrable Securities pursuant
to the Registration Statement.
4. Obligations of the Investors. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least five days
prior to the first anticipated filing date of the Registration Statement, the
Company shall notify each Investor of the information the Company requires from
each such Investor (the "Requested Information") if any of such Investor's
Registrable Securities are eligible for inclusion in the Registration Statement.
If at least one Business Day prior to the filing date the Company has not
received the Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement without
including Registrable Securities of such Non-Responsive Investor but shall not
<PAGE>
be relieved of its obligation to file a Registration Statement with the SEC
relating to the Registrable Securities of such Non-Responsive Investor promptly
after such Non-Responsive Investor provides the Requested Information;
(b) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(c) In the event Investors holding a majority in interest of the
Registrable Securities being registered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(d) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(f)
or 3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession of the prospectus covering such
Registrable Securities current at the time of receipt of such notice;
(e) No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and other fees and expenses of investment
bankers and any manager or managers of such underwriting and legal expenses of
the underwriters applicable with respect to its Registrable Securities, in each
case to the extent not payable by the Company pursuant to the terms of this
Agreement; and
(f) Each Investor agrees to take all reasonable actions necessary
to comply with the prospectus delivery requirements of the 1933 Act applicable
to its sales of Registrable Securities.
5. Expenses of Registration. All reasonable expenses, other than
underwriting discounts and commissions and other fees and expenses of investment
<PAGE>
bankers and other than brokerage commissions, incurred in connection with
registrations, filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees and the fees and disbursements of counsel for
the Company and the Investors (in addition to the payment of the Initial
Investor's expenses to the extent provided in the Subscription Agreement), shall
be borne by the Company, provided, however, that the Investors shall bear the
fees and out-of-pocket expenses of the one legal counsel selected by the
Investors pursuant to Section 2(b) hereof.
6. Indemnification. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the 1933
Act or the 1934 Act, any underwriter (as defined in the 1933 Act) for the
Investors, the directors, if any, of such underwriter and the officers, if any,
of such underwriter, and each person, if any, who controls any such underwriter
within the meaning of the 1933 Act or the 1934 Act (each, an "Indemnified
Person"), against any losses, claims, damages, liabilities or expenses (joint or
several) incurred (collectively, "Claims") to which any of them may become
subject under the 1933 Act, the 1934 Act or otherwise, insofar as such Claims
(or actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following: (i) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereof or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any state securities law
or any rule or regulation under the 1933 Act, the 1934 Act or any state
securities law (the matters in the foregoing clauses (i) through (iii) being,
collectively, "Violations"). Subject to the restrictions set forth in Section
6(d) with respect to the number of legal counsel, the Company shall reimburse
the Investors and the other Indemnified Persons, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (I) shall not apply to
a Claim arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by any
Indemnified Person or underwriter for such Indemnified Person expressly for use
in connection with the preparation of the Registration Statement, the prospectus
or any such amendment thereof or supplement thereto, if such prospectus was
timely made available by the Company pursuant to Section 3(c) hereof; (II) with
respect to any preliminary prospectus shall not inure to the benefit of any such
person from whom the person asserting any such Claim purchased the Registrable
Securities that are the subject thereof (or to the benefit of any person
controlling such person) if the untrue statement or omission of material fact
<PAGE>
contained in the preliminary prospectus was corrected in the prospectus, as then
amended or supplemented, if such prospectus was timely made available by the
Company pursuant to Section 3(c) hereof; and (III) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify and hold
harmless, to the same extent and in the same manner set forth in Section 6(a),
the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within the
meaning of the 1933 Act or the 1934 Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
to which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and such Investor will reimburse any legal or other expenses
reasonably incurred by any Indemnified Party in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) shall not apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior written consent of
such Investor, which consent shall not be unreasonably withheld; provided,
further, however, that the Investor shall be liable under this Section 6(b) for
only that amount of a Claim as does not exceed the amount by which the net
proceeds to such Investor from the sale of Registrable Securities pursuant to
such Registration Statement exceeds the cost of such Registrable Securities to
such Investor. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information so furnished in writing by such persons
expressly for inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
<PAGE>
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel selected by the indemnifying party
but reasonably acceptable to the Indemnified Person or the Indemnified Party, as
the case may be; provided, however, that an Indemnified Person or Indemnified
Party shall have the right to retain its own counsel with the fees and expenses
to be paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this Section
6, except to the extent that the indemnifying party is prejudiced in its ability
to defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. Contribution. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6, (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of such fraudulent misrepresentation
and (c) contribution by any seller of Registrable Securities shall be limited in
amount to the amount by which the net amount of proceeds received by such seller
from the sale of such Registrable Securities exceeds the purchase price paid by
such seller for such Registrable Securities.
8. Reports under 1934 Act. With a view to making available to the
Investors the benefits of Rule 144, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 and the
1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company and (iii)
<PAGE>
such other information as may be reasonably requested to permit the Investors to
sell such securities pursuant to Rule 144 without registration.
9. Assignment of the Registration Rights. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of all or any portion
of such securities (or to any transferee of all or any portion of the Preferred
Shares or the Warrants which transfer is permitted by Section 4(a) of the
Subscription Agreement) only if: (a) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (c) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws,
and (d) at or before the time the Company receives the written notice
contemplated by clause (b) of this sentence the transferee or assignee agrees in
writing with the Company to be bound by all of the applicable provisions
contained herein and in the Subscription Agreement. In connection with any such
transfer the Company shall, at its sole cost and expense, promptly after such
assignment take such actions as shall be reasonably acceptable to the Initial
Investor and such transferee to assure that the Registration Statement and
related prospectus are available for use by such transferee for sales of the
Registrable Securities in respect of which the rights to registration have been
so assigned. In connection with any such assignment, each Investor shall assign
to such transferee such Investor's rights and obligations under the Subscription
Agreement. Upon such assignment of rights under the Subscription Agreement, the
Company shall be obligated to such transferee to perform all of its covenants
under the Subscription Agreement as if such transferee were the Buyer under the
Subscription Agreement.
10. Amendment of Registration Rights. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Majority Holders. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be
in writing and shall be deemed to be sufficiently given when personally
delivered (by hand, by courier, by telephone line facsimile transmission (with
answer back confirmation) or other means) (i) if to the Company, at 3146 Gold
Camp Drive, Rancho Cordova, California 95670, Attention: Chief Executive
Officer, telephone line facsimile transmission number (916) 858-8728, (ii) if to
<PAGE>
the Initial Investor at 4111 East 37th Street North, Wichita, Kansas 67220,
Attention: Josh Taylor, telephone line facsimile transmission number (316)
828-7947 and (iii) if to any other Investor, at such address as such Investor
shall have provided in writing to the Company, or at such other address as each
such party furnishes by notice given in accordance with this Section 11(b), and
shall be effective upon receipt.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and construed
in accordance with the laws of the State of California applicable to agreements
made and to be performed entirely within such State. In the event that any
provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid
or unenforceable under any law shall not affect the validity or enforceability
of any other provision hereof.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) The Company acknowledges that any failure by the Company to
perform its obligations under this Agreement, including, without limitation, the
Company's obligations under Section 3(n), or any delay in such performance could
result in damages to the Investors and the Company agrees that, in addition to
any other liability the Company may have by reason of any such failure or delay,
the Company shall be liable for all direct and consequential damages caused by
any such failure or delay.
(j) Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
<PAGE>
(k) The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.
(l) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by telephone line facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of day and
year first above written.
THERMOGENESIS CORP.
By:
----------------------------
Name:
Title:
By:
-------------------------------
SUBSCRIPTION AGREEMENT
dated as of December 22, 1999
by and between
THERMOGENESIS CORP.
and
-----------------------------
--------------------
SERIES B CONVERTIBLE PREFERRED STOCK
and
COMMON STOCK PURCHASE WARRANTS
<PAGE>
SUBSCRIPTION AGREEMENT
SERIES B CONVERTIBLE PREFERRED STOCK
and
COMMON STOCK PURCHASE WARRANTS
THERMOGENESIS CORP.
TABLE OF CONTENTS
Page
1. AGREEMENT TO
SUBSCRIBE.............................................................1
(a)
Subscription...................................................1
(b) Form of Payment................................................1
(c) Method of Payment..............................................2
2. BUYER REPRESENTATIONS, WARRANTIES, ETC................................2
(a) Purchase for Investment........................................2
(b) Accredited Investor............................................2
(c) Reoffers and Resales...........................................2
(d) Company Reliance...............................................2
(e) Information Provided...........................................2
(f) Absence of Approvals...........................................3
(g) Subscription Agreement.........................................3
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.............................3
(a) Organization and Authority.....................................3
(b) Capitalization.................................................3
(c) Concerning the Shares and the Common Stock.....................4
(d) Subscription Agreement and Other Transaction Documents.........4
(e) Non-contravention..............................................4
(f) Approvals......................................................5
(g) Information Provided...........................................5
(h) Absence of Certain Changes.....................................5
(i) Absence of Certain Proceedings.................................6
(j) Properties.....................................................6
(k) Labor Relations................................................7
(l) SEC Filings....................................................7
(m) Absence of Brokers, Finders, Etc..............................7
(n) No Solicitation................................................7
(o) Certain Issuances of Securities................................7
(p) Absence of Rights Agreement....................................7
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.................................8
(a) Transfer Restrictions.........................................8
(b) Restrictive Legend.............................................8
(c) Registration Rights Agreement.................................9
<PAGE>
(d) Form D.........................................................9
(e) Authorization for Trading......................................9
(f) Use of Proceeds................................................9
(g) Blue Sky Laws.................................................10
(h) Certain Expenses..............................................10
(i) Certain Issuances of Securities...............................10
(j) Certain Selling Restrictions..................................11
(k) Best Efforts..................................................11
5. TRANSFER AGENT AGREEMENT.............................................11
(a) Transfer Agent Agreement......................................11
(b) Conversion Procedure..........................................12
6. CLOSING DATE.........................................................12
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE.............12
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.....................12
9. MISCELLANEOUS........................................................13
(a) Governing Law.................................................13
(b) Counterparts..................................................13
(c) Headings, etc.................................................13
(d) Severability..................................................14
(e) Amendments....................................................14
(f) Waivers.......................................................14
(g) Notices.......................................................14
(h) Assignment....................................................14
(i) Survival of Representations and Warranties....................14
(j) Entire Agreement..............................................14
(k) Termination...................................................14
(l) Further Assurances............................................15
(m) Public Statements, Press Releases, Etc........................15
(n) Construction..................................................15
SCHEDULES
Schedule 3(a) Subsidiaries
Schedule 3(b) Antidilution Adjustments
Schedule 3(c)-1 Participation Rights
Schedule 3(c)-2 Nasdaq Matters
Schedule 3(i) Certain Proceedings
Schedule 3(n) Sales of Securities
ANNEXES
Annex I Form of Certificate of Designations
Annex II Form of Common Stock Purchase Warrant
<PAGE>
Annex III Joint Escrow Instructions
Annex IV Form of Registration Rights Agreement
Annex V Form of Transfer Agent Agreement
Annex VI Form of Notice of Conversion of Series B Convertible
Preferred Stock
Annex VII Form of Opinion of Counsel to Be Delivered on Closing Date
Annex VIII Form of Opinion of General Counsel of the Company to Be
Delivered on Closing Date
<PAGE>
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of December 22, 1999, by
and between THERMOGENESIS CORP., a Delaware corporation (the "Company"), with
headquarters located at 3146 Gold Camp Drive, Rancho Cordova, California 95670,
and KOCH INVESTMENT GROUP LIMITED, a Delaware corporation (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Buyer wishes to purchase, upon the terms and subject
to the conditions of this Agreement, shares of non-voting, convertible preferred
stock of the Company which will be convertible into shares of Common Stock,
$.001 par value (the "Common Stock"), of the Company and in connection therewith
the Company is to issue to the Buyer warrants to purchase shares of Common Stock
as provided in this Agreement; and
WHEREAS, the Company and the Buyer are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by Rule 506 of Regulation D ("Regulation D") as promulgated by the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act");
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(a) Subscription. The Buyer hereby agrees to purchase from the
Company the number of shares (the "Preferred Shares") of Series B Convertible
Preferred Stock, $.001 par value (the "Preferred Stock"), of the Company set
forth on the signature page of this Agreement, having the terms and conditions
as set forth in the form of the Certificate of Designations of the Series B
Convertible Preferred Stock attached hereto as Annex I (the "Certificate of
Designations") at the price per share and for the aggregate purchase price set
forth on the signature page of this Agreement (the "Purchase Price"). In
connection with the purchase of the Preferred Shares by the Buyer, the Company
shall issue to the Buyer, at the closing on the Closing Date (as defined
herein), Common Stock Purchase Warrants in the form attached hereto as Annex II
(the "Warrants") to purchase a number of shares of Common Stock equal to the
amount obtained by multiplying (i) the quotient obtained by dividing (x) the
Purchase Price by (y) the average closing bid price of the Common Stock on the
Nasdaq SmallCap Market ("Nasdaq") for the ten consecutive trading days
immediately prior to the Closing Date times (ii) 0.25 (subject to adjustment
after issuance of the Warrants as provided in the Warrants). The shares of
Common Stock issuable upon exercise of the Warrants are referred to herein as
the "Warrant Shares." The Warrant Shares and the shares of Common Stock issuable
upon conversion of the Preferred Shares are referred to herein collectively as
the "Common Shares." The Common Shares and the Preferred Shares are referred to
herein collectively as the "Shares." The Shares and the Warrants are referred to
herein collectively as the "Securities."
(b) Form of Payment. The Buyer shall pay the Purchase Price for
the Preferred Shares by delivering good funds in United States Dollars to the
escrow agent (the "Escrow Agent") identified in the Joint Escrow Instructions
attached hereto as Annex III (the "Joint Escrow Instructions"). Such delivery of
<PAGE>
funds shall be made against delivery by the Company of the certificates for the
Preferred Shares and the Warrants registered in the name of the Buyer or its
nominee. Promptly following payment by the Buyer to the Escrow Agent of the
Purchase Price, but in any event prior to the Closing Date, the Company shall
deliver certificates for the Preferred Shares and the Warrants, registered in
the name of the Buyer or its nominee, to the Escrow Agent. The certificates for
the Preferred Shares shall be delivered by the Company to the Escrow Agent on a
delivery against payment basis at the closing. By signing this Agreement, the
Buyer and the Company each agrees to all of the terms and conditions of, and
becomes a party to, the Joint Escrow Instructions, all of the provisions of
which are incorporated herein by this reference as if set forth in full.
(c) Method of Payment. Payment of the Purchase Price for the
Preferred Shares shall be made by wire transfer of funds to:
Citibank, N.A.
153 East 53rd Street
New York, New York 10043
ABA#021000089
For credit to A/C#37179446
For credit to the account of Brian W. Pusch Attorney Escrow
Account, Reference: Koch/ThermoGenesis
Not later than 4:00 p.m., New York City time, on the date which is two Business
Days after the Company shall have accepted this Agreement and returned a signed
counterpart of this Agreement to the Buyer or its legal counsel, the Buyer shall
deposit with the Escrow Agent an amount equal to the Purchase Price. As used in
this Agreement, the term "Business Day" means any day other than a Saturday,
Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
(a) Purchase for Investment. The Buyer is purchasing the
Preferred Shares and acquiring the Warrants, and will acquire the Common Shares
upon conversion of the Preferred Shares or exercise of the Warrants, for its own
account for investment only and not with a view towards the public sale or
distribution thereof;
(b) Accredited Investor. The Buyer is an "accredited investor" as
that term is defined in Rule 501 of the General Rules and Regulations under the
1933 Act by reason of Rule 501(a)(3);
(c) Reoffers and Resales. All subsequent offers and sales of the
Securities by the Buyer shall be made pursuant to registration of the Securities
being offered and sold under the 1933 Act or pursuant to an exemption from
registration;
(d) Company Reliance. The Buyer understands that the Preferred
Shares are being offered and sold, the Warrants are being issued, and the Common
Shares are being offered, in each case to it in reliance on specific exemptions
<PAGE>
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Preferred Shares and the Warrants and to receive an offer of the
Common Shares;
(e) Information Provided. The Buyer and its advisors, if any,
have been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Preferred Shares and the issuance of the Warrants and the offer of the Common
Shares which have been requested by the Buyer; the Buyer and its advisors, if
any, have been afforded the opportunity to ask questions of the Company and have
received satisfactory answers to any such inquiries; without limiting the
generality of the foregoing, the Buyer has had the opportunity to obtain and to
review the Company's (1) Annual Report on Form 10-K for the fiscal year ended
June 30, 1999 (the "1999 10-K"), (2) Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1999, and (3) definitive proxy statement for
the Company's 1999 Annual Meeting of Shareholders to be held on December 10,
1999, in each case as filed with the SEC (collectively, the "SEC Reports"); and
the Buyer understands that its investment in the Shares involves a high degree
of risk;
(f) Absence of Approvals. The Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Shares; and
(g) Subscription Agreement. This Agreement has been duly and
validly authorized, executed and delivered on behalf of the Buyer and is a valid
and binding agreement of the Buyer enforceable in accordance with its terms,
subject as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium and other similar laws affecting the enforcement of
creditors' rights generally.
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to, and covenants and agrees
with, the Buyer that:
(a) Organization and Authority. The Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all requisite corporate power and
authority to (i) own, lease and operate its properties and to carry on its
business as now being conducted, and (ii) to execute, deliver and perform its
obligations under this Agreement, the Certificate of Designations, the Warrants,
the Registration Rights Agreement, the form of which is attached hereto as Annex
IV (the "Registration Rights Agreement"), the Transfer Agent Agreement, the form
of which is attached hereto as Annex V (the "Transfer Agent Agreement"), and the
other agreements to be executed and delivered by the Company in connection
herewith, and to consummate the transactions contemplated hereby and thereby.
The Company is duly qualified to do business as a foreign corporation and is in
good standing in all jurisdictions wherein such qualification is necessary and
where failure so to qualify could have a material adverse effect on the
business, properties, operations, condition (financial or other), results of
operations or prospects of the Company. All subsidiaries and persons in which
the Company has an equity investment are disclosed on Schedule 3(a) to this
Agreement and, except as disclosed on Schedule 3(a), have no assets, operations
<PAGE>
or liabilities, including, without limitation, indirect, contingent,
environmental or litigation-related liabilities.
(b) Capitalization. The authorized capital stock of the Company
consists of (1) 50,000,000 shares of Common Stock of which 21,188,262 shares
were outstanding on December 17, 1999, all of which are fully paid and
nonassessable; and (2) 2,000,000 shares of Preferred Stock, $.001 par value, of
which (A) 1,200,000 shares are designated as Series A Convertible Preferred
Stock (the "Series A Preferred Stock"), of which 770,000 shares are issued and
outstanding, and (B) 4,080 shares will be designated as Series B Convertible
Preferred Stock of which 4,000 shares will be issued pursuant to this Agreement
and the other subscription agreement for the purchase of shares of Preferred
Stock and the acquisition of common stock purchase warrants being entered into
in connection herewith (the "Other Subscription Agreement"); and on the Closing
Date there will be (x) no material increase from December 17, 1999 in the number
of shares of Common Stock outstanding and (y) no issuances of preferred stock
except as issued pursuant to this Agreement and the Other Subscription
Agreement. As of December 17, 1999, the Company had outstanding Series A
Preferred Stock, options, warrants and similar rights entitling the holders to
purchase an aggregate of 9,760,429 shares of Common Stock. Other than as set
forth in the preceding sentence, the Company does not have outstanding any
material amount of securities (or obligations to issue any such securities)
convertible into, exchangeable for or otherwise entitling the holders thereof to
acquire shares of Common Stock, except as disclosed in the SEC Reports. The
Company has duly reserved from its authorized and unissued shares of Common
Stock the full number of shares required for (a) all options, warrants,
convertible securities and other rights to acquire shares of Common Stock which
are outstanding and (b) all shares of Common Stock and options and other rights
to acquire shares of Common Stock which may be issued or granted under the stock
option and similar plans which have been adopted by the Company. Each
outstanding class or series of securities for which any antidilution or similar
adjustment arising by reason of the issuance or conversion of the Preferred
Shares or the issuance or exercise of the Warrants or the issuance or conversion
of the shares of Preferred Stock and the issuance or exercise of the warrants to
be issued pursuant to the Other Subscription Agreement will occur is identified
on Schedule 3(b) to this Agreement, together with the amount of such
antidilution adjustment. The outstanding shares of Common Stock and Series A
Preferred Stock and outstanding options, warrants and other securities
convertible into, exchangeable for or otherwise entitling the holder thereof to
acquire shares of Common Stock have been duly authorized and validly issued.
None of such outstanding shares of Common Stock, Series A Preferred Stock,
options, warrants and other securities has been issued in violation of the
preemptive rights of any securityholder of the Company. The offers and sales of
the outstanding shares of Common Stock, Series A Preferred Stock, and such
options, warrants and other securities were at all relevant times either
registered under the 1933 Act and applicable state securities laws or exempt
from such requirements. No holder of any of the Company's securities has any
rights, "demand," "piggy-back" or otherwise, to have such securities registered
by reason of the intention to file, filing or effectiveness of the Registration
Statement (as defined in the Registration Rights Agreement).
(c) Concerning the Shares and the Common Stock. The Shares have
been duly authorized. The Preferred Shares, when issued and paid for in
accordance with this Agreement, and the Common Shares, when issued upon
conversion of the Preferred Shares in accordance with the Certificate of
Designations or upon exercise of the Warrants in accordance with the terms of
the Warrants, as the case may be, will be duly and validly issued, fully paid
<PAGE>
and non-assessable and will not subject the holder thereof to personal liability
by reason of being such holder. Except as disclosed on Schedule 3(c)-1 to this
Agreement, there are no preemptive or similar rights of any stockholder of the
Company or any other person to acquire any of the Shares or the Warrants. The
Company has duly reserved 4,236,000 shares of Common Stock for conversion of the
shares of Preferred Stock and exercise of the Warrants and the warrants issuable
in connection with the Other Subscription Agreement, and such shares shall
remain so reserved (subject to reduction from time to time for shares of Common
Stock issued upon conversion of shares of Preferred Stock or redemption or other
permitted retirement of shares of Preferred Stock), and the Company shall from
time to time reserve such additional shares of Common Stock as shall be required
to be reserved pursuant to the Certificate of Designations, as long as the
Preferred Stock is convertible, and pursuant to the Warrants, as long as the
Warrants are exercisable. The Common Stock is listed for trading on Nasdaq and
(1) the Company and the Common Stock meet the criteria for continued listing and
trading on Nasdaq; (2) except as disclosed on Schedule 3(c)-2 to this Agreement,
the Company has not been notified since January 1, 1997 by Nasdaq of any failure
or potential failure to meet the criteria for continued listing and trading on
Nasdaq and (3) no suspension of trading in the Common Stock is in effect. The
Company knows of no reason that the Common Shares will not be eligible for
listing on Nasdaq.
(d) Subscription Agreement and Other Transaction Documents. This
Agreement, the Certificate of Designations, the Registration Rights Agreement,
the Warrants and the Transfer Agent Agreement and the other agreements and
instruments contemplated hereby and thereby have been duly and validly
authorized by the Company, this Agreement has been duly executed and delivered
by the Company and this Agreement is, and the Registration Rights Agreement, the
Warrants and the Transfer Agent Agreement and such other agreements, when
executed and delivered by the Company, will be, valid and binding obligations of
the Company enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
(e) Non-contravention. The execution and delivery by the Company
of this Agreement and the other documents contemplated by this Agreement and the
consummation by the Company of the issuance of the Preferred Shares and the
Warrants as contemplated by this Agreement, and the other transactions
contemplated by this Agreement, the Certificate of Designations, the
Registration Rights Agreement, the Warrants and the Transfer Agent Agreement do
not and will not, with or without the giving of notice or the lapse of time, or
both (i) result in any violation of any terms of the Articles of Incorporation,
as amended, or By-laws of the Company , (ii) conflict with or result in a breach
by the Company of any of the terms or provisions of, or constitute a default
under, or result in the modification, amendment, termination or cancellation of,
result in the acceleration of any obligation of the Company under, or result in
the creation or imposition of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company pursuant to, any indenture,
mortgage, deed of trust or other agreement or instrument to which the Company is
a party or by which the Company or any of its properties or assets is bound or
affected, (iii) violate or contravene any applicable law, rule or regulation or
any applicable decree, judgment or order of any court, United States federal or
state regulatory body, administrative agency or other governmental body having
jurisdiction over the Company or any of its properties or assets or (iv) have
any material adverse effect on any permit, certification, registration,
approval, consent, license or franchise necessary for the Company to own or
lease and operate any of its properties or to conduct any of its business or the
ability of the Company to make use thereof.
<PAGE>
(f) Approvals. No authorization, approval or consent of, or
filing with, any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the stockholders of the Company is
required to be obtained or made by the Company for (1) the execution, delivery
and performance by the Company of this Agreement, the Registration Rights
Agreement, the Warrants, the Transfer Agent Agreement and the other agreements
and instruments contemplated hereby and thereby, (2) the execution, filing and
performance by the Company of the Certificate of Designations, (3) the issuance
and sale of the Preferred Shares and the issuance of the Warrants as
contemplated by this Agreement and (4) the issuance of Common Shares on
conversion of the Preferred Shares or upon the exercise of the Warrants, other
than (u) the filing with the SEC after the Closing Date of a Current Report on
Form 8-K with respect to the transactions contemplated by this Agreement, (v)
the filing of the notification for listing of additional shares with the Nasdaq
pursuant to Section 4(e), (w) the filing of the Certificate of Designations with
the Secretary of State of the State of Delaware, (x) registration of the resale
of the Common Shares under the 1933 Act as contemplated by the Registration
Rights Agreement, (y) as may be required under applicable state securities or
"blue sky" laws and (z) filing of one or more Forms D with respect to the
Securities as required under Regulation D.
(g) Information Provided. The information provided by or on
behalf of the Company to the Buyer in connection with the transactions
contemplated by this Agreement, including, without limitation, the information
referred to in Section 2(e) of this Agreement, does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading, it being understood that, for purposes of
this Section 3(g), any statement contained in such information shall be deemed
to be modified or superseded for purposes of this Section 3(g) to the extent
that a statement in any document included in such information which was prepared
or filed with the SEC on a later date modifies or replaces such statement,
whether or not such later prepared or filed statement so states. The Company has
not filed any reports with the SEC under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), since June 30, 1999 other than the SEC Reports.
(h) Absence of Certain Changes. Since June 30, 1999, there has
been no material adverse change and no material adverse development in the
business, properties, operations, condition (financial or other), results of
operations or prospects of the Company, except as disclosed in the SEC Reports.
Except as and to the extent disclosed, reflected or reserved against in the
financial statements of the Company and the notes thereto included in the SEC
Reports, the Company has no material (individually or in the aggregate)
liabilities, debts or obligations whether accrued, absolute, contingent or
otherwise, and whether due or to become due. Subsequent to June 30, 1999, the
Company has not incurred any liabilities, debts or obligations of any nature
whatsoever which are individually or in the aggregate material to the Company,
other than those incurred in the ordinary course of its business or disclosed in
the SEC Reports.
(i) Absence of Certain Proceedings. Except as disclosed in the
SEC Reports, there is no action, suit, proceeding, inquiry or investigation
before or by any court, arbitrator, public board or body or governmental agency
(collectively, an "Action") pending or, to the knowledge of the Company,
threatened against the Company, in any such case wherein an unfavorable
decision, ruling or finding would have a material adverse effect on business,
properties, operations, condition (financial or other), results of operations or
<PAGE>
prospects of the Company or the transactions contemplated by this Agreement or
any of the documents contemplated hereby or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of such other documents;
except as disclosed on Schedule 3(i) to this Agreement, neither the Company nor
any director or officer thereof is or has been the subject of any Action
involving a claim of violation of or liability under federal or state securities
laws or a claim of breach of fiduciary duty; except as disclosed on Schedule
3(i) to this Agreement, the Company does not have pending before the SEC any
request for confidential treatment of information and to the best of the
Company's knowledge no such request will be made by the Company prior to the
time the Registration Statement relating to the Common Shares which is
contemplated by the Registration Rights Agreement is first ordered effective by
the SEC; and there has not been, and to the best of the Company's knowledge
there is not pending or contemplated, any investigation by the SEC involving the
Company or any current or former director or officer of the Company.
(j) Properties. The Company has good title to or leasehold
interests in all property real and personal (tangible and intangible) and other
assets owned by them, free and clear of all security interests, charges,
mortgages, liens or other encumbrances, except with respect to capital lease
obligations and protective filings by lessors and except such as are described
in the SEC Reports or such as do not materially interfere with the use of such
property made, or proposed to be made, by the Company. The leases, licenses or
other contracts or instruments under which the Company leases, holds or is
entitled to use any property, real or personal, are valid, subsisting and
enforceable with only such exceptions as do not materially interfere with the
use of such property made, or proposed to be made, by the Company. The Company
has not received notice of any material violation of any applicable law,
ordinance, regulation, order or requirement relating to its owned or leased
properties. The Company does not have any knowledge of, and the Company has not
given or received any notice of, any pending conflicts with or infringement of
the rights of others with respect to any Company Proprietary Rights (as defined
herein) or with respect to any license of Company Proprietary Rights. No action,
suit, arbitration, or legal, administrative or other proceeding or investigation
is pending, or, to the best knowledge of the Company, threatened, which involves
any Company Proprietary Rights. The Company is not subject to any judgment,
order, writ, injunction or decree of any court or any federal, state, local,
foreign or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or any arbitrator, or has entered into or
is a party to any contract which restricts or impairs the use of any such
Company Proprietary Rights in a manner which would have a material adverse
effect on the use by the Company of any of the Company Proprietary Rights. To
the best knowledge of the Company, no Company Proprietary Rights and no services
or products sold by the Company conflict with or infringe upon any proprietary
rights available to any third party. The Company has not received written notice
of any pending conflict with or infringement upon such third-party proprietary
rights. The Company has not entered into any consent, indemnification,
forbearance to sue or settlement agreement with respect to Company Proprietary
Rights other than in the ordinary course of business. No claims have been
asserted by any person with respect to the validity of the Company's ownership
or right to use the Company Proprietary Rights and, to the best knowledge of the
Company, there is no reasonable basis for any such claim to be successful. To
the best knowledge of the Company, the Company Proprietary Rights are valid and
enforceable. No registration relating to the Company Proprietary Rights has
lapsed, expired or been abandoned or canceled or is the subject of cancellation
or other adversarial proceedings, and all applications therefor are pending and
are in good standing, except for such lapses, expirations, abandonments,
cancellations, adversarial proceedings or failures to be in good standing which
<PAGE>
would not, singly or in the aggregate, have a material adverse effect on the
business, properties, operations, condition (financial or other), results of
operations or prospects of the Company. The Company has complied, in all
material respects, with its respective contractual obligations relating to the
protection of the Company Proprietary Rights used pursuant to licenses. To the
best knowledge of the Company, no person is infringing on or violating the
Company Proprietary Rights. As used herein, the term "Company Proprietary
Rights" means all patents, patent applications, inventions, trademarks, trade
names, applications for registration of trademarks, service marks, service mark
applications, domain names, copyrights, know-how, manufacturing processes,
formulae, trade secrets, licenses and rights in any thereof and any other
intangible property and assets which are material to the business of the Company
as now conducted, as proposed to be conducted or as described in this Agreement.
(k) Labor Relations. Except as disclosed in the SEC Reports, no
material labor problem exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company.
(l) SEC Filings. The Company has timely filed all required forms,
reports and other documents required to be filed by the Company with the SEC
under the 1934 Act. All of such forms, reports and other documents complied,
when filed, in all material respects, with all applicable requirements of the
1933 Act and the 1934 Act.
(m) Absence of Brokers, Finders, Etc. No broker, finder or
similar person is entitled to any commission, fee or other compensation by
reason of the transactions contemplated by this Agreement other than Reedland
Capital Partners, a Division of Financial West Group, and the Company shall pay,
and indemnify and hold harmless the Buyer from, any claim made against the Buyer
by such entity or any other person for any such commission, fee or other
compensation.
(n) No Solicitation. No form of general solicitation or general
advertising was used by the Company or, to the best of its knowledge, any other
person acting on behalf of the Company, in respect of or in connection with the
offer and sale of the Securities. Except as disclosed on Schedule 3(n) to this
Agreement, neither the Company nor, to its knowledge, any person acting on
behalf of the Company has, either directly or indirectly, sold or offered for
sale to any person any of the Preferred Shares or the Warrants or, within the
six months prior to the date hereof, any other similar security of the Company
except as contemplated by this Agreement and the Other Subscription Agreement;
and neither the Company nor any person authorized to act on its behalf will sell
or offer for sale any shares of Preferred Stock or shares of Common Stock or
Warrants, or solicit any offers to buy any shares of Preferred Stock or shares
of Common Stock or Warrants, so as thereby to cause the issuance or sale of any
of the Shares or the issuance of the Warrants to be in violation of Section 5 of
the 1933 Act.
(o) Certain Issuances of Securities. The Company has not issued
any shares of Common Stock or shares of any series of preferred stock or other
securities convertible into, exchangeable for or otherwise entitling the holder
to acquire shares of Common Stock which are subject to Rule 4310(c)(25)(H) of
the Nasdaq as in effect from time to time or any successor, replacement or
similar provision thereof or of any other market on which the Common Stock is
listed for trading (the "Stockholder Approval Rule") and which would be
integrated with the sale of the Preferred Shares to the Buyer or the issuance of
<PAGE>
Common Shares upon conversion thereof or upon exercise of the Warrants for
purposes of the Stockholder Approval Rule.
(p) Absence of Rights Agreement. The Company has not adopted a
shareholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Stock or a change in control of the Company.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(a) Transfer Restrictions. The Company and the Buyer acknowledge
and agree that (1) the Preferred Shares and the Warrants have not been and are
not being registered under the provisions of the 1933 Act and, except as
provided in the Registration Rights Agreement with respect to the resale of the
Common Shares, the Common Shares have not been and are not being registered for
resale under the 1933 Act, and the Securities may not be transferred unless (A)
subsequently registered for resale thereunder or (B) the Buyer shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any resale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any such resale of
Securities under circumstances in which the seller, or the person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other person is under any obligation to register the Securities
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder (other than
pursuant to Section 4(d) hereof and pursuant to the Registration Rights
Agreement). Any transfer of the Preferred Shares or the Warrants shall be made
in compliance with Section 9(h).
(b) Restrictive Legend. (1) The Buyer acknowledges and agrees
that the Preferred Shares shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of the
Preferred Shares):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be sold, transferred or assigned in
the absence of an effective registration statement for the securities
under the Securities Act of 1933, as amended, or an opinion of counsel
that registration is not required under said Act.
The number of shares constituting the portion of the Maximum Share
Amount, as defined in the Certificate of Designations of the Series B
Convertible Preferred Stock (the "Certificate of Designations"),
allocated to the shares represented by this certificate for purposes of
conversion thereof is 1,588,500.
Section 10(b)(3)(a) of the Certificate of Designations permits a holder
of the securities represented by this certificate to convert such
securities in accordance with the Certificate of Designations without
being required to surrender this certificate to the Company unless all
of the securities represented hereby are so converted. Consequently,
following conversion of any of the securities represented by this
certificate, the number of shares represented by this certificate may be
<PAGE>
less than the number of shares stated hereon. Upon request of any
proposed transferee of this certificate, the Company will provide
confirmation of the number of shares evidenced by this certificate.
(2) The Buyer further acknowledges and agrees that the Warrants
shall bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the Warrants):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be resold, transferred or assigned
in the absence of an effective registration statement for the securities
under the Securities Act of 1933, as amended, or an opinion of counsel
that registration is not required under said Act.
(3) The Buyer further acknowledges and agrees that until such
time as the Common Shares have been registered for resale under the 1933 Act as
contemplated by the Registration Rights Agreement, the certificates for the
Common Shares may bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of the certificates
for the Common Shares):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be resold, transferred or assigned
in the absence of an effective registration statement for the securities
under the Securities Act of 1933, as amended, or an opinion of counsel
that registration is not required under said Act.
(4) Once the Registration Statement required to be filed by the
Company pursuant to Section 2 of the Registration Rights Agreement has been
declared effective, thereafter (1) upon request of the Buyer the Company will
substitute certificates without restrictive legend for certificates for any
Common Shares issued prior to the date such Registration Statement is declared
effective by the SEC which bear such restrictive legend and remove any
stop-transfer restriction relating thereto promptly, but in no event later than
three Trading Days (as defined in the Certificate of Designations) after
surrender of such certificates by the Buyer and (2) the Company shall not place
any restrictive legend on certificates for Common Shares issued on conversion of
the Preferred Shares or upon exercise of the Warrants or impose any
stop-transfer restriction thereon.
(c) Registration Rights Agreement. The parties hereto agree to
enter into the Registration Rights Agreement in the form attached hereto as
Annex IV on or before the Closing Date.
(d) Form D. The Company agrees to file a Form D with respect to
the Securities as required under Regulation D and to provide a copy thereof to
the Buyer promptly after such filing. The Buyer agrees to cooperate with the
Company in connection with such filing and, upon request of the Company, to
provide all information relating to the Buyer reasonably required for such
filing.
(e) Authorization for Trading; Reporting Status. On or before the
Closing Date, the Company shall file a notification for listing of additional
shares with the Nasdaq relating to the Common Shares and shall provide evidence
<PAGE>
of such filing to the Buyer. So long as the Buyer beneficially owns any of the
Preferred Shares, the Warrants or the Common Shares, the Company shall file all
reports required to be filed with the SEC pursuant to Section 13 or 15(d) of the
1934 Act and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination.
(f) Use of Proceeds. The Company does not own or have any present
intention of acquiring any "margin stock" as defined in Regulation G (12 CFR
Part 207) of the Board of Governors of the Federal Reserve System ("margin
stock"). The proceeds of sale of the Preferred Shares will be used for general
working capital purposes and in the operation of the Company's business. None of
such proceeds will be used, directly or indirectly (1) to make any loan to or
investment in any other person (other than financing the Company's subsidiaries
in the ordinary course of business or in connection with an acquisition of
another corporation or business or assets of another corporation or business) or
(2) for the purpose, whether immediate, incidental or ultimate, of purchasing or
carrying any margin stock or for the purpose of maintaining, reducing or
retiring any indebtedness which was originally incurred to purchase or carry any
stock that is currently a margin stock or for any other purpose which might
constitute the transactions contemplated by this Agreement a "purpose credit"
within the meaning of such Regulation G. Neither the Company nor any agent
acting on its behalf has taken or will take any action which might cause this
Agreement or the transactions contemplated hereby to violate Regulation G,
Regulation T or any other regulation of the Board of Governors of the Federal
Reserve System or to violate the 1934 Act, in each case as in effect now or as
the same may hereafter be in effect.
(g) Blue Sky Laws. On or before the Closing Date, the Company
shall take such action as shall be necessary to qualify, or to obtain an
exemption for, the Preferred Shares for sale to the Buyer and the Warrants for
issuance to the Buyer pursuant to this Agreement and the Common Shares for
issuance to the Buyer on conversion of the Preferred Shares and exercise of the
Warrants under such of the securities or "blue sky" laws of jurisdictions as
shall be applicable to the sale of the Preferred Shares and the issuance of the
Warrants pursuant to this Agreement and the issuance to the Buyer of Common
Shares on conversion of the Preferred Shares and exercise of the Warrants. The
Company shall furnish copies of all filings, applications, orders and grants or
confirmations of exemptions relating to such securities or "blue sky" laws on or
prior to the Closing Date.
(h) Certain Expenses. At the closing on the Closing Date, the
Company shall pay or reimburse the Buyer for all reasonable expenses (including,
without limitation, legal fees and expenses of counsel to the Buyer and the
Buyer's due diligence expenses) not in excess of $25,000 incurred by the Buyer
in connection with this Agreement and the transactions contemplated hereby. In
addition, the Company shall pay on demand all expenses incurred by the Buyer,
including reasonable attorneys' fees and expenses, as a consequence of, or in
connection with (1) the negotiation, preparation or execution of any amendment,
modification or waiver of this Agreement, the Certificate of Designations, the
Registration Rights Agreement, the Warrants, the Transfer Agent Agreement and
the other agreements and instruments contemplated hereby and thereby requested
by the Company, (2) any default or breach of any of the Company's obligations
set forth in any of such agreements or instruments and (3) the enforcement or
restructuring of any right of, including the collection of any payments due, the
Buyer under any of such agreements or instruments, including any action or
proceeding relating to such enforcement, or any order, injunction or other
<PAGE>
process seeking to restrain the Company from paying any amount due the Buyer, in
which the Buyer prevails.
(i) Certain Issuances of Securities. (1) Unless the Company
obtains the Stockholder Approval (as defined in the Certificate of Designations)
or a waiver thereof from the Nasdaq, the Company will not issue any shares of
Common Stock or shares of any other series of preferred stock or other
securities convertible into, exchangeable for, or otherwise entitling the holder
to acquire, shares of Common Stock which would be subject to the requirements of
the Stockholder Approval Rule and which would be integrated with the sale of the
Preferred Shares and issuance of the Warrants to the Buyer or the issuance of
Common Shares upon conversion of the Preferred Shares or upon exercise of the
Warrants for purposes of the Stockholder Approval Rule.
(2) During the period from the date of this Agreement to the
later of (i) the date which is one year after the Closing Date and (ii) the date
on which the Registration Statement shall have been effective with the SEC for
270 consecutive days, the Company shall not offer, sell, contract to sell or
issue (or engage any person to assist the Company in taking any such action) (A)
any security (whether debt or equity) with conversion or exchange terms similar
in nature to the conversion rights of the Preferred Stock or (B) any equity
securities or securities convertible into, exchangeable for or otherwise
entitling the holder to acquire, any Common Stock at a price below the market
price of the Common Stock on the date of such issuance or the date of
conversion, exchange or other exercise thereof (or below an average market price
for a reasonable period prior to such issuance, conversion, exchange or other
exercise) (collectively, "Equity Securities"); provided, however, that nothing
in this Section 4(i)(2) shall prohibit the Company from issuing securities (w)
pursuant to compensation plans for employees, directors, officers, advisers or
consultants of the Company and in accordance with the terms of such plans as in
effect as of the date of this Agreement, (x) upon exercise of conversion,
exchange, purchase or similar rights issued, granted or given by the Company and
outstanding as of the date of this Agreement and disclosed in the SEC Reports or
this Agreement, (y) pursuant to a public offering underwritten on a firm
commitment basis registered under the 1933 Act or (z) as part of a transaction
involving a strategic alliance, acquisition of stock or assets, merger,
collaboration, joint venture, partnership or other similar arrangement of the
Company with another corporation, partnership or other business entity which is
engaged in a business similar to or related to the business of the Company, so
long as in the case of this clause (z) the Board of Directors by resolution duly
adopted (and a copy of which shall be furnished to the Buyer promptly after
adoption) determines that such issuance is fair to the holders of each class and
series of capital stock of the Company and to the Buyer in respect of its equity
interest in the Company that is represented by the Preferred Shares and the
Warrants.
(3) Subject to the restrictions in Sections 4(i)(1) and 4(i)(2),
during the period from the date of execution and delivery of this Agreement to
the date which is one year after the Closing Date, the Company shall not offer,
sell, contract to sell or issue (or engage any person to assist the Company in
taking any such action) any Equity Securities without giving the Buyer the first
right to acquire the Equity Securities on the same terms as the Equity
Securities are to be offered to other investors; provided, however, that this
Section 4(i)(3) shall not apply to the offer or sale of Equity Securities by the
Company in the transactions, and subject to the conditions, set forth in clauses
(w), (x), (y) and (z) of the proviso to the first sentence of Section 4(i)(2)
above. The Company shall give notice to the Buyer of the detailed terms of the
Equity Securities proposed to be issued and, promptly after being requested by
the Buyer, such other information as requested by the Buyer. The Buyer may, by
notice to the Company, exercise such right of first refusal at any time until
<PAGE>
the later of (x) 30 Business Days after such notice from the Company to the
Buyer and (y) 15 Business Days after the Company provides such additional
information as shall have been requested by the Buyer; provided, however, that
if the Company has theretofore complied in good faith with any such request for
additional information, the Buyer must exercise such right not later than 45
Business Days after such notice from the Company to the Buyer.
(j) Certain Selling Restrictions. So long as the Company is in
compliance in all material respects with its obligations to the Buyer under this
Agreement, the Certificate of Designations, the Warrants and the Registration
Rights Agreement, during the 20 consecutive Trading Days (as defined in the
Certificate of Designations) immediately preceding the Initial Reset Date (as
defined in the Certificate of Designations) and each Biannual Reset Date (as
defined in the Certificate of Designations), the Buyer agrees on its behalf and
on behalf of its Affiliates (as defined in the Certificate of Designations) that
it will not sell, or engage in any short sales with respect to, any shares of
Common Stock on Nasdaq or any other securities market where the Common Stock is
then listed for trading.
(k) Best Efforts. Each of the parties shall use its best efforts
timely to satisfy each of the conditions to the other party's obligations to
sell and purchase the Preferred Shares set forth in Section 7 or 8, as the case
may be, of this Agreement on or before the Closing Date.
5. TRANSFER AGENT AGREEMENT; CONVERSION PROCEDURE.
(a) Transfer Agent Agreement. Prior to the Closing Date, the
Company will (1) execute and deliver the Transfer Agent Agreement in the form
attached hereto as Annex V and thereby irrevocably instruct, American Securities
Transfer & Trust, Inc., as Transfer Agent and Registrar (the "Transfer Agent"),
to issue certificates for the Common Shares from time to time upon conversion of
the Preferred Shares and exercise of the Warrants in such amounts as specified
from time to time to the Transfer Agent in the Notices of Conversion surrendered
in connection with such conversions and referred to in Section 5(b) of this
Agreement and the Form of Subscription in the form attached to the Warrants and
(2) appoint the Transfer Agent the conversion agent for the Preferred Stock and
the exercise agent for the Warrants. The certificates for the Common Shares may
bear the restrictive legend specified in Section 4(b) of this Agreement prior to
registration of the resale of the Common Shares under the 1933 Act. The
certificates for the Common Shares shall be registered in the name of the Buyer
or its designee and in such denominations to be specified by the Buyer in
connection with each conversion of Preferred Shares or exercise of the Warrants.
The Company warrants that no instruction other than (x) such instructions
referred to in this Section 5, (y) stop transfer instructions to give effect to
Section 4(a) prior to registration of the resale of the Common Shares under the
1933 Act and (z) the instructions required by Section 3(n) of the Registration
Rights Agreement will be given by the Company to the Transfer Agent and that the
Common Shares shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement. Nothing in this
Section 5(a) shall limit in any way the Buyer's obligations and agreement to
comply with the registration requirements of the 1933 Act upon resale of the
Common Shares. If the Buyer provides the Company with an opinion of counsel,
reasonably satisfactory in form, scope and substance to the Company and its
legal counsel, that registration of a resale by the Buyer of any of the
Securities is not required under the 1933 Act, the Company shall permit the
transfer of such Securities and, in the case of the Common Shares, in accordance
with clause (1)(B) of Section 4(a) of this Agreement, promptly instruct the
Transfer Agent to issue upon transfer one or more share certificates in such
<PAGE>
name and in such denominations as specified by the Buyer within three Business
Days after receipt of such opinion. Nothing in this Section 5(a) shall limit the
obligations of the Company under Section 3(n) of the Registration Rights
Agreement.
(b) Conversion Procedure. In connection with the exercise of
conversion rights relating to the Preferred Shares, the Buyer or any subsequent
holder of the Preferred Shares shall complete, sign and furnish to the Transfer
Agent a Notice of Conversion of Series B Convertible Preferred Stock in the form
attached hereto as Annex VI (a "Conversion Notice") and shall provide a copy
thereof to the Company on the same day, which actions shall be deemed to satisfy
all requirements of the Certificate of Designations.
6. CLOSING DATE.
Subject to the satisfaction or waiver of the conditions set forth
in Sections 7 and 8, the date and time of the issuance and sale of the Preferred
Shares and the issuance of the Warrants (the "Closing Date") shall be 12:00
noon, New York City time, on or before the date which is three Business Days
after the date the Buyer has deposited the Purchase Price with the Escrow Agent
in accordance with Section 1(b), or such other mutually agreed to time. The
closing shall occur on the Closing Date at the Law Offices of Brian W Pusch,
Penthouse Suite, 29 West 57th Street, New York, New York 10019.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE.
The Buyer understands that the Company's obligation to sell the
Preferred Shares and issue the Warrants to the Buyer pursuant to this Agreement
is conditioned upon the satisfaction of the following conditions precedent on or
before the Closing Date (any or all of which may be waived by the Company in its
sole discretion):
(a) The receipt and acceptance by the Company of this Agreement
as evidenced by execution of this Agreement by the Company and delivery of an
executed counterpart of this Agreement to the Buyer or its legal counsel;
(b) Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the Purchase Price for the Preferred
Shares in accordance with Section 1(b) hereof; and
(c) The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement as if made on the Closing
Date and the performance by the Buyer on or before the Closing Date of all
covenants and agreements of the Buyer required to be performed on or before the
Closing Date.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase
the Preferred Shares and acquire the Warrants on the Closing Date is conditioned
upon the satisfaction of the following conditions precedent on or before the
Closing Date (any or all of which may be waived by the Buyer in its sole
discretion):
<PAGE>
(a) Delivery by the Company to the Escrow Agent of the
certificates for the Preferred Shares and the Warrants in accordance with this
Agreement;
(b) The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the Closing
Date and the performance by the Company on or before the Closing Date of all
covenants and agreements of the Company required to be performed on or before
the Closing Date, and receipt by the Buyer of a certificate, dated the Closing
Date, of the Chief Executive Officer of the Company confirming such matters and
such other matters as the Buyer may reasonably request;
(c) The receipt by the Buyer of confirmation of the filing with
the Secretary of State of the State of Delaware of the Certificate of
Designations;
(d) The receipt by the Buyer of a certificate, dated the Closing
Date, of the Secretary of the Company certifying (1) the Amended and Restated
Certificate of Incorporation and By-Laws of the Company as in effect on the
Closing Date and (2) all resolutions of the Board of Directors (and committees
thereof) of the Company relating to this Agreement and the transactions
contemplated hereby;
(e) The Transfer Agent shall have executed and delivered the
Transfer Agent Agreement in the form attached hereto as Annex V; and
(f) Receipt by the Buyer on the Closing Date of (i) an opinion of
Bartel Eng Linn & Schroder, counsel for the Company, dated the Closing Date, in
form, scope and substance reasonably satisfactory to the Buyer, to the effect
set forth in Annex VII attached hereto, and (ii) an opinion of David C. Adams,
Esq., General Counsel of the Company, dated the Closing Date, in form, scope and
substance reasonably satisfactory to the Buyer, to the effect set forth in Annex
VIII attached hereto.
9. MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of California.
(b) Counterparts. This Agreement may be executed in counterparts
and by the parties hereto on separate counterparts, all of which together shall
constitute one and the same instrument. A facsimile transmission of this
Agreement bearing a signature on behalf of a party hereto shall be legal and
binding on such party. Although this Agreement is dated as of the date first set
forth above, the actual date of execution and delivery of this Agreement by each
party is the date set forth below such party's signature on the signature page
hereof. Any reference in this Agreement or in any of the documents executed and
delivered by the parties hereto in connection herewith to (1) the date of
execution and delivery of this Agreement by the Buyer shall be deemed a
reference to the date set forth below the Buyer's signature on the signature
page hereof, (2) the date of execution and delivery of this Agreement by the
Company shall be deemed a reference to the date set forth below the Company's
signature on the signature page hereof and (3) the date of execution and
delivery of this Agreement or the date of execution and delivery of this
Agreement by the Buyer and the Company shall be deemed a reference to the later
of the dates set forth below the signatures of the parties on the signature page
hereof.
<PAGE>
(c) Headings, etc. The headings, captions and footers of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement.
(d) Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
(e) Amendments. No amendment, modification, waiver, discharge or
termination of any provision of this Agreement nor consent to any departure by
the Buyer or the Company therefrom shall in any event be effective unless the
same shall be in writing and signed by the party to be charged with enforcement,
and then shall be effective only in the specific instance and for the purpose
for which given. No course of dealing between the parties hereto shall operate
as an amendment of this Agreement.
(f) Waivers. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, or any course of dealings between the parties, shall not operate as a
waiver thereof or an amendment hereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
exercise of any other right or power.
(g) Notices. Any notices required or permitted to be given under
the terms of this Agreement shall be delivered personally (which shall include
telephone line facsimile transmission with answer back confirmation) or by
courier and shall be effective upon receipt, in the case of the Company
addressed to the Company at its address shown in the introductory paragraph of
this Agreement, Attention: Chief Executive Officer (telephone line facsimile
transmission number (916) 858-8728 or, in the case of the Buyer, at its address
or telephone line facsimile transmission number shown on the signature page of
this Agreement or such other address or telephone line facsimile transmission
number as a party shall have provided by notice to the other party in accordance
with this provision. The Buyer hereby designates as its address for any notice
required or permitted to be given to the Buyer pursuant to the Certificate of
Designations the address shown on the signature page of this Agreement, until
the Buyer shall designate another address for such purpose.
(h) Assignment. Prior to the Closing Date, the Buyer may not
assign its rights and obligations under this Agreement. Any transfer of the
Preferred Shares or the Warrants by the Buyer after the Closing Date shall be
made in accordance with Section 4(a) and, in connection with such transfer, the
Buyer shall assign to the transferee its rights and obligations under this
Agreement and the Registration Rights Agreement by compliance with the
provisions of Section 9 of the Registration Rights Agreement.
(i) Survival of Representations and Warranties. The respective
representations, warranties, covenants and agreements of the Buyer and the
Company contained in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement shall survive the delivery of and
payment for the Preferred Shares and shall remain in full force and effect
regardless of any investigation made by or on behalf of them or any person
controlling or advising any of them.
<PAGE>
(j) Entire Agreement. This Agreement and its Schedules and
Annexes set forth the entire agreement between the parties hereto with respect
to the subject matter hereof and supersede all prior agreements and
understandings, whether written or oral, with respect thereto.
(k) Termination. The Buyer shall have the right to terminate this
Agreement by giving notice to the Company at any time at or prior to the Closing
Date if:
(1) the Company shall have failed, refused, or been unable at or
prior to the date of such termination of this Agreement to perform any
of its obligations hereunder;
(2) any other condition of the Buyer's obligations hereunder is
not fulfilled; or
(3) the closing shall not have occurred on a Closing Date on or
before December 23, 1999, or such later date as the parties shall
mutually agree, other than solely by reason of a breach of this
Agreement by the Buyer.
Any such termination shall be effective upon the giving of notice thereof by the
Buyer. Upon such termination, the Buyer shall have no further obligation to the
Company hereunder and the Company shall remain liable for any breach of this
Agreement or the other documents contemplated hereby which occurred on or prior
to the date of such termination.
(l) Further Assurances. Each party to this Agreement will perform
any and all acts and execute any and all documents as may be necessary and
proper under the circumstances in order to accomplish the intents and purposes
of this Agreement and to carry out its provisions.
(m) Public Statements, Press Releases, Etc. The Company and the
Buyer shall have the right to approve before issuance any press releases or any
other public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of the Buyer, to make any press release or other public disclosure with
respect to such transactions as is required by applicable law or Nasdaq
regulation (although the Buyer shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its release and
shall be provided with a copy thereof).
(n) Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Buyer and the Company by their respective officers or other representatives
thereunto duly authorized on the respective dates set forth below.
NUMBER OF SHARES: ________
PRICE PER SHARE: $______
AGGREGATE PURCHASE PRICE: $______
-------------------------------------
By:
Date:
Address: _______________________
Facsimile No.: _________________
THERMOGENESIS CORP.
Name:
Title:
Date:
