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UNITED STATES
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) January 29, 1999
NEOTHERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 000-28782 93-0979187
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No)
157 Technology Drive, Irvine, California 92618
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (949) 788-6700
Not Applicable
(Former name or former address, if changed since last report)
Exhibit Index on Page 4
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ITEM 5. OTHER EVENTS
On January 29, 1999, NeoTherapeutics, Inc. (the "Company") entered into
a Preferred Stock Purchase Agreement with two institutional investors (the
"Agreement"). Pursuant to the Agreement, the Company issued and sold to the
investors shares of the Company's 5% Series A Preferred Stock with Conversion
Features ("Series A shares") and issued Warrants to purchase 75,000 shares of
common stock, for total consideration of $4.0 million. Under the Agreement, the
Company also has the option to sell $2.0 million of 5% Series B Preferred Stock
with Conversion Features ("Series B shares") to the investors commencing 180
days after January 29, 1999, subject to certain conditions contained in the
Agreement and the Certificate of Designation governing the Series A shares.
During the first 90 days after the closing, the Series A shares are
convertible only at an initial price of $13.06 per share of common stock (the
"fixed price"). Thereafter, the Series A shares are convertible in 25%
cumulative monthly increments at the lesser of the fixed price or at a variable
rate of 101% of the Per Share Market Value (as defined in the Agreement) of the
common stock at the time of conversion. In no event can the Series A shares be
converted into more than 1,450,000 shares of common stock. The Series B shares
will contain terms and conditions for conversion identical to the Series A
shares, except that the fixed conversion price of the Series B shares will be
set at 125% of the average Per Share Market Value of the common stock at the
time of the second closing. Dividends on both series of preferred stock are
payable in cash or in common stock, at the option of the Company, at the annual
rate of 5%. In connection with the purchase of the Series A shares, the
investors also received warrants to purchase 75,000 shares of common stock at
$12.98 per share for a period of 5 years. There are no warrants associated with
the Series B shares. Additional features of the preferred stock include, among
other things, a redemption feature at the Company's option if the common stock
trades below a floor or above a ceiling price and a prohibition on conversion
below a stipulated price. In connection with this financing, the Company paid a
finder's fee to an unrelated third party consisting of cash and warrants to
purchase common stock of the Company.
ITEM 7. EXHIBITS
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Exhibits:
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4.1 Certificate of Designation of 5% Series A Preferred Stock
with Conversion Features.
4.2 Preferred Stock Purchase Agreement dated as of January 29,
1999, by and among Registrant, Westover Investments L.P.
and Montrose Investments L.P.
4.3 Registration Rights Agreement dated as of January 29,
1999, by and among Registrant, Westover Investments L.P.
and Montrose Investments L.P.
4.4 Form of Warrant issued by Registrant to Westover
Investments L.P. and Montrose Investments L.P. dated as of
January 29, 1999.
99.1 Press Release dated February 2, 1999.
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2
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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 thereunto duly authorized.
NEOTHERAPEUTICS, INC.
Date: February 8, 1999 By: /s/ SAMUEL GULKO
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Samuel Gulko
Chief Financial Officer
3
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EXHIBIT INDEX
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Exhibits Description
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<S> <C>
4.1 Certificate of Designation of 5% Series A Preferred Stock
with Conversion Features.
4.2 Preferred Stock Purchase Agreement dated as of January 29,
1999, by and among Registrant, Westover Investments L.P.
and Montrose Investments L.P.
4.3 Registration Rights Agreement dated as of January 29,
1999, by and among Registrant, Westover Investments L.P.
and Montrose Investments L.P.
4.4 Form of Warrant issued by Registrant to Westover
Investments L.P. and Montrose Investments L.P. dated as of
January 29, 1999.
99.1 Press Release dated February 2, 1999.
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EXHIBIT 4.1
CERTIFICATE OF DESIGNATION
OF
5% SERIES A PREFERRED STOCK WITH CONVERSION FEATURES
OF
NEOTHERAPEUTICS, INC.
Pursuant to Section 151 of the General Corporation Law of the State of Delaware
-------------
NEOTHERAPEUTICS, INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), hereby
certifies, pursuant to the authority contained in the Certificate of
Incorporation and in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware that the following resolution
was duly adopted by the Board of Directors of the Corporation on January 25,
1999, creating a series of its Preferred Stock designated as 5% Series A
Preferred Stock with Conversion Features:
RESOLVED, that pursuant to the authority expressly granted to and vested
in the Board of Directors of the Corporation (the "Board") by the provisions of
the Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation"), there hereby is created, out of the 5,000,000 shares of
Preferred Stock, par value $0.001 per share, of the Corporation authorized in
Article 4 of the Certificate of Incorporation (the "Preferred Stock"), a series
of the Preferred Stock of the Corporation consisting of 400 shares, which shall
be designated 5% Series A Preferred Stock with Conversion Features, which series
shall have the powers, designations, preferences and relative, participating,
optional and other rights, and the qualifications, limitations and restrictions
set forth below:
SECTION 1. Designation, Amount and Par Value. The series of preferred
stock shall be designated as 5% Series A Preferred Stock with Conversion
Features (the "Preferred Stock") and the number of shares so designated shall be
400 (which shall not be subject to increase without the consent of the holders
of the Preferred Stock (each, a "Holder" and collectively, the "Holders")); Each
share of Preferred Stock shall have a par value of $.001 and a stated value of
$10,000 (the "Stated Value").
SECTION 2. Dividends.
(a) Holders shall be entitled to receive, when and as declared by
the Board of Directors out of funds legally available therefor, and the Company
shall pay, cumulative dividends at the rate per share (as a percentage of the
Stated Value per share) equal to 5% per annum, payable, subject to the
provisions of this Section 2(a), on a quarterly basis on March 31, June 30,
September 30 and December 31 of each year while such share is outstanding (each
a "Dividend Payment Date") and on each Conversion Date (as defined herein) for
such share, commencing on the earlier to occur of the Conversion Date for such
share and March 31, 1999, in cash or shares of Common Stock (as defined in
Section 8). Subject to the terms and conditions herein, the decision whether to
pay
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dividends hereunder in Common Stock or cash shall be at the discretion of the
Company. Dividends on the Preferred Stock shall be calculated on the basis of a
360-day year, shall accrue daily commencing on the Original Issue Date (as
defined in Section 8), and shall be deemed to accrue from such date whether or
not earned or declared and whether or not there are profits, surplus or other
funds of the Company legally available for the payment of dividends. A party
that holds shares of Preferred Stock on the record date with respect to a
Dividend Payment Date will be entitled to receive such dividend payment and any
other accrued and unpaid dividends which accrued prior to such Dividend Payment
Date, without regard to any sale or disposition of such Preferred Stock
subsequent to the applicable record date. Except as otherwise provided herein,
if at any time the Company pays less than the total amount of dividends then
accrued on account of the Preferred Stock, such payment shall be distributed
ratably among the Holders based upon the number of shares of Preferred Stock
held by each Holder. The Company shall provide the Holders notice of its
intention to pay dividends in cash or shares of Common Stock not less than 10
Trading Days (as defined in Section 8) prior to any Dividend Payment Date, it
being understood that a failure of the Company to timely provide such notice
shall be deemed an election (if permitted hereunder) to pay such dividends in
shares of Common Stock pursuant to the terms hereof. If the Company has properly
elected, and is permitted hereunder, to pay dividends in shares of Common Stock,
then such dividends will be due and payable on each Conversion Date for the
applicable shares of Preferred Stock (and not on each Dividend Payment Date) and
the number of shares of Common Stock issuable on account of such dividend shall
equal the cash amount of such dividend on such Conversion Date divided by the
Conversion Price (as defined below) on such date. Any dividends to be paid in
cash hereunder that are not paid on a Dividend Payment Date shall continue to
accrue and shall entail a late fee, which must be paid in cash, at the rate of
15% per annum or the maximum amount that is permitted by applicable law,
whichever is less (such fees to accrue daily, from the date such dividend is due
hereunder through and including the date of payment).
(b) Notwithstanding anything to the contrary contained herein,
the Company may not issue shares of Common Stock in payment of dividends on the
Preferred Stock (and must deliver cash in respect thereof) if:
(i) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes is insufficient to pay such
dividends in shares of Common Stock;
(ii) after the Dividend Effectiveness Date (as defined
in Section 8), such shares (x) are not registered for resale pursuant to an
effective Underlying Securities Registration Statement (as defined in Section 8)
and (y) may not be sold without volume restrictions pursuant to Rule 144
promulgated under the Securities Act (as defined in Section 8), as determined by
counsel to the Company pursuant to a written opinion letter, addressed to the
Company's transfer agent in the form and substance acceptable to the applicable
Holder and such transfer agent (if the Company is permitted and elects to pay
dividends in shares of Common Stock under this clause (ii) prior to the Dividend
Effectiveness Date and thereafter an Underlying Securities Registration
Statement shall be declared effective by the Commission (as defined in Section
8), the Company shall, within three (3) Trading Days after the date of such
declaration of effectiveness, exchange such shares for shares of Common Stock
that are free of restrictive legends of any kind);
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(iii) such shares are not then listed or quoted on the
Nasdaq National Market (the "NASDAQ"), or on the New York Stock Exchange,
American Stock Exchange or Nasdaq SmallCap Market (each, a "Subsequent Market");
(iv) the Company has failed to timely satisfy its
conversion obligations hereunder; or
(v) the issuance of such shares would result in a
violation of Section 5(a)(iii).
(c) So long as any Preferred Stock shall remain outstanding,
neither the Company nor any subsidiary thereof shall redeem, purchase or
otherwise acquire directly or indirectly any Junior Securities (as defined in
Section 8), nor shall the Company directly or indirectly pay or declare any
dividend or make any distribution (other than a dividend or distribution
described in Section 5 or dividends due and paid in the ordinary course on
preference shares of the Company at such times when the Company is in compliance
with its payment and other obligations hereunder) upon, nor shall any
distribution be made in respect of, any Junior Securities, nor shall any monies
be set aside for or applied to the purchase or redemption (through a sinking
fund or otherwise) of any Junior Securities.
SECTION 3. Voting Rights. Except as otherwise provided herein and as
otherwise required by law, the Preferred Stock shall have no voting rights.
However, so long as any shares of Preferred Stock are outstanding, the Company
shall not, without the affirmative vote of the Holders of all of the shares of
the Preferred Stock then outstanding, (a) alter or change adversely the powers,
preferences or rights given to the Preferred Stock or alter or amend this
Certificate of Designation , (b) authorize or create any class of stock ranking
as to dividends or distribution of assets upon a Liquidation (as defined in
Section 4) senior to or otherwise pari passu with the Preferred Stock, (c) amend
its certificate of incorporation or other charter documents so as to affect
adversely any rights of the Holders, (d) increase the authorized number of
shares of Preferred Stock, or (e) enter into any agreement with respect to the
foregoing.
SECTION 4. Liquidation. Upon any liquidation, dissolution or winding-up
of the Company, whether voluntary or involuntary (a "Liquidation"), the Holders
shall be entitled to receive out of the assets of the Company, whether such
assets are capital or surplus, for each share of Preferred Stock an amount equal
to the Stated Value plus all due but unpaid dividends per share, whether
declared or not, before any distribution or payment shall be made to the holders
of any Junior Securities, and if the assets of the Company shall be insufficient
to pay in full such amounts, then the entire assets to be distributed to the
Holders shall be distributed among the Holders ratably in accordance with the
respective amounts that would be payable on such shares if all amounts payable
thereon were paid in full. A sale, conveyance or disposition of all or
substantially all of the assets of the Company or the effectuation by the
Company of a transaction or series of related transactions in which more than
33% of the voting power of the Company is disposed of, or a consolidation or
merger of the Company with or into any other company or companies shall not be
treated as a Liquidation, but instead shall be subject to the provisions of
Section 5. The Company
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shall mail written notice of any such Liquidation, not less than 45 days prior
to the payment date stated therein, to each record Holder.
SECTION 5. Conversion.
(a)(i) Conversions at Option of Holder. Each share of Preferred
Stock shall be convertible into shares of Common Stock (subject to the
limitations set forth in Section 5(a)(iii) hereof) at the Conversion Ratio (as
defined in Section 8) at the option of the Holder, at any time and from time to
time, from and after the Original Issue Date; provided, that, (A) from and after
the Original Issue Date through the date which is the ninetieth (90th) day after
the Original Issue Date (such ninetieth (90) day, the "Record Date"), the
Conversion Price applicable to any conversion during such period shall be the
Initial Conversion Price (as defined herein), (B) from and after the Record Date
through the fourth (4th) month thereafter, any conversions of shares of
Preferred Stock shall be limited in each monthly period to 25% of the number of
shares of Preferred Stock outstanding on the Record Date, on a cumulative basis
(for example, during the first month following the Record Date, the Holder may
tender conversions of shares of Preferred Stock of up to 25% of the number of
shares of Preferred Stock outstanding on the Record Date and during the second
month following the Record Date, the Holder may tender conversions of shares of
Preferred Stock of up to 50% of the number of shares Preferred Stock outstanding
on the Record Date less such number of shares of Preferred Stock for which
conversions have previously been honored), provided, further, that the
restrictions on conversion set forth in this Section 5(a)(i) shall be null and
void ab initio from and after the earlier of (i) the date that the Company
delivers to the Holders an Optional Redemption Notice (as defined in Section
6(a)) and (ii) the date that the Company delivers to the Holders a Subsequent
Financing Notice (as defined in the Purchase Agreement). Holders shall effect
conversions by surrendering the certificate or certificates representing the
shares of Preferred Stock to be converted to the Company, together with the form
of conversion notice attached hereto as Exhibit A (a "Conversion Notice"). Each
Conversion Notice shall specify the number of shares of Preferred Stock to be
converted and the date on which such conversion is to be effected, which date
may not be prior to the date the Holder delivers such Conversion Notice by
facsimile (the "Conversion Date"). If no Conversion Date is specified in a
Conversion Notice, the Conversion Date shall be the date that the Conversion
Notice is deemed delivered hereunder. If the Holder is converting less than all
shares of Preferred Stock represented by the certificate or certificates
tendered by the Holder with the Conversion Notice, or if a conversion hereunder
cannot be effected in full for any reason, the Company shall promptly deliver to
such Holder (in the manner and within the time set forth in Section 5(b)) a
certificate representing the number of shares of Preferred Stock as have not
been converted.
(ii) Automatic Conversion. Subject to the provisions in
this paragraph, all outstanding shares of Preferred Stock for which conversion
notices have not previously been received or for which redemption has not been
made or required hereunder shall be automatically converted on the third
anniversary of the later to occur of (i) the Effectiveness Date (as defined in
the Registration Rights Agreement) or (ii) the date that the Commission declares
effective an Underlying Securities Registration Statement, at the Conversion
Price on such date. The conversion contemplated by this paragraph shall not
occur at such time as (a) (1) an Underlying Securities Registration Statement is
not then effective or (2) the Holder is not permitted to resell Underlying
Shares (as defined in Section 8) pursuant to Rule 144(k) promulgated under the
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Securities Act, without volume restrictions, as evidenced by an opinion letter
of counsel acceptable to the Holder and the transfer agent for the Common Stock;
(b) there are not sufficient shares of Common Stock authorized and reserved for
issuance upon such conversion; or (c) the Company shall have defaulted on its
covenants and obligations hereunder or under the Purchase Agreement or
Registration Rights Agreement. Notwithstanding the foregoing, the three-year
period for conversion under this Section shall be extended (on a day-for-day
basis) for any Trading Days after the date that the Commission declares
effective an Underlying Securities Registration Statement that the Purchaser is
unable to resell Underlying Shares under an Underlying Securities Registration
Statement due to (a) the Common Stock not being listed for trading on the NASDAQ
or any Subsequent Market, (b) the failure of such Underlying Securities
Registration Statement to remain effective during the Effectiveness Period (as
defined in the Registration Rights Agreement) as to all Underlying Shares, or
(c) the suspension of the Holder's ability to resell Underlying Shares
thereunder.
(iii) Certain Conversion Restrictions.
(A)(1) A Holder may not convert shares of Preferred
Stock or receive shares of Common Stock as payment of dividends hereunder to the
extent such conversion or receipt of such dividend payment would result in the
Holder beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules thereunder) in excess of 4.999% of the then
issued and outstanding shares of Common Stock, including shares issuable upon
conversion of, and payment of dividends on, the shares of Preferred Stock held
by such Holder after application of this Section. The Holder shall have the sole
authority and obligation to determine whether the restriction contained in this
Section applies and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which shares of
Preferred Stock are convertible shall be in the sole discretion of the Holder.
The provisions of this Section may be waived by a Holder (but only as to itself
and not to any other Holder) upon not less than 75 days prior notice to the
Company. Other Holders shall be unaffected by any such waiver.
(2) A Holder may not convert shares of Preferred
Stock or receive shares of Common Stock as payment of dividends hereunder to the
extent such conversion or receipt of such dividend payment would result in the
Holder beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act (as defined in Section 8) and the rules thereunder) in excess
of 9.999% of the then issued and outstanding shares of Common Stock, including
shares issuable upon conversion of, and payment of dividends on, the shares of
Preferred Stock held by such Holder after application of this Section. The
Holder shall have the sole authority and obligation to determine whether the
restriction contained in this Section applies and to the extent that the Holder
determines that the limitation contained in this Section applies, the
determination of which shares of Preferred Stock are convertible shall be in the
sole discretion of the Holder. The provisions of this Section may be waived by a
Holder (but only as to itself and not to any other Holder) upon not less than 75
days prior notice to the Company. Other Holders shall be unaffected by any such
waiver.
(B) If on any Conversion Date (A) the Common Stock is
listed for trading on the NASDAQ or the Nasdaq SmallCap Market, (B) the
Conversion Price then in effect is such that the aggregate number of shares of
Common Stock that would then be issuable upon conversion in full of all then
outstanding shares of Preferred Stock and as payment of dividends
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thereon in shares of Common Stock, together with any shares of Common Stock
previously issued upon conversion of shares of Preferred Stock and as payment of
dividends thereon, would equal or exceed 20% of the number of shares of Common
Stock outstanding on the Series A Closing Date (as defined in the Purchase
Agreement) (such number of shares as would not equal or exceed such 20% limit,
the "Issuable Maximum"), and (C) the Company shall not have previously obtained
the vote of shareholders (the "Shareholder Approval"), if any, as may be
required by the applicable rules and regulations of the Nasdaq Stock Market (or
any successor entity) applicable to approve the issuance of shares of Common
Stock in excess of the Issuable Maximum pursuant to the terms hereof, then the
Company shall issue to the Holder so requesting a conversion a number of shares
of Common Stock equal to its pro rata share of the Issuable Maximum (determined
by reference to the number of shares of Preferred Stock issued to all Holders on
the Series A Closing Date) and, with respect to the remainder of the aggregate
Stated Value of the shares of Preferred Stock then held by such Holder for which
a conversion in accordance with the Conversion Price would result in an issuance
of shares of Common Stock in excess of the Issuable Maximum (the "Excess Stated
Value"), the converting Holder shall have the option to require the Company to
either (1) use its best efforts to obtain the Shareholder Approval applicable to
such issuance as soon as is possible, but in any event not later than the 75th
day after such request, or (2)(i) issue and deliver to such Holder a number of
shares of Common Stock as equals (x) the Excess Stated Value, plus accrued
dividends on all shares of Preferred Stock being converted, divided by (y) the
closing sales price of the Common Stock as reported by the NASDAQ on the Series
A Closing Date, and (ii) cash in an amount equal to the product of (x) the Per
Share Market Value on the Conversion Date and (y) the number of shares of Common
Stock in excess of such Holder's pro rata portion of the Issuable Maximum that
would have otherwise been issuable to the Holder in respect of such conversion
but for the provisions of this Section (such amount of cash being hereinafter
referred to as the "Discount Equivalent"), or (3) pay cash to the converting
Holder in an amount equal to the Mandatory Redemption Amount (as defined in
Section 8) for the Excess Stated Value. If the Company fails to pay the Discount
Equivalent or the Mandatory Redemption Amount, as the case may be, in full
pursuant to this Section within seven (7) days after the date payable, the
Company will pay interest thereon at a rate of 15% per annum (or the maximum
rate permitted by applicable law, whichever is less) to the converting Holder,
accruing daily from the Conversion Date until such amount, plus all such
interest thereon, is paid in full.
(C) Notwithstanding anything herein to the contrary,
the Company shall not be obligated to issue in excess of 1,450,000 Underlying
Shares upon conversion of shares of Preferred Stock and as payment of dividends
thereon.
(b)(i) Not later than three (3) Trading Days after any Conversion
Date, the Company will deliver to the Holder (i) a certificate or certificates
which shall be free of restrictive legends and trading restrictions (other than
those required by Section 3.1(b) of the Purchase Agreement) representing the
number of shares of Common Stock being acquired upon the conversion of shares of
Preferred Stock (subject to the limitations set forth in Section 5(a)(iii)
hereof), (ii) one or more certificates representing the number of shares of
Preferred Stock not converted, (iii) a bank check in the amount of accrued and
unpaid dividends (if the Company has elected to pay accrued dividends in cash),
and (iv) if the Company has elected and is permitted hereunder to pay accrued
dividends in shares of Common Stock, certificates, which shall be free of
restrictive legends and trading restrictions (other than those required by
Section 3.1 (b) of the Purchase Agreement), representing such shares of Common
Stock; provided, however, that the
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Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon conversion of any shares of Preferred Stock until
certificates evidencing such shares of Preferred Stock are delivered for
conversion to the Company, or the Holder of such Preferred Stock notifies the
Company that such certificates have been lost, stolen or destroyed and provides
a bond (or other adequate security) reasonably satisfactory to the Company to
indemnify the Company from any loss incurred by it in connection therewith. The
Company shall, upon request of the Holder, if available, use its best efforts to
deliver any certificate or certificates required to be delivered by the Company
under this Section electronically through the Depository Trust Corporation or
another established clearing corporation performing similar functions. If in the
case of any Conversion Notice such certificate or certificates, including for
purposes hereof, any shares of Common Stock to be issued on the Conversion Date
on account of accrued but unpaid dividends hereunder, are not delivered to or as
directed by the applicable Holder by the third (3rd) Trading Day after the
Conversion Date, the Holder shall be entitled by written notice to the Company
at any time on or before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the Company shall
immediately return the certificates representing the shares of Preferred Stock
tendered for conversion.
(ii) If the Company fails to deliver to the Holder such
certificate or certificates pursuant to Section 5(b)(i), including for purposes
hereof, any shares of Common Stock to be issued on the Conversion Date on
account of accrued but unpaid dividends hereunder, by the third (3rd) Trading
Day after the Conversion Date, the Company shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, $5,000 for each Trading Day after such
third (3rd) Trading Day until such certificates are delivered. Nothing herein
shall limit a Holder's right to pursue actual damages for the Company's failure
to deliver certificates representing shares of Common Stock upon conversion
within the period specified herein and such Holder shall have the right to
pursue all remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief. The
exercise of any such rights shall not prohibit the Holders from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.
Further, if the Company shall not have delivered any cash due in respect of
conversions of Preferred Stock or as payment of dividends thereon by the third
(3rd) Trading Day after the Conversion Date, the Holder may, by notice to the
Company, require the Company to issue shares of Common Stock pursuant to Section
5(c), except that for such purpose the Conversion Price applicable thereto shall
be the lesser of the Conversion Price on the Conversion Date and the Conversion
Price on the date of such Holder demand. Any such shares will be subject to the
provision of this Section.
(iii) In addition to any other rights available to the
Holder, if the Company fails to deliver to the Holder such certificate or
certificates pursuant to Section 5(b)(i), including for purposes hereof, any
shares of Common Stock to be issued on the Conversion Date on account of accrued
but unpaid dividends hereunder, by the third (3rd) Trading Day after the
Conversion Date, and if after such third (3rd) Trading Day the Holder purchases
(in an open market transaction or otherwise) Common Stock to deliver in
satisfaction of a sale by such Holder of the Underlying Shares which the Holder
was entitled to receive upon such conversion (a "Buy-In"), then the Company
shall (A) pay in cash to the Holder (in addition to any remedies available to or
elected by the Holder) the amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the Common Stock so purchased
exceeds (y) the product of (1) the aggregate number of shares of Common Stock
that such Holder was entitled to receive from the
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conversion at issue multiplied by (2) the market price of the Common Stock at
the time of the sale giving rise to such purchase obligation and (B) at the
option of the Holder, either return the shares of Preferred Stock for which such
conversion was not honored or deliver to such Holder the number of shares of
Common Stock that would have been issued had the Company timely complied with
its conversion and delivery obligations under Section 5(b)(i). For example, if
the Holder purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted conversion of shares of Preferred
Stock with respect to which the market price of the Underlying Shares on the
date of conversion was a total of $10,000 under clause (A) of the immediately
preceding sentence, the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In. Notwithstanding anything contained
herein to the contrary, if a Holder requires the Company to make payment in
respect of a Buy-In for the failure to timely deliver certificates hereunder and
the Company timely pays in full such payment, the Company shall not be required
to pay such Holder liquidated damages under Section 5(b)(ii) in respect of the
certificates resulting in such Buy-In.
(c)(i) The conversion price for each share of Preferred Stock
(the "Conversion Price") in effect on any Conversion Date shall be the lesser of
(a) 125% of the average of the Per Share Market Values for the fifteen (15)
Trading Days immediately preceding the Original Issue Date (the "Initial
Conversion Price") and (b) 101% of the average of the ten (10) lowest Per Share
Market Values during the thirty (30) Trading Days immediately preceding the
applicable Conversion Date (which, at the Holder's option, may include Trading
Days prior to the 120th day following the Original Issue Date), provided, that
such thirty (30) Trading Day period shall be extended for the number of Trading
Days, if any, during such period in which (A) trading in the Common Stock is
suspended from the NASDAQ or a Subsequent Market on which it is listed for
trading prior to such suspension, or (B) after the date declared effective by
the Commission, the Underlying Securities Registration Statement is not
effective, or (C) after the date declared effective by the Commission, the
Prospectus included in the Underlying Securities Registration Statement may not
be used by the Holder for the resale of Underlying Shares, provided, further,
that during the period from the Original Issue Date until the 120th day
following the Original Issue Date, the Conversion Price shall be the Initial
Conversion Price.
If (a) the Underlying Securities Registration Statement is not
filed on or prior to the Filing Date (if the Company files such Underlying
Securities Registration Statement without affording the Holder the opportunity
to review and comment on the same as required by Section 3(a) of the
Registration Rights Agreement, the Company shall not be deemed to have satisfied
this clause (a)), or (b) after the earlier of March 31, 1999 and the date of
acceptance by the Commission of the Company's Annual Report on Form 10-K for the
annual period ended December 31, 1998 the Company is notified (orally or in
writing, whichever is earlier) by the Commission that an Underlying Securities
Registration Statement will not be "reviewed," or not subject to further review
or comment and the Company fails to file with the Commission a request for
acceleration in accordance with Rule 12d1-2 promulgated under the Securities
Exchange Act of 1934, as amended, within five (5) days of the date of such
notification, or (c) the Underlying Securities Registration Statement is not
declared effective by the Commission on or prior to the Effectiveness Date, or
(d) such Underlying Securities Registration Statement is filed with and declared
effective by the Commission but thereafter ceases to be effective as to all
Registrable Securities (as defined in the Registration Rights Agreement) at any
time prior to the expiration of the Effectiveness Period
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<PAGE> 9
without being succeeded within ten (10) days by a subsequent Underlying
Securities Registration Statement filed with and declared effective by the
Commission, or (e) trading in the Common Stock shall be suspended from the
NASDAQ or a Subsequent Market for more than three (3) Business Days (which need
not be consecutive days) other than any halts in trading, which do not continue
for an entire Trading Day, to allow for the release of information by the
Company, (f) the conversion rights of the Holders are suspended for any reason
or (g) unless the Company is notified by the Commission that it is not eligible
to file the Underlying Securities Registration Statement on Form S-3, an
amendment to the Underlying Securities Registration Statement is not filed by
the Company with the Commission within fifteen (15) Business Days of the
Commission's notifying the Company that such amendment is required in order for
the Underlying Securities Registration Statement to be declared effective (if
the Company files such amendment without affording the Holder the opportunity to
review and comment on the same as required by Section 3(a) of the Registration
Rights Agreement, the Company shall not be deemed to have satisfied this clause
(g)) (any such failure or breach being referred to as an "Event," and for
purposes of clauses (a), (c), (f) the date on which such Event occurs, or for
purposes of clause (b) the date on which such five (5) day period is exceeded,
or for purposes of clause (d) the date which such 10 day-period is exceeded, for
purposes of clause (e) the date on which such three (3) Business Day-period is
exceeded, or for purposes of clause (g) the date which such 15 Business
Day-period is exceeded, being referred to as "Event Date"), then, on the Event
Date and each monthly anniversary thereof until the earlier to occur of the
second month after the Event Date and such time as the applicable Event is
cured, the Company shall pay to the Holder 1.0% of the aggregate Stated Value of
the shares of Preferred Stock then held by such Holder (which, for purposes
hereof shall include all shares of Preferred Stock tendered for conversion by
such Holder but for which Underlying Shares due in respect thereof shall not
have been received by such Holder) in cash, as liquidated damages and not as a
penalty. Commencing on the second month anniversary after the Event Date and on
each monthly anniversary thereof until such time as the applicable Event is
cured, the Company shall pay to the Holder 1.5% of the aggregate Stated Value of
the shares of Preferred Stock then held by such Holder (which, for purposes
hereof shall include all shares of Preferred Stock tendered for conversion by
such Holder but for which Underlying Shares due in respect thereof shall not
have been received by such Holder) in cash, as liquidated damages and not as a
penalty. The provisions of this Section are not exclusive and shall in no way
limit the Company's obligations under the Registration Rights Agreement.
(ii) If the Company, at any time while any shares of
Preferred Stock are outstanding, shall (a) pay a stock dividend or otherwise
make a distribution or distributions on shares of its Junior Securities or pari
passu securities payable in shares of Common Stock, (b) subdivide outstanding
shares of Common Stock into a larger number of shares, (c) combine outstanding
shares of Common Stock into a smaller number of shares, or (d) issue by
reclassification and exchange of the Common Stock any shares of capital stock of
the Company, then the Initial Conversion Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding
before such event and of which the denominator shall be the number of shares of
Common Stock outstanding after such event. Any adjustment made pursuant to this
Section 5(c)(ii) shall become effective immediately after the record date for
the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or re-classification.
(iii) If the Company, at any time while any shares of
Preferred Stock are outstanding, shall issue rights, warrants or options to all
holders of Common Stock
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<PAGE> 10
entitling them to subscribe for or purchase shares of Common Stock at a price
per share less than the Per Share Market Value at the record date mentioned
below, then the Initial Conversion Price shall be multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such rights, warrants or options, plus the
number of shares of Common Stock which the aggregate offering price of the total
number of shares so offered would purchase at such Per Share Market Value, and
the denominator of which shall be the sum of the number of shares of Common
Stock outstanding immediately prior to such issuance plus the number of shares
of Common Stock offered for subscription or purchase. Such adjustment shall be
made whenever such rights or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such rights or warrants. However, upon the expiration of any right,
warrant or option to purchase shares of Common Stock the issuance of which
resulted in an adjustment in the Conversion Price pursuant to this Section
5(c)(iii), if any such right, warrant or option shall expire and shall not have
been exercised, the Conversion Price shall immediately upon such expiration
shall be recomputed and effective immediately upon such expiration shall be
increased to the price which it would have been (but reflecting any other
adjustments in the Conversion Price made pursuant to the provisions of this
Section 5 upon the issuance of other rights or warrants) had the adjustment of
the Conversion Price made upon the issuance of such rights, warrants, or options
been made on the basis of offering for subscription or purchase only that number
of shares of Common Stock actually purchased upon the exercise of such rights,
warrants or options actually exercised.
(iv) If the Company or any subsidiary thereof, as
applicable with respect to Common Stock Equivalents (as defined below), at any
time while any shares of Preferred Stock are outstanding, shall issue shares of
Common Stock or rights, warrants, options or other securities or debt that is
convertible into or exchangeable for shares of Common Stock, other than (i) the
granting of options or warrants to employees, officers, directors, consultants
and other service providers (but not Strategic Partners (as defined in the
Purchase Agreement)), and the issuance of shares of Common Stock upon exercise
of options granted, under any stock option plan heretofore or hereinafter duly
adopted by the Company and (ii) the issuance of shares of Common Stock issuable
pursuant to the Private Equity Line of Credit Agreement dated March 27, 1998
between the Company and Kingsbridge Capital Limited, as described in the
Company's Amendment No. 2 on Form SB-2, filed with the Commission on August 13,
1998 (but not pursuant to any amendment or modification thereto) ("Common Stock
Equivalents"), entitling any Person to acquire shares of Common Stock at a price
per share less than the Conversion Price, then the Conversion Price shall be
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to the issuance of such Common
Stock or such Common Stock Equivalents plus the number of shares of Common Stock
which the offering price for such shares of Common Stock or Common Stock
Equivalents would purchase at the Conversion Price, and the denominator of which
shall be the sum of the number of shares of Common Stock outstanding immediately
prior to such issuance plus the number of shares of Common Stock so issued or
issuable, provided, that for purposes hereof, all shares of Common Stock that
are issuable upon conversion, exercise or exchange of Common Stock Equivalents
shall be deemed outstanding immediately after the issuance of such Common Stock
Equivalents. Such adjustment shall be made whenever such Common Stock or Common
Stock Equivalents are issued.
(v) If the Company, at any time while shares of
Preferred Stock are outstanding, shall distribute to all holders of Common Stock
(and not to Holders) evidences of its
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<PAGE> 11
indebtedness or assets or rights or warrants to subscribe for or purchase any
security (excluding those referred to in Sections 5(c)(ii)-(iv) above), then in
each such case the Initial Conversion Price at which each share of Preferred
Stock shall thereafter be convertible shall be determined by multiplying the
Initial Conversion Price in effect immediately prior to the record date fixed
for determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Per Share Market Value determined
as of the record date mentioned above, and of which the numerator shall be such
Per Share Market Value on such record date less the then fair market value at
such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding shares of Common Stock as determined
by the Board of Directors in good faith; provided, however, that in the event of
a distribution exceeding ten percent (10%) of the net assets of the Company, if
the Holders of a majority in interest of the Preferred Stock dispute such
valuation, such fair market value shall be determined by a nationally recognized
or major regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) (an "Appraiser") selected in
good faith by the Holders of a majority in interest of the shares of Preferred
Stock then outstanding; and provided, further, that the Company, after receipt
of the determination by such Appraiser shall have the right to select an
additional Appraiser, in good faith, in which case the fair market value shall
be equal to the average of the determinations by each such Appraiser. In either
case the adjustments shall be described in a statement provided to the Holders
of the portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(vi) All calculations under this Section 5 shall be
made to the nearest cent or the nearest 1/100th of a share, as the case may be.
(vii) Whenever the Conversion Price is adjusted
pursuant to Section 5(c)(ii),(iii),(iv), or (v) the Company shall promptly mail
to each Holder, a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
(viii) In case of any reclassification of the Common
Stock, or any compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property (other than compulsory share
exchanges which constitute Change of Control Transactions), the Holders of the
Preferred Stock then outstanding shall have the right thereafter to convert such
shares only into the shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common Stock following such
reclassification or share exchange, and the Holders of the Preferred Stock shall
be entitled upon such event to receive such amount of securities, cash or
property as a holder of the number of shares of Common Stock of the Company into
which such shares of Preferred Stock could have been converted immediately prior
to such reclassification or share exchange would have been entitled. This
provision shall similarly apply to successive reclassifications or share
exchanges.
(ix) If (a) the Company shall declare a dividend (or
any other distribution) on the Common Stock, (b) the Company shall declare a
special nonrecurring cash dividend on or a redemption of the Common Stock, (c)
the Company shall authorize the granting to all holders of Common Stock rights
or warrants to subscribe for or purchase any shares of capital
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<PAGE> 12
stock of any class or of any rights, (d) the approval of any stockholders of the
Company shall be required in connection with any reclassification of the Common
Stock, any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share of exchange whereby the Common Stock is converted into other
securities, cash or property, or (e) the Company shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the
Company; then the Company shall cause to be filed at each office or agency
maintained for the purpose of conversion of Preferred Stock, and shall cause to
be mailed to the Holders at their last addresses as they shall appear upon the
stock books of the Company, at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, 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,
distributions, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share
exchange. Holders are entitled to convert shares of Preferred Stock during the
20-day period commencing the date of such notice to the effective date of the
event triggering such notice.
(x) In case of any (1) merger or consolidation of the
Company with or into another Person that would constitute a Change of Control
Transaction, or (2) sale by the Company of more than one-half of the assets of
the Company (on an as valued basis) in one or a series of related transactions,
or (3) tender or other offer or exchange (whether by the Company or another
Person) pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, stock, cash or property of the
Company or another Person; then, if a Holder has not exercised its rights of
redemption, if any, under Section 7 hereof, such Holder shall have the right
thereafter to (A) if permitted under Section 7 hereof, exercise its rights of
redemption under Section 7 with respect to such event, (B) convert its shares of
Preferred Stock into the shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common Stock following such
merger, consolidation or sale, and such Holder shall be entitled upon such event
or series of related events to receive such amount of securities, cash and
property as the shares of Common Stock into which such shares of Preferred Stock
could have been converted immediately prior to such merger, consolidation or
sales would have been entitled, (C) in the case of a merger or consolidation,
(x) require the surviving entity to issue shares of convertible preferred stock
or convertible debentures with such aggregate stated value or in such face
amount, as the case may be, equal to the Stated Value of the shares of Preferred
Stock then held by such Holder, plus all accrued and unpaid dividends and other
amounts owing thereon, which newly issued shares of preferred stock or
debentures shall have terms identical (including with respect to conversion) to
the terms of the Preferred Stock (except, in the case of debentures, as may be
required to reflect the differences between debt and equity) and shall be
entitled to all of the rights and privileges of a Holder of Preferred Stock set
forth herein and the agreements pursuant to which the Preferred Stock was issued
(including, without limitation, as such rights relate to the acquisition,
transferability, registration and listing of such shares of stock other
securities issuable upon conversion thereof), and (y) simultaneously with the
issuance of such convertible preferred stock or convertible debentures, shall
have the right to convert such instrument only into shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such
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<PAGE> 13
merger or consolidation, or (D) in the event of an exchange or tender offer or
other transaction contemplated by clause (3) of this Section, tender or exchange
its shares of Preferred Stock for such securities, stock, cash and other
property receivable upon or deemed to be held by holders of Common Stock that
have tendered or exchanged their shares of Common Stock following such tender or
exchange, and such Holder shall be entitled upon such exchange or tender to
receive such amount of securities, cash and property as the shares of Common
Stock into which such shares of Preferred Stock could have been converted
(taking into account all then accrued and unpaid dividends) immediately prior to
such tender or exchange would have been entitled as would have been issued. In
the case of clause (C), the conversion price applicable for the newly issued
shares of convertible preferred stock or convertible debentures shall be based
upon the amount of securities, cash and property that each share of Common Stock
would receive in such transaction, the Conversion Ratio immediately prior to the
effectiveness or closing date for such transaction and the Conversion Price
stated herein. The terms of any such merger, sale, consolidation, tender or
exchange shall include such terms so as continue to give the Holders of
Preferred Stock the right to receive the securities, cash and property set forth
in this Section upon any conversion or redemption following such event. This
provision shall similarly apply to successive such events.
(d) The Company covenants that it will at all times reserve and
keep available out of its authorized and unissued shares of Common Stock solely
for the purpose of issuance upon conversion of Preferred Stock and payment of
dividends on Preferred Stock, each as herein provided, free from preemptive
rights or any other actual contingent purchase rights of persons other than the
Holders, not less than such number of shares of Common Stock as shall (subject
to any additional requirements of the Company as to reservation of such shares
set forth in the Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 5(a) and Section 5(c)) upon the
conversion of all outstanding shares of Preferred Stock and payment of dividends
hereunder (assuming all such dividends are paid in shares of Common Stock). The
Company covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly and validly authorized, issued and fully paid,
nonassessable and freely tradeable, subject to the legend requirements of
Section 3.1(b) of the Purchase Agreement.
(e) Upon a conversion hereunder the Company shall not be required
to issue stock certificates representing fractions of shares of Common Stock,
but may if otherwise permitted, make a cash payment in respect of any final
fraction of a share based on the Per Share Market Value at such time. If the
Company elects not, or is unable, to make such a cash payment, the Holder of a
share of Preferred Stock shall be entitled to receive, in lieu of the final
fraction of a share, one whole share of Common Stock.
(f) The issuance of certificates for Common Stock on conversion
of Preferred Stock and as payment of dividends in shares of Common Stock shall
be made without charge to the Holders thereof for any documentary stamp or
similar taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate upon conversion in a name other than that of the Holder
of such shares of Preferred Stock so converted.
(g) Shares of Preferred Stock converted into Common Stock or
redeemed in accordance with the terms hereof shall be canceled and may not be
reissued.
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<PAGE> 14
(h) Any and all notices or other communications or deliveries to
be provided by the Holders of the Preferred Stock hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile or sent by a nationally recognized overnight courier service,
addressed to the attention of the Chief Financial Officer of the Company at the
facsimile telephone number or address of the principal place of business of the
Company as set forth in the Purchase Agreement. Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by facsimile or sent by a nationally
recognized overnight courier service, addressed to each Holder at the facsimile
telephone number or address of such Holder appearing on the books of the
Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
8:00 p.m. (New York City time), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 8:00 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) upon receipt, if sent by a nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such notice is
required to be given.
SECTION 6. Optional Redemption.
(a) Subject to the provisions of this Section 6, the Company
shall have the right, exercisable upon five (5) Trading Days' notice (an
"Optional Redemption Notice") to the Holders of the Preferred Stock after any
date on which the closing sales price for the Common Stock as reported by
Bloomberg Information Services, Inc., or any successor to its function of
reporting prices, for the previous ten (10) consecutive Trading Days is either
(i) less than $5.00 or (ii) greater than $20.00 (such date, the "Optional
Redemption Qualifying Date"), to redeem all or any portion of the shares of
Preferred Stock which have not previously been converted or redeemed, at a price
equal to the Optional Redemption Price (as defined below), provided, that if the
Company shall not have provided a Holder with notice of its intent to redeem
shares of Preferred Stock pursuant to this Section 6 within twenty (20) Trading
Days from the Optional Redemption Qualifying Date, the Company shall be
precluded from redeeming shares of Preferred Stock pursuant to this Section
until the next Optional Redemption Qualifying Date, if any (the calculation for
one Optional Redemption Qualifying Date may not include any Trading Days used to
calculate a prior Optional Redemption Qualifying Date). The Company shall not be
entitled to deliver an Optional Redemption Notice to the Holders if: (i) the
number of shares of Common Stock at the time authorized, unissued and unreserved
for all purposes is insufficient to satisfy the Company's conversion obligations
of all shares of Preferred Stock then outstanding, or (ii) neither the
Underlying Shares then outstanding are registered for resale pursuant to an
effective Underlying Securities Registration Statement nor may such Underlying
Shares be sold without volume restrictions pursuant to Rule 144 promulgated
under the Securities Act, as determined by counsel to the Company pursuant to a
written opinion letter, addressed to the Company's transfer agent in the form
and substance acceptable to the Holders and such transfer agent, or (iii) the
Common Stock is not then listed for trading on the NASDAQ or on a Subsequent
Market. The entire Optional Redemption Price shall be paid in cash. Holders may
convert (and the Company shall honor such conversions in accordance with the
terms hereof) any shares of Preferred Stock, including shares subject to an
Optional Redemption Notice, during the
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<PAGE> 15
period from the date thereof through the 4th Trading Day after the receipt of an
Optional Redemption Notice, provided, that, notwithstanding anything herein to
the contrary, the Conversion Price applicable to such conversions shall be
subject to a floor of $5.00.
(b) If any portion of the Optional Redemption Price shall not be
paid by the Company by the 20th Trading Day after the delivery of an Optional
Redemption Notice, interest shall accrue thereon at the rate of 15% per annum
(or the maximum rate permitted by applicable law, whichever is less) until the
Optional Redemption Price plus all such interest is paid in full. In addition,
if any portion of the Optional Redemption Price remains unpaid after the date
due, the Holder of the Preferred Stock subject to such redemption may elect, by
written notice to the Company given at any time thereafter, to either (i) demand
conversion of all or any portion of the shares of Preferred Stock for which such
Optional Redemption Price, plus interest thereof, has not been paid in full (the
"Unpaid Redemption Shares"), in which event the Per Share Market Value for such
shares shall be the lower of the Per Share Market Value calculated on the date
the Optional Redemption Price was originally due and the Per Share Market Value
as of the Holder's written demand for conversion, or (ii) invalidate ab initio
such redemption, notwithstanding anything herein contained to the contrary. If
the Holder elects option (i) above, the Company shall within three (3) Trading
Days of its receipt of such election deliver to the Holder the shares of Common
Stock issuable upon conversion of the Unpaid Redemption Shares subject to such
Holder conversion demand and otherwise perform its obligations hereunder with
respect thereto; or, if the Holder elects option (ii) above, the Company shall
promptly, and in any event not later than three (3) Trading Days from receipt of
Holder's notice of such election, return to the Holder all of the Unpaid
Redemption Shares.
(c) The "Optional Redemption Price" shall equal the sum of (i)
the greater of (A) the Stated Value of the shares of Preferred Stock to be
redeemed and all accrued dividends thereon and (B)the product of (x) the number
of shares of Preferred Stock to be redeemed and (y) the product of (1) the
average Per Share Market Value for the five (5) Trading Days immediately
preceding (x) the date of the Optional Redemption Notice or (y) the date of
payment in full by the Company of the Optional Redemption Price, whichever is
greater, and (2) the Conversion Ratio calculated on the date of the Optional
Redemption Notice, and (ii) all other amounts, costs, expenses and liquidated
damages due in respect of such shares of Preferred Stock.
SECTION 7. Redemption Upon Triggering Events.
(a) Upon the occurrence of a Triggering Event, each Holder shall
(in addition to all other rights it may have hereunder or under applicable law),
have the right, exercisable at the sole option of such Holder, to require the
Company to redeem all or a portion of the Preferred Stock then held by such
Holder for a redemption price, in cash, equal to the sum of (i) the Mandatory
Redemption Amount plus (ii) the product of (A) the number of Underlying Shares
issued in respect of conversions or as payment of dividends hereunder and then
held by the Holder and (B) the Per Share Market Value on the date such
redemption is demanded or the date the redemption price hereunder is paid in
full, whichever is greater (such sum, the "Redemption Price"). The Redemption
Price shall be due and payable within (10) days of the date on which the notice
for the payment therefor is provided by a Holder. If the Company fails to pay
the redemption price hereunder in full pursuant to this Section on the date such
amount is due in accordance with this Section, the
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<PAGE> 16
Company will pay interest thereon at a rate of 15% (or the maximum amount
permitted under applicable law, whichever is less) per annum, accruing daily
from such date until the redemption price, plus all such interest thereon, is
paid in full. For purposes of this Section, a share of Preferred Stock is
outstanding until such date as the Holder shall have received Underlying Shares
upon a conversion (or attempted conversion) thereof that meets the requirements
hereof.
A "Triggering Event" means any one or more of the following
events (whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgement, decree or order of
any court, or any order, rule or regulation of any administrative or
governmental body):
(i) the failure of an Underlying Securities
Registration Statement to be declared effective by the Commission on or prior to
the 180th day after the Original Issue Date;
(ii) if, during the Effectiveness Period, the
effectiveness of the Underlying Securities Registration Statement lapses for any
reason for more than an aggregate of three (3) Trading Days, or the Holder shall
not be permitted to resell Registrable Securities under the Underlying
Securities Registration Statement for more than an aggregate of three (3)
Trading Days (which need not be consecutive Trading Days);
(iii) the failure of the Common Stock to be listed for
trading on the NASDAQ or on a Subsequent Market or the suspension of the Common
Stock from trading on the NASDAQ or on a Subsequent Market, in either case, for
more than three (3) Trading Days (which need not be consecutive Trading Days);
(iv) the Company shall fail for any reason to deliver
certificates representing Underlying Shares issuable upon a conversion hereunder
that comply with the provisions hereof prior to the 10th day after the
Conversion Date or the Company shall provide notice to any Holder, including by
way of public announcement, at any time, of its intention not to comply with
requests for conversion of any Preferred Stock in accordance with the terms
hereof;
(v) the Company shall be a party to any Change of
Control Transaction, shall agree to sell (in one or a series of related
transactions) all or substantially all of its assets (whether or not such sale
would constitute a Change of Control Transaction) or shall redeem more than a de
minimis number of Common Stock or other Junior Securities (other than
redemptions of Underlying Shares);
(vi) an Event shall not have been cured to the
satisfaction of the Holders prior to the expiration of thirty (30) days from the
Event Date relating thereto;
(vii) the Company shall fail for any reason to pay
in full the amount of cash due pursuant to a Buy-In within seven (7) days after
notice therefor is delivered hereunder; or
(viii) the Company shall fail to have available a
sufficient number of authorized and unreserved shares of Common Stock to issue
to such Holder upon a conversion hereunder.
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SECTION 8. Definitions. For the purposes hereof, the following terms
shall have the following meanings:
"Change of Control Transaction" means the occurrence of any of
(i) an acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 33% of the
voting securities of the Company, (ii) a replacement at one time or over time of
more than one-half of the members of the Company's board of directors which is
not approved by a majority of those individuals who are members of the board of
directors on the date hereof (or by those individuals who are serving as members
of the board of directors on any date whose nomination to the board of directors
was approved by a majority of the members of the board of directors who are
members on the date hereof), (iii) the merger of the Company with or into
another entity, consolidation or sale of all or substantially all of the assets
of the Company in one or a series of related transactions, or (iv) the execution
by the Company of an agreement to which the Company is a party or by which it is
bound, providing for any of the events set forth above in (i), (ii) or (iii).
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value $.001
per share, and stock of any other class into which such shares may hereafter
have been reclassified or changed.
"Conversion Ratio" means, at any time, a fraction, the numerator
of which is Stated Value plus accrued but unpaid dividends but only to the
extent not paid in Common Stock in accordance with the terms hereof, and the
denominator of which is the Conversion Price at such time.
"Dividend Effectiveness Date" means the earlier to occur of (x)
the Effectiveness Date (as defined in the Registration Rights Agreement) and (y)
the date that an Underlying Securities Registration Statement is declared
effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Junior Securities" means the Common Stock and all other equity
securities of the Company which are junior in rights and liquidation preference
to the Preferred Stock.
"Mandatory Redemption Amount" for each share of Preferred Stock
means the sum of (i) the greater of (A) the Stated Value and all accrued
dividends with respect to such share and (B) the product of (a) the Per Share
Market Value on the Trading Day immediately preceding (x) the date of the
Triggering Event or the Conversion Date, as the case may be, or (y) the date of
payment in full by the Company of the applicable redemption price, whichever is
greater, and (b) the Conversion Ratio calculated on the date of the Triggering
Event, or the Conversion Date, as the case may be, and (ii) all other amounts,
costs, expenses and liquidated damages due in respect of such share of Preferred
Stock.
"Original Issue Date" shall mean the date of the first issuance
of any shares of the Preferred Stock regardless of the number of transfers of
any particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
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<PAGE> 18
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of Common Stock on such date on the NASDAQ or on the
Subsequent Market on which the Common Stock is then listed or quoted, or if
there is no such price on such date, then the closing bid price on the NASDAQ or
on such Subsequent Market on the date nearest preceding such date, or (b) if the
Common Stock is not then listed or quoted on the NASDAQ or on a Subsequent
Market, the closing bid price for a shares of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the National Quotation Bureau Incorporated (or
similar organization or agency succeeding to its functions of reporting prices),
then the average of the "Pink Sheet" quotes for the relevant conversion period,
as determined in good faith by the Holder, or (d) if the Common Stock are not
then publicly traded the fair market value of a Common Share as determined by an
Appraiser selected in good faith by the Holders of a majority of the shares of
the Preferred Stock.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Convertible Preferred Stock
Purchase Agreement, dated as of the Original Issue Date, between the Company and
the original Holder.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, between the Company and the
original Holder.
"Securities Act" means the Securities Act of 1933, as amended.
"Trading Day" means (a) a day on which the Common Stock is traded
on the NASDAQ or on the Subsequent Market on which the Common Stock is then
listed or quoted, as the case may be, or (b) if the Common Stock s not listed on
the NASDAQ or on a Subsequent Market, a day on which the Common Stock is traded
in the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if
the Common Stock is not quoted on the OTC Bulletin Board, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided, however, that in the
event that the Common Stock is not listed or quoted as set forth in (a), (b) and
(c) hereof, then Trading Day shall mean any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
"Underlying Securities Registration Statement" means a
registration statement that meets the requirements of the Registration Rights
Agreement and registers the resale of all Underlying Shares by the recipient
thereof, who shall be named as a "selling stockholder" thereunder.
"Underlying Shares" means, collectively, the shares of Common
Stock into which the Shares are convertible and the shares of Common Stock
issuable upon payment of dividends thereon in accordance with the terms hereof.
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<PAGE> 19
IN WITNESS WHEREOF, the undersigned has caused this Certificate of
Designation to be duly executed by its Chief Financial Officer this 28th day of
January, 1999.
NEOTHERAPEUTICS, INC.
By: /s/ SAMUEL GULKO
--------------------------------
Samuel Gulko, Chief Financial Officer
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<PAGE> 20
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby elects to convert the number of shares of 5% Series A
Preferred Stock with Conversion Features indicated below, into shares of Common
Stock, par value $.001 per share (the "Common Stock"), of NeoTherapeutics, Inc.
(the "Company") according to the conditions hereof, as of the date written
below. If shares are to be issued in the name of a person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
Holder for any conversion, except for such transfer taxes, if any.
Conversion calculations: -----------------------------------------------
Date to Effect Conversion
-----------------------------------------------
Number of shares of Preferred Stock to be
Converted
-----------------------------------------------
Number of shares of Common Stock to be Issued
-----------------------------------------------
Applicable Conversion Price
-----------------------------------------------
Signature
-----------------------------------------------
Name
-----------------------------------------------
Address
<PAGE> 1
EXHIBIT 4.2
- --------------------------------------------------------------------------------
PREFERRED STOCK PURCHASE AGREEMENT
By and Among
NEOTHERAPEUTICS, INC.,
WESTOVER INVESTMENTS L.P.
and
MONTROSE INVESTMENTS L.P.
Dated as of January 29, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of
January 29, 1999, by and among NeoTherapeutics, Inc., a Delaware corporation
(the "Company"), Westover Investments L.P., a Delaware limited partnership
("Westover"), and Montrose Investments L.P., a Cayman Islands exempt limited
partnership ("Montrose"). Westover and Montrose are each sometimes referred to
herein as a "Purchaser" and are collectively sometimes referred to herein as the
"Purchasers."
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers and the
Purchasers, severally and not jointly, desire to purchase from the Company
shares of the Company's 5% Series A Preferred Stock with Conversion Features,
par value $.001 per share (the "Series A Preferred"), and shares of the
Company's 5% Series B Preferred Stock with Conversion Features, par value $.001
per share (the "Series B Preferred" and, together with the Series A Preferred,
the "Preferred Stock").
IN CONSIDERATION of the mutual covenants contained in this Agreement,
the Company and the Purchasers agree as follows:
ARTICLE 1
PURCHASE AND SALE OF PREFERRED STOCK
1.1 Purchase and Sale. (a) Subject to the terms and conditions set
forth herein, the Company shall issue and sell to the Purchasers, and the
Purchasers, severally and not jointly, shall purchase from the Company 400
shares of the Series A Preferred (the "Series A Shares") and 200 shares of the
Series B Preferred (the "Series B Shares" and, together with the Series A
Shares, the "Shares").
(b) The Series A Preferred shall have the respective rights,
preferences and privileges set forth in Exhibit A attached hereto (the "Series A
Terms"), which shall be incorporated into a Certificate of Designation to be
approved by the Purchasers and filed prior to the Series A Closing Date (as
defined below) by the Company with the Secretary of State of Delaware (the
"Series A Designation"). The Series B Preferred shall have respective rights,
preferences and privileges identical to the Series A Terms, mutatis mutandis,
and shall rank pari passu with the Series A Preferred with regard to dividends,
liquidation, voting rights and any other preferential rights designated therein,
except that the Conversion Price (as defined below) for conversion of the Series
B Shares shall be determined as of the Original Issue Date (as defined below)
for the Series B Shares.
The Series B Preferred shall be authorized pursuant to a Certificate of
Designation prepared by the Company and, subject to the approval of the
Purchasers, filed prior to the Series B Closing Date (as defined below), by the
Company with the Secretary of State of Delaware (the "Series B Designation" and,
together with the Series A Designation, the "Certificates of Designation").
For purposes of this Agreement, "Business Day", "Conversion Price,"
"Original Issue Date," "Trading Day" and "Per Share Market Value" shall have the
meanings set forth in Exhibit A. Each of the Series A Closing and Series B
Closing are sometimes individually referred to herein as a "Closing."
1.2 Purchase Price. The purchase price per Share shall be $10,000.
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<PAGE> 3
1.3 The Closings.
(a) The Series A Closing. (i) The closing of the purchase and
sale of the Series A Shares (the "Series A Closing") shall take place at the
offices of Robinson Silverman Pearce Aronsohn & Berman LLP, 1290 Avenue of the
Americas, New York, New York 10104 ("Robinson Silverman"), immediately following
the execution hereof or such later date as the parties shall agree. The date of
the Series A Closing is hereinafter referred to as the "Series A Closing Date."
(ii) At the Series A Closing, the parties shall deliver or
shall cause to be delivered the following: (a) the Company shall deliver
to the Purchasers (1) a stock certificate representing 140 Series A
Shares, registered in the name of Westover, (2) a stock certificate
representing 260 Series A Shares registered in the name of Montrose, (3)
common stock purchase warrant in the form of Exhibit B entitling
Westover to purchase an aggregate of 26,250 shares of the Company's
common stock, $.001 par value per share (the "Common Stock"), at an
exercise price equal to 125% of the average Per Share Market Values for
the ten (10) Trading Days immediately preceding the Series A Closing
Date (the "Exercise Price"), registered in the name of Westover (the
"Westover Warrant"), (4) common stock purchase warrant in the form of
Exhibit B entitling Montrose to purchase an aggregate of 48,750 shares
of Common Stock at the Exercise Price, registered in the name of
Montrose (the "Montrose Warrant" and, together with the Westover
Warrant, the "Warrants"), (5) the legal opinion of Stradling Yocca
Carlson & Rauth, outside counsel to the Company, substantially in the
form of Exhibit D, dated the Series A Closing Date, and (6) all other
documents, instruments and writings required to have been delivered at
or prior to the Series A Closing Date by the Company pursuant to this
Agreement, including an executed Registration Rights Agreement, dated
the date hereof, among the Company and the Purchasers, in the form of
Exhibit C (the "Registration Rights Agreement"), and the Irrevocable
Transfer Agent Instructions, in the form of Exhibit E, delivered to and
acknowledged by the Company's transfer agent (the "Transfer Agent
Instructions") and dated the Series A Closing Date; (b) Westover shall
deliver to the Company (1) $1,400,000 in United States dollars in
immediately available funds by wire transfer to an account designated in
writing by the Company for such purpose prior to the Series A Closing
Date, and (2) all documents, instruments and writings required to have
been delivered at or prior to the Series A Closing by Westover pursuant
to this Agreement, including an executed Registration Rights Agreement
(c) Montrose shall deliver to the Company (1) $2,600,000 in United
States dollars in immediately available funds by wire transfer to an
account designated in writing by the Company for such purpose prior to
the Series A Closing Date, and (2) all documents, instruments and
writings required to have been delivered at or prior to the Series A
Closing by Montrose pursuant to this Agreement, including an executed
Registration Rights Agreement.
(b) The Series B Closing. (i) Subject to the terms and conditions
set forth in this Agreement, the Company shall have the right to deliver a
written notice to the Purchasers (a "Subsequent Financing Notice") requiring the
Purchasers to purchase, severally and not jointly (subject to adjustment as
provided herein), at the Company's option, up to an aggregate of 200 Series B
Shares for an aggregate purchase price of $2,000,000. A Subsequent Financing
Notice may be delivered no earlier than 180 days following the Series A Closing
Date and no later than 230 days following the Series A Closing Date (the
expiration of such 230 day period or such earlier date as the
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<PAGE> 4
Company notifies the Purchasers in writing of its election to irrevocably waive
its rights hereunder to sell the Series B Shares to the Purchasers, the "Series
B Closing Expiration Date"). The closing of the purchase and sale of the Series
B Shares (the "Series B Closing") shall take place at the offices of Robinson
Silverman on the tenth (10th) Trading Day after the Subsequent Financing Notice
is deemed delivered hereunder or on such other date as otherwise agreed to by
the parties; provided, however, that in no case shall the Series B Closing take
place unless and until all of the conditions listed in Section 4.1 have been
satisfied by the Company or waived by the Purchasers (it being understood that
each Purchaser may elect to waive or enforce such conditions in its sole
discretion). The date of the Series B Closing is hereinafter referred to as the
"Series B Closing Date."
(ii) At the Series B Closing, the parties shall deliver or
shall cause to be delivered the following: (a) the Company shall deliver
to each Purchaser acquiring Series B Stock (1) a stock certificate
representing Series B Shares, registered in the name of such Purchaser,
in an amount equal to the pro rata portion of the number of Series B
Shares to be acquired by such Purchaser (determined by reference to the
pro rata portion of the amount of Series A Shares acquired by such
Purchaser hereunder at the Series A Closing); (2) the legal opinion
referenced in Section 4.1(xi), and (3) all other documents, instruments
and writings required to have been delivered at or prior to the Series B
Closing Date by the Company pursuant to this Agreement, including the
Transfer Agent Instructions referenced in Section 4.1 (xvii); (b) each
Purchaser acquiring Series B Shares shall deliver to the Company (1) the
product of $10,000 and the number of Series B Shares to be issued and
sold to it at the Series B Closing, in United States dollars in
immediately available funds by wire transfer to an account designated in
writing by the Company for such purpose prior to the Series B Closing
Date and (b) all documents, instruments and writings required to have
been delivered at or prior to the Series B Closing Date by such
Purchaser pursuant to this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The
Company hereby makes the following representations and warranties to the
Purchasers:
(a) Organization and Qualification. The Company is a corporation,
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, with the requisite corporate power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries other than as set forth in Schedule
2.1(a) (collectively the "Subsidiaries"). Each of the Subsidiaries is an entity,
duly incorporated or otherwise organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization (as
applicable), with the full corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, (x) adversely
affect the legality, validity or enforceability of the Securities (as defined
below) or any of this Agreement, the Certificates of Designation, the Warrants
or the Registration Rights Agreement (collectively, the
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<PAGE> 5
"Transaction Documents"), (y) have or result in a material adverse effect on the
results of operations, assets, prospects, or condition (financial or otherwise)
of the Company and the Subsidiaries, taken as a whole, or (z) adversely impair
the Company's ability to perform fully on a timely basis its obligations under
any of the Transaction Documents (any of (x), (y) or (z), a "Material Adverse
Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents, and otherwise to carry out
its obligations thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company. Each of the Transaction Documents has been duly executed by the Company
and, when delivered (or filed, as the case may be) in accordance with the terms
hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms. Neither the
Company nor any Subsidiary is in violation of any of the provisions of its
respective certificate of incorporation, by-laws or other charter documents.
(c) Capitalization. The number of authorized, issued and
outstanding capital stock of the Company is set forth in Schedule 2.1(c). No
shares of Common Stock are entitled to preemptive or similar rights, nor is any
holder of the Common Stock entitled to preemptive or similar rights arising out
of any agreement or understanding with the Company by virtue of any of the
Transaction Documents. Except as disclosed in Schedule 2.1(c), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or, except as a result of
the purchase and sale of the Shares and the Warrants, securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock. To
the knowledge of the Company, except as specifically disclosed in the SEC
Documents (as defined below) or Schedule 2.1(c), no Person or group of related
Persons beneficially owns (as determined pursuant to Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) or
has the right to acquire by agreement with or by obligation binding upon the
Company in excess of 5% of the Common Stock. A "Person" means an individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
(d) Issuance of the Shares and the Warrants. The Shares and the
Warrants are duly authorized, and, when issued and paid for in accordance with
the terms hereof, shall have been validly issued, fully paid and nonassessable,
free and clear of all liens, encumbrances and rights of first refusal of any
kind (collectively, "Liens"). The Company has on the date hereof and will, at
each Closing Date and at all times while the Shares and the Warrants are
outstanding, maintain an adequate reserve of duly authorized shares of Common
Stock, reserved for issuance to the holders of the Shares and the Warrants to
enable it to perform its conversion, exercise and other obligations under this
Agreement, the Certificates of Designations and the Warrants. With respect to
the Securities to be issued at or in connection with each Closing hereunder,
such number of reserved
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<PAGE> 6
and available shares of Common Stock is not less than the sum of (i) 200% of the
number of shares of Common Stock which would be issuable upon conversion in full
of the Shares to be issued at such Closing, assuming such conversion occurred on
the Original Issue Date for such Shares, the applicable Filing Date (as defined
in the Registration Rights Agreement) or the applicable Effectiveness Date,
whichever yields the lowest Conversion Price for such Shares, (ii) the number of
shares of Common Stock issuable upon exercise in full of the Warrants to be
issued at such Closing, and (iii) the number of shares Common Stock which would
be issuable upon payment of dividends on the Shares to be issued at such
Closing, assuming each Share is outstanding for three years and all dividends
are paid in shares of Common Stock (such number of shares of Common Stock, the
"Initial Minimum"). All such authorized shares of Common Stock shall be duly
reserved for issuance to the holders of the Shares and the Warrants. The shares
of Common Stock issuable upon conversion of the Shares, as payment of dividends
thereon, and upon exercise of the Warrants are collectively referred to herein
as the "Underlying Shares." The Shares, the Warrants and the Underlying Shares
are collectively referred to herein as, the "Securities." When issued in
accordance with the Certificates of Designation and the Warrants, the Underlying
Shares shall have been duly authorized, validly issued, fully paid and
nonassessable, free and clear of all Liens.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its certificate of incorporation, bylaws or other
charter documents (each as amended through the date hereof), or (ii) subject to
obtaining the Required Approvals (as defined below), conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, indenture or instrument (evidencing
a Company debt or otherwise) to which the Company or any Subsidiary is a party
or by which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or govern-mental
authority to which the Company is subject (including Federal and state
securities laws and regulations), or by which any property or asset of the
Company is bound or affected, except in the case of each of clauses (ii) and
(iii), as could not, individually or in the aggregate, have or result in a
Material Adverse Effect. The business of the Company is not being conducted in
violation of any law, ordinance or regulation of any governmental authority,
except for violations which, individually or in the aggregate, could not have or
result in a Material Adverse Effect.
(f) Filings, Consents and Approvals. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other
Federal, state, local or other govern-mental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filing of the Certificates of
Designation with the Secretary of State of Delaware, (ii) the filings required
pursuant to Section 3.10, (iii) the filing of one or more Underlying Securities
Registration Statement with the Securities and Exchange Commission (the
"Commission") meeting the requirements set forth in the Registration Rights
Agreement and covering the resale of the Underlying Shares by the Purchasers,
(iv) the application(s) to the Nasdaq National Market ("NASDAQ") for the listing
of the Underlying Shares for trading on the NASDAQ (and with any other national
securities exchange or market on which the Common Stock is then listed), (v)
applicable Blue Sky filings and (vi) in all other cases where the failure to
obtain such
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<PAGE> 7
consent, waiver, authorization or order, or to give such notice or make such
filing or registration could not have or result in, individually or in the
aggregate, a Material Adverse Effect (collectively, the "Required Approvals").
(g) Litigation; Proceedings. Except as specifically disclosed in
the SEC Documents, there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or any of their respective
properties before or by any court, governmental or administrative agency or
regulatory authority (Federal, state, county, local or foreign) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, individually or in
the aggregate, have or result in a Material Adverse Effect.
(h) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of (and no event has occurred
which has not been waived which, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received notice of a claim that it is in default under or that
it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound, (ii) is in violation of any order of any court, arbitrator
or governmental body, or (iii) is in violation of any statute, rule or
regulation of any governmental authority, except as could not individually or in
the aggregate, have or result in a Material Adverse Effect.
(i) Private Offering. Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Sections
2.2(b)-(g), the offer, issuance and sale of the Securities to the Purchasers as
contemplated hereby are exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"). Neither the Company
nor any Person acting on its behalf has taken any action which could subject the
offering, issuance or sale of the Securities to the registration requirements of
the Securities Act. Neither the Company nor any Person acting on the Company's
behalf has solicited any offer to buy or sell the Securities by means of any
form of general solicitation or advertising.
(j) SEC Documents; Financial Statements. The Company has filed
all reports required to be filed by it under the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the three years preceding the
date hereof (or such shorter period as the Company was required by law to file
such material) (the foregoing materials being collectively referred to herein as
the "SEC Documents" and, together with the Schedules to this Agreement the
"Disclosure Materials") on a timely basis or has received a valid extension of
such time of filing and has filed any such SEC Documents prior to the expiration
of any such extension. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Documents, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. All material
agreements to which the Company is a party or to which the property or assets of
the Company are subject have been filed as exhibits to the SEC Documents as
required. The financial statements of the Company included in the SEC Documents
comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect
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<PAGE> 8
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved ("GAAP"), except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
Since September 30, 1998, except as specifically disclosed in the SEC Documents,
(a) there has been no event, occurrence or development that has had or could
have or result in a Material Adverse Effect, (b) the Company has not incurred
any liabilities (contingent or otherwise) other than (x) liabilities incurred in
the ordinary course of business consistent with past practice and (y)
liabilities not required to be reflected in the Company's financial statements
pursuant to GAAP or required to be disclosed in filings made with the
Commission, (c) the Company has not altered its method of accounting or the
identity of its auditors and (d) the Company has not declared or made any
payment or distribution of cash or other property to its stockholders or
officers or directors (other than in compliance with existing Company stock
option plans) with respect to its capital stock, or purchased, redeemed (or made
any agreements to purchase or redeem) any shares of its capital stock. The
Company last filed audited financial statements with the Commission on March 31,
1998, and has not received any comments from the Commission in respect thereof.
(k) Investment Company. The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(l) Certain Fees. Except for certain fees payable by the Company
to Brighton Capital Ltd., no fees or commissions will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, or bank with respect to the transactions contemplated by this
Agreement. The Purchasers shall have no obligation with respect to any fees or
with respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement. The Company shall indemnify and
hold harmless the Purchasers, their employees, officers, directors, agents, and
partners, and their respective Affiliates, from and against all claims, losses,
damages, costs (including the costs of preparation and attorney's fees) and
expenses suffered in respect of any such claimed or existing fees, as such fees
and expenses are incurred.
(m) Form S-3 Eligibility. The Company is, and at each Closing
Date will be, eligible to register securities for resale with the Commission
under Form S-3 promulgated under the Securities Act.
(n) Exclusivity. The Company shall not issue and sell shares of
Preferred Stock to any Person other than the Purchasers other than with the
specific prior written consent of the Purchasers.
(o) Seniority. No class of equity securities of the Company is
senior to the Shares in right of payment, whether upon liquidation or
dissolution, or otherwise.
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(p) Listing and Maintenance Requirements Compliance. The Company
has not, in the two years preceding the date hereof, received notice (written or
oral) from the NASDAQ or any other stock exchange, market or trading facility on
which the Common Stock is or has been listed (or on which it has been quoted) to
the effect that the Company is not in compliance with the listing or maintenance
requirements of such exchange or market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such maintenance requirements.
(q) Patents and Trademarks. The Company has, or has rights to
use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and rights (collectively, the
"Intellectual Property Rights") which are necessary or material for use in
connection with its business, and which the failure to so have would have a
Material Adverse Effect. To the best knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.
(r) Registration Rights; Rights of Participation. Except as set
forth on Schedule 6(b) to the Registration Rights Agreement, the Company has not
granted or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered with the
Commission or any other governmental authority which has not been satisfied. No
Person, has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents.
(s) Regulatory Permits. The Company and its Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate Federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Documents, except where the failure to
possess such permits could not, individually or in the aggregate, have or result
in a Material Adverse Effect ("Material Permits"), and neither the Company nor
any such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
(t) Title. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property and personal property owned
by them which is material to the business of the Company and its Subsidiaries,
in each case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its Subsidiaries. Any
real property and facilities held under lease by the Company and its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
Subsidiaries.
(u) Disclosure. The Company confirms that it has not provided the
Purchasers or their agents or counsel with any information that constitutes or
might constitute material non-public information. The Company understands and
confirms that the Purchasers shall be relying on the foregoing representations
in effecting transactions in securities of the Company. All disclosure provided
to the Purchasers regarding the Company, its business and the transactions
contemplated hereby, including the Schedules to this Agreement, furnished by or
on behalf of the Company are true and correct and do not contain any untrue
statement of a material fact or omit to state any
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<PAGE> 10
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
2.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby represents and warrants to the Company as follows:
(a) Organization; Authority. Such Purchaser is a limited
partnership validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite power and authority, to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations thereunder. The purchase by
such Purchaser of the Securities hereunder has been duly authorized by all
necessary action on the part of such Purchaser. Each of this Agreement and the
Registration Rights Agreement has been duly executed and delivered by such
Purchaser and constitutes the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms.
(b) Investment Intent. Such Purchaser is acquiring the Securities
for its own account for investment purposes only and not with a view to or for
distributing or reselling such Securities or any part thereof or interest
therein, without prejudice, however, to such Purchaser's right, subject to the
provisions of this Agreement and the Registration Rights Agreement, at all times
to sell or otherwise dispose of all or any part of such Securities pursuant to
an effective registration statement under the Securities Act and in compliance
with applicable state securities laws or under an exemption from such
registration.
(c) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof, it is, and at each Closing Date and
each exercise date under its respective Warrant, it will be, an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Such Purchaser has
not been formed solely for the purpose of acquiring the Securities.
(d) Experience of Purchaser. Such Purchaser either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. Such
Purchaser is able to bear the economic risk of an investment in the Securities
and, at the pre-sent time, is able to afford a complete loss of such investment.
(f) Access to Information. Such Purchaser acknowledges receipt of
the Disclosure Materials and further acknowledges that it has reviewed the
Disclosure Materials and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, proper-ties, management
and prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained
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in the Disclosure Materials. Neither such inquiries nor any other investigation
conducted by or on behalf of such Purchaser or its representatives or counsel
shall modify, amend or affect such Purchaser's right to rely on the truth,
accuracy and completeness of the Disclosure Materials and the Company's
representations and warranties contained in the Transaction Documents.
(g) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.
(h) Reliance. Such Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to it without registration under
the Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.
The Company acknowledges and agrees that each of the Purchasers
makes no representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 2.2.
ARTICLE 3
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from or in a transaction not
subject to the registration requirements of the Securities Act. In connection
with any transfer of Securities other than pursuant to an effective registration
statement or to the Company, except as otherwise set forth herein, the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred securities under the
Securities Act. Notwithstanding the foregoing, the Company hereby consents to
and agrees to register on the books of the Company and with any transfer agent
for the securities of the Company any transfer of Securities by a Purchaser to
another Purchaser, to one or more funds under common management with a
Purchaser, and any transfer among any such commonly managed funds, provided that
the transferee provides the Company the representations and warranties set forth
in Section 2.2 hereof. Any such transferee shall agree in writing to be bound by
the terms of this Agreement and shall have the rights of a Purchaser under this
Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE
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"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
Underlying Shares shall not contain the legend set forth above
nor any other legend if the conversion of Shares, the payment of dividends
thereon, and exercise of the Warrants or other issuances of Underlying Shares as
contemplated hereby, by the Certificates of Designation or the Warrants occurs
at any time while an Underlying Securities Registration Statement is effective
under the Securities Act or, in the event there is not an effective Underlying
Securities Registration Statement, at such time, if in the opinion of counsel to
the Company, such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the staff of the Commission). The Company shall cause its counsel to issue the
legal opinion included in the Transfer Agent Instructions to the Company's
transfer agent on the day that the Underlying Securities Registration Statement
is declared effective by the Commission. The Company agrees that, in the event
any Underlying Shares are issued with a legend in accordance with this Section
3.1(b), it will, within three (3) Trading Days after request therefor by a
Purchaser and the surrender by such Purchaser of the certificate representing
the Underlying Shares, provide such Purchaser with a certificate or certificates
representing such Underlying Shares, free from such legend at such time as such
legend would not have been required under this Section 3.1(b) had such issuance
occurred on the date of such request. The Company may not make any notation on
its records or give instructions to any transfer agent of the Company which
enlarge the restrictions of transfer set forth in this Section. Each Purchaser
will comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities (as defined
in the Registration Rights Agreement) pursuant to an Underlying Securities
Registration Statement.
3.2 Acknowledgment of Dilution. The Company acknowledges that the
issuance of the Underlying Shares upon (i) conversion of the Shares and payment
of dividends thereon in accordance with the terms of the Certificates of
Designation and (ii) exercise of the Warrants in accordance with their terms
will result in dilution of the outstanding shares of Common Stock, which
dilution may be substantial under certain market conditions. The Company further
acknowledges that its obligation to issue Underlying Shares upon (x) conversion
of the Shares and payment of dividends thereon in accordance with the terms of
the Certificates of Designation, and (y) exercise of the Warrants in accordance
with their terms, is unconditional and absolute, subject to the limitations set
forth herein and in the Certificates of Designation or pursuant to the Warrants,
regardless of the effect of any such dilution.
3.3 Furnishing of Information. As long as the Purchasers own
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act. As long as the Purchasers own Securities, if
the Company is not required to file reports pursuant to such sections, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) promulgated under the Securities Act such information as is
required for the Purchasers to sell the Securities under Rule 144 promulgated
under
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the Securities Act. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell Underlying Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
the legal opinion referenced above in this Section. Upon the request of any such
Person, the Company shall deliver to such Person a written certification of a
duly authorized officer as to whether it has complied with such requirements.
3.4 Integration. The Company shall not, and shall use its best
efforts to ensure that, no Affiliate shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers.
3.5 Increase in Authorized Shares. Subject to the operation of
Section 5(a)(iii)(A)(2) of each of the Certificates of Designation, if on any
date the Company would be, if a notice of conversion or exercise (as the case
may be) were to be delivered on such date, precluded from (a) issuing 200% of
the number of Underlying Shares as would then be issuable upon a conversion in
full of the then outstanding Shares and as payment of any accrued and unpaid
dividends in respect thereof in shares of Common Stock, or (b) issuing the
number of Underlying Shares upon exercise in full of the then outstanding
Warrants (the "Current Required Minimum"), in either case, due to the
unavailability of a sufficient number of authorized but unissued or reserved
shares of Common Stock, then the Board of Directors of the Company shall
promptly (and in any case, within 60 Business Days from such date) prepare and
mail to the stockholders of the Company proxy materials requesting authorization
to amend the Company's Certificate of Incorporation to increase the number of
shares of Common Stock which the Company is authorized to issue to at least such
number of shares as reasonably requested by the Purchasers in order to provide
for such number of authorized and unissued shares of Common Stock to enable the
Company to comply with its issuance, conversion exercise and reservation of
shares obligations as set forth in this Agreement, the Certificates of
Designation and the Warrants (the sum of (x) the number of shares of Common
Stock then outstanding plus all shares of Common Stock issuable upon exercise of
all outstanding options, warrants, agreements and convertible instruments, and
(y) the Current Required Minimum, shall be a reasonable number). In connection
therewith, the Board of Directors shall (a) adopt proper resolutions authorizing
such increase, (b) recommend to and otherwise use its best efforts to promptly
and duly obtain stockholder approval to carry out such resolutions (and hold a
special meeting of the stockholders no later than the 60th day after delivery of
the proxy materials relating to such meeting) and (c) within five (5) Business
Days of obtaining such stockholder authorization, file an appropriate amendment
to the Company's Certificate of Incorporation to evidence such increase.
3.6 Reservation and Listing of Underlying Shares. (a) The Company
shall (i) not later than the fifth (5th) Business Day following each Closing
Date prepare and file with the NASDAQ (and such other national securities
exchange or market or trading or quotation facility on which the Common Stock is
then listed) an additional shares listing application covering a number of
shares of Common Stock which is not less than the Initial Minimum for the
Securities to be issued on such Closing Date, (ii) take all steps necessary to
cause such shares of Common Stock to be approved for listing in the NASDAQ (as
well as on any such other national securities exchange or market or
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trading or quotation facility on which the Common Stock is then listed) as soon
as possible thereafter, and (iii) provide the Purchasers evidence of such
listing, and the Company shall maintain the listing of its Common Stock thereon.
If the number of Underlying Shares issuable upon conversion in full of the then
outstanding Shares, as payment of dividends thereon, and upon exercise of the
then unexercised portion of the Warrants exceeds 85% of the number of Underlying
Shares previously listed on account thereof with NASDAQ (and any such other
required exchanges), then the Company shall take the necessary actions to
immediately list a number of Underlying Shares as equals no less than the then
Current Required Minimum.
(b) The Company shall maintain a reserve of shares of Common
Stock for issuance upon conversion of the Shares and for payment of dividends
thereupon in shares of Common Stock and upon exercise in full of the Warrants in
accordance with this Agreement, the Certificates of Designation and the
Warrants, respectively, in such amount as may be required to fulfill its
obligations in full under the Transaction Documents, which reserve shall equal
no less than the then Current Required Minimum.
3.7 Conversion Procedures. The Transfer Agent Instructions,
Conversion Notice (as defined in Exhibit A) and Notice of Exercise under the
Warrants set forth the totality of the procedures with respect to the conversion
of the Shares and exercise of the Warrants, including the form of legal opinion,
if necessary, that shall be rendered to the Company's transfer agent and such
other information and instructions as may be reasonably necessary to enable the
Purchasers to convert their Shares and exercise their Warrants as contemplated
in the Certificates of Designation and the Warrants (as applicable).
3.8 Conversion and Exercise Obligations of the Company. The Company
shall honor conversions of the Shares and exercises of the Warrants and shall
deliver Underlying Shares in accordance with the respective terms, conditions
and time periods set forth in the respective Certificates of Designation and the
Warrants.
3.9 Right of First Refusal; Subsequent Registrations. (a) The Company
shall not, directly or indirectly, without the prior written consent of the
Purchasers, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other
disposition) any of its or its Affiliates' equity or equity-equivalent
securities in a transaction intended to be exempt or not subject to registration
under the Securities Act (a "Subsequent Placement") for a period of 180 days
after the earlier to occur of the Series B Closing Date and the Series B Closing
Expiration Date, except (i) the granting of options or warrants to employees,
officers, directors, consultants and other service providers (but not Strategic
Partners (as defined below)), and the issuance of shares upon exercise of
options granted, under any stock option plan heretofore or hereinafter duly
adopted by the Company, (ii) shares of Common Stock issuable upon exercise of
any currently outstanding options and warrants and upon conversion of any
currently outstanding convertible securities of the Company, in each case
disclosed in Schedule 2.1(c), (iii) shares of Common Stock issuable upon
conversion of Preferred Stock and as payment of dividends thereon and upon
exercise of the Warrants in accordance with the Certificates of Designation or
the Warrants, respectively, (iv) shares of Common Stock issuable pursuant to the
Private Equity Line of Credit Agreement dated March 27, 1998 between the Company
and Kingsbridge Capital Limited, as described in the Company's Amendment No. 2
on Form SB-2, filed with the Commission on August 13, 1998 (but not pursuant to
any amendment or modification
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<PAGE> 15
thereto), and (v) shares of Common Stock issuable in connection with a Strategic
Transaction (as defined below); unless (A) the Company delivers to the
Purchasers a written notice (the "Subsequent Placement Notice") of its intention
to effect such Subsequent Placement, which Subsequent Placement Notice shall
describe in reasonable detail the proposed terms of such Subsequent Placement,
the amount of proceeds intended to be raised thereunder, the Person with whom
such Subsequent Placement shall be effected, and attached to which shall be a
term sheet or similar document relating thereto and (B) the Purchasers shall not
have notified the Company by 5:00 p.m. (New York City time) on the fifth (5th)
Trading Day after their receipt of the Subsequent Placement Notice of their
willingness to provide (or to cause its sole designee to provide), subject to
completion of mutually acceptable documentation, financing to the Company on
conversion, reset and pricing terms (including original issue discount, if any)
and substantially on such other terms set forth in the Subsequent Placement
Notice. If the Purchasers shall fail to notify the Company of their intention to
enter into such negotiations within such time period, the Company may effect the
Subsequent Placement substantially upon the terms and to the Persons (or
Affiliates of such Persons) set forth in the Subsequent Placement Notice;
provided, that the Company shall provide the Purchasers with a second Subsequent
Placement Notice, and the Purchasers shall again have the right of first refusal
set forth above in this paragraph (a), if the Subsequent Placement subject to
the initial Subsequent Placement Notice shall not have been consummated for any
reason on conversion, reset and pricing terms (including original issue
discount, if any) and substantially on such other terms set forth in such
Subsequent Placement Notice within thirty (30) Trading Days after the date of
the initial Subsequent Placement Notice with the Person (or an Affiliate of such
Person) identified in the Subsequent Placement Notice. If the Purchasers shall
indicate a willingness to provide financing in excess of the amount set forth in
the Subsequent Placement Notice, then each Purchaser shall be entitled to
provide financing pursuant to such Subsequent Placement Notice up to an amount
equal to such Purchaser's pro rata portion of the aggregate number of Shares
purchased by such Purchaser under this Agreement, but the Company shall not be
required to accept financing from the Purchasers in an amount less than or in
excess of the amount set forth in the Subsequent Placement Notice. For purposes
of this Section 3.9, a "Strategic Transaction" shall mean a transaction or
relationship in which the Company issues shares of Common Stock to an entity
which is, itself or through its subsidiaries, an operating company in a business
related to the business of the Company and in which the Company receives
material benefits in addition to the investment of funds, but shall not include
a transaction in which the Company is issuing securities primarily for the
purpose of raising capital or to an entity whose primary business is investing
in securities (such entity, a "Strategic Partner").
(b) Except for (x) Underlying Shares, (y) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to be
registered, and securities of the Company permitted pursuant to Schedule 6(b) of
the Registration's Rights Agreement to be registered, in an Underlying
Securities Registration in accordance with the Registration Rights Agreement,
and (z) Common Stock to be registered for resale in connection with financings
permitted pursuant to paragraph (a)(i) - (v) of Section 3.9(a), the Company
shall not, without the prior written consent of the Purchasers (i) issue or sell
any of its or any of its Affiliates' equity or equity-equivalent securities
pursuant to Regulation S promulgated under the Securities Act, or (ii) register
for resale any securities of the Company for a period of not less than 90
Trading Days after the date that the Underlying Securities Registration
Statement is declared effective by the Commission. Any days that a Purchaser is
unable to sell Underlying Securities under the
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Underlying Securities Registration Statement shall be added to such 90 Trading
Day period for the purposes of (i) and (ii) above.
3.10 Certain Securities Laws Disclosures; Publicity. The Company
shall: (i) on each Closing date, issue a press release acceptable to the
Purchasers disclosing the transactions contemplated hereby on the Closing Date,
(ii) file with the Commission a Report on Form 8-K disclosing the transactions
contemplated hereby within ten (10) Business Days after each Closing Date, and
(iii) timely file with the Commission a Form D promulgated under the Securities
Act as required under Regulation D promulgated under the Securities Act with
respect to each Closing and provide a copy thereof to the Purchasers promptly
after the filing thereof. The Company shall, no less than two (2) Business Days
prior to the filing of any disclosure required by clauses (ii) and (iii) above,
provide a copy thereof to the Purchasers.
3.11 Use of Proceeds. The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of Company debt or to redeem any Company equity or
equity-equivalent securities. Pending application of the proceeds of this
placement in the manner permitted hereby, the Company will invest such proceeds
in interest bearing accounts and/or short-term, investment grade interest
bearing securities.
3.12 Transfer of Intellectual Property Rights. Except in connection
with the sale of all or substantially all of the assets of the Company, the
Company shall not transfer, sell or otherwise dispose of any Intellectual
Property Rights or allow any of the Intellectual Property Rights to become
subject to any Liens, or fail to renew such Intellectual Property Rights (if
renewable and it would otherwise lapse if not renewed), without the prior
written consent of the Purchasers. Notwithstanding the foregoing, the Company
may license the right to promote and use its Intellectual Property Rights to
Strategic Partners in the ordinary course of its business without the prior
consent of the Purchasers.
3.13 Reimbursement. If any of the Purchasers, other than by reason of
its gross negligence or willful misconduct, become involved in any capacity in
any action, proceeding or investigation brought by or against any Person,
including stockholders of the Company, in connection with or as a result of the
consummation of the transactions contemplated by Transaction Documents, the
Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation and preparation) incurred in
connection therewith, as such expenses are incurred. In addition, other than
with respect to any matter in which any of the Purchasers is a named party, the
Company will pay such Purchaser the charges, as reasonably determined by such
Purchaser, for the time of any officers or employees of such Purchaser devoted
to appearing and preparing to appear as witnesses, assisting in preparation for
hearings, trials or pretrial matters, or otherwise with respect to inquiries,
hearings, trials, and other proceedings relating to the subject matter of this
Agreement. The reimbursement obligations of the Company under this paragraph
shall be in addition to any liability which the Company may otherwise have,
shall extend upon the same terms and conditions to any Affiliates of the
Purchasers who are actually named in such action, proceeding or investigation,
and partners, directors, agents, employees and controlling persons (if any), as
the case may be, of the Purchasers and any such Affiliate, and shall be binding
upon and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither
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the Purchasers nor any such Affiliates, partners, directors, agents, employees
or controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company in connection with or
as a result of the consummation of the Transaction Documents except to the
extent that any losses, claims, damages, liabilities or expenses incurred by the
Company result from the gross negligence or willful misconduct of the Purchasers
or entity in connection with the transactions contemplated by this Agreement.
ARTICLE 4
CONDITIONS
4.1 Conditions Precedent to the Obligation of the Purchasers to
Purchase Series B Shares. The obligation of the Purchasers to acquire Series B
Shares is subject to the satisfaction or waiver by the Purchasers, at or before
the Series B Closing Date of each of the following conditions:
(i) Series A Closing. The Series A Closing shall have
occurred;
(ii) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company contained
herein shall be true and correct as of the date when made and as of the
Series B Closing Date as though made on and as of the Series B Closing
Date.
(iii) Performance by the Company. The Company shall have
performed, satisfied and complied with all covenants, agreements and
conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Series B
Closing Date;
(iv) Underlying Securities Registration Statement. The
Underlying Securities Registration Statement covering the Underlying
Shares issuable upon conversion of Series A Shares, payment of dividends
thereon in shares of Common Stock and exercise of the Warrants shall
have been declared effective under the Securities Act by the Commission
not less than 60 Trading Days prior to the Series B Closing Date and
shall have remained effective at all times, not subject to any actual or
threatened stop order or subject to any actual or threatened suspension
at any time prior to the Series B Closing Date;
(v) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by the Transaction Documents, including the
issuance or conversion of any of the Shares or exercise of the Warrants;
(vi) Adverse Changes. Since the Series A Closing Date, no
event or series of events which reasonably would be expected to have or
result in a Material Adverse Effect shall have occurred.
(vii) Management. In the reasonable judgment of the
Purchasers, there have been no substantial changes in the senior
management of the Company;
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(viii) No Suspensions of Trading in Common Stock. The
trading in the Common Stock shall not have been suspended by the
Commission or on the NASDAQ (except for any suspension of trading of
limited duration solely to permit dissemination of material information
regarding the Company) at any time since the Series A Closing Date;
(ix) Listing of Common Stock. The Common Stock shall have
been at all times since the Series A Closing Date listed for trading on
the NASDAQ;
(x) Change of Control. No Change of Control in the
Company shall have occurred. "Change of Control" means the occurrence of
any of (i) an acquisition after the date hereof by an individual or
legal entity or "group" (as described in Rule 13d-5(b)(1) promulgated
under the Exchange Act) of in excess of 33% of the voting securities of
the Company, (ii) a replacement of more than one-half of the members of
the Company's board of directors which is not approved by those
individuals who are members of the board of directors on the date hereof
in one or a series of related transactions, (iii) the merger of the
Company with or into another entity, consolidation or sale of all or
substantially all of the assets of the Company in one or a series of
related transactions or (iv) the execution by the Company of an
agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i), (ii) or (iii);
(xi) Legal Opinion. The Company shall have delivered to
the Purchasers the opinion of the Company's outside counsel, in
substantially the form of Exhibit D, dated the Series B Closing Date;
(xii) Required Approvals. All Required Approvals shall
have been obtained;
(xiii) Shares of Common Stock. On the Series B Closing
Date, the Company shall have duly reserved the number of Underlying
Shares required by this Agreement to be reserved for issuance upon
conversion of Series B Shares and payment of dividends thereon;
(xiv) Delivery of Stock Certificate. The Company shall
have delivered to each of the Purchasers or its designee the stock
certificate(s) representing the Series B Shares registered in the name
of such Purchaser, in form satisfactory to such Purchaser;
(xv) Performance of Conversion/Exercise Obligations. The
Company shall have (a) delivered Underlying Shares upon conversion of
Series A Shares and otherwise performed its obligations in accordance
with the terms, conditions and timing requirements of the Series A
Certificate of Designation and (b) delivered Underlying Shares upon
exercise of the Warrants and otherwise performed its obligations in
accordance with the terms of the Warrants;
(xvi) Closing Threshold. For the 10 Trading Days
immediately preceding the Series B Closing Date, the average daily
trading volume of the Common Stock on the NASDAQ shall be at least
35,000 shares and the average of the Per Share Market Value for such 10
Trading Day period shall be greater than $8.00;
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<PAGE> 19
(xvii) Transfer Agent Instructions. The Transfer Agent
Instructions, dated the Series B Closing Date, shall have been delivered
to and acknowledged in writing by the Company's transfer agent; and
(xviii) Shareholder Approval. No approval of the
shareholders of the Company shall be required under the rules of the
Nasdaq Stock Market in order to issue 200% of the number of Underlying
Shares issuable upon conversion in full of the Series B Shares (assuming
such conversion occurred on the Series B Closing Date) and as payment of
dividends.
ARTICLE 5
MISCELLANEOUS
5.1 Fees and Expenses. At the Series A Closing the Company shall pay
$20,000 to Robinson Silverman in connection with the preparation and negotiation
of the Transaction Documents and $5,000 at the Series B Closing. Other than the
amount contemplated in the immediately prior sentence, and except as otherwise
set forth in the Registration Rights Agreement, each party shall pay the fees
and expenses of its advisers, counsel, accountants and other experts, if any,
and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all stamp and other taxes and duties levied in connection with the
issuance of the Securities.
5.2 Entire Agreement; Amendments. The Transaction Documents, together
with the Exhibits and Schedules thereto, and the Transfer Agent Instructions
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been
merged into such documents, exhibits and schedules.
5.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 8:00 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Agreement later than 8:00 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the Business Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications shall be as follows:
If to the Company: NeoTherapeutics Inc.
157 Technology Drive
Irvine, CA 92618
Facsimile No.:(949) 788-6706
Attn: Chief Financial Officer
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<PAGE> 20
With copies to: Stradling, Yocca, Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660
Facsimile No.: 949-725-4100
Attn: C. Craig Carlson, Esq. And
Robert E. Rich, Esq.
If to Montrose: Montrose Investments, Ltd.
300 Crescent Court, Suite 700
Dallas, TX 75201
Facsimile: (214) 758-1221
Attn: Will Rose
If to Westover: Westover Investments L.P.
300 Crescent Court, Suite 700
Dallas, TX 75201
Facsimile: (214) 758-1221
Attn: Will Rose
With copies to (for all
communications to
Montrose and Westover): Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630
Attn: Kenneth L. Henderson, Esq. And
Eric L. Cohen, Esq.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
5.4 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each of the Purchasers; or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
5.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each of the Purchasers. Except as set forth
in Section 3.1(a), the Purchasers may not assign this Agreement
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<PAGE> 21
or any of the rights or obligations hereunder without the consent of the
Company. This provision shall not limit the each Purchaser's right to transfer
securities or transfer or assign rights hereunder or under the Registration
Rights Agreement.
5.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
5.8 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
5.9 Survival. The representations, warranties, agreements and
covenants contained herein shall survive each Closing and the delivery and
conversion or exercise (as the case may be) of the Shares and the Warrants.
5.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
5.11 Publicity. The Company and each of the Purchasers shall consult
with each other in issuing any press releases or otherwise making public
statements or filings and other communications with the Commission or any
regulatory agency or stock market or trading facility with respect to the
transactions contemplated hereby that are contemplated by Section 3.10 hereof or
the Registration Rights Agreement and neither party shall issue any such press
release or otherwise make any such public statement, filings or other
communications without the prior written consent of the other, which consent
shall not be unreasonably withheld or delayed, except that no prior consent
shall be required if such disclosure is required by law or applicable stock
market regulations, in which such case the disclosing party shall provide the
other party with prior notice of such public statement, filing or other
communication.
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<PAGE> 22
5.12 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
5.13 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers will be entitled to specific performance of the obligations of the
Company under the Transaction Documents. Each of the Company and the Purchasers
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of its obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.
5.14 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchaser hereunder, and neither Purchaser shall be
responsible in any way for the performance of the obligations of the other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the
Transaction Documents, and it shall not be necessary for the other Purchaser to
be joined as an additional party in any proceeding for such purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
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<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this Preferred Stock
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
NEOTHERAPEUTICS, INC.
By:_____________________________________
Name:
Title:
WESTOVER INVESTMENTS L.P.
By:_____________________________________
Name:
Title:
MONTROSE INVESTMENTS L.P.
By:_____________________________________
Name:
Title:
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<PAGE> 1
EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement"), dated as of
January 29, 1999, is made and entered into by and among NeoTherapeutics, Inc., a
Delaware corporation (the "Company"), Westover Investments L.P., a Delaware
limited partnership ("Westover"), and Montrose Investments L.P., a Cayman
Islands exempt limited partnership ("Montrose"). Westover and Montrose are
collectively sometimes referred to herein as the "Purchasers."
This Agreement is made pursuant to the Convertible Preferred Stock
Purchase Agreement, dated as of the date hereof by and among the Company and the
Purchasers (the "Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein that are defined
in the Purchase Agreement shall have the meanings given such terms in the
Purchase Agreement. As used in this Agreement, the following terms shall have
the following meanings:
"Advice" shall have meaning set forth in Section 3(p).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
New York generally are authorized or required by law or other government actions
to close.
"Closing Date" shall have the meaning set forth in the Purchase
Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, $.001 par value.
"Effectiveness Date" means (i) with respect to the Registrable
Securities issuable upon conversion of the Series A Shares (and payment of
dividends thereon) and exercise of the Warrants, the 120th day following the
Series A Closing Date, (ii) with respect to the Registrable Securities issuable
upon conversion of the Series B Shares (and payment of dividends thereon), the
120th day following the Series B Closing Date and (iii) with respect to any
subsequent Registration Statement required to be filed hereunder, the 120th day
after demand therefor is received from the Holders pursuant to Section 3(c)
hereof.
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<PAGE> 2
"Effectiveness Period" shall have the meaning set forth in Section 2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means (i) with respect to the Registrable Securities
issuable upon conversion of the Series A Shares (and payment of dividends
thereon) and exercise of the Warrants, the 30th day following the Series A
Closing Date, (ii) with respect to the Registrable Securities issuable upon
conversion of the Series B Shares (and payment of dividends thereon), the 30th
day following the Series B Closing Date and (iii) with respect to any subsequent
Registration Statement required to be filed hereunder, the 30th day after demand
therefor is received from the Holders pursuant to Section 3(c) hereof.
"Holder" or "Holders" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Preferred Stock" means the Series A Shares and Series B Shares.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"Registrable Securities" means (a) with respect to the Registration
Statement required to be filed after the Series A Closing, the shares of Common
Stock issuable upon (i) conversion of the Series A Shares, (ii) exercise in full
of the Warrants, and (iii) payment of dividends in respect of the Series A
Shares, assuming all dividends are paid in shares of Common Stock and that all
Series A Shares remain outstanding for three years, and (b) with respect to the
Registration Statement to be filed after the Series B Closing, the shares of
Common Stock issuable upon (i) conversion of the Series B Shares and (ii)
payment of dividends in respect of the Series B Shares, assuming all dividends
are paid in shares of Common Stock and that all Series B Shares remain
outstanding for
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<PAGE> 3
three years; provided, however that in order to account for the fact that the
number of shares of Common Stock that are issuable upon conversion of shares of
Preferred Stock (and as payment of dividends thereon) is determined in part upon
the market price of the Common Stock at the time of conversion, Registrable
Securities issuable upon the conversion of shares of Preferred Stock (and as
payment of dividends thereon), for each Registration Statement, shall include
(but not be limited to) a number of shares of Common Stock equal to no less than
200% of the number of shares of Common Stock into which the applicable series of
Preferred Stock are convertible (including shares of Common Stock issuable as
dividends), assuming such conversion occurred on the applicable Closing Date for
such series of Preferred Stock, the applicable Filing Date for such series of
Preferred Stock or the date the Company files an acceleration request with the
Commission relating to a Registration Statement covering, among other things, a
particular series of Preferred Stock, whichever such date yields the lowest
Conversion Price (as defined in the Purchase Agreement). Such registered shares
of Common Stock shall be allocated among the Holders pro-rata based on the total
number of Registrable Securities issued or issuable as of each date that a
Registration Statement is declared effective by the Commission.
"Registration Statement" means the registration statements and any
additional registration statements contemplated by Section 2(a), including (in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 424" means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Special Counsel" means one special counsel to the Holders, for which
the Holders will be reimbursed by the Company pursuant to Section 4.
"Series A Closing" shall have the meaning set forth in the Purchase
Agreement.
"Series B Closing" shall have the meaning set forth in the Purchase
Agreement.
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<PAGE> 4
"Series A Closing Date" shall have the meaning set forth in the Purchase
Agreement.
"Series B Closing Date" shall have the meaning set forth in the Purchase
Agreement.
"Series A Shares" means the Company's shares of 5% Series A Preferred
Stock with Conversion Features, $.001 par value per share, to be issued to the
Purchasers pursuant to the Purchase Agreement.
"Series B Shares" means the Company's shares of 5% Series B Preferred
Stock with Conversion Features, $.001 par value per share, to be issued to the
Purchasers pursuant to the Purchase Agreement.
"Underwritten Registration or Underwritten Offering" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
"Warrants" means the common stock purchase warrants to be issued to the
Purchasers at the Series A Closing pursuant to the Purchase Agreement.
2. Shelf Registration
(a) On or prior to each Filing Date, the Company shall prepare and file
with the Commission a "Shelf" Registration Statement covering all Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule
415. The Registration Statement shall be on Form S-3 (or if the Company is not
then eligible to register for resale the Registrable Securities on Form S-3 such
registration shall be on another appropriate form in accordance herewith, or, in
connection with an Underwritten Offering hereunder, such other form agreed to by
the Company and by the Holders of a majority of the Registrable Securities). The
Company shall use its best efforts to cause the Registration Statement to be
declared effective under the Securities Act as promptly as possible after the
filing thereof, but in any event prior to the Effectiveness Date for such
Registration Statement, and shall use its best efforts to keep such Registration
Statement continuously effective under the Securities Act until the date which
is three years after the date that such Registration Statement is declared
effective by the Commission or such earlier date when all Registrable Securities
covered by such Registration Statement have been sold or may be sold without
volume restrictions pursuant to Rule 144(k) as determined by the counsel to the
Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent (the "Effectiveness Period"),
provided, however, that the Company shall not be deemed to have used its best
efforts to keep the Registration Statement effective during the Effectiveness
Period if it voluntarily takes any action that would result in the Holders not
being able to sell the Registrable Securities covered by such Registration
Statement during the Effectiveness Period, unless such action is required under
applicable law or the Company has filed a post-effective amendment to the
Registration Statement and the Commission has not declared it effective.
(b) If the Holders of a majority of the Registrable Securities so elect,
an offering of Registrable Securities pursuant to the Registration Statement may
be effected in the form of an Underwritten Offering. In such event, and, if the
man-aging underwriters advise the Company and such Holders in writing that in
their opinion the amount of Registrable Securities proposed to be sold in
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<PAGE> 5
such Underwritten Offering exceeds the amount of Registrable Securities which
can be sold in such Underwritten Offering, there shall be included in such
Underwritten Offering the amount of such Registrable Securities which in the
opinion of such managing underwriters can be sold, and such amount shall be
allocated pro rata among the Holders proposing to sell Registrable Securities in
such Underwritten Offering.
(c) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker in interest that will administer
the offering will be selected by the Holders of a majority of the Registrable
Securities included in such offering upon consultation with the Company. No
Holder may participate in any Underwritten Offering hereunder unless such Holder
(i) agrees to sell its Registrable Securities on the basis provided in any
underwriting agreements approved by the Persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such arrangements.
3. Registration Procedures
In connection with the Company's registration obligations hereunder, the
Company shall:
(a) Prepare and file with the Commission on or prior to each applicable
Filing Date, a Registration Statement on Form S-3 (or if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3 such
registration shall be on another appropriate form in accordance herewith, or, in
connection with an Underwritten Offering hereunder, such other form agreed to by
the Company and by the Holders of a majority Registrable Securities) which shall
contain the "Plan of Distribution" attached hereto as Annex A (except if
otherwise directed by the Holders), and cause the Registration Statement to
become effective and remain effective as provided herein; provided, however,
that not less than five (5) Business Days prior to the filing of the
Registration Statement or any related Prospectus (other than a Prospectus filed
pursuant to Rule 424) and not less than one (1) Business Day prior to the filing
of any amendment or supplement thereto (including any document that would be
incorporated or deemed to be incorporated therein by reference), the Company
shall (i) provide to the Holders, their Special Counsel and any managing
underwriters, copies of all such documents proposed to be filed, which documents
(other than those incorporated or deemed to be incorporated by reference) will
be subject to the review of such Holders, their Special Counsel and such
managing under-writers, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel to such Holders
and such underwriters, to conduct a reasonable investigation within the meaning
of the Securities Act. The Company shall not file the Registration Statement or
any such Prospectus or any amendments or supplements thereto to which the
Holders of a majority of the Registrable Securities, their Special Counsel, or
any managing underwriters, shall reasonably object on a timely basis.
(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement as may be necessary to
keep the Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and prepare and file with
the Commission such additional Registration Statements in order to register for
resale under the Securities Act all of the Registrable Securities; (ii) cause
the related Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424
(or any similar provisions then in force) promulgated
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<PAGE> 6
under the Securities Act; (iii) respond as promptly as reasonably possible to
any comments received from the Commission with respect to the Registration
Statement or any amendment thereto and as promptly as reasonably possible
provide the Holders true and complete copies of all correspondence from and to
the Commission relating to the Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) File additional Registration Statements if the number of Registrable
Securities at such time exceeds the number of shares of Common Stock then
registered in a Registration Statement. The Company shall have 30 days to file
such additional number of Registration Statements after notice of the
requirement thereof which the Holders may give at such time when the Registrable
Securities exceeds 85% of the number of shares of Common Stock then registered
in a Registration Statement hereunder. In such event, the Registration Statement
required to be filed by the Company shall include no less than a number of
shares of Common Stock equal to no less than 200% of the number of shares of
Common Stock into which all then outstanding shares of Preferred Stock are
convertible (assuming such conversion occurred on the Filing Date for such
Registration Statement or the date of the filing of the final acceleration
request therefor, whichever date yields a lower Conversion Price) and any other
Registrable Securities not then registered in a Registration Statement.
(d) Notify the Holders of Registrable Securities to be sold, their
Special Counsel and any managing underwriters as promptly as reasonably possible
(and, in the case of (i)(A) below, not less than five (5) days prior to such
filing) and (if requested by any such Person) confirm such notice in writing no
later than one (1) Business Day following the day (i)(A) when a Prospectus or
any Prospectus supplement (other than a Prospectus filed pursuant to Rule 424)
or post-effective amendment to the Registration Statement is proposed to be
filed; (B) when the Commission notifies the Company whether there will be a
"review" of such Registration Statement and whenever the Commission comments in
writing on such Registration Statement (the Company shall provide true and
complete copies thereof and all written responses thereto to each of the
Holders); and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) and in the case of Underwritten Offerings, if at any time any of
the representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to
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<PAGE> 7
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(e) Use its best efforts to avoid the issuance of, or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of the Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(f) If requested by any managing underwriter or the Holders of a
majority in interest of the Registrable Securities to be sold in connection with
an Underwritten Offering, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as such
managing underwriters and such Holders reasonably agree should be included
therein, and (ii) make all required filings of such Prospectus supplement or
such post--effective amendment as soon as practicable after the Company has
received notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment; provided, however, that the Company
shall not be required to take any action pursuant to this Section 3(f) that
would, in the opinion of counsel for the Company, violate applicable law or be
materially detrimental to the business prospects of the Company.
(g) Furnish to each Holder, their Special Counsel and any managing
underwriters, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent requested by such Person (including
those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.
(h) Promptly deliver to each Holder, their Special Counsel, and any
underwriters, without charge, as many copies of the Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request; and the Company hereby consents to the use
of such Prospectus and each amendment or supplement thereto by each of the
selling Holders and any underwriters in connection with the offering and sale of
the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(i) Prior to any public offering of Registrable Securities, use its best
efforts to register or qualify or cooperate with the selling Holders, any
underwriters and their Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder or underwriter
requests in writing, to keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period and to do any and
all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, however, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action that would subject it to general service of process in any
such jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
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<PAGE> 8
(j) Cooperate with the Holders and any managing underwriters to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent
permitted by applicable law, of all restrictive leg-ends, and to enable such
Registrable Securities to be in such denominations and registered in such names
as any such managing underwriters or Holders may request.
(k) Upon the occurrence of any event contemplated by Section 3(d)(vi),
as promptly as reasonably possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(l) Use its best efforts to cause all Registrable Securities relating to
such Registration Statement to be listed on the Nasdaq National Market
("NASDAQ") or on any other stock market or trading facility on which the shares
of Common Stock are traded, listed or quoted (each a "Subsequent Market") as and
when required pursuant to the Purchase Agreement.
(m) Enter into such agreements (including an under-writing agreement in
form, scope and substance as is customary in Underwritten Offerings) and take
all such other actions in connection therewith (including those reasonably
requested by any managing underwriters and the Holders of a majority of the
Registrable Securities being sold) in order to expedite or facilitate the
disposition of such Registrable Securities, and whether or not an underwriting
agreement is entered into, (i) make such representations and warranties to such
Holders and such underwriters as are customarily made by issuers to underwriters
in underwritten public offerings, and confirm the same if and when requested;
(ii) in the case of an Underwritten Offering obtain and deliver copies thereof
to each Holder and the managing underwriters, if any, of opinions of counsel to
the Company and updates thereof addressed to each Holder and each such
underwriter, in form, scope and substance reasonably satisfactory to any such
managing underwriters and Special Counsel to the selling Holders covering the
matters customarily covered in opinions requested in Underwritten Offerings and
such other matters as may be reasonably requested by such Special Counsel and
underwriters; (iii) immediately prior to the effectiveness of the Registration
Statement, and, in the case of an Underwritten Offering, at the time of delivery
of any Registrable Securities sold pursuant thereto, use its best reasonable
efforts to obtain and deliver copies to the Holders and the managing
underwriters, if any, of "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements and
financial data is, or is required to be, included in the Registration
Statement), addressed to the Company in form and substance as are customary in
connection with Underwritten Offerings; (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and procedures
no less favorable to the selling Holders and the under-writers, if any, than
those set forth in Section 5 (or such other provisions and procedures acceptable
to the managing underwriters, if any, and holders of a majority of Registrable
Securities participating in such Under-written Offering); and (v) deliver such
documents and certificates as may be reason-
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<PAGE> 9
ably requested by the Holders of a majority of the Registrable Securities being
sold, their Special Counsel and any managing underwriters to evidence the
continued validity of the representations and warranties made pursuant to
Section 3(m)(i) above and to evidence compliance with any customary conditions
contained in the underwriting agreement or other agreement entered into by the
Company.
(n) Make available for inspection by the selling Holders, any
representative of such Holders, any under-writer participating in any
disposition of registrable Securities, and any attorney or accountant retained
by such selling Holders or underwriters, at the offices where normally kept,
during reasonable business hours, all financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries, and
cause the officers, directors, agents and employees of the Company and its
subsidiaries to supply all information in each case reasonably requested by any
such Holder, representative, underwriter, attorney or accountant in connection
with the Registration Statement; provided, however, that any information that is
determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information shall be kept confidential by
such Persons, unless (i) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities; (ii) disclosure of such information, in the opinion of counsel to
such Person, is required by law; (iii) such information becomes generally
available to the public other than as a result of a disclosure or failure to
safeguard by such Person; or (iv) such information becomes available to such
Person from a source other than the Company and such source is not known by such
Person to be bound by a confidentiality agreement with the Company.
(o) Comply with all applicable rules and regulations of the Commission.
(p) The Company may require each selling Holder to furnish to the
Company such information regarding the distribution of such Registrable
Securities and the beneficial ownership of Common Stock held by such Holder as
is required by law to be disclosed in the Registration Statement, and the
Company may exclude from such registration the Registrable Securities of any
such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or otherwise
as the holder of any securities of the Company, then such Holder shall have the
right to require (if such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar Federal statute then in force) the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(h) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(d) and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.
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<PAGE> 10
Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of any event
of the kind described in Sections 3(d)(ii), 3(d)(iii), 3(d)(iv), 3(d)(v) or
3(d)(vi), such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(k), or until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
Each Holder agrees that, other than ordinary course brokerage
arrangements, in the event it enters into any arrangement with a broker-dealer
for the sale of any Registrable Securities through a block trade, special
offering, exchange distribution or secondary distribution or a purchase by a
broker or dealer, such Holder shall promptly deliver to the Company in writing
all applicable information required in order for the Company to be able to
timely file a supplement to the Prospectus pursuant to Rule 424(b) under the
Securities Act. Such information shall include a description of (i) the name of
such Holder and of the participating broker-dealer(s), (ii) the number of
Registrable Securities involved, (iii) the price at which such Registrable
Securities were or are to be sold, and (iv) the commissions paid or to be paid
or discounts or concessions allowed or to be allowed to such broker-dealer(s),
where applicable.
4. Registration Expenses
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Company, except as and to the extent specified in
Section 4(b), shall be borne by the Company whether or not pursuant to an
Underwritten Offering and whether or not the Registration Statement is filed or
becomes effective and whether or not any registrable Securities are sold
pursuant to the Registration Statement. The fees and expenses referred to in the
foregoing sentence shall include, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses (A) with respect
to filings required to be made with the NASDAQ and any Subsequent Market on
which the Common Stock is then listed for trading, and (B) in compliance with
state securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the Holders in connection with Blue Sky
qualifications or exemptions of the Registrable Securities and determination of
the eligibility of the Registrable Securities for investment under the laws of
such jurisdictions as the managing underwriters, if any, or the Holders of a
majority of Registrable Securities may designate)), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriters, if any, or by the
holders of a majority of the Registrable Securities included in the Registration
Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company and Special Counsel for the Holders
(not to exceed $7,500), (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting
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<PAGE> 11
duties), the expense of any annual audit, the fees and expenses incurred in
connection with the listing of the Registrable Securities on any securities
exchange as required hereunder.
(b) If the Holders require an Underwritten Offering pursuant to the
terms hereof, the Company shall be responsible for all costs, fees and expenses
in connection therewith, except for the fees and disbursements of the
Underwriters (including any underwriting commissions and discounts) and their
legal counsel and accountants. By way of illustration which is not intended to
diminish from the provisions of Section 4(a), the Holders shall not be
responsible for, and the Company shall be required to pay, the fees or
disbursements incurred by the Company (including by its legal counsel and
accountants) in connection with, the preparation and filing of a Registration
Statement and related Prospectus for such offering, the maintenance of such
Registration Statement in accordance with the terms hereof, the listing of the
Registrable Securities in accordance with the requirements hereof, and printing
expenses incurred to comply with the requirements hereof.
5. Indemnification
(a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents (including any underwriters retained by such Holder
in connection with the offer and sale of Registrable Securities), brokers
(including brokers who offer and sell Registrable Securities as principal as a
result of a pledge or any failure to perform under a margin call of Common
Stock), investment advisors and employees of each of them, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, with-out limitation, costs of preparation and
reasonable attorneys' fees) and expenses (collectively, "Losses"), as incurred,
arising out of or relating to any untrue or alleged untrue statement of a
material fact contained in the Registration Statement, any Prospectus or any
form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that such untrue
statements or omissions are based solely upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use therein, or
to the extent that such information relates to such Holder or such Holder's
pro-posed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto. The Company shall notify the Holders promptly
of the institution, threat or assertion of any Proceeding of which the Company
is aware in connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of or based solely upon any untrue
statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of or
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<PAGE> 12
based solely upon any omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading to the extent, but
only to the extent, that such untrue statement or omission is contained in any
information so furnished in writing by such Holder to the Company specifically
for inclusion in the Registration Statement or such Prospectus or to the extent
that such information relates to such Holder or such Holder's pro-posed method
of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus, or in any amendment or
supplement thereto. In no event shall the liability of any selling Holder
hereunder be greater in amount than the dollar amount of the net proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within
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<PAGE> 13
ten (10) Business Days of written notice thereof to the Indemnifying Party
(regard-less of whether it is ultimately deter-mined that an Indemnified Party
is not entitled to indemnification hereunder; provided, that the Indemnifying
Party may require such Indemnified Party to undertake to reimburse all such fees
and expenses to the extent it is finally judicially determined that such
Indemnified Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information sup-plied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Not-withstanding the provisions of this Section 5(d), no Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Per-son who was
not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section are
in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a Holder, of
any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of dam-ages, will be entitled
to specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby
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<PAGE> 14
further agrees that, in the event of any action for specific performance in
respect of such breach, it shall waive the defense that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has, as of the date hereof, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions
hereof.. Except as and to the extent specified in Schedule 6(b) hereto, neither
the Company nor any of its subsidiaries has previously entered into any
agreement granting any registration rights with respect to any of its securities
to any Person. Without limiting the generality of the foregoing, without the
written consent of the Holders of a majority of the then outstanding Registrable
Securities, the Company shall not grant to any Person the right to request the
Company to register any securities of the Company under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of the Holders set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement.
(c) No Piggyback on Registrations. Except as and to the extent specified
in Schedule 6(b) hereto, neither the Company nor any of its security holders
(other than the Holders in such capacity pursuant hereto) may include securities
of the Company in the Registration Statement other than the Registrable
Securities, and the Company shall not after the date hereof enter into any
agreement providing any such right to any of its security holders.
(d) Piggy-Back Registrations. If at any time when there is not an
effective Registration Statement covering all of the Registrable Securities and
the Underlying Shares, the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each holder of Registrable
Securities written notice of such determination and, if within twenty (20) days
after receipt of such notice, any such holder shall so request in writing, the
Company shall include in such registration statement all or any part of such
Registrable Securities such holder requests to be registered; provided, however,
that the Company shall not be required to register any Registrable Securities
pursuant to this Section 6(d) that are eligible for sale pursuant to Rule 144(k)
of the Commission.
(e) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the same shall be in writing and signed by the Company and the
Holders of at least two-thirds of the then outstanding Registrable Securities;
provided, however, that, for the purposes of this sentence, Registrable
Securities that are owned, directly or indirectly, by the Company, or an
Affiliate of the Company are not deemed outstanding. Notwithstanding the
fore-going, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders and that
does not directly or indirectly affect the rights of other Holders may be given
by Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; provided, however, that the
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<PAGE> 15
provisions of this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the immediately preceding sentence.
(f) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 8:00 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in the Purchase Agreement later than 8:00 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:
If to the Company: NeoTherapeutics Inc.
157 Technology Drive
Irvine, CA 92618
Facsimile No.:(949) 788-6706
Attn: Chief Financial Officer
With copies to: Stradling, Yocca, Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660
Facsimile No.: 949-725-4100
Attn: C. Craig Carlson, Esq. And
Robert E. Rich, Esq.
If to Montrose: Montrose Investments, Ltd.
300 Crescent Court, Suite 700
Dallas, TX 75201
Facsimile: (214) 758-1221
Attn: Will Rose
If to Westover: Westover Investments L.P.
300 Crescent Court, Suite 700
Dallas, TX 75201
Facsimile: (214) 758-1221
Attn: Will Rose
With copies to (for all
communications to
Montrose and Westover): Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630
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<PAGE> 16
Attn: Kenneth L. Henderson, Esq. And
Eric L. Cohen, Esq.
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears
in the stock transfer books of the Company
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
(g) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of each Holder. The Company may not assign its
rights or obligations hereunder without the prior written consent of each
Holder. Each Holder may assign their respective rights hereunder in the manner
and to the Persons as permitted under the Purchase Agreement.
(h) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(i) Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
(j) Cumulative Remedies. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
(k) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms,
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<PAGE> 17
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(l) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or other-wise affect the meaning hereof.
(m) Shares Held by The Company and its Affiliates. Whenever the consent
or approval of Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company or its Affiliates
(other than any Holder or transferees or successors or assigns thereof if such
Holder is deemed to be an Affiliate solely by reason of its holdings of such
Registrable Securities) shall not be counted in determining whether such consent
or approval was given by the Holders of such required percentage.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW]
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<PAGE> 18
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
NEOTHERAPEUTICS, INC.
By:_____________________________________
Name:
Title:
WESTOVER INVESTMENTS L.P.
By:_____________________________________
Name:
Title:
MONTROSE INVESTMENTS L.P.
By:_____________________________________
Name:
Title:
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<PAGE> 19
ANNEX A
PLAN OF DISTRIBUTION
The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of the shares of
Common Stock offered hereby on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The Selling Stockholders may use any one or more of
the following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The Selling Stockholders may also engage in short sales against the box,
puts and calls and other transactions in securities of the Company or
derivatives of Company securities and may sell or deliver shares in connection
with these trades. The Selling Stockholders may pledge their shares to their
brokers under the margin provisions of customer agreements. If a Selling
Stockholder defaults on a margin loan, the broker may, from time to time, offer
and sell the pledged shares. The Selling Stockholders have advised the Company
that they have not entered into any agreements, understandings or arrangements
with any underwriters or broker-dealers regarding the sale of their shares other
than ordinary course brokerage arrangements, nor is there an underwriter or
coordinating broker acting in connection with the proposed sale of shares by the
Selling Stockholders.
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser)
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<PAGE> 20
in amounts to be negotiated. The Selling Stockholders do not expect these
commissions and discounts to exceed what is customary in the types of
transactions involved.
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
Selling Stockholders. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
Upon the Company being notified by a Selling Stockholder that any
material arrangement has been entered into with a broker-dealer for the sale of
shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each such Selling Stockholder and of
the participating broker-dealer(s), (ii) the number of shares involved, (iii)
the price at which such shares were sold, (iv) the commissions paid or discounts
or concessions allowed to such broker-dealer(s), where applicable, (v) that such
broker-dealer(s) did not conduct any investigation to verify the information set
out or incorporated by reference in this prospectus, and (vi) other facts
material to the transaction. In addition, upon the Company being notified by a
Selling Stockholder that a donee or pledgee intends to sell more than 500
shares, a supplement to this prospectus will be filed.
The Company has advised the Selling Stockholders that the
anti-manipulative provisions of Regulation M promulgated under the Exchange Act
may apply to their sales of the shares offered hereby.
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<PAGE> 1
EXHIBIT 4.4
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
NEOTHERAPEUTICS, INC.
WARRANT
Dated: January 29, 1999
NeoTherapeutics, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for value received, Westover Investments L.P., or its registered
assigns ("Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company up to a total of 26,250 shares of Common Stock, $.001
par value per share (the "Common Stock"), of the Company (each such share, a
"Warrant Share" and all such shares, the "Warrant Shares") at an exercise price
equal to $12.98 per share (as adjusted from time to time as provided in Section
8, the "Exercise Price"), at any time and from time to time from and after the
date hereof and through and including January 29, 2004 (the "Expiration Date"),
and subject to the following terms and conditions:
1. Registration of Warrant. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, and the Company shall not be affected by
notice to the contrary.
2. Registration of Transfers and Exchanges.
(a) Subject to compliance with the provisions of Section 3.1 of
the Preferred Stock Purchase Agreement of even date herewith to which the
Company and the original Holder are parties, the Company shall register the
transfer of any portion of this Warrant in the Warrant Register, upon surrender
of this Warrant, with the Form of Assignment attached hereto duly completed and
signed, to the Transfer Agent or to the Company at the office specified in or
pursuant to Section 3(b). Upon any such registration or transfer, a new warrant
to purchase Common Stock, in substantially the form of this Warrant (any such
new warrant, a "New Warrant"), evidencing the portion of this Warrant so
transferred shall be issued to the transferee and a New Warrant evidencing the
remaining portion of this Warrant not so transferred, if any, shall be issued to
the transferring
<PAGE> 2
Holder. The acceptance of the New Warrant by the transferee
thereof shall be deemed the acceptance of such transferee of all of the rights
and obligations of a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by
the Holder to the office of the Company specified in or pursuant to Section 3(b)
for one or more New Warrants, evidencing in the aggregate the right to purchase
the number of Warrant Shares which may then be purchased hereunder. Any such New
Warrant will be dated the date of such exchange.
3. Duration and Exercise of Warrants.
(a) This Warrant shall be exercisable by the registered Holder on
any business day before 5:00 P.M., New York City time, at any time and from time
to time on or after the date hereof to and including the Expiration Date. At
5:00 P.M., New York City time on the Expiration Date, the portion of this
Warrant not exercised prior thereto shall be and become void and of no value.
Prior to the Expiration Date, the Company may not call or otherwise redeem this
Warrant without the prior written consent of the Holder.
(b) Subject to Sections 2(b), 5 and 9, upon surrender of this
Warrant, with the Form of Election to Purchase attached hereto duly completed
and signed, to the Company at its address for notice set forth in Section 11 and
upon payment of the Exercise Price multiplied by the number of Warrant Shares
that the Holder intends to purchase hereunder, in the manner provided hereunder,
all as specified by the Holder in the Form of Election to Purchase, the Company
shall promptly (but in no event later than 3 business days after the Date of
Exercise (as defined herein)) issue or cause to be issued and cause to be
delivered to or upon the written order of the Holder and in such name or names
as the Holder may designate, a certificate for the Warrant Shares issuable upon
such exercise, free of restrictive legends except (i) either in the event that a
registration statement covering the resale of the Warrant Shares and naming the
Holder as a selling stockholder thereunder is not then effective or the Warrant
Shares are not freely transferable without volume restrictions pursuant to Rule
144(k) promulgated under the Securities Act of 1933, as amended (the "Securities
Act"), or (ii) if this Warrant shall have been issued pursuant to a written
agreement between the original Holder and the Company, as required by such
agreement. Any person so designated by the Holder to receive Warrant Shares
shall be deemed to have become holder of record of such Warrant Shares as of the
Date of Exercise of this Warrant.
A "Date of Exercise" means the date on which the Company
shall have received (i) this Warrant (or any New Warrant, as applicable), with
the Form of Election to Purchase attached hereto (or attached to such New
Warrant) appropriately completed and duly signed, and (ii) payment of the
Exercise Price for the number of Warrant Shares so indicated by the holder
hereof to be purchased.
(c) This Warrant shall be exercisable, either in its entirety or,
from time to time, for a portion of the number of Warrant Shares. If less than
all of the Warrant Shares which may be purchased under this Warrant are
exercised at any time, the Company shall issue or cause to be issued, at its
expense, a New Warrant evidencing the right to purchase the remaining number of
Warrant Shares for which no exercise has been evidenced by this Warrant.
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<PAGE> 3
4. Piggyback Registration Rights. During the Effectiveness Period
(as defined in the Registration Rights Agreement, of even date herewith, to
which the Company and the original Holder are parties), the Company may not file
any registration statement with the Securities and Exchange Commission (other
than registration statements of the Company filed on Form S-8 or Form S-4, each
as promulgated under the Securities Act, pursuant to which the Company is
registering securities pursuant to a Company employee benefit plan or pursuant
to a merger, acquisition or similar transaction including supplements thereto,
but not additionally filed registration statements in respect of such
securities) at any time when there is not an effective registration statement
covering the resale of the Warrant Shares and naming the Holder as a selling
stockholder thereunder, unless the Company provides the Holder with not less
than 20 days notice of its intention to file such registration statement and
provides the Holder the option to include any or all of the applicable Warrant
Shares therein. The piggyback registration rights granted to the Holder pursuant
to this Section shall continue until all of the Holder's Warrant Shares have
been sold in accordance with an effective registration statement or upon the
Expiration Date. The Company will pay all registration expenses in connection
therewith.
5. Payment of Taxes. The Company will pay all documentary stamp
taxes attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
indemnity, if requested, satisfactory to it. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
7. Reservation of Warrant Shares. The Company covenants that it will
at all times reserve and keep available out of the aggregate of its authorized
but unissued Common Stock, solely for the purpose of enabling it to issue
Warrant Shares upon exercise of this Warrant as herein provided, the number of
Warrant Shares which are then issuable and deliverable upon the exercise of this
entire Warrant, free from preemptive rights or any other actual contingent
purchase rights of persons other than the Holder (taking into account the
adjustments and restrictions of Section 8). The Company covenants that all
Warrant Shares that shall be so issuable and deliverable shall, upon issuance
and the payment of the applicable Exercise Price in accordance with the terms
hereof, be duly and validly authorized, issued and fully paid and nonassessable.
8. Certain Adjustments. The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 8. Upon each such adjustment of the
Exercise Price pursuant to this Section 8, the Holder shall thereafter prior to
the Expiration Date be entitled to purchase, at the Exercise Price resulting
from such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of
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<PAGE> 4
this Warrant immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
(a) If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend (except scheduled dividends paid on
outstanding preferred stock as of the date hereof which contain a stated
dividend rate) or otherwise make a distribution or distributions on shares of
its Common Stock or on any other class of capital stock and not the Common
Stock) payable in shares of Common Stock, (ii) subdivide outstanding shares of
Common Stock into a larger number of shares, or (iii) combine outstanding shares
of Common Stock into a smaller number of shares, the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding before such event
and of which the denominator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding after such event. Any adjustment
made pursuant to this Section shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination, and shall apply to
successive subdivisions and combinations.
(b) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, the sale or
transfer of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification, consolidation, merger, sale,
transfer or share exchange, and the Holder shall be entitled upon such event to
receive such amount of securities or property equal to the amount of Warrant
Shares such Holder would have been entitled to had such Holder exercised this
Warrant immediately prior to such reclassification, consolidation, merger, sale,
transfer or share exchange. The terms of any such consolidation, merger, sale,
transfer or share exchange shall include such terms so as to continue to give to
the Holder the right to receive the securities or property set forth in this
Section 8(b) upon any exercise following any such reclassification,
consolidation, merger, sale, transfer or share exchange.
(c) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to holders
of this Warrant) evidences of its indebtedness or assets or rights or warrants
to subscribe for or purchase any security (excluding those referred to in
Sections 8(a), (b) and (d)), then in each such case the Exercise Price shall be
determined by multiplying the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Exercise Price
determined as of the record date mentioned above, and of which the numerator
shall be such Exercise Price on such record date less the then fair market value
at such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Company's independent certified public accountants that regularly examines
the financial statements of the Company (an "Appraiser").
(d) Except for (i) the granting of options or warrants to
employees, officers, directors, consultants and other service providers (but not
Strategic Partners (as defined in the
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<PAGE> 5
Purchase Agreement, of even date herewith, to which the Company and the original
Holder are parties)), and the issuance of shares of Common Stock upon exercise
of options granted, under any stock option plan heretofore or hereinafter duly
adopted by the Company and (ii) the issuance of shares of Common Stock issuable
pursuant to the Private Equity Line of Credit Agreement dated March 27, 1998
between the Company and Kingsbridge Capital Limited, as described in the
Company's Amendment No. 2 on Form SB-2, filed with the Commission on August 13,
1998 (but not pursuant to any amendment or modification thereto), if, at any
time while this Warrant is outstanding, the Company shall issue or cause to be
issued rights or warrants to acquire or otherwise sell or distribute shares of
Common Stock for a consideration per share less than the Exercise Price then in
effect, then, forthwith upon such issue or sale, the Exercise Price shall be
reduced to the price (calculated to the nearest cent) determined by multiplying
the Exercise Price in effect immediately prior thereto by a fraction, the
numerator of which shall be the sum of (i) the number of shares of Common Stock
outstanding immediately prior to such issuance, and (ii) the number of shares of
Common Stock which the aggregate consideration received (or to be received,
assuming exercise or conversion in full of such rights, warrants and convertible
securities) for the issuance of such additional shares of Common Stock would
purchase at the Exercise Price, and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding immediately after the issuance
of such additional shares. Such adjustment shall be made successively whenever
such an issuance is made.
(e) For the purposes of this Section 8, the following clauses
shall also be applicable:
(i) Record Date. In case the Company shall take a record of
the holders of its Common Stock for the purpose of entitling them (A) to receive
a dividend or other distribution payable in Common Stock or in securities
convertible or exchangeable into shares of Common Stock, or (B) to subscribe for
or purchase Common Stock or securities convertible or exchangeable into shares
of Common Stock, then such record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued or sold
upon the declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase, as the
case may be.
(ii) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(f) All calculations under this Section 8 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(g) Whenever the Exercise Price is adjusted pursuant to Section
8(c) above, the Holder, after receipt of the determination by the Appraiser,
shall have the right to select an additional appraiser (which shall be a
nationally recognized accounting firm), in which case the adjustment shall be
equal to the average of the adjustments recommended by each of the Appraiser and
such appraiser. The Holder shall promptly mail or cause to be mailed to the
Company, a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts
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<PAGE> 6
requiring such adjustment. Such adjustment shall become effective immediately
after the record date mentioned above.
(h) If:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(ii) the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common Stock; or
(iii) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any rights; or
(iv) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock of
the Company, any consolidation or merger to which the Company is a party, any
sale or transfer of all or substantially all of the assets of the Company, or
any compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; or
(v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of the affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 30 calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, 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, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
9. Payment of Exercise Price. The Holder may pay the Exercise Price
in one of the following manners:
(a) Cash Exercise. The Holder shall deliver immediately
available funds; or
(b) Cashless Exercise. The Holder shall surrender this Warrant
to the Company together with a notice of cashless exercise, in which event the
Company shall issue to the Holder the number of Warrant Shares determined as
follows:
X = Y (A-B)/A
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<PAGE> 7
where:
X = the number of Warrant Shares to be issued to
the Holder.
Y = the number of Warrant Shares with respect to
which this Warrant is being exercised.
A = the average of the closing sale prices of the
Common Stock for the five (5) trading days
immediately prior to (but not including) the Date
of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.
10. Fractional Shares. The Company shall not be required to issue or
cause to be issued fractional Warrant Shares on the exercise of this Warrant.
The number of full Warrant Shares which shall be issuable upon the exercise of
this Warrant shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of this Warrant so presented. If any fraction of
a Warrant Share would, except for the provisions of this Section 10, be issuable
on the exercise of this Warrant, the Company shall pay an amount in cash equal
to the Exercise Price multiplied by such fraction.
11. Notices. Any and all notices or other communications or deliveries
hereunder shall be in writing and shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 8:00 p.m. (New York City time) on a business day, (ii) the
business day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 8:00 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (iii) the business day following
the date of mailing, if sent by nationally recognized overnight courier service,
or (iv) upon actual receipt by the party to whom such notice is required to be
given. The addresses for such communications shall be: (i) if to the Company, to
157 Technology Drive, Irvine, CA 92618, Attention: Chief Financial Officer, or
to facsimile no. (949) 788-6706, or (ii) if to the Holder, to the Holder at the
address or facsimile number appearing on the Warrant Register or such other
address or facsimile number as the Holder may provide to the Company in
accordance with this Section 11.
12. Warrant Agent. The Company shall serve as warrant agent under this
Warrant. Upon thirty (30) days' notice to the Holder, the Company may appoint a
new warrant agent. Any corporation into which the Company or any new warrant
agent may be merged or any corporation resulting from any consolidation to which
the Company or any new warrant agent shall be a party or any corporation to
which the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its
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<PAGE> 8
succession as warrant agent to be mailed (by first class mail, postage prepaid)
to the Holder at the Holder's last address as shown on the Warrant Register.
13. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit of
the parties hereto and their respective successors and permitted assigns. This
Warrant may be amended only in writing signed by the Company and the Holder and
their successors and assigns.
(b) Subject to Section 13(a), above, nothing in this Warrant
shall be construed to give to any person or corporation other than the Company
and the Holder any legal or equitable right, remedy or cause under this Warrant.
This Warrant shall inure to the sole and exclusive benefit of the Company and
the Holder.
(c) This Warrant shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York without regard to
the principles of conflicts of law thereof. The Company and the Holder hereby
irrevocably submit to the exclusive jurisdiction of the state and federal courts
sitting in the City of New York, borough of Manhattan, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, or that such suit,
action or proceeding is improper. Each of the Company and the Holder hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by receiving a copy thereof sent
to the Company at the address in effect for notices to it under this instrument
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law.
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.
(e) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
NEOTHERAPEUTICS, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
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<PAGE> 10
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares
of Common Stock under the foregoing Warrant)
To NeoTherapeutics, Inc.:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of Common Stock ("Common Stock"), $.001 par value per share, of
NeoTherapeutics, Inc. and , if such Holder is not utilizing the cashless
exercise provisions set forth in this Warrant, encloses herewith $________ in
cash, certified or official bank check or checks, which sum represents the
aggregate Exercise Price (as defined in the Warrant) for the number of shares of
Common Stock to which this Form of Election to Purchase relates, together with
any applicable taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
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(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise
shall not be all of the shares of Common Stock which the undersigned is entitled
to purchase in accordance with the enclosed Warrant, the undersigned requests
that a New Warrant (as defined in the Warrant) evidencing the right to purchase
the shares of Common Stock not issuable pursuant to the exercise evidenced
hereby be issued in the name of and delivered to:
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: _____________ Name of Holder:
(Print)
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(By:)
--------------------------------------------
(Name:)
(Title:)
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
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<PAGE> 11
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
________________________________ the right represented by the within Warrant to
purchase ____________ shares of Common Stock of NeoTherapeutics, Inc. to which
the within Warrant relates and appoints ________________ attorney to transfer
said right on the books of NeoTherapeutics, Inc. with full power of substitution
in the premises.
Dated: ____________, ____
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(Signature must conform in all respects to name
of holder as specified on the face of the Warrant)
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Address of Transferee
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In the presence of:
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-11-
<PAGE> 1
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
NEOTHERAPEUTICS ANNOUNCES $6 MILLION PREFERRED STOCK FINANCING
Irvine, Calif. - February 2, 1999 - NeoTherapeutics, Inc. (Nasdaq: NEOT; NEOTW)
announced today that it has completed the placement of $4 million in preferred
stock with conversion features to two institutional investors. The Company also
has the option to sell an additional $2 million in preferred stock to the
investors commencing in 180 days.
"This financing brings the Company's present cash and securities to
approximately $6 million. With the additional $2 million available under this
transaction, together with committed funding under our existing line of equity,
the Company has additional cash availability of approximately $13 million. Based
on the positive results from our recent Phase 2a clinical trial, the total
financial resources of approximately $19 million will allow us to accelerate and
complete the next phase of the clinical development program for NeoTherapeutics'
lead compound, NEOTROFIN(TM) (AIT-082, leteprinim potassium)," stated Sam Gulko,
NeoTherapeutics' Chief Financial Officer.
The financing consists of two tranches of preferred stock. The first tranche of
$4 million, which was funded on January 29, 1999, is convertible into common
stock at an initial fixed price of $13.06 per share. During the first 90 days
after the closing, the preferred stock is convertible only at the fixed price.
Thereafter, the preferred stock is convertible at the lesser of the fixed price
or, in 25% cumulative monthly increments, at a variable rate of 101% of the
average market price (as defined in the agreement) of the common stock at the
time of conversion. In no event can the first tranche be converted into more
than 1,450,000 shares. The second tranche of $2 million, which is at
NeoTherapeutics' option, is eligible to fund after 180 days, subject to certain
conditions contained in the agreement. The preferred stock in the second tranche
will contain terms and conditions for conversion similar to the first tranche,
except that the fixed conversion price of the second tranche will be set at 125%
of the average market price of the common stock at the time of the second
closing. Dividends on the preferred stock are payable in cash or in common
stock, at the option of NeoTherapeutics, at the annual rate of 5%. The investors
also received warrants to purchase 75,000 shares of common stock at $12.98 per
share for a period of 5 years. There are no warrants associated with the second
tranche. Additional features of the preferred stock issue include, among other
things, a redemption feature at the Company's option if the common stock trades
below a floor or above a ceiling price and a prohibition on conversion below a
stipulated price.
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<PAGE> 2
NeoTherapeutics Announces $6 Million Preferred Stock Financing
February 2, 1999
Page 2
NeoTherapeutics' research program is focused on designing and developing small
molecules capable of promoting nerve regeneration and repair for a range of
neurological diseases and conditions such as Alzheimer's and Parkinson's
diseases, stroke and spinal cord injury. Additional compounds in
NeoTherapeutics' product pipeline address other health issues such as migraine
and depression. For additional Company information, visit the NeoTherapeutics
web site at www.neotherapeutics.com.
This press release contains forward-looking statements regarding future events
and the future performance of NeoTherapeutics that involve risks and
uncertainties that could cause actual results to differ materially. These risks
include, but are not limited to, the early stage of product development, the
need for additional funding, the initiation and completion of clinical trials
and dependence on third parties for clinical testing, manufacturing and
marketing. These risks are described in further detail in the Company's reports
filed with the Securities and Exchange Commission.
CONTACTS:
Investment Community: Media:
Carol Gruetter John Lockhart
NeoTherapeutics, Inc. Halsted Communications, Inc.
Tel: (949) 788-6700 Tel: (800) 600-7111 x.224
e-mail: [email protected] (213) 957-3111 x.224
e-mail: [email protected]
Margaret Wyrwas and Christine Seketa
Hill and Knowlton, Inc.
Tel: (212) 885-0544 or (212) 885-0350
e-mail: [email protected]
[email protected]
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