<PAGE> 1
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): MAY 27, 1998
------------
CREATIVE BIOMOLECULES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-19910 94-2786743
- --------------- ------------ -------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
45 SOUTH STREET, HOPKINTON, MASSACHUSETTS 01748
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 782-1100
--------------
<PAGE> 2
ITEM 5. OTHER EVENTS.
On May 27, 1998 (the "Issuance Date"), Creative BioMolecules, Inc. (the
"Company") issued 25,000 shares of Series 1998/A Convertible Preferred Stock
with a stated value of $1,000 per share (the "Preferred Stock"), for aggregate
proceeds of $25,000,000. The shares were sold to three institutional investors
(the "Investors") in a private equity offering pursuant to Regulation D of the
Securities Act of 1933, as amended. The following summary of certain terms of
the Preferred Stock is qualified in its entirety by reference to the
Certificate of Designations of the Series 1998/A Convertible Preferred Stock
and the Form of Subscription Agreement filed as Exhibits 3.3 and 10.54,
respectively, to this Current Report on Form 8-K.
Each share of Preferred Stock is convertible into the number of shares of
the Company's common stock, par value $.01 per share (the "Common Stock"),
equal to (i) the stated value ($1,000) plus an accrued amount of 5% per annum
of the stated amount from the Issuance Date of the Preferred Stock, divided by
(ii) the Conversion Price. The conversion price is equal to the average of the
five lowest closing bid prices of the Common Stock during the twenty consecutive
trading days immediately preceding the conversion date (the "Conversion Price").
From the Issuance Date through May 27, 1999, the Conversion Price may not exceed
$10.00. From May 28, 1999 through January 25, 2000, the Conversion Price may not
exceed $11.00. From the Issuance Date through January 25, 2000, portions of the
outstanding Preferred Stock may be converted into shares of Common Stock at the
Company's option if the market price of the Common Stock exceeds certain
thresholds.
The Investors are subject to certain limits on the number of shares of
Preferred Stock they can convert. From the Issuance Date through May 1999, no
more than 175,000 shares of Common Stock per month may be issued pursuant to
conversions of the Preferred Stock at Conversion Prices below $10.00. From June
1999 through January 2000, no more than 150,000 shares of Common Stock per
month may be issued pursuant to conversions of the Preferred Stock at
Conversion Prices below $7.00. No Investor will be permitted at any time to
convert Preferred Stock which would result in such Investor then owning more
than 4.9% of the then outstanding Common Stock.
The Preferred Stock is subject to redemption at varying percentages of
the original stated value; plus the accrual amount. The Company may redeem all
or a portion of the Preferred Stock (i) at a redemption percentage of 115% or
(ii) if the market price of the Common Stock falls below certain thresholds, at
a redemption percentage of 105%. The Company may also redeem the Preferred
Stock in connection with certain acquisitions of the Company, at redemption
percentages ranging from 125% to 135%. Upon the occurrence of certain events
described in the Certificate of Designations, the Company may be required to
redeem the Preferred Stock at a redemption percentage of 110%. If the market
price of the Common Stock falls below certain thresholds, the Company may be
required to redeem a portion of the outstanding Preferred Stock at a redemption
percentage of 100%.
2
<PAGE> 3
Any shares of Preferred Stock not converted into Common Stock by May 2001
will convert into Common Stock at the then effective Conversion Price. Pursuant
to the terms of the Certificate of Designations of the Series 1998/A
Convertible Preferred Stock, in addition to other covenants, the Company has
agreed to certain limitations on the incurrence of additional indebtedness.
The Company has agreed to file a registration statement for the resale of
the Common Stock issuable upon conversion of the Preferred Stock within twenty
days of the Issuance Date. The Company may be required to redeem the Preferred
Stock at par if the registration statement is not declared effective within 90
days of the Issuance Date.
Diaz & Altschul Capital, LLC was the placement agent in the transaction.
In consideration for its services as placement agent, the Company paid Diaz &
Altschul Capital, LLC a fee of $1,187,500.
The Company's press release announcing the sale of the Series 1998/A
Preferred Stock is filed as Exhibit 99.1 to this Current Report on Form 8-K.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(c) Exhibits.
3.3 Certificate of Designations of the Series 1998/A Convertible
Preferred Stock.
10.54 Form of Subscription Agreement dated May 22, 1998.
99.1 Press Release dated May 29, 1998.
3
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Creative BioMolecules, Inc.
---------------------------
(Registrant)
Date: June 5, 1998 /s/ Wayne E. Mayhew III
--------------------------------
Wayne E. Mayhew III
Vice President, Chief Financial
Officer, Treasurer and Secretary
<PAGE> 1
EXHIBIT 3.3
CREATIVE BIOMOLECULES, INC.
CERTIFICATE OF DESIGNATIONS
OF
SERIES 1998/A CONVERTIBLE PREFERRED STOCK
(Pursuant to Section 151 of the General Corporation
Law of the State of Delaware)
--------------
Creative BioMolecules, Inc., a Delaware corporation (the
"Corporation"), in accordance with the provisions of Section 103 of the General
Corporation Law of the State of Delaware DOES HEREBY CERTIFY:
That pursuant to authority vested in the Board of Directors of the
Corporation (the "Board of Directors" or the "Board") by the Certificate of
Incorporation, as amended, of the Corporation, the Board of Directors, by
unanimous written consent dated May 20, 1998, adopted a resolution providing for
the creation of a series of the Corporation's Preferred Stock, $.01 par value,
which series is designated "Series 1998/A Convertible Preferred Stock," which
resolution is as follows:
RESOLVED, that pursuant to authority vested in the Board of
Directors by the Certificate of Incorporation, as amended, the Board of
Directors does hereby provide for the creation of a series of the Preferred
Stock, $.01 par value (hereafter called the "Preferred Stock"), of the
Corporation, and to the extent that the voting powers and the designations,
preferences and relative, participating, optional or other special rights
thereof and the qualifications, limitations or restrictions of such rights have
not been set forth in the Certificate of Incorporation, as amended, of the
Corporation, does hereby fix the same as follows:
SERIES 1998/A CONVERTIBLE PREFERRED STOCK
SECTION 1. CERTAIN DEFINED TERMS. (a) All the agreements or
instruments defined in this Certificate of Designations shall mean such
agreements or instruments as the same may from time to time be supplemented or
amended or the terms thereof waived or modified to the extent permitted by, and
in accordance with, the terms thereof and of this Certificate of Designations.
<PAGE> 2
(b) The following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Accrual Amount" means with respect to any share of Series 1998/A
Preferred Stock on any date an amount calculated at the rate of 5% per annum of
the Accrual Value of such share from the Issuance Date to the date of
determination.
"Accrual Value" means $1,000 per share of Series 1998/A Preferred
Stock.
"Affiliate" means, with respect to any Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by or under common control with the subject Person. For purposes of
the term "Affiliate," the term "control" (including the terms "controlling,"
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to direct or to cause the direction of the management and
policies of a Person, whether through the ownership of securities, by contract
or otherwise.
"Aggregated Person" means, with respect to any holder of shares of
Series 1998/A Preferred Stock, any Person whose beneficial ownership of shares
of Common Stock would be aggregated with such holder's beneficial ownership of
shares of Common Stock for purposes of Section 13(d) of the 1934 Act and
Regulation 13D-G thereunder.
"Aggregate Threshold Price Conversion Amount" means for each
conversion of shares of Series 1998/A Preferred Stock pursuant to Section
10(c)(1) in connection with any Threshold Price Conversion Event, 6,250 shares
of Series 1998/A Preferred Stock or such lesser number of shares of Series
1998/A Preferred Stock as are outstanding on the date such Threshold Price
Conversion Event occurs.
"AMEX" means the American Stock Exchange, Inc.
"Auditors" means Deloitte & Touche LLP or another firm of
independent public accounts of recognized national standing.
"Blackout Period" means the period of up to 15 consecutive Trading
Days after the date the Corporation notifies holders of shares of Series 1998/A
Preferred Stock who are bound by any Subscription Agreement that such holders
are required, pursuant to Section 8(c)(4) of the Subscription Agreements, to
suspend offers and sales of Registrable Securities pursuant to the Registration
Statement as a result of an event or circumstance described in Section
8(b)(5)(A) of the Subscription Agreements, during which period, by reason of
Section 8(b)(5)(B) of the Subscription Agreements, the Corporation is not
required to amend the Registration Statement or to supplement the related
prospectus.
"Board of Directors" or "Board" means the Board of Directors of
the Corporation.
"Business Combination Redemption Percentage" means with respect to
a redemption of shares of Series 1998/A Preferred Stock in accordance with
Section 10(b)(6), the
-2-
<PAGE> 3
applicable percentage determined with respect to the due date for payment of the
Business Combination Redemption Price as follows:
Business Combination
Date of Payment Redemption Percentage
--------------- ---------------------
Issuance Date through the 182nd day thereafter 125%
183rd through 365th day after the Issuance Date 130%
On or after 366th day after the Issuance Date 135%
"Business Combination Redemption Price" means an amount in cash
equal to the sum of (A) the product obtained by multiplying (i) $1,000 times
(ii) the applicable Business Combination Redemption Percentage plus (B) an
amount equal to the Accrual Amount on the share of Series 1998/A Preferred Stock
to be redeemed to the date the redemption price payable pursuant to Section
10(b)(6) is required to be paid.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in The City of New York are authorized or
required by law to remain closed.
"Cash and Cash Equivalent Balances" of any Person on any date
shall be determined from such Person's books maintained in accordance with
Generally Accepted Accounting Principles, and means, without duplication, the
sum of (1) the cash accrued by such Person and its subsidiaries on a
consolidated basis on such date and available for use by such Person and its
subsidiaries on such date, (2) all assets which would, on a consolidated balance
sheet of such Person and its subsidiaries prepared as of such date in accordance
with Generally Accepted Accounting Principles, be classified as cash or cash
equivalents and (3) all Eligible Marketable Securities which are assets which
would, on a consolidated balance sheet of such Person and its subsidiaries
prepared as of such date in accordance with Generally Accepted Accounting
Principles, be classified as marketable securities which are current assets.
"Common Stock" means the Common Stock, $.01 par value, of the
Corporation or any shares of capital stock into which such stock shall be
changed or reclassified after the Issuance Date.
"Conversion Agent" means ChaseMellon Shareholder Services, L.L.C.,
or its duly appointed successor who shall be serving as transfer agent and
registrar for the Common Stock and who shall have been authorized by the
Corporation to act as conversion agent for the Series 1998/A Preferred Stock in
accordance with the Transfer Agent Instruction and the name, address and
telephone number of which shall have been given to the holders of the Series
1998/A Preferred Stock by notice from the Corporation.
-3-
<PAGE> 4
"Conversion Date" means the date on which a Conversion Notice is
actually received by the Conversion Agent, whether by mail, courier, personal
service, telephone line facsimile transmission or other means, in case of a
conversion of shares of Series 1998/A Preferred Stock pursuant to Section 10(a).
"Conversion Notice" means a Notice of Conversion of Series
1998/A Convertible Preferred Stock substantially in the form set forth in
Section 14(a).
"Conversion Price" means for any Conversion Date the arithmetic
average of the five lowest Market Prices of the Common Stock during the
Measurement Period for such Conversion Date; provided, however, that for any
Conversion Date which is on or after the Issuance Date and on or before the date
which is 365 days after the Issuance Date the Conversion Price shall not be
greater than $10.00 (subject to equitable adjustments from time to time on terms
reasonably acceptable to the Majority Holders for (i) stock splits, (ii) stock
dividends, (iii) combinations, (iv) capital reorganizations, (v) issuance to all
holders of Common Stock of rights or warrants to purchase shares of Common
Stock, (vi) distribution by the Corporation to all holders of Common Stock of
evidences of indebtedness of the Corporation or cash (other than regular
quarterly cash dividends), (vii) Tender Offers by the Corporation or any
Subsidiary for, or other repurchases of shares of, Common Stock in one or more
transactions which, individually or in the aggregate, result in the purchase of
more than ten percent of the Common Stock outstanding, and (viii) similar events
relating to the Common Stock, in each case which occur, or with respect to which
"ex-" trading of the Common Stock begins, on or after the date this Certificate
of Designations is filed with the Secretary of State of the State of Delaware
and on or before the applicable Conversion Date) notwithstanding the Conversion
Price otherwise determined in accordance with this definition; provided further,
however, that for any Conversion Date which on or after the date which is 366
days after the Issuance Date and on or before the date which is 608 days after
the Issuance Date the Conversion Price shall not be greater than $11.00 (subject
to equitable adjustments from time to time on terms reasonably acceptable to the
Majority Holders for (i) stock splits, (ii) stock dividends, (iii) combinations,
(iv) capital reorganizations, (v) issuance to all holders of Common Stock of
rights or warrants to purchase shares of Common Stock, (vi) distribution by the
Corporation to all holders of Common Stock of evidences of indebtedness of the
Corporation or cash (other than regular quarterly cash dividends), (vii) Tender
Offers by the Corporation or any Subsidiary for, or other repurchases of shares
of, Common Stock in one or more transactions which, individually or in the
aggregate, result in the purchase of more than ten percent of the Common Stock
outstanding, and (viii) similar events relating to the Common Stock, in each
case which occur, or with respect to which "ex-" trading of the Common Stock
begins, on or after the Issuance Date and on or before the applicable Conversion
Date) notwithstanding the Conversion Price otherwise determined in accordance
with this definition.
"Conversion Restriction Price" means,
(1) for any Conversion Date on or prior to the date which is 365
days after the Issuance Date, $10.00; and
-4-
<PAGE> 5
(2) for any Conversion Date on or after the date which is 366 days
after the Issuance Date and on or before the date which is 608 days after
the Issuance Date, $7.00;
such prices in the preceding clauses (1) and (2) being subject to equitable
adjustments from time to time on terms reasonably acceptable to the Majority
Holders for (i) stock splits, (ii) stock dividends, (iii) combinations, (iv)
capital reorganizations, (v) issuance to all holders of Common Stock of rights
or warrants to purchase shares of Common Stock, (vi) distribution by the
Corporation to all holders of Common Stock of evidences of indebtedness of the
Corporation or cash (other than regular quarterly cash dividends), (vii) Tender
Offers by the Corporation or any Subsidiary for, or other repurchases of shares
of, Common Stock in one or more transactions which, individually or in the
aggregate, result in the purchase of more than ten percent of the Common Stock
outstanding, and (viii) similar events relating to the Common Stock, in each
case which occur, or with respect to which "ex-" trading of the Common Stock
begins, on or after the date this Certificate of Designations is filed with the
Secretary of State of the State of Delaware.
"Converted Restriction Amount" means:
(1) during any calendar month which ends on or prior to the date
which is 90 days after the Issuance Date, zero; and
(2) during any calendar month which ends after the date which is
90 days after the Issuance Date and begins on or prior to the date which
is 365 days after the Issuance Date, 175,000 shares of Common Stock (such
amount to be subject to equitable adjustment from time to time on terms
reasonably acceptable to the Majority Holders for stock splits, stock
dividends, combinations, capital reorganizations and similar events
relating to the Common Stock which occur on or after the Issuance Date);
and
(3) during any calendar month which begins on or after the date
which is 366 days after the Issuance Date and begins prior to the date
which is 608 days after the Issuance Date, 150,000 shares of Common Stock
(such amount to be subject to equitable adjustment from time to time on
terms reasonably acceptable to the Majority Holders for stock splits,
stock dividends, combinations, capital reorganizations and similar events
relating to the Common Stock which occur on or after the Issuance Date).
"Corporation Notice" means a Corporation Notice substantially in
the form set forth in Section 14(i).
"DTC" means Depository Trust Company.
"DWAC" means the Deposit Withdrawal Agent Commission system
maintained by DTC.
"Eligible Bank" means a corporation organized or existing under
the laws of the United States or any state, having combined capital and surplus
of at least $100 million and
-5-
<PAGE> 6
subject to supervision by United States federal or state authority and which has
a branch located in Boston, Massachusetts or New York, New York.
"Eligible Marketable Securities" of the Corporation as of any date
means marketable securities which would be reflected on a consolidated balance
sheet of the Corporation and its subsidiaries prepared as of such date in
accordance with Generally Accepted Accounting Principles and which are permitted
under the Corporation's Investment Guidelines, dated September 27, 1996, as the
same may be modified, with the approval of the Board of Directors, from time to
time.
"Fixed Conversion Date" means the date which is the third
anniversary of the Issuance Date, unless such date is not a Trading Date, in
which case the Fixed Conversion Date shall be the next succeeding date which is
a Trading Day; provided, however, that if on such date the Corporation does not
meet the requirements of clauses (x) through (z) of the first sentence of
Section 10(c)(2), then the Fixed Conversion Date shall be the date which is five
Trading Days after the date on which the Corporation shall have notified the
holders of shares of Series 1998/A Preferred Stock that the Corporation has met
the requirements of clauses (x) through (z) of the first sentence of Section
10(c)(2) on a date subsequent to such third anniversary.
"Generally Accepted Accounting Principles" for any Person means
the generally accepted accounting principles and practices applied by such
Person from time to time in the preparation of its audited financial statements.
"Holder Notice" means a Holder Notice substantially in the form
set forth in Section 14(h).
"Holder Registration Redemption Notice" means a Holder
Registration Redemption Notice in the form set forth in Section 14(j).
"Inconvertibility Day" means any Trading Day on which (x) in the
case of a Trading Day which is on or after the date which is 609 days after the
Issuance Date, any share of Series 1998/A Preferred Stock held by any holder of
shares of Series 1998/A Preferred Stock would not have been convertible into
shares of Common Stock in accordance with Section 10(a) as a consequence of the
limitations set forth in Section 7(a)(1) had all outstanding shares of Series
1998/A Preferred Stock held by such holder on such Trading Day been converted
into Common Stock on such Trading Day, determined as if the Conversion Price
applicable on such Trading Day were the Volume-Weighted Trading Price of the
Common Stock for the ten consecutive Trading Days ending on the Trading Day
prior to such Trading Day (and, in the case of each of such determinations,
without regard to the limitation, if any, on beneficial ownership by such holder
contained in Section 10(a)) or (y) the Corporation does not have reserved from
its authorized and unissued shares of Common Stock for purposes of conversion of
the shares of Series 1998/A Preferred Stock the number of shares so required to
be reserved pursuant to Section 10(b)(5).
-6-
<PAGE> 7
"Inconvertibility Notice" means a notice from the Corporation to a
holder of shares of Series 1998/A Preferred Stock in the form set forth in
Section 14(b) or a notice from a holder of shares of Series 1998/A Preferred
Stock to the Corporation in the form set forth in Section 14(c).
"Indebtedness" as used in reference to any Person means all
indebtedness of such Person for borrowed money, the deferred purchase price of
property, goods and services (which shall not be deemed to include compensation
expense for employees of such Person) and obligations under leases which are
required to be capitalized in accordance with Generally Accepted Accounting
Principles and shall include all such indebtedness guaranteed in any manner by
such Person or in effect guaranteed by such Person through a contingent
agreement to purchase and all indebtedness for the payment or purchase of which
such Person has contingently agreed to advance or supply funds and all
indebtedness secured by mortgage or other lien upon property owned by such
Person, although such Person has not assumed or become liable for the payment of
such indebtedness, and, for all purposes hereof, such indebtedness shall be
treated as though it has been assumed by such Person, but shall not include any
amount which, in accordance with Generally Accepted Accounting Principles, is
classified as current liabilities which are accounts payable or accrued
liabilities.
"Issuance Date" means the first date of original issuance of any
shares of Series 1998/A Preferred Stock.
"Junior Dividend Stock" means, collectively, the Common Stock and
any other class or series of capital stock of the Corporation ranking junior as
to dividends thereon to the Series 1998/A Preferred Stock as to any dividends
which have been declared on the Series 1998/A Preferred Stock.
"Junior Liquidation Stock" means, collectively, the Common Stock
and any other class or series of capital stock of the Corporation ranking junior
as to liquidation rights to the Series 1998/A Preferred Stock.
"Liquidation Preference" means, for each share of Series 1998/A
Preferred Stock, the sum of (i) an amount equal to the Accrual Amount thereon to
the date of final distribution to the holders of shares of Series 1998/A
Preferred Stock in connection with the liquidation, dissolution or winding up of
the Corporation plus (ii) $1,000.
"Majority Holders" means at any time the holders of shares of
Series 1998/A Preferred Stock who, based on the number of shares of Series
1998/A Preferred Stock originally issued to such holders, held shares of Series
1998/A Preferred Stock which constituted a majority of the shares of Series
1998/A Preferred Stock originally issued, unless such holders no longer hold
(together with holdings of their Affiliates) at least 6,000 shares of Series
1998/A Preferred Stock, in which case "Majority Holders" means at any time the
holders of outstanding shares of Series 1998/A Preferred Stock which shares
constitute a majority of the shares of Series 1998/A Preferred Stock outstanding
at such time.
-7-
<PAGE> 8
"Mandatory Redemption Waiver" means an agreement of the
Corporation and a holder of shares of Series 1998/A Preferred Stock in the form
set forth in Section 14(e).
"Market Price" of any security on any date means the closing bid
price of such security on such date on the Nasdaq or such other securities
exchange or other market on which such security is listed for trading which
constitutes the principal securities market for such security, as reported by
Bloomberg, L.P.; provided, however, that during any period the Market Price is
being determined, the Market Price shall be subject to equitable adjustments
from time to time on terms reasonably acceptable to the Majority Holders for
(i) stock splits, (ii) stock dividends, (iii) combinations, (iv) capital
reorganizations, (v) issuance to all holders of Common Stock of rights or
warrants to purchase shares of Common Stock, (vi) distribution by the
Corporation to all holders of Common Stock of evidences of indebtedness of the
Corporation or cash (other than regular quarterly cash dividends), (vii) Tender
Offers by the Corporation or any Subsidiary for, or other repurchases of shares
of, Common Stock in one or more transactions which, individually or in the
aggregate, result in the purchase of more than ten percent of the Common Stock
outstanding, and (viii) similar events relating to the Common Stock, in each
case which occur, or with respect to which "ex-" trading of the Common Stock
begins, during such period.
"Maximum Share Amount" means 6,701,170 shares of Common Stock, or
such greater number of shares of Common Stock as shall be duly authorized, duly
reserved for issuance upon conversion of the Series 1998/A Preferred Stock and
permitted by the rules of the Nasdaq Stock Market (such amount to be subject to
equitable adjustment from time to time on terms reasonably acceptable to the
Majority Holders for stock splits, stock dividends, combinations, capital
reorganizations and similar events relating to the Common Stock occurring after
the Issuance Date).
"Measurement Period" means with respect to any Conversion Date,
the period consisting of 20 consecutive Trading Days ending on the Trading Day
immediately preceding such Conversion Date.
"Minimum Price Redemption Date" means the date for redemption of
shares of Series 1998/A Preferred Stock pursuant to Section 9(b) which is not
less than five nor more than ten Business Days after a Minimum Price Redemption
Notice is given, as set forth in such Minimum Price Redemption Notice.
"Minimum Price Redemption Event" means that the Volume-Weighted
Trading Price of the Common Stock for any period of ten consecutive Trading Days
occurring on or after the Issuance Date shall have been less than $5.00 (subject
to equitable adjustments from time to time on terms reasonably acceptable to the
Majority Holders for (i) stock splits, (ii) stock dividends, (iii) combinations,
(iv) capital reorganizations, (v) issuance to all holders of Common Stock of
rights or warrants to purchase shares of Common Stock, (vi) distribution by the
Corporation to all holders of Common Stock of evidences of indebtedness of the
Corporation or cash (other than regular quarterly cash dividends), (vii) Tender
Offers by the Corporation or any Subsidiary for, or other repurchases of shares
of, Common Stock in one or more transactions
-8-
<PAGE> 9
which, individually or in the aggregate, result in the purchase of more than ten
percent of the Common Stock outstanding, and (viii) similar events relating to
the Common Stock, in each case which occur, or with respect to which "ex-"
trading of the Common Stock begins, on or after the date this Certificate of
Designations is filed with the Secretary of State of the State of Delaware).
"Minimum Price Redemption Notice" means a Minimum Price Redemption
Notice substantially in the form set forth in Section 14(g).
"Minimum Price Redemption Price" means an amount in cash equal to
the sum of (A) the product obtained by multiplying (i) $1,000 times (ii) 105%
plus (B) an amount equal to the Accrual Amount on the share of Series 1998/A
Preferred Stock to be redeemed to the applicable Minimum Price Redemption Date.
"Nasdaq" means the Nasdaq National Market.
"Nasdaq SmallCap" means the Nasdaq SmallCap Market.
"Nasdaq Stock Market" means The Nasdaq Stock Market, Inc.
"Net Cash and Cash Equivalent Balances" of any Person on any date
means the consolidated Cash and Cash Equivalent Balances of such Person and its
subsidiaries on such date less the sum of (1) the amount of any outstanding
Indebtedness of such Person or any of its subsidiaries which, directly or
indirectly, is secured in whole or in part by, or restricts the use of, the
consolidated Cash and Cash Equivalent Balances of such Person and its
subsidiaries plus (2) the amount of outstanding Indebtedness of such Person and
its subsidiaries not included in the immediately preceding clause (1) which on
such date is classified as short-term debt in accordance with Generally Accepted
Accounting Principles, other than any such Indebtedness which is Permitted
Indebtedness under clause (5) of the definition of the term Permitted
Indebtedness.
"1934 Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute thereto.
"1933 Act" means the Securities Act of 1933, as amended, or any
successor statute thereto.
"NYSE" means the New York Stock Exchange, Inc.
"Optional Redemption Date" means the date which is three Business
Days after a holder of shares of Series 1998/A Preferred Stock who is entitled
to redemption rights under Section 11(a) and 11(b) gives a Holder Notice.
"Optional Redemption Event" means any one of the following events:
-9-
<PAGE> 10
(1) For any period of five consecutive Trading Days following the
Issuance Date there shall be no reported sale price of the Common Stock
on any of the Nasdaq, the NYSE or the AMEX;
(2) The Common Stock ceases to be listed for trading on the
Nasdaq, the NYSE or the AMEX;
(3) Any consolidation or merger of the Corporation or any
subsidiary of the Corporation with or into another entity or other
business combination transaction involving the Corporation or any
subsidiary of the Corporation (other than a merger or consolidation of a
subsidiary of the Corporation into the Corporation or a wholly-owned
subsidiary of the Corporation) where the stockholders of the Corporation
immediately prior to such transaction do not collectively own at least
51% of the outstanding voting securities of the surviving corporation of
such transaction immediately following such transaction or the common
stock of such surviving corporation is not listed for trading on the
NYSE, the AMEX or the Nasdaq; or the sale of all or substantially all of
the assets of the Corporation and its subsidiaries;
(4) The adoption of any amendment to the Certificate of
Incorporation of the Corporation (other than (A) any such amendment which
has been approved by the Majority Holders in accordance with Section
12(b) or (B) any certificate designating a series of preferred stock of
the Corporation which (i) has been approved by the Majority Holders in
accordance with Section 12(b) or (ii) creates any stock which is both
Junior Dividend Stock and Junior Liquidation Stock) which materially and
adversely affects the rights of the holders of shares of Series 1998/A
Preferred Stock or the taking of any other action which materially and
adversely affects the rights of the holders of Series 1998/A Preferred
Stock;
(5) Prior to the end of the Registration Period, any holder of
shares of Series 1998/A Preferred Stock shall not be entitled for (x) 30
Trading Days (whether or not consecutive), occurring on or after the SEC
Effective Date, in any period of 365 consecutive days or (y) 90 Trading
Days (whether or not consecutive) during the Registration Period for such
holder, to sell shares of Common Stock issuable or issued upon conversion
of shares of Series 1998/A Preferred Stock pursuant to the Registration
Statement (1) by reason of the requirements of the 1933 Act, the 1934 Act
or any of the rules or regulations under either thereof or (2) due to the
Registration Statement containing any untrue statement of material fact
or omitting to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or any other
failure of the Registration Statement to comply with the rules and
regulations of the SEC; or
(6) The Corporation shall fail or default in the timely
performance of any material obligation to a holder of shares of Series
1998/A Preferred Stock under the terms of this Certificate of
Designations or under the Subscription Agreement with such holder or any
other agreement or document entered into in connection with the issuance
of
-10-
<PAGE> 11
shares of Series 1998/A Preferred Stock, as such agreements and
instruments may be amended from time to time.
"Optional Redemption Percentage" means 110%.
"Optional Redemption Price" means an amount in cash equal to the
sum of (A) the product obtained by multiplying (i) $1,000 times (ii) the
Optional Redemption Percentage plus (B) an amount equal to the Accrual Amount on
the share of Series 1998/A Preferred Stock to be redeemed to the applicable
Optional Redemption Date.
"Option Share Surrender" means the surrender of shares of Common
Stock to the Corporation in payment of the exercise price or tax obligations
incurred in connection with the exercise of a stock option granted by the
Corporation to any of its employees, directors or consultants.
"Parity Dividend Stock" means any class or series or the
Corporation's capital stock ranking, as to dividends, on a parity with the
Series 1998/A Preferred Stock.
"Parity Liquidation Stock" means any class or series of the
Corporation's capital stock having parity as to liquidation rights with the
Series 1998/A Preferred Stock.
"Permitted Indebtedness" means:
(1) Indebtedness not in excess of $7,500,000 aggregate principal
amount which is outstanding on the Issuance Date and which would be
reflected on a balance sheet of the Corporation as of the Issuance Date
or in the notes thereto prepared in accordance with Generally Accepted
Accounting Principles;
(2) Indebtedness incurred after the Issuance Date consisting of
(a) equipment lease obligations or other equipment financings for
equipment used in the business of the Corporation and its subsidiaries
which obligations or financings are required to be capitalized in
accordance with Generally Accepted Accounting Principles; and (b)
Indebtedness incurred in connection with acquisition of furniture,
fixtures and equipment used in the business of the Corporation and its
subsidiaries;
(3) Indebtedness incurred after the Issuance Date to any Person in
connection with a strategic alliance, collaboration, joint venture,
partnership or other similar arrangement of the Corporation with any
Person which is engaged in a business similar to or related to the
business of the Corporation;
(4) Indebtedness incurred after the Issuance Date that is secured
solely by the Corporation's interest in real estate, improvements to real
estate and office and laboratory facilities used in its business;
-11-
<PAGE> 12
(5) Indebtedness incurred after the Issuance Date to fund the cost
of any redemption of shares of Series 1998/A Preferred Stock which
redemption is permitted or required to be made under the provisions of
this Certificate of Designations in an amount not in excess of the
aggregate redemption price of shares of Series 1998/A Preferred Stock
redeemed in such redemption to the extent such Indebtedness is used for
such purpose; and
(6) Indebtedness (other than as permitted by the preceding clauses
(1) through (5)) in an aggregate principal amount which, together with
the principal amount of other Permitted Indebtedness outstanding pursuant
to this clause (6) at the time of such incurrence, does not exceed 25% of
the stockholders' equity of the Corporation and its subsidiaries at the
time of such incurrence (determined in accordance with Generally Accepted
Accounting Principles);
so long as in the case of Indebtedness permitted by the preceding clauses (2)
through (4) and (6), on the date of incurrence of such Indebtedness no Optional
Redemption Event shall have occurred with respect to which any holder of shares
of Series 1998/A Preferred Stock shall be entitled to exercise redemption rights
under Section 11 or with respect to which any holder of shares of Series 1998/A
Preferred Stock shall have exercised such rights and the Optional Redemption
Price shall not have been paid.
"Person" means an individual, partnership, corporation, limited
liability company, trust, incorporated organization, unincorporated association,
joint stock company, government, governmental agency or political subdivision.
"Quarterly Cash Requirements" on any date means the consolidated
net cash used in operating activities and for payment of Indebtedness of the
Corporation and its subsidiaries for the most recent fiscal quarter for which,
at such date, the Corporation has published a consolidated statement of cash
flows, prepared in accordance with Generally Accepted Accounting Principles, as
shown on such statement.
"Redemption Date" means the date for redemption of shares of
Series 1998/A Preferred Stock pursuant to Section 9(a) which is not less than 30
or more than 60 days after a Redemption Notice is given, as set forth in such
Redemption Notice.
"Redemption Election" means (1) a notice by a holder of Series
1998/A Preferred Stock to the Corporation substantially in the form set forth in
Section 14(d) or (2) a notice by a holder of Series 1998/A Preferred Stock to
the Corporation included in paragraph 3 of the form of Holder Inconvertibility
Notice set forth in Section 14(c).
"Redemption Election Period" means, with respect to a particular
Inconvertibility Day, the period of ten Business Days after the later of (x) the
date an Inconvertibility Notice with respect to such Inconvertibility Day is
given or (y) the date such Inconvertibility Notice was required to have been
given by the Corporation.
-12-
<PAGE> 13
"Redemption Exempt Amount" means an amount equal to 20% of the
number of shares of Series 1998/A Preferred Stock originally issued and
originally evidenced by each certificate for shares of Series 1998/A Preferred
Stock so issued.
"Redemption Notice" means a Redemption Notice substantially in the
form set forth in Section 14(f).
"Redemption Price" means an amount in cash equal to the sum of (A)
the product obtained by multiplying (i) $1,000 times (ii) 115% plus (B) an
amount equal to the Accrual Amount on the share of Series 1998/A Preferred Stock
to be redeemed to the applicable Redemption Date.
"Registrable Securities" means (1) the shares of Common Stock
issuable or issued upon conversion of shares of Series 1998/A Preferred Stock,
(2) if the Common Stock is changed, converted or exchanged by the Corporation or
its successor, as the case may be, into any other stock or other securities on
or after the date this Certificate of Designations is filed with the Secretary
of State of the State of Delaware, such other stock or other securities which
are issued or issuable in respect of or in lieu of the shares of Common Stock
issuable or issued upon conversion of shares of Series 1998/A Preferred Stock
and (3) if any other securities are issued to holders of the Common Stock (or
such other shares or other securities into which or for which the Common Stock
is so changed, converted or exchanged as described in the immediately preceding
clause (2)) upon any reclassification, share combination, share subdivision,
share dividend, merger, consolidation or similar transaction or event, such
other securities which are issued or issuable in respect of or in lieu of the
shares of Common Stock issuable or issued upon conversion of shares of Series
1998/A Preferred Stock.
"Registration Period" means the period from the Issuance Date to
the earliest of (1) the date which is three years after the Issuance Date, (2)
the date on which no Person who is entitled to the benefits of Section 8 of any
Subscription Agreement and who is or was a holder of shares of Series 1998/A
Preferred Stock any longer owns or has any right to acquire any Registrable
Securities and (3) the date on which each Person who is entitled to the benefits
of Section 8 of any Subscription Agreement and who is or was a holder of shares
of Series 1998/A Preferred Stock may sell, pursuant to Rule 144 under the 1933
Act (or any successor or replacement rule or regulation), all Registrable
Securities owned by such Person or which such Person has the right to acquire,
without the filing of any notice with the SEC and without restriction on the
manner of sale or amount of securities sold.
"Registration Redemption Event" means the occurrence of either of
the following events:
(a) the Corporation fails to file the Registration Statement
within the 20-day period provided in Section 8(a)(1) of the Subscription
Agreements; or
(b) the SEC Effective Date shall not have occurred on or before
the date which is 90 days after the Issuance Date.
-13-
<PAGE> 14
"Registration Redemption Price" means an amount in cash equal to
the sum of (A) the product obtained by multiplying (i) $1,000 times (ii) 105%
plus (B) an amount equal to the Accrual Amount on the share of Series 1998/A
Preferred Stock to be redeemed to the date the Corporation is required to pay
the Registration Redemption Price in accordance with Section 11(c).
"Registration Restriction Inconvertibility" means that (1)
notwithstanding Rule 416 under the 1933 Act or the provisions of Section 8(b) of
the Subscription Agreements, the Registration Statement is not deemed to cover
such indeterminate number of additional shares of Common Stock as shall be
issuable upon conversion of the shares of Series 1998/A Preferred Stock held by
any holder of shares of Series 1998/A Preferred Stock based on changes from time
to time in the Conversion Price, and (2) on any five Trading Days ending on or
after the SEC Effective Date within any period of ten consecutive Trading Days
the number of shares of Common Stock issuable upon conversion of all shares of
Series 1998/A Preferred Stock held by any holder of shares of Series 1998/A
Preferred Stock had all shares of Series 1998/A Preferred Stock held by such
holder been converted in full into Common Stock on each such Trading Day,
determined at the Conversion Price applicable on each such Trading Day and
without regard to the limitation, if any, on such holder contained in the second
sentence of Section 10(a), would exceed the number of shares of Common Stock
covered by the Registration Statement and available for sale by such holder
pursuant to the Registration Statement; provided, however, that a Registration
Restriction Inconvertibility shall not be deemed to occur with respect to any
holder of shares of Series 1998/A Preferred Stock on or after the date such
holder is entitled to sell, pursuant to Rule 144 under the 1933 Act (or any
successor or replacement rule or regulation), all Registrable Securities owned
by such holder or which such holder has the right to acquire, without the filing
of any notice with the SEC and without restriction on the manner of sale or the
amount of securities sold.
"Registration Statement" means each Registration Statement
required to be filed by the Corporation with the SEC pursuant to Section 8 of
the Subscription Agreement.
"SEC" means the United States Securities and Exchange Commission.
"SEC Effective Date" means the date on which the Registration
Statement is first ordered effective by the SEC.
"Senior Dividend Stock" means any class or series of capital stock
of the Corporation ranking senior as to dividends thereon to the Series 1998/A
Preferred Stock as to any dividends which have been declared on the Series
1998/A Preferred Stock.
"Senior Liquidation Stock" means any class or series of capital
stock of the Corporation ranking senior as to liquidation rights to the Series
1998/A Preferred Stock.
"Series 1998/A Preferred Stock" means the Series 1998/A
Convertible Preferred Stock, $.01 par value, of the Corporation.
-14-
<PAGE> 15
"Share Limitation Redemption Date" means each date which is five
Business Days after the date on which a Redemption Election is given by any
holder of shares of Series 1998/A Preferred Stock.
"Share Limitation Redemption Price" means an amount in cash equal
to the sum of (1) $1,000 plus (2) the Accrual Amount on the share of Series
1998/A Preferred Stock to be redeemed to the applicable Share Limitation
Redemption Date.
"Stockholder Approval" means the approval by a majority of the
votes cast by the holders of shares of Common Stock (in person or by proxy) at a
meeting of the stockholders of the Corporation (duly convened at which a quorum
was present), or a written consent of holders of shares of Common Stock entitled
to such number of votes given without a meeting, of the issuance by the
Corporation of 20% or more of the Common Stock of the Corporation outstanding on
the Issuance Date for less than the greater of the book or market value of the
Common Stock on conversion of the Series 1998/A Preferred Stock, as and to the
extent required under Rule 4460(i) of the Nasdaq as in effect from time to time
or any successor or replacement provision of the Nasdaq or any other securities
market or securities exchange on which the Common Stock is listed at the time of
determination.
"Subscription Agreements" means the several Subscription
Agreements, dated as of May 22, 1998, by and between the Corporation and the
several original holders of shares of Series 1998/A Preferred Stock pursuant to
which the shares of Series 1998/A Preferred Stock were issued.
"Tender Offer" means a tender offer or exchange offer.
"Threshold Price Conversion Amount" means for each holder of
shares of Series 1998/A Preferred Stock for each conversion of shares of Series
1998/A Preferred Stock pursuant to Section 10(c)(1) in connection with any
Threshold Price Conversion Event, the lesser of:
(1) the portion of the Aggregate Threshold Price Conversion Amount
allocated to such holder in accordance with Section 10(c)(1)(B) (less the
number of shares of Series 1998/A Preferred Stock converted by such
holder during the period beginning on the latest of (x) the Issuance
Date, (y) the latest previous Threshold Price Conversion Date and (z) the
date which is 40 Trading Days (other than any Trading Day during which a
Blackout Period is in effect), whether or not consecutive, prior to the
date on which the Threshold Price Conversion Event occurs in respect of
which this determination is being made, and in each such case ending on
the day immediately prior to the first Trading Day in the period of eight
consecutive Trading Days used to determine the occurrence of such
Threshold Price Conversion Event); and
(2) (A) in the case of any Threshold Price Conversion Event for
which the Threshold Price Conversion Date is on or prior to the date
which is 365 days after the Issuance Date, the portion allocated to such
holder of the quotient obtained by dividing
-15-
<PAGE> 16
(x) the product obtained by multiplying (i) 15% of the Threshold Price
Conversion Event Volume for the eight Trading Days used to determine the
occurrence of such Threshold Price Conversion Event times (ii) the
Conversion Price which would be applicable on such Threshold Price
Conversion Date pursuant to the first proviso to the definition of the
term Conversion Price by (y) $1,000 or (B) in the case of any Threshold
Price Conversion Event for which the Threshold Price Conversion Date is
on or after the date which is 366 days after the Issuance Date, the
portion allocated to such holder of the quotient obtained by dividing (x)
the product obtained by multiplying (i) 15% of the Threshold Price
Conversion Event Volume for the eight Trading Days used to determine the
occurrence of such Threshold Price Conversion Event times (ii) the
Conversion Price which would be applicable on such Threshold Price
Conversion Date pursuant to the second proviso to the definition of the
term Conversion Price by (y) $1,000,
or in each such case such lesser number of shares of Series 1998/A Preferred
Stock as shall be outstanding on such Threshold Price Conversion Date.
"Threshold Price Conversion Date" means the date which is not less
than 20 or more than 40 Trading Days after a notice is given by the Corporation
pursuant to Section 10(c)(1), as set forth in such notice.
"Threshold Price Conversion Event" means that on any Trading Day
on or after the date on which the Registration Statement shall have been
effective and available for use by the selling stockholders named therein for 60
consecutive days and on or prior to the date which is 608 days after the
Issuance Date:
(1) in the case of the first Threshold Price Conversion Event in
connection with which the Corporation gives notice to the holders of
shares of Series 1998/A Preferred Stock pursuant to Section 10(c)(1), the
Volume-Weighted Trading Price of the Common Stock for the eight
consecutive Trading Days ending on the Trading Day prior to such Trading
Day shall have been greater than (A) $13.00 per share of Common Stock, if
such first Threshold Price Conversion Event occurs on or prior to the
date which is 365 days after the Issuance Date, or (B) $14.00 per share
of Common Stock, if such first Threshold Price Conversion Event occurs on
or after the date which is 366 days after the Issuance Date;
(2) in the case of the second Threshold Price Conversion Event in
connection with which the Corporation gives notice to the holders of
shares of Series 1998/A Preferred Stock pursuant to Section 10(c)(1), the
Volume-Weighted Trading Price of the Common Stock for the eight
consecutive Trading Days ending on the Trading Day prior to such Trading
Day shall have been greater than (A) $14.00 per share of Common Stock, if
such second Threshold Price Conversion Event occurs on or prior to the
date which is 365 days after the Issuance Date, or (B) $15.00 per share
of Common Stock, if such second Threshold Price Conversion Event occurs
on or after the date which is 366 days after the Issuance Date; and
-16-
<PAGE> 17
(3) in the case of the third Threshold Price Conversion Event or
any Threshold Price Conversion Event thereafter in connection with which
the Corporation gives notice to the holders of shares of Series 1998/A
Preferred Stock pursuant to Section 10(c)(1), the Volume-Weighted Trading
Price of the Common Stock for the eight consecutive Trading Days ending
on the Trading Day prior to such Trading Day shall have been greater than
(A) $15.00 per share of Common Stock, if such third Threshold Price
Conversion Event or subsequent Threshold Price Conversion Event occurs on
or prior to the date which is 365 days after the Issuance Date, or (B)
$16.00 per share of Common Stock, if such third Threshold Price
Conversion Event or subsequent Threshold Price Conversion Event occurs on
or after the date which is 366 days after the Issuance Date
(such prices in the preceding clauses (1) through (3) to be subject to equitable
adjustments from time to time on terms reasonably acceptable to the Majority
Holders for (i) stock splits, (ii) stock dividends, (iii) combinations, (iv)
capital reorganizations, (v) issuance to all holders of Common Stock of rights
or warrants to purchase shares of Common Stock, (vi) distribution by the
Corporation to all holders of Common Stock of evidences of indebtedness of the
Corporation or cash (other than regular quarterly cash dividends), (vii) Tender
Offers by the Corporation or any Subsidiary for, or other repurchases of shares
of, Common Stock in one or more transactions which, individually or in the
aggregate, result in the purchase of more than ten percent of the Common Stock
outstanding, and (viii) similar events relating to the Common Stock, in each
case which occur, or with respect to which "ex-" trading of the Common Stock
begins, on or after the date this Certificate of Designations is filed with the
Secretary of State of the State of Delaware); provided, however, that after the
first Threshold Price Conversion Event shall have occurred, no subsequent
Threshold Price Conversion Event shall be deemed to have occurred unless the
period of eight consecutive Trading Days used to determine the occurrence of
such subsequent Threshold Price Conversion Event occurs on or after a date which
is at least 11 Trading Days after the previous Threshold Price Conversion Event.
"Threshold Price Conversion Event Volume" means for any period for
any security the aggregate trading volume of such security used in determining
the Volume-Weighted Trading Price of such security for such period.
"Trading Day" means a day on whichever of (x) the national
securities exchange, (y) the Nasdaq or (z) such other securities market, which
at the time constitutes the principal securities market for the Common Stock, is
open for general trading of securities.
"Transaction Documents" means, individually or collectively, the
Subscription Agreements, this Certificate of Designations and the Transfer Agent
Instruction.
"Transfer Agent Instruction" means the Transfer Agent Instruction
given by the Corporation to the Conversion Agent pursuant to Section 5(c) of the
Subscription Agreements for the benefit of the holders of the shares of Series
1998/A Preferred Stock.
-17-
<PAGE> 18
"Volume-Weighted Trading Price" for any security for any period
means the quotient obtained by dividing (A) the sum for all trades (regular way)
of such security between 9:15 a.m. and 4:30 p.m., Eastern Time, on each Trading
Day during such period on the principal securities market for such security of
the product of (x) the number of shares of such security traded in each trade
times (y) the price at which such security was traded in such trade by (B) the
sum of the number of shares of such security traded in all such trades, as
reported by Bloomberg, L.P. in its AQR function for such security.
SECTION 2. DESIGNATION AND AMOUNT. The shares of such series shall
be designated as "Series 1998/A Convertible Preferred Stock", and the number of
shares constituting the Series 1998/A Preferred Stock shall be 25,000, and shall
not be subject to increase. The Corporation shall not issue any shares of Series
1998/A Preferred Stock other than pursuant to the Subscription Agreements,
unless such issuance shall have been approved by the Majority Holders. Any
shares of Series 1998/A Preferred Stock which are redeemed by the Corporation
and retired and any shares of Series 1998/A Preferred Stock which are converted
in accordance with Section 10 shall be restored to the status of authorized,
unissued and undesignated shares of the Corporation's class of Preferred Stock
and shall not be subject to issuance, and may not thereafter be outstanding, as
shares of Series 1998/A Preferred Stock.
SECTION 3. SERIES 1998/A PREFERRED STOCK CAPITAL. The amount to be
represented in the capital account for the Series 1998/A Preferred Stock at all
times for each outstanding share of Series 1998/A Preferred Stock shall be an
amount equal to the sum of (1) the product obtained by multiplying (A) $1,000
times (B) 110% plus (2) an amount equal to the Accrual Amount on such share of
Series 1998/A Preferred Stock to the date of determination.
SECTION 4. RANK. The shares of Series 1998/A Preferred Stock shall
rank senior to the Common Stock and any shares of any other series of Preferred
Stock or any shares of any other class of preferred stock of the Corporation,
now or hereafter issued, as to payment of dividends and distribution of assets
upon liquidation, dissolution, or winding up of the Corporation, whether
voluntary or involuntary except as otherwise approved by the Majority Holders in
accordance with Section 12(b). Nothing in this Section 4 shall prohibit the
Corporation from issuing shares of capital stock if such issuance is made in
compliance with Section 12(b) and the applicable provisions of the General
Corporation Law of the State of Delaware.
SECTION 5. DIVIDENDS AND DISTRIBUTIONS. (a) The holders of shares
of Series 1998/A Preferred Stock shall be entitled to receive, when, as, and if
declared by the Board of Directors out of funds legally available for such
purpose, dividends in such amounts as determined from time to time by the Board
of Directors. Dividends on the shares of Series 1998/A Preferred Stock shall not
be cumulative.
If at any time any dividend on any Senior Dividend Stock shall be
in default, in whole or in part, no dividend shall be paid or declared and set
apart for payment on the Series 1998/A Preferred Stock unless and until all
accrued and unpaid dividends with respect to the Senior Dividend Stock,
including the full dividends for the then current dividend period, shall
-18-
<PAGE> 19
have been paid or declared and set apart for payment, without interest. Without
the prior written consent of the Majority Holders, no dividends shall be paid or
declared and set apart for payment on any Parity Dividend Stock for any period
unless dividends in an equivalent amount per share (based on the relative stated
values) shall have been, or contemporaneously are, paid or declared and set
apart for such payment on the Series 1998/A Preferred Stock. No dividends shall
be paid or declared and set apart for payment on the Series 1998/A Preferred
Stock for any period unless all accrued but unpaid dividends have been, or
contemporaneously are, paid or declared and set apart for payment on the Parity
Dividend Stock for all dividend periods terminating on or prior to the date of
payment of such dividends.
Any references to "distribution" contained in this Section 5 shall
not be deemed to include any stock dividend or distributions made in connection
with any liquidation, dissolution, or winding up of the Corporation, whether
voluntary or involuntary.
(b) Neither the Corporation nor any subsidiary of the Corporation
shall redeem, repurchase or otherwise acquire in any one transaction or series
of related transactions any shares of Common Stock (other than in a Tender Offer
to which Section 5(c) is applicable), Junior Dividend Stock or Junior
Liquidation Stock if the number of shares so repurchased, redeemed or otherwise
acquired in such transaction or series of related transactions (excluding any
Option Share Surrender) is more than 5% of the number of shares of Common Stock,
Junior Dividend Stock or Junior Liquidation Stock, as the case may be,
outstanding immediately prior to such transaction or series of related
transactions unless, (x) if such redemption, repurchase or acquisition occurs
prior to the end of the Registration Period, at the time thereof the
Registration Statement is effective and available for use by the holders of
shares of Series 1998/A Preferred Stock named as selling stockholders in the
Registration Statement, (y) no Optional Redemption Event shall have occurred
with respect to which any holder of shares of Series 1998/A Preferred Stock
shall be entitled to exercise redemption rights under Section 11 or with respect
to which any holder of shares of Series 1998/A Preferred Stock shall have
exercised such rights and the Optional Redemption Price shall not have been paid
and (z) the Corporation or such subsidiary offers to purchase for cash from each
holder of shares of Series 1998/A Preferred Stock at the time of such
redemption, repurchase or acquisition the same percentage of such holder's
shares of Series 1998/A Preferred Stock as the percentage of the number of
outstanding shares of Common Stock, Junior Dividend Stock or Junior Liquidation
Stock, as the case may be, to be so redeemed, repurchased or acquired, at a
purchase price per share of Series 1998/A Preferred Stock equal to the sum of
(1) the product obtained by multiplying (A) $1,000 times (B) 110% plus (2) the
amount equal to the Accrual Amount on such share of Series 1998/A Preferred
Stock to the date of repurchase pursuant to this Section 5(b).
(c) Neither the Corporation nor any subsidiary of the Corporation
shall (1) make any Tender Offer for more than 5% of the outstanding shares of
Common Stock, unless the Corporation contemporaneously therewith makes an offer,
or (2) enter into an agreement regarding a Tender Offer for more than 5% of the
outstanding shares of Common Stock by any Person other than the Corporation or
any subsidiary of the Corporation, unless such Person agrees with the
Corporation to make an offer, in either such case to each holder of outstanding
shares of Series 1998/A Preferred Stock to purchase for cash at the time of
purchase in such
-19-
<PAGE> 20
Tender Offer the same percentage of shares of Series 1998/A Preferred Stock held
by such holder as the percentage of outstanding shares of Common Stock offered
to be purchased in such Tender Offer at a price per share of Series 1998/A
Preferred Stock equal to the greater of (i) the sum of (a) the product obtained
by multiplying (1) $1,000 times (2) 110% plus (b) an amount equal to the Accrual
Amount on such share of Series 1998/A Preferred Stock to the date of purchase
pursuant to this Section 5(c) and (ii) an amount equal to the product obtained
by multiplying (x) the number of shares of Common Stock which would, but for the
purchase pursuant to such Tender Offer, be issuable on conversion in accordance
with Section 10(a) of one share of Series 1998/A Preferred Stock if a Conversion
Notice were given by the holder of such share of Series 1998/A Preferred Stock
on the date of purchase pursuant to such Tender Offer (determined without regard
to any limitation on beneficial ownership contained in the second sentence of
Section 10(a)) times (y) the price per share of Common Stock offered in such
Tender Offer.
SECTION 6. LIQUIDATION PREFERENCE. In the event of a liquidation,
dissolution, or winding up of the Corporation, whether voluntary or involuntary,
the holders of Series 1998/A Preferred Stock shall be entitled to receive out of
the assets of the Corporation, whether such assets constitute stated capital or
surplus of any nature, an amount per share of Series 1998/A Preferred Stock
equal to the Liquidation Preference, and no more, before any payment shall be
made or any assets distributed to the holders of Junior Liquidation Stock;
provided, however, that such rights shall accrue to the holders of Series 1998/A
Preferred Stock only in the event that the Corporation's payments with respect
to the liquidation preference of the holders of Senior Liquidation Stock are
fully met. After the liquidation preferences of the Senior Liquidation Stock are
fully met, the entire assets of the Corporation available for distribution shall
be distributed ratably among the holders of the Series 1998/A Preferred Stock
and any Parity Liquidation Stock in proportion to the respective preferential
amounts to which each is entitled (but only to the extent of such preferential
amounts). After payment in full of the Liquidation Preference of the shares of
the Series 1998/A Preferred Stock and the liquidation preference of the Parity
Liquidation Stock, the holders of such shares shall not be entitled to any
further participation in any distribution of assets by the Corporation. Neither
a consolidation or merger of the Corporation with another Person nor a sale or
transfer of all or part of the Corporation's assets to any other Person or
Persons in and of itself will be considered a liquidation, dissolution, or
winding up of the Corporation.
SECTION 7. MANDATORY REDEMPTION.
(a) MANDATORY REDEMPTION BASED ON MAXIMUM SHARE AMOUNT OR
REGISTRATION RESTRICTION INCONVERTIBILITY. (1) (A) Notwithstanding any other
provision herein, unless the Stockholder Approval shall have been obtained from
the stockholders of the Corporation or waived by the Nasdaq Stock Market, the
Corporation shall not be required to issue upon conversion of shares of Series
1998/A Preferred Stock pursuant to Section 10 more than the Maximum Share
Amount. The Maximum Share Amount shall be allocated among the shares of Series
1998/A Preferred Stock at the time of initial issuance thereof pro rata based on
the total number of authorized shares of Series 1998/A Preferred Stock provided
in Section 2. Each certificate for shares of Series 1998/A Preferred Stock
initially issued shall bear a notation as to the number of shares constituting
the portion of the Maximum Share Amount allocated to
-20-
<PAGE> 21
the shares of Series 1998/A Preferred Stock represented by such certificate for
purposes of conversion thereof.
(B) Upon surrender of any certificate for shares of Series 1998/A
Preferred Stock for transfer or re-registration thereof (or, at the option of
the holder of such certificate, for conversion pursuant to Section 10(a) of less
than all of the shares of Series 1998/A Preferred Stock represented thereby),
the Corporation shall make a notation on the new certificate issued upon such
transfer or re-registration or evidencing such unconverted shares, as the case
may be, as to the number of shares of Common Stock from the Maximum Share Amount
remaining available for conversion of the shares of Series 1998/A Preferred
Stock evidenced by such new certificate. If any certificate for shares of Series
1998/A Preferred Stock is surrendered for split-up into two or more certificates
representing an aggregate number of shares of Series 1998/A Preferred Stock
equal to the number of shares of Series 1998/A Preferred Stock represented by
the certificate so surrendered (as reduced by any contemporaneous conversion of
shares of Series 1998/A Preferred Stock represented by the certificate so
surrendered), each certificate issued on such split-up shall bear a notation of
the portion of the Maximum Share Amount allocated thereto determined by pro rata
allocation of the remaining portion of the Maximum Share Amount allocated to the
certificate so surrendered. If any shares of Series 1998/A Preferred Stock
represented by a single certificate are converted in full pursuant to Section
10, all of the portion of the Maximum Share Amount allocated to such shares of
Series 1998/A Preferred Stock which remains unissued after such conversion shall
be re-allocated pro rata to the outstanding shares of Series 1998/A Preferred
Stock held of record by the holder of record at the close of business on the
date of such conversion of the shares of Series 1998/A Preferred Stock so
converted, and if there shall be no other shares of Series 1998/A Preferred
Stock held of record by such holder at the close of business on such date, then
such portion of the Maximum Share Amount shall be re-allocated pro rata among
the shares of Series 1998/A Preferred Stock outstanding at the close of business
on such date.
(2) (A) If (i) an Inconvertibility Day occurs then, unless the
Stockholder Approval shall have been obtained from the stockholders of the
Corporation or waived by the Nasdaq Stock Market (or other applicable securities
market or securities exchange) in the case of an Inconvertibility Day pursuant
to clause (x) of the definition of such term, the Corporation shall and (ii) if
during the Registration Period a Registration Restriction Inconvertibility
occurs, then the Corporation shall, in each such case, promptly, but in no event
later than five Business Days after each such occurrence, give an
Inconvertibility Notice to each holder of shares of Series 1998/A Preferred
Stock (by telephone line facsimile transmission at such number as such holder of
shares of Series 1998/A Preferred Stock has specified in writing to the
Corporation for such purposes or, if such holder of shares of Series 1998/A
Preferred Stock shall not have specified any such number, by overnight courier
delivery to such holder's address as the same appears on the stock books of the
Corporation) and any holder of shares of Series 1998/A Preferred Stock may at
any time after such occurrence give an Inconvertibility Notice to the
Corporation. If the Corporation shall have given or been required to give any
Inconvertibility Notice, or if a holder of Series 1998/A Preferred Stock shall
have given any Inconvertibility Notice, then within the applicable Redemption
Election Period the holder receiving or giving or entitled to receive, as the
case may be, such Inconvertibility Notice shall have the right by a
-21-
<PAGE> 22
Redemption Election given to the Corporation (which may be contained in the
Inconvertibility Notice given by such holder) to direct the Corporation to
redeem the portion of such holder's outstanding shares of Series 1998/A
Preferred Stock (which, if applicable, shall be all of such holder's outstanding
shares of Series 1998/A Preferred Stock) as shall not, on the Business Day prior
to the applicable Share Limitation Redemption Date, (x) be convertible into
shares of Common Stock by reason of such Inconvertibility Day, determined as if
the Conversion Price applicable on such Business Day were the Volume-Weighted
Trading Price of the Common Stock for the ten consecutive Trading Days ending on
the Trading Day prior to such Business Day, or (y) be convertible into shares of
Common Stock which are covered by the Registration Statement and available for
sale by such holder pursuant to the Registration Statement by reason of a
Registration Restriction Inconvertibility, in each such case, on the applicable
Share Limitation Redemption Date, at a price per share equal to the Share
Limitation Redemption Price. Notwithstanding any other provision of this
Certificate of Designations, no such redemption shall be made with respect to a
Registration Restriction Inconvertibility if, prior to the expiration of the
applicable Redemption Election Period, the Corporation and such holder shall, by
a Mandatory Redemption Waiver, waive the Corporation's obligation to make such
redemption. Notwithstanding any other provision of this Certificate of
Designations, if at the time any Redemption Election is given by reason of a
Registration Restriction Inconvertibility and thereafter (1) no Optional
Redemption Event shall have occurred with respect to which any holder of shares
of Series 1998/A Preferred Stock shall have the right to require repurchase of
any shares of Series 1998/A Preferred Stock pursuant to Section 11 or with
respect to which any holder of shares of Series 1998/A Preferred Stock shall
have exercised such right and the Corporation shall not have paid the Optional
Redemption Price, (2) the Corporation is in compliance in all material respects
with its obligations to the holders of shares of Series 1998/A Preferred Stock
(including, without limitation, its obligations under the Transaction
Documents), (3) the Registration Statement is and remains effective and
available for use by holders of shares of Series 1998/A Preferred Stock for
resale of the shares of Common Stock which are covered by the Registration
Statement, (4) the Corporation files with the SEC an additional Registration
Statement as and when required by Section 8(b)(1) of the Subscription Agreements
and complies in all material respects with its obligations under the
Subscription Agreements regarding such Registration Statement, and (5) the
Corporation maintains Net Cash and Cash Equivalent Balances at least equal to
four times the Corporation's Quarterly Cash Requirements, then the Corporation
shall not be required to redeem any shares of Series 1998/A Preferred Stock by
reason of a particular Registration Restriction Inconvertibility prior to the
date which is 30 days after such Registration Restriction Inconvertibility first
occurs.
(B) An Inconvertibility Notice or a Redemption Election given by a
holder of shares of Series 1998/A Preferred Stock shall be deemed for all
purposes to be in proper form unless the Corporation notifies such holder in
writing within three Business Days after an Inconvertibility Notice or a
Redemption Election has been given (which notice shall specify all defects in
the Inconvertibility Notice or Redemption Election), and any Inconvertibility
Notice or Redemption Election containing any such defect shall nonetheless be
effective on the date given if such holder promptly undertakes in writing to
correct all such defects. Notwithstanding the absence of any such undertaking
from such holder, no such claim of error shall limit or delay performance of the
Corporation's obligation to redeem all inconvertible shares of Series 1998/A
-22-
<PAGE> 23
Preferred Stock as to which a Redemption Election has been given and which
shares are not in dispute.
(3) Notwithstanding the giving of any Inconvertibility Notice by
the Corporation to one or more holders of Series 1998/A Preferred Stock or the
giving or the absence of any Inconvertibility Notice or Redemption Election by
one or more holders of the Series 1998/A Preferred Stock or any redemption of
shares of Series 1998/A Preferred Stock pursuant to Section 7(a)(2), thereafter
the provisions of Section 7(a)(2) shall continue to be applicable on any
occasion unless, in the case of an Inconvertibility Day specified in clause (x)
of the definition of such term, the Stockholder Approval shall have been
obtained or waived by the Nasdaq Stock Market (or other applicable securities
market or securities exchange).
(4) On each Share Limitation Redemption Date (or such later date
as a holder surrenders such holder's certificate(s) for shares of Series 1998/A
Preferred Stock redeemed), the Corporation shall make payment by wire transfer
of immediately available funds of the applicable Share Limitation Redemption
Price to the holder of shares of Series 1998/A Preferred Stock to be redeemed to
such account as specified by such holder in writing to the Corporation at least
one Business Day prior to such Share Limitation Redemption Date. A holder of
shares of Series 1998/A Preferred Stock which are redeemed pursuant to this
Section 7(a) shall not be entitled to payment of the Share Limitation Redemption
Price of such shares of Series 1998/A Preferred Stock until such holder shall
have surrendered the certificate(s) for such shares of Series 1998/A Preferred
Stock to the Corporation or, in the case of the loss, theft or destruction of
any such certificate, given indemnity in accordance with Section 15(b). In
connection with a redemption of less than all of the shares of Series 1998/A
Preferred Stock evidenced by a particular certificate, promptly, but in no event
later than three Trading Days after surrender of such certificate to the
Corporation, the Corporation shall issue a replacement certificate for the
shares of Series 1998/A Preferred Stock evidenced by such certificate which have
not been redeemed. Only whole shares of Series 1998/A Preferred Stock may be
redeemed.
(5) If on or before the applicable Share Limitation Redemption
Date the Corporation shall fail to pay in full the Share Limitation Redemption
Price which has become payable by reason of a Registration Restriction
Inconvertibility for all shares of Series 1998/A Preferred Stock to be redeemed
on such Share Limitation Redemption Date or to deposit the same with an Eligible
Bank in accordance with Section 15(c), then without in any way relieving the
Corporation of its obligation to pay such amount in accordance herewith (except
to the extent expressly provided in Section 7(a)(7)), the holder of any such
share of Series 1998/A Preferred Stock shall have the right to convert such
shares of Series 1998/A Preferred Stock into Common Stock in accordance with
Section 10(a) (subject to the Maximum Share amount provided in Section 7(a)(1)
and the limitation based on beneficial ownership contained in the second
sentence of Section 10(a)) at any time prior to the date on which the
Corporation pays the Share Limitation Redemption Price of such share of Series
1998/A Preferred Stock to such holder (together with any amount due to such
holder pursuant to Section 15(d)) or so deposits the same (together with any
amount due to such holder pursuant to Section 15(d)) and gives notice to such
holder of such deposit; provided, however, that the shares of Common Stock
received by such holder upon any such conversion in certain circumstances may be
subject to restrictions on resale
-23-
<PAGE> 24
by such holder arising under applicable securities laws to the extent not
registered for resale by the holder pursuant to the Registration Statement.
(6) If on or before the applicable Share Limitation Redemption
Date the Corporation shall have failed to pay in full the Share Limitation
Redemption Price for any portion (which, if applicable, may be all) of any
holder's shares of Series 1998/A Preferred Stock to be redeemed on such Share
Limitation Redemption Date or to deposit the same with an Eligible Bank in
accordance with Section 15(c) in connection with an Inconvertibility Day and the
Stockholder Approval shall not have been obtained, then without in any way
relieving the Corporation of its obligation to pay such amount in accordance
herewith (except to the extent expressly provided in Section 7(a)(7)), upon the
written request of the Majority Holders, the Corporation shall use its best
efforts to obtain a waiver from the Nasdaq Stock Market (or other applicable
securities market or securities exchange) of the requirement for Stockholder
Approval for issuance of all shares of Common Stock issuable upon conversion of
the Series 1998/A Preferred Stock. If such waiver, in form reasonably
satisfactory to the Majority Holders, is not obtained within 15 days after the
Corporation's receipt of such request from the Majority Holders, then the
Corporation promptly shall call a special meeting of its stockholders, to be
held not later than 75 days after the expiration of the foregoing 15-day period,
to seek the Stockholder Approval for issuance of all shares of Common Stock
issuable upon conversion of the Series 1998/A Preferred Stock in accordance with
Section 10.
(7) If a holder of shares of Series 1998/A Preferred Stock
converts all or any portion of such holder's shares of Series 1998/A Preferred
Stock pursuant to Section 7(a)(5), the amount of the Share Limitation Redemption
Price due to such holder with respect to the number of shares of Series 1998/A
Preferred Stock so converted shall be reduced by $1,000 for each share of Series
1998/A Preferred Stock so converted.
(b) NO OTHER MANDATORY REDEMPTION. The shares of Series 1998/A
Preferred Stock shall not be subject to mandatory redemption by the Corporation
except as provided in this Section 7 and in Sections 10(b)(6) and 11.
SECTION 8. NO SINKING FUND. The shares of Series 1998/A Preferred
Stock shall not be entitled to the benefits of any sinking fund for the
redemption or repurchase of shares of Series 1998/A Preferred Stock.
SECTION 9. REDEMPTION AT OPTION OF CORPORATION.
(a) OPTIONAL REDEMPTION. (1) So long as on the date the
Corporation gives the Redemption Notice and at all times thereafter through the
Redemption Date (w) the Corporation shall be in compliance in all material
respects with its obligations to the holders of the Series 1998/A Preferred
Stock (including, without limitation, its obligations under the Transaction
Documents), (x) if such Redemption Notice is given prior to the end of the
Registration Period, the Registration Statement shall be effective and available
for use by the selling stockholders named therein, (y) no Optional Redemption
Event shall have occurred with respect to which any holder of shares of Series
1998/A Preferred Stock shall be entitled to
-24-
<PAGE> 25
exercise redemption rights under Section 11 or with respect to which any holder
of shares of Series 1998/A Preferred Stock shall have exercised such rights and
the Optional Redemption Price shall not have been paid and (z) the Corporation
has Net Cash and Cash Equivalent Balances which, together with the amount of all
definitive, binding commitments available to the Corporation on or prior to the
applicable Redemption Date to fund payment of the Redemption Price of the shares
of Series 1998/A Preferred Stock to be redeemed, are sufficient, after taking
into account the Corporation's cash requirements during the period from the date
the Redemption Notice is given to the Redemption Date, to pay the Redemption
Price of the shares of Series 1998/A Preferred Stock to be redeemed, the
Corporation shall have the right at any time to redeem all or from time to time
to redeem any part of the outstanding shares of Series 1998/A Preferred Stock
pursuant to this Section 9(a) at the Redemption Price. In order to exercise its
right of redemption under this Section 9(a), the Corporation shall give a
Redemption Notice to the holders of shares of Series 1998/A Preferred Stock not
less than 30 or more than 60 days prior to the Redemption Date.
(2) On the Redemption Date (or such later date as a holder of
shares of Series 1998/A Preferred Stock shall surrender to the Corporation the
certificate(s) for the shares of Series 1998/A Preferred Stock redeemed), the
Corporation shall pay to or upon the order of each holder of shares of Series
1998/A Preferred Stock by wire transfer of immediately available funds to such
account as shall be specified for such purpose by such holder an amount equal to
the Redemption Price of all of such holder's shares of Series 1998/A Preferred
Stock to be redeemed. A holder of shares of Series 1998/A Preferred Stock which
are redeemed pursuant to this Section 9(a) shall not be entitled to payment of
the Redemption Price of such shares of Series 1998/A Preferred Stock until such
holder shall have surrendered the certificate(s) for such shares of Series
1998/A Preferred Stock to the Corporation or, in the case of the loss, theft or
destruction of any such certificate, given indemnity in accordance with Section
15(b).
(3) Notwithstanding the giving of a Redemption Notice, each holder
of shares of Series 1998/A Preferred Stock shall be entitled to convert in
accordance with Section 10 any shares of Series 1998/A Preferred Stock which are
to be redeemed at any time prior to (1) the Redemption Date or (2) if on or
before the applicable Redemption Date the Corporation fails to pay the
Redemption Price in full to such holder or to deposit the same with an Eligible
Bank in accordance with Section 15(c), the date on which the Corporation pays
the Redemption Price in full to such holder for all shares of Series 1998/A
Preferred Stock to be redeemed from such holder (together with any amount due to
such holder pursuant to Section 15(d)) or so deposits the same (together with
any amount due to such holder pursuant to Section 15(d)) and gives notice to
such holder of such deposit. In the case of a conversion of any share of Series
1998/A Preferred Stock as contemplated by the clause (2) of this immediately
preceding sentence, upon delivery to the converting holder of the shares of
Common Stock issuable upon such conversion the Corporation shall have no further
liability in respect of the Redemption Price of such share of Series 1998/A
Preferred Stock.
(4) Any redemption of shares of Series 1998/A Preferred Stock
pursuant to this Section 9(a) shall be made as nearly as practical pro rata from
all holders of shares of Series 1998/A Preferred Stock outstanding, subject to
reduction of the shares of Series 1998/A
-25-
<PAGE> 26
Preferred Stock to be redeemed from any holder by reason of conversions of
shares of Series 1998/A Preferred Stock of such holder between the date the
Redemption Notice is given and the Redemption Date.
(5) Upon receipt by the Corporation from a holder of shares of
Series 1998/A Preferred Stock of certificates for shares of Series 1998/A
Preferred Stock evidencing a greater number of shares of Series 1998/A Preferred
Stock than the number of shares of Series 1998/A Preferred Stock to be redeemed
in accordance with this Section 9(a), the Corporation shall, within three
Trading Days after such surrender, issue and deliver to or upon the order of
such holder a new certificate for the balance of shares of Series 1998/A
Preferred Stock.
(6) Notwithstanding any other provision of this Certificate of
Designations to the contrary, if senior management of the Corporation is
involved in discussions with another Person involving a potential merger,
consolidation, tender offer, sale or transfer of all or substantially all of the
assets of the Corporation, share exchange or similar type of business
combination transaction with, to or involving such Person to which the
provisions of Section 10(b)(6) would be applicable and which discussions have
proceeded to the point that such transaction is reasonably likely to occur, the
Corporation shall not be entitled to exercise its right to redeem shares of
Series 1998/A Preferred Stock pursuant to this Section 9(a) by giving a
Redemption Notice prior to the date on which the Corporation has publicly
announced the execution and delivery of a definitive, binding agreement which
sets forth the terms of such transaction.
(7) During the period from the date the Corporation gives a
Redemption Notice to the applicable Redemption Date with respect thereto (i) any
shares of Series 1998/A Preferred Stock for which the holder exercises
conversion rights under Section 10 and for which the Conversion Date is during
such period shall reduce by the same number the shares of Series 1998/A
Preferred Stock which the Corporation is required to redeem from such holder by
reason of such Redemption Notice and (ii) the provisions of Section 10(a)(2)
shall be inapplicable as to conversions by the holder thereof of a number of
shares of Series 1998/A Preferred Stock which are specified in such Redemption
Notice to be redeemed from such holder.
(b) OPTIONAL REDEMPTION FOR MINIMUM PRICE REDEMPTION EVENT. (1) If
a Minimum Price Redemption Event shall have occurred, then so long as on the
date the Corporation gives the Minimum Price Redemption Notice and at all times
thereafter through the Minimum Price Redemption Date (w) the Corporation shall
be in compliance in all material respects with its obligations to the holders of
the Series 1998/A Preferred Stock (including, without limitation, its
obligations under the Transaction Documents), (x) if such Minimum Price
Redemption Notice is given before the end of the Registration Period, the
Registration Statement shall be effective and available for use by the selling
stockholders named therein, (y) no Optional Redemption Event shall have occurred
with respect to which any holder of shares of Series 1998/A Preferred Stock
shall be entitled to exercise redemption rights under Section 11 or with respect
to which any holder of shares of Series 1998/A Preferred Stock shall have
exercised such rights and the Optional Redemption Price shall not have been paid
and (z) the Corporation has Net Cash and Cash Equivalent Balances which,
together with the amount of all definitive,
-26-
<PAGE> 27
binding commitments available to the Corporation on or prior to the applicable
Minimum Price Redemption Date to fund the payment of the Minimum Price
Redemption Price of the shares of Series 1998/A Preferred Stock to be redeemed,
are sufficient, after taking into account the Corporation's cash requirements
during the period from the date the Minimum Price Redemption Notice is given to
the Minimum Price Redemption Date, to pay the Minimum Price Redemption Price of
the shares of Series 1998/A Preferred Stock to be redeemed, the Corporation
shall have the right on one occasion only by reason of such Minimum Price
Redemption Event to redeem all or any part of the outstanding shares of Series
1998/A Preferred Stock pursuant to this Section 9(b) at the Minimum Price
Redemption Price. In order to exercise its right of redemption under this
Section 9(b), the Corporation shall give a Minimum Price Redemption Notice to
the holders of shares of Series 1998/A Preferred Stock within five Trading Days
after such Minimum Price Redemption Event occurs and not less than five or more
than ten Business Days prior to the Minimum Price Redemption Date.
(2) On the Minimum Price Redemption Date (or such later date as a
particular holder of shares of Series 1998/A Preferred Stock shall surrender to
the Corporation the certificate(s) for the shares of Series 1998/A Preferred
Stock redeemed), the Corporation shall pay to or upon the order of each holder
of shares of Series 1998/A Preferred Stock by wire transfer of immediately
available funds to such account as shall be specified for such purpose by such
holder an amount equal to the Minimum Price Redemption Price of all of such
holder's shares of Series 1998/A Preferred Stock to be redeemed. A holder of
shares of Series 1998/A Preferred Stock which are redeemed pursuant to this
Section 9(b) shall not be entitled to payment of the Minimum Price Redemption
Price of such shares of Series 1998/A Preferred Stock until such holder shall
have surrendered the certificate(s) for such shares of Series 1998/A Preferred
Stock to the Corporation or, in the case of the loss, theft or destruction of
any such certificate, given indemnity in accordance with Section 15(b).
(3) The Corporation shall not be entitled to give a Minimum Price
Redemption Notice with respect to, or to redeem, any shares of Series 1998/A
Preferred Stock with respect to which a Conversion Notice has been given on a
Conversion Date which is on or prior to the date on which a Minimum Price
Redemption Notice is given. If a Minimum Price Redemption Notice has been given,
thereafter such redemption shall not affect the rights of the holders of shares
of Series 1998/A Preferred Stock to convert any shares of Series 1998/A
Preferred Stock not called for redemption, and, notwithstanding the giving of
such Minimum Price Redemption Notice, each holder of shares of Series 1998/A
Preferred Stock shall be entitled after such Minimum Price Redemption Notice is
given (1) to convert in accordance with Section 10 at any time prior to the
Minimum Price Redemption Date a number of shares of Series 1998/A Preferred
Stock which are to be redeemed equal to (x) the Redemption Exempt Amount for
such holder less (y) the number (not in excess of the Redemption Exempt Amount)
of shares of Series 1998/A Preferred Stock held by such holder on the date such
Minimum Price Redemption Notice is given which shares have not been called for
redemption pursuant to such Minimum Price Redemption Notice, and (2) if on or
before the applicable Minimum Price Redemption Date the Corporation fails to pay
the Minimum Price Redemption Price in full to such holder or to deposit the same
with an Eligible Bank in accordance with Section 15(c), such holder shall be
entitled to convert in accordance with Section 10 the shares of Series 1998/A
-27-
<PAGE> 28
Preferred Stock of such holder so called for redemption at any time prior to the
date on which the Corporation pays the Minimum Price Redemption Price in full to
such holder for all shares of Series 1998/A Preferred Stock to be redeemed from
such holder (together with any amount due to such holder pursuant to Section
15(d)) or so deposits the same (together with any amount due to such holder
pursuant to Section 15(d)) and gives notice to such holder of such deposit. In
the case of any conversion of any share of Series 1998/A Preferred Stock as
contemplated by clause (2) of the immediately preceding sentence, upon delivery
to the converting holder of the shares of Common Stock issuable upon such
conversion the Corporation shall have no further liability in respect of the
Minimum Price Redemption Price of such share of Series 1998/A Preferred Stock.
(4) Any redemption of shares of Series 1998/A Preferred Stock
pursuant to this Section 9(b) shall be made as nearly as practical pro rata from
all holders of shares of Series 1998/A Preferred Stock outstanding, subject to
reduction of the shares of Series 1998/A Preferred Stock to be redeemed from any
holder by reason of conversions of shares of Series 1998/A Preferred Stock of
such holder between the date the Minimum Price Redemption Notice is given and
the Minimum Price Redemption Date.
(5) Upon receipt by the Corporation from a holder of shares of
Series 1998/A Preferred Stock of certificates for shares of Series 1998/A
Preferred Stock evidencing a greater number of shares of Series 1998/A Preferred
Stock than the number of shares of Series 1998/A Preferred Stock to be redeemed
in accordance with this Section 9(b), the Corporation shall, within three
Trading Days after such surrender, issue and deliver to or upon the order of
such holder a new certificate for the balance of shares of Series 1998/A
Preferred Stock.
(6) If at any time the Corporation shall have become entitled to
exercise its right to redeem shares of Series 1998/A Preferred Stock pursuant to
this Section 9(b) and the Corporation shall not exercise such right in
accordance herewith, then thereafter the Corporation shall not be entitled to
exercise its right to redeem shares of Series 1998/A Preferred Stock pursuant to
this Section 9(b) unless a subsequent Minimum Price Redemption Event shall have
occurred on a date which is more than ten Trading Days after the date the
Corporation became so entitled to exercise its right to redeem shares of Series
1998/A Preferred Stock pursuant to this Section 9(b).
(7) The Redemption Exempt Amount shall be allocated among the
shares of Series 1998/A Preferred Stock at the time of initial issuance thereof
pro rata based on the number of issued shares of Series 1998/A Preferred Stock.
Each certificate for shares of Series 1998/A Preferred Stock initially issued
shall bear a notation as to the number of shares constituting the portion of the
Redemption Exempt Amount allocated to the shares of Series 1998/A Preferred
Stock represented by such certificate for purposes of this Section 9(b). If any
certificate for shares of Series 1998/A Preferred Stock is surrendered for
split-up into two or more certificates representing an aggregate number of
shares of Series 1998/A Preferred Stock equal to the number of shares of Series
1998/A Preferred Stock represented by the certificate so surrendered (as reduced
by any contemporaneous conversion of shares of Series 1998/A Preferred Stock
represented by the certificate so surrendered), each certificate issued on such
split-up shall bear a
-28-
<PAGE> 29
notation of the portion of the Redemption Exempt Amount allocated thereto
determined by pro rata allocation from among the Redemption Exempt Amount
allocated to the certificate so surrendered. If any shares of Series 1998/A
Preferred Stock represented by a single certificate are converted in full
pursuant to this Section 9, the Redemption Exempt Amount allocated to such
shares of Series 1998/A Preferred Stock shall be re-allocated pro rata to the
outstanding shares of Series 1998/A Preferred Stock held of record by the holder
of record at the close of business on the date of such conversion of the shares
of Series 1998/A Preferred Stock so converted, unless there shall be no other
shares of Series 1998/A Preferred Stock held of record by such holder at the
close of business on such date, in which case such portion of the Redemption
Exempt Amount shall not be so re-allocated.
(C) NO OTHER REDEMPTION AT THE OPTION OF THE CORPORATION. Except
as otherwise specifically provided in Sections 9(a) and 9(b), the Corporation
shall not have any right to redeem any shares of Series 1998/A Preferred Stock
at the option of the Corporation.
SECTION 10. CONVERSION.
(a) CONVERSION AT OPTION OF HOLDER.
(1) CONVERSION RIGHT. The holders of the Series 1998/A Preferred
Stock may convert at any time all or from time to time any part of their
outstanding shares of Series 1998/A Preferred Stock into fully paid and
nonassessable shares of Common Stock and such other securities and property as
hereinafter provided. Commencing on the Issuance Date, and at any time
thereafter, each share of Series 1998/A Preferred Stock may be converted at the
office of the Conversion Agent or at such additional office or offices, if any,
as the Board of Directors may designate, into such number of fully paid and
nonassessable shares of Common Stock (calculated as to each conversion to the
nearest 1/100th of a share) determined by dividing (x) the sum of (i) $1,000
plus (ii) an amount equal to the Accrual Amount on the share of Series 1998/A
Preferred Stock being converted to the applicable Conversion Date by (y) the
Conversion Price on the applicable Conversion Date; provided, however, that in
no event shall any holder of shares of Series 1998/A Preferred Stock be entitled
to convert any shares of Series 1998/A Preferred Stock in excess of that number
of shares of Series 1998/A Preferred Stock upon conversion of which the sum of
(1) the number of shares of Common Stock beneficially owned by such holder
(including shares of Common Stock beneficially owned by all Aggregated Persons
of such holder) (other than shares of Common Stock deemed beneficially owned by
such holder or any Aggregated Person of such holder through the ownership of (x)
unconverted shares of Series 1998/A Preferred Stock and (y) the unconverted or
unexercised portion of any instrument which contains limitations similar to
those set forth in this sentence) and (2) the number of shares of Common Stock
issuable upon the conversion of the number of shares of Series 1998/A Preferred
Stock with respect to which the determination in this proviso is being made,
would result in beneficial ownership by such holder and all Aggregated Persons
of such holder of more than 4.9% of the outstanding shares of Common Stock. For
purposes of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the 1934 Act
and Regulation 13D-G thereunder, except as otherwise provided in clause (1) of
the proviso to the immediately preceding sentence. For purposes of the proviso
to
-29-
<PAGE> 30
the second preceding sentence, the Corporation shall be entitled to rely, and
shall be fully protected in relying, on any statement or representation made by
a holder of shares of Series 1998/A Preferred Stock to the Corporation in
connection with a particular conversion, without any obligation on the part of
the Corporation to make any inquiry or investigation or to examine its records
or the records of any transfer agent for the Common Stock and without any
liability of the Corporation with respect thereto.
(2) CERTAIN LIMITATIONS ON CONVERSION RIGHTS. (A) Except as
otherwise specified by or provided in this Certificate of Designations, if at
any time on or after the Issuance Date the Conversion Price is below the
Conversion Restriction Price, then so long as the Corporation shall be in
compliance in all material respects with its obligations to the holders of the
shares of Series 1998/A Preferred Stock (including, without limitation, its
obligations under the Transaction Documents), the holders of shares of Series
1998/A Preferred Stock shall not during any calendar month which ends prior to
or includes the date which is 608 days after the Issuance Date without the prior
written consent of the Corporation be entitled to convert shares of Series
1998/A Preferred Stock at Conversion Prices below the applicable Conversion
Restriction Price into a number of shares of Common Stock in excess of the
Converted Restriction Amount; provided, however, that (x) in the case of the
calendar month which includes the 90th day after the Issuance Date, if such 90th
day is not the first day of such calendar month, the Converted Restriction
Amount for such calendar month shall be pro rated based on the number of days of
such calendar month which occur on or after such 90th day and (y) in the case of
the calendar month which includes such 608th day, if such 608th day is not the
last day of such calendar month, the Converted Restriction Amount for such
calendar month shall be pro rated based on the number of days of such calendar
month which occur on or prior to such 608th day.
(B) The Converted Restriction Amount shall be allocated among the
shares of Series 1998/A Preferred Stock at the time of initial issuance thereof
pro rata based on the number of issued shares of Series 1998/A Preferred Stock.
Each certificate for shares of Series 1998/A Preferred Stock initially issued
shall bear a notation as to the number of shares constituting the portion of the
Converted Restriction Amount allocated to the shares of Series 1998/A Preferred
Stock represented by such certificate for purposes of conversion thereof in
accordance with the restrictions in this Section 10(a)(2). If any certificate
for shares of Series 1998/A Preferred Stock is surrendered for split-up into two
or more certificates representing an aggregate number of shares of Series 1998/A
Preferred Stock equal to the number of shares of Series 1998/A Preferred Stock
represented by the certificate so surrendered (as reduced by any contemporaneous
conversion of shares of Series 1998/A Preferred Stock represented by the
certificate so surrendered), each certificate issued on such split-up shall bear
a notation of the portion of the Converted Restriction Amount allocated thereto
determined by pro rata allocation from among the Converted Restriction Amount
allocated to the certificate so surrendered. If any shares of Series 1998/A
Preferred Stock represented by a single certificate are converted in full
pursuant to this Section 10, the Converted Restriction Amount allocated to such
shares of Series 1998/A Preferred Stock shall be re-allocated pro rata to the
outstanding shares of Series 1998/A Preferred Stock held of record by the holder
of record at the close of business on the date of such conversion of the shares
of Series 1998/A Preferred Stock so converted (subject to reduction
-30-
<PAGE> 31
during only the calendar month in which such conversion occurs for the portion
of the Converted Restriction Amount for such calendar month which was used by
the holder of such certificate in such calendar month prior to such conversion
in full), and if there shall be no other shares of Series 1998/A Preferred Stock
held of record by such holder at the close of business on such date, then such
portion of the Converted Restriction Amount shall be re-allocated on the first
day of the calendar month next succeeding the calendar month in which such
conversion in full occurred pro rata among the shares of Series 1998/A Preferred
Stock outstanding at the opening of business on the first day of such calendar
month.
(C) Any portion of the Converted Restriction Amount allocated to
any holder of shares of Series 1998/A Preferred Stock which is not used by such
holder in any calendar month which ends on or prior to the date which is 365
days after the Issuance Date may not be carried forward to any subsequent
calendar month. Any portion of the Converted Restriction Amount allocated to any
holder of shares of Series 1998/A Preferred Stock which is not used by such
holder in any calendar month which ends on or after the date which is 366 days
after the Issuance Date may be carried forward to a subsequent calendar month;
provided, however, that the number of shares of Common Stock issued to any such
holder in any such subsequent calendar month during the period this Section
10(a)(2) is applicable at Conversion Prices which are less than the applicable
Conversion Restriction Price shall not exceed 150% of the Converted Restriction
Amount allocated to such holder. The Corporation shall maintain records of the
number of shares of Common Stock issued to holders of shares of Series 1998/A
Preferred Stock at Conversion Prices below the Conversion Restriction Price and
such records shall be controlling in the absence of manifest error.
(D) The Corporation shall not permit any holder of shares of
Series 1998/A Preferred Stock to convert such shares when otherwise restricted
by this Section 10(a)(2) unless the Corporation simultaneously offers all
holders of shares of Series 1998/A Preferred Stock a pro rata opportunity to so
convert the shares of Series 1998/A Preferred Stock held by all such holders;
provided, however, that this restriction shall not be applicable to any such
conversion which inadvertently occurs through a good faith error by the
Corporation.
(b) OTHER PROVISIONS. (1) The holders of shares of Series 1998/A
Preferred Stock at the close of business on the record date for any dividend
payment to holders of Series 1998/A Preferred Stock shall be entitled to receive
the dividend payable on such shares on the corresponding dividend payment date
notwithstanding the conversion thereof after the record date for such dividend
payment or the Corporation's default in payment of the dividend due on such
dividend payment date; provided, however, that the holder of shares of Series
1998/A Preferred Stock converted during the period between the close of business
on any record date for a dividend payment and the opening of business on the
corresponding dividend payment date must pay to the Corporation, within five
days after receipt by such holder, an amount equal to the dividend payable on
such shares on such dividend payment date if such dividend is paid by the
Corporation to such holder. A holder of shares of Series 1998/A Preferred Stock
on a record date for a dividend payment who (or whose transferee) converts any
of such shares into shares of Common Stock on or after such dividend payment
date will receive the dividend payable by the Corporation on such shares of
Series 1998/A Preferred Stock on such dividend payment date,
-31-
<PAGE> 32
and the converting holder need not make any payment of the amount of such
dividend in connection with such conversion of shares of Series 1998/A Preferred
Stock. Except as provided above, no adjustment shall be made in respect of cash
dividends on Common Stock or Series 1998/A Preferred Stock that may be accrued
and unpaid at the date of conversion of shares of Series 1998/A Preferred Stock.
(2) The right of the holders of Series 1998/A Preferred Stock to
convert their shares shall be exercised by delivering (which may be made by
telephone line facsimile transmission) a Conversion Notice to the Corporation at
the address or telephone line facsimile transmission number provided in or
pursuant to Section 15(a), with a copy to the Conversion Agent at its address or
telephone line facsimile transmission number provided in the form of Conversion
Notice (as such address or telephone line facsimile transmission number may be
changed from time to time pursuant to Section 15(a)); provided, however, that
any failure or delay in the giving of a copy of a Conversion Notice to the
Conversion Agent shall not affect the validity or Conversion Date for any such
Conversion Notice. The number of shares of Common Stock to be issued upon each
conversion of shares of Series 1998/A Preferred Stock shall be the number set
forth in the applicable Conversion Notice, which number shall be conclusive
absent manifest error. The Corporation shall notify a holder who has given a
Conversion Notice of any claim of manifest error within three Trading Days after
such holder gives such Conversion Notice, which notice shall state the number of
shares of Common Stock in dispute, and, notwithstanding such notice from the
Corporation, no such claim of error shall limit or delay performance of the
Corporation's obligation to issue upon such conversion the number of shares of
Common Stock which are not in dispute as and when required by this Certificate
of Designations. A Conversion Notice shall be deemed for all purposes to be in
proper form unless the Corporation notifies a holder of shares of Series 1998/A
Preferred Stock being converted within three Trading Days after a Conversion
Notice has been given (which notice shall specify all defects in such Conversion
Notice), and any Conversion Notice containing any such defect shall nonetheless
be effective on the date given if the converting holder promptly undertakes to
correct all such defects. If the Corporation shall have notified such holder of
any such claim of manifest error, and the Corporation and such holder do not
agree as to a resolution of such claim on or before the date of such notice by
the Corporation of an error in such Conversion Notice, the Corporation shall on
the date the Corporation gives such notice submit the dispute to the Auditors
for determination and shall instruct the Auditors to resolve such dispute and to
notify the Corporation and such holder within two Trading Days after such
dispute is submitted to the Auditors. Immediately after receipt of timely notice
of the Auditors' determination (but in any event within five Trading Days after
the applicable Conversion Date), the Corporation shall issue to the converting
holder any additional shares of Common Stock to which such holder is entitled
based on the determination of the Auditors. If the Auditors shall fail to notify
the Corporation or such holder of their determination within five Trading Days
after the applicable Conversion Date, then the Corporation shall, within five
Trading Days after the applicable Conversion Date, issue to the converting
holder any additional shares of Common Stock to which such holder is entitled
based on the applicable Conversion Notice. Time shall be of the essence in the
performance by the Corporation of its obligation to issue shares of Common Stock
upon any conversion of shares of Series 1998/A Preferred Stock.
-32-
<PAGE> 33
(3) If a holder of Series 1998/A Preferred Stock elects to convert
any shares of Series 1998/A Preferred Stock in accordance with Section 10(a),
such holder shall not be required to surrender the certificate(s) representing
such shares of Series 1998/A Preferred Stock physically to the Corporation
unless all of the shares of Series 1998/A Preferred Stock represented thereby
are so converted. Each holder of shares of Series 1998/A Preferred Stock and the
Corporation shall maintain records showing the number of shares so converted and
the dates of such conversions or shall use such other method, satisfactory to
such holder and the Corporation, so as to not require physical surrender of such
certificates upon each such conversion. In the event of any dispute or
discrepancy, such records of the Corporation shall be controlling and
determinative in the absence of manifest error. If a holder of shares of Series
1998/A Preferred Stock shall have given a Notice of Conversion of shares of
Series 1998/A Preferred Stock without surrender of the certificate therefor,
from and after the applicable Conversion Date such certificate shall be deemed
to evidence a number of shares of Series 1998/A Preferred Stock equal to the
number of unconverted shares of Series 1998/A Preferred Stock evidenced by such
certificate, unless the Corporation shall fail to deliver to such holder all
shares of Common Stock issuable upon such conversion. Notwithstanding the
foregoing, if any shares of Series 1998/A Preferred Stock evidenced by a
particular certificate therefor are converted as aforesaid, the holder of Series
1998/A Preferred Stock may not transfer the certificate(s) representing the
remaining shares of Series 1998/A Preferred Stock evidenced by such certificate
unless such holder first physically surrenders such certificate(s) to the
Corporation, whereupon the Corporation will forthwith issue and deliver upon the
order of such holder of shares of Series 1998/A Preferred Stock new
certificate(s) of like tenor, registered as such holder of shares of Series
1998/A Preferred Stock (upon payment by such holder of shares of Series 1998/A
Preferred Stock of any applicable transfer taxes) may request, representing in
the aggregate the remaining number of shares of Series 1998/A Preferred Stock
represented by such certificate(s) after taking into account all shares formerly
represented by such certificate(s) which have previously been converted. Each
holder of shares of Series 1998/A Preferred Stock, by acceptance of a
certificate for such shares, acknowledges and agrees that (1) by reason of the
provisions of this paragraph, following conversion of any shares of Series
1998/A Preferred Stock represented by such certificate, the number of shares of
Series 1998/A Preferred Stock represented by such certificate may be less than
the number of shares stated on such certificate and by reason of Section 7(a),
the number of shares of Common Stock from the Maximum Share Amount allocated to
the shares of Series 1998/A Preferred Stock represented by such certificate for
purposes of conversion of such shares may be less than the number thereof stated
on such certificate and (2) the Corporation may place one or more legends on the
certificates for shares of Series 1998/A Preferred Stock which refers to or
describes the provisions of this paragraph. The Corporation may by notice to any
holder of shares of Series 1998/A Preferred Stock require such holder to
surrender the certificate(s) for such holder's shares of Series 1998/A Preferred
Stock in exchange for issuance by the Corporation of one or more new
certificates for the number of shares evidenced by the certificate(s) so
surrendered.
(4) The Corporation shall pay any transfer tax arising in
connection with any conversion of shares of Series 1998/A Preferred Stock except
that the Corporation shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery upon
conversion of shares of Common Stock or other securities or
-33-
<PAGE> 34
property in a name other than that of the holder of the shares of the Series
1998/A Preferred Stock being converted, and the Corporation shall not be
required to issue or deliver any such shares or other securities or property
unless and until the Person or Persons requesting the issuance thereof shall
have paid to the Corporation the amount of any such tax or shall have
established to the satisfaction of the Corporation that such tax has been paid.
A holder of shares of Series 1998/A Preferred Stock who converts such shares
shall be responsible for the amount of any withholding tax payable in connection
with such conversion.
(5) The Corporation (and any successor corporation) shall take all
action necessary so that a number of shares of the authorized but unissued
Common Stock (or common stock in the case of any successor corporation)
sufficient to provide for the conversion of the Series 1998/A Preferred Stock
outstanding upon the basis hereinbefore provided are at all times reserved by
the Corporation (or any successor corporation), free from preemptive rights, for
such conversion, subject to the provisions of the next succeeding paragraph. If
the Corporation shall issue any securities or make any change in its capital
structure which would change the number of shares of Common Stock into which
each share of the Series 1998/A Preferred Stock shall be convertible as herein
provided, the Corporation shall at the same time also make proper provision so
that thereafter there shall be a sufficient number of shares of Common Stock
authorized and reserved, free from preemptive rights, for conversion of the
outstanding Series 1998/A Preferred Stock on the new basis. If at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all of the outstanding shares of Series 1998/A
Preferred Stock, the Corporation promptly shall seek such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose.
(6) (A) In case of any consolidation or merger of the Corporation
with any other corporation (other than a wholly-owned subsidiary of the
Corporation) in which the Corporation is not the surviving corporation, or in
case of any sale or transfer of all or substantially all of the assets of the
Corporation, or in the case of any share exchange pursuant to which all of the
outstanding shares of Common Stock are converted into other securities or
property, the Corporation shall make appropriate provision or cause appropriate
provision to be made so that each holder of shares of Series 1998/A Preferred
Stock then outstanding shall have the right thereafter to convert such shares of
Series 1998/A Preferred Stock into the kind of shares of stock and other
securities and property receivable upon such consolidation, merger, sale,
transfer, or share exchange by a holder of shares of Common Stock into which
such shares of Series 1998/A Preferred Stock could have been converted
immediately prior to the effective date of such consolidation, merger, sale,
transfer, or share exchange and on a basis which preserves the economic benefits
of the conversion rights of the holders of shares of Series 1998/A Preferred
Stock on a basis as nearly as practical as such rights exist hereunder prior
thereto. If, in connection with any such consolidation, merger, sale, transfer,
or share exchange, each holder of shares of Common Stock is entitled to elect to
receive securities, cash, or other assets upon completion of such transaction,
the Corporation shall provide or cause to be provided to each holder of Series
1998/A Preferred Stock the right to elect prior to completion of such
transaction the securities, cash, or other assets into which the Series 1998/A
Preferred Stock held by such holder shall be convertible after completion of any
such transaction on the same terms
-34-
<PAGE> 35
and subject to the same conditions applicable to holders of the Common Stock
(including, without limitation, notice of the right to elect, limitations on the
period in which such election shall be made, and the effect of failing to
exercise the election). In connection with any such merger, consolidation, sale,
transfer or exchange, if the Corporation shall have failed to make provision for
preservation of economic benefits of the conversion rights of the holders of
shares of Series 1998/A Preferred Stock, then in lieu of any other right or
remedy available to the holders of shares of Series 1998/A Preferred Stock, the
Corporation shall redeem all outstanding shares of Series 1998/A Preferred Stock
on the Business Day immediately following the date of completion of such
transaction at a price per share of Series 1998/A Preferred Stock in cash equal
to the Business Combination Redemption Price. On such Business Day (or such
later date as a holder of shares of Series 1998/A Preferred Stock surrenders
such holder's certificates for shares of Series 1998/A Preferred Stock redeemed)
the Corporation shall make payment by wire transfer of immediately available
funds of the applicable Business Combination Redemption Price to each holder of
shares of Series 1998/A Preferred Stock to be redeemed to such account as
specified by such holder in writing to the Corporation at least one Business Day
prior to such payment of the Business Combination Redemption Price. A holder of
shares of Series 1998/A Preferred Stock which are redeemed pursuant to this
Section 10(b)(6) shall not be entitled to payment of the Business Combination
Redemption Price of such shares of Series 1998/A Preferred Stock until such
holder shall have surrendered the certificate(s) for such shares of Series
1998/A Preferred Stock to the Corporation or, in the case of the loss, theft or
destruction of any such certificate, given indemnity in accordance with Section
15(b). The Corporation shall not effect any such transaction unless it shall
have complied with the provisions of this paragraph. The above provisions shall
similarly apply to successive consolidations, mergers, sales, transfers, or
share exchanges.
(B) Whenever the Corporation shall propose to take any of the
actions specified in this Section 10(b)(6), the Corporation shall cause a notice
to be mailed, at least 20 days prior to the date on which the books of the
Corporation will close or on which the security holders entitled to participate
(other than solely by voting) in such transaction will be determined, to the
holders of record of the outstanding Series 1998/A Preferred Stock on the date
of such notice. Such notice shall specify the action proposed to be taken by the
Corporation and the date as of which holders of record of the Common Stock shall
participate in any such actions or be entitled to exchange their Common Stock
for securities or other property, as the case may be.
(7) Upon receipt by the Corporation from a holder of shares of
Series 1998/A Preferred Stock of a Conversion Notice, the Corporation shall
issue and deliver or cause to be issued and delivered to or upon the order of
such holder certificates for the Common Stock issuable upon such conversion by
the close of business on the third Trading Day after such Conversion Notice is
received, and as of the close of business on the date of such receipt such
holder (or such holder's assignee) shall be deemed to be the holder of record of
the Common Stock issuable upon such conversion, and all rights with respect to
the shares of Series 1998/A Preferred Stock so converted shall forthwith
terminate except the right to receive the Common Stock or other securities,
cash, or other assets, as herein provided, on such conversion. If a holder of
Series 1998/A Preferred Stock shall have given a Conversion Notice in accordance
-35-
<PAGE> 36
with the terms of this Certificate of Designations, the Corporation's obligation
to issue and deliver the shares of Common Stock issuable upon such conversion in
accordance with the terms of this Certificate of Designations shall be absolute
and unconditional, irrespective of any action or inaction by the converting
holder to enforce the same, any waiver or consent with respect to any provision
thereof, the recovery of any judgment against any Person or any action to
enforce the same, any failure or delay in the enforcement of any other
obligation of the Corporation to the holder of record, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the holder or any other Person of any obligation to the Corporation,
or any violation or alleged violation of law by such holder or any other Person,
and irrespective of any other circumstance which might otherwise limit such
obligation of the Corporation to such holder in connection with such conversion;
provided, however, that nothing herein shall limit or prejudice the right of the
Corporation to pursue any such claim in any other manner permitted by applicable
law. The occurrence of an event which requires an equitable adjustment of the
Conversion Price or the Market Price as contemplated by the definition thereof
in Section 1 shall in no way restrict or delay the right of any holder of shares
of Series 1998/A Preferred Stock to receive shares of Common Stock upon
conversion of shares of Series 1998/A Preferred Stock, and the Corporation shall
use its best efforts to implement each such adjustment on terms reasonably
acceptable to the Majority Holders within two Trading Days after such
occurrence. If the Corporation fails to issue and deliver the certificates for
the Common Stock to the holder converting shares of Series 1998/A Preferred
Stock as and when required to do so and such failure shall continue after the
fifth Trading Day after the applicable Conversion Date, in addition to any other
liabilities the Corporation may have hereunder and under applicable law (1) the
Corporation shall pay or reimburse such holder on demand for all out-of-pocket
expenses, including, without limitation, reasonable fees and expenses of legal
counsel, incurred by such holder as a result of such failure, (2) the Conversion
Price applicable to such conversion shall be reduced by one-tenth of a
percentage point from the Conversion Price otherwise applicable to such
conversion for each Trading Day during the period from the date the Corporation
was required to deliver such shares of Common Stock to the date the Corporation
so delivers such shares of Common Stock; provided, however, that in no event
shall any such reduction be made for any Trading Day in such period which is
after the date which is 120 days after the date the Corporation was required to
deliver such shares of Common Stock in connection with such conversion, and (3)
such holder may by written notice (which may be given by mail, courier, personal
service or telephone line facsimile transmission) or oral notice (promptly
confirmed in writing) given at any time prior to delivery to such holder of the
certificates for the shares of Common Stock issuable upon such conversion of
shares of Series 1998/A Preferred Stock, rescind such conversion, whereupon such
holder shall have the right to convert such shares of Series 1998/A Preferred
Stock thereafter in accordance herewith; provided, however, that the Corporation
shall not be liable to any holder of shares of Series 1998/A Preferred Stock
under the preceding clause (1) or clause (2) to the extent the failure of the
Corporation to deliver or to cause to be delivered such shares of Common Stock
results from fire, flood, storm, earthquake, shipwreck, strike, war, acts of
terrorism, crash involving facilities of a common carrier, acts of God, or any
similar event outside the control of the Corporation (it being understood that
the action or failure to act of the Conversion Agent shall not be deemed an
event outside the control of the Corporation except to the extent resulting from
fire, flood, storm, earthquake, shipwreck, strike, war, acts of terrorism, crash
involving facilities of a common carrier, acts of God, the
-36-
<PAGE> 37
bankruptcy, liquidation or reorganization of the Conversion Agent under any
bankruptcy, insolvency or other similar law or any similar event outside the
control of the Conversion Agent). A holder of shares of Series 1998/A Preferred
Stock who has given a Conversion Notice shall notify the Corporation in writing
(or by telephone conversation, confirmed in writing) as promptly as practicable
after becoming aware that shares of Common Stock issued upon such conversion
have not been received as provided in this Section 10(b)(7). In the case of any
delivery by the Corporation of shares of Common Stock upon conversion of shares
of Series 1998/A Preferred Stock which delivery is, at the request of the
converting holder, to be made through the DTC Fast Automated Securities Transfer
Program to such holder by electronic transmission of such shares of Common Stock
to such holder by crediting the account of such holder or such holder's broker
with DTC through the DWAC system, for purposes of this Section 10(b)(7) such
shares of Common Stock shall be deemed to have been delivered to such holder
when made available to such holder or such holder's broker through the DWAC
system.
(8) No fractional shares of Common Stock shall be issued upon
conversion of Series 1998/A Preferred Stock but, in lieu of any fraction of a
share of Common Stock which would otherwise be issuable in respect of the
aggregate number of shares of Series 1998/A Preferred Stock surrendered for
conversion at one time by the same holder, the Corporation shall pay in cash to
such holder at the time of issuance of shares of Common Stock in connection with
such conversion an amount equal to the product of (i) the arithmetic average of
the Market Price of one share of Common Stock on the three consecutive Trading
Days ending on the Trading Day immediately preceding the Conversion Date times
(ii) such fraction of a share of Common Stock.
(c) CONVERSION BY CORPORATION; MANDATORY CONVERSION.
(1) THRESHOLD PRICE CONVERSION. (A) If a Threshold Price
Conversion Event shall occur, so long as:
(x) on the applicable Threshold Price Conversion Date the
Corporation shall be in compliance in all material respects with its
obligations to the holders of the Series 1998/A Preferred Stock
(including, without limitation, its obligations under the Transaction
Documents),
(y) on the date such Threshold Price Conversion Event occurs and
at all times thereafter through the applicable Threshold Price Conversion
Date the Registration Statement shall be effective and available for use
by the selling stockholders named therein or all holders of shares of
Series 1998/A Preferred Stock shall be entitled to sell all shares of
Common Stock issuable to them upon conversion of shares of Series 1998/A
Preferred Stock without registration under the 1933 Act and without
limitation on the volume of sales or manner of sale and
(z) on the date such Threshold Price Conversion Event occurs and
at all times thereafter through the applicable Threshold Price Conversion
Date the Corporation shall not have commenced a voluntary case or other
proceeding, and no person shall have
-37-
<PAGE> 38
commenced an involuntary case or other proceeding against the
Corporation, in any such case seeking liquidation, reorganization or
other relief with respect to the Corporation or its debts under any
bankruptcy, insolvency, receivership, moratorium or other similar law now
or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial
part of the Corporation's property, the Corporation shall not have
consented to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, and the Corporation shall not have made
a general assignment for the benefit of creditors,
then
(i) the Corporation shall have the right on one occasion only by
reason of such Threshold Price Conversion Event to require the conversion
on the applicable Threshold Price Conversion Date of the number of shares
of Series 1998/A Preferred Stock evidenced by each certificate therefor
which equals the Threshold Price Conversion Amount allocated to each such
certificate (less the number of shares of Series 1998/A Preferred Stock
converted by the holder of such certificate from such Threshold Price
Conversion Amount during the period beginning on the first day in the
period of eight Trading Days during which such Threshold Price Conversion
Event occurred and ending on the day immediately prior to the Threshold
Price Conversion Date for such Threshold Price Conversion Event), in
accordance with the provisions, and subject to the limitations, of this
Section 10 into shares of Common Stock to the extent the same are at such
time convertible into shares of Common Stock, and
(ii) if the Corporation exercises its right to require conversion
of shares of Series 1998/A Preferred Stock pursuant to this Section
10(c)(1) by reason of such Threshold Price Conversion Event, then from
the date such Threshold Price Conversion Event occurs until the
applicable Threshold Price Conversion Date with respect thereto, the
restrictions of Section 10(a)(2) shall be inapplicable as to the number
of shares of Common Stock evidenced by each certificate for shares of
Series 1998/A Preferred Stock issuable upon conversion by the holder of
such certificate of a number of shares of Series 1998/A Preferred Stock
equal to the balance of the Threshold Price Conversion Amount allocated
to such certificate which, on the day immediately subsequent to the date
on which such Threshold Price Conversion Event occurs, would be subject
to conversion on the applicable Threshold Price Conversion Date if the
Corporation exercises its right to require conversion of shares of Series
1998/A Preferred Stock by reason of such Threshold Price Conversion
Event.
In order to exercise its right to require a conversion of shares of Series
1998/A Preferred Stock pursuant to this Section 10(c)(1), the Corporation shall
give a notice to all holders of shares of Series 1998/A Preferred Stock (i)
stating that a Threshold Price Conversion Event has occurred and the date
thereof, (ii) stating that the Corporation is exercising such right and (iii)
setting forth the applicable Threshold Price Conversion Date, which notice shall
be given within three Trading Days after such Threshold Price Conversion Event
occurs and not less than 20 or more
-38-
<PAGE> 39
than 40 Trading Days prior to the applicable Threshold Price Conversion Date. On
such Threshold Price Conversion Date such shares of Series 1998/A Preferred
Stock determined as aforesaid (or such lesser number of shares of Series 1998/A
Preferred Stock as are convertible into Common Stock on such Threshold Price
Conversion Date) shall be converted into such number of shares of Common Stock
as shall be determined pursuant to this Section 10 as if the conversion of such
number of shares of Series 1998/A Preferred Stock were made by the holders
thereof in accordance herewith, without any further action on the part of the
holders of such shares of Series 1998/A Preferred Stock and subject to the
limitations on conversion based on the Maximum Share Amount as provided in
Section 7(a) and based on beneficial ownership as provided in Section 10(a).
Upon receipt by the Corporation from a holder of the certificates for shares of
Series 1998/A Preferred Stock converted into shares of Common Stock in
accordance with this Section 10(c)(1), the Corporation shall issue and, within
three Trading Days after such surrender, deliver to or upon the order of such
holder (1) that number of shares of Common Stock as shall be issuable in respect
of the conversion of the number of shares of Series 1998/A Preferred Stock so
converted into Common Stock as shall be determined in accordance herewith and
(2) a new certificate for the balance of shares of Series 1998/A Preferred
Stock, if any.
(B) The Aggregate Threshold Price Conversion Amount shall be
allocated among the shares of Series 1998/A Preferred Stock at the time of
initial issuance thereof pro rata based on the number of issued shares of Series
1998/A Preferred Stock. Each certificate for shares of Series 1998/A Preferred
Stock initially issued shall bear a notation as to the number of shares
constituting the portion of the Aggregate Threshold Price Conversion Amount
which is allocated to the shares of Series 1998/A Preferred Stock represented by
such certificate for purposes of conversion thereof in accordance with the
provisions of this Section 10(c)(1). If any certificate for shares of Series
1998/A Preferred Stock is surrendered for split-up into two or more certificates
representing an aggregate number of shares of Series 1998/A Preferred Stock
equal to the number of shares of Series 1998/A Preferred Stock represented by
the certificate so surrendered (as reduced by any contemporaneous conversion of
shares of Series 1998/A Preferred Stock represented by the certificate so
surrendered), each certificate issued on such split-up shall bear a notation of
the portion of the Aggregate Threshold Price Conversion Amount which is
allocated thereto determined by pro rata allocation from among the portion of
the Aggregate Threshold Price Conversion Amount which is allocated to the
certificate so surrendered. If any shares of Series 1998/A Preferred Stock
represented by a single certificate are converted in full pursuant to this
Section 10, the portion of the Aggregate Threshold Price Conversion Amount which
is allocated to such shares of Series 1998/A Preferred Stock shall be
re-allocated pro rata to the outstanding shares of Series 1998/A Preferred Stock
held of record by the holder of record at the close of business on the date of
such conversion of the shares of Series 1998/A Preferred Stock so converted,
unless there shall be no other shares of Series 1998/A Preferred Stock held of
record by such holder at the close of business on such date, in which case such
portion of the Aggregate Threshold Price Conversion Amount shall not be so
re-allocated. For purposes of determining the amount of the Threshold Price
Conversion Amount specified in clause (2) of the definition of the term
Threshold Price Conversion Amount which is allocated to the shares of Series
1998/A Preferred Stock issued to each holder thereof, the Threshold Price
Conversion Amount specified in clause (2) of the definition of the term
Threshold Price Conversion Amount shall be allocated to each certificate for
shares of Series 1998/A Preferred
-39-
<PAGE> 40
Stock based on the portion of the Aggregate Threshold Conversion Amount
specified in which is allocated to such certificate.
(2) FIXED CONVERSION DATE So long as on the Fixed Conversion Date
(x) the Corporation shall be in compliance in all material respects with its
obligations to the holders of the Series 1998/A Preferred Stock (including,
without limitation, its obligations under the Transaction Documents), (y) if the
Fixed Conversion Date is before the end of the Registration Period, the
Registration Statement shall be effective and available for use by the selling
stockholders named therein or all holders of shares of Series 1998/A Preferred
Stock shall be entitled to sell all shares of Common Stock issuable to them upon
conversion of the Series 1998/A Preferred Stock without registration under the
1933 Act and without limitation on the volume of sales or manner of sale and (z)
the Corporation shall not have commenced a voluntary case or other proceeding,
and no person shall have commenced an involuntary case or other proceeding
against the Corporation, in any such case seeking liquidation, reorganization or
other relief with respect to the Corporation or its debts under any bankruptcy,
insolvency, receivership, moratorium or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of the Corporation's
property, the Corporation shall not have consented to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, and the Corporation shall not have
made a general assignment for the benefit of creditors, then on the Fixed
Conversion Date all of the outstanding shares of Series 1998/A Preferred Stock
shall be converted, in accordance with the provisions, and subject to the
limitations, of this Section 10 into shares of Common Stock to the extent the
same are at such time convertible into shares of Common Stock. On the Fixed
Conversion Date all outstanding shares of Series 1998/A Preferred Stock shall be
converted into such number of shares of Common Stock as shall be determined
pursuant to this Section 10 as if the conversion of such number of shares of
Series 1998/A Preferred Stock were made by the holders thereof in accordance
herewith on the Fixed Price Conversion Date, without any further action on the
part of the holders of such shares of Series 1998/A Preferred Stock; provided,
however, that if the limitation on conversion based on beneficial ownership
provided in Section 10(a) would limit such conversion of any shares of Series
1998/A Preferred Stock held by any holder, such shares of Series 1998/A
Preferred Stock of such holder so restricted shall not convert pursuant to this
Section 10(c)(2) on the Fixed Conversion Date and thereafter such holder shall
use its best efforts to reduce its beneficial ownership of shares of Common
Stock as promptly as practicable so as to permit the full conversion of the
Series 1998/A Preferred Stock held by such holder at such Conversion Price and,
unless the next succeeding proviso is inapplicable, such holder shall have no
other rights as a holder of Series 1998/A Preferred Stock other than the right
to convert the Series 1998/A into shares of Common Stock pursuant to Section 10;
provided further, however, that if the limitation on conversion of any shares of
Series 1998/A Preferred Stock based on the Maximum Share amount would limit such
conversion of any shares of Series 1998/A Preferred Stock held by any holder,
such shares of Series 1998/A Preferred Stock of such holder which are so limited
shall not convert pursuant to this Section 10(c)(2) on the Fixed Conversion Date
and thereafter shall remain outstanding and entitled to all the rights and
preferences provided in this Certificate of Designations. Upon receipt by the
Corporation from a holder of the certificates for shares of Series 1998/A
Preferred Stock converted into shares of
-40-
<PAGE> 41
Common Stock in accordance with this Section 10(c)(2), the Corporation shall
issue and, within three Trading Days after such surrender, deliver to or upon
the order of such holder (1) that number of shares of Common Stock as shall be
issuable in respect of the conversion of the number of shares of Series 1998/A
Preferred Stock so converted into Common Stock as shall be determined in
accordance herewith and (2) a new certificate for the balance of shares of
Series 1998/A Preferred Stock, if any.
SECTION 11. REDEMPTION UPON OPTIONAL REDEMPTION EVENT OR
REGISTRATION REDEMPTION EVENT.
(a) REDEMPTION RIGHT UPON OPTIONAL REDEMPTION EVENT. If an
Optional Redemption Event occurs, then each holder of shares of Series 1998/A
Preferred Stock shall have the right, at such holder's option, to require the
Corporation to redeem all of such holder's shares of Series 1998/A Preferred
Stock, or any portion thereof, on the date that is three Business Days after the
date of the Holder Notice given with respect to such Optional Redemption Event.
Each holder of shares of Series 1998/A Preferred Stock shall have the right to
require the Corporation to redeem all or any such portion of such holder's
shares of Series 1998/A Preferred Stock if an Optional Redemption Event occurs
at any time while any of such holder's shares of Series 1998/A Preferred Stock
are outstanding at a price equal to the Optional Redemption Price.
(b) NOTICES; METHOD OF EXERCISING OPTIONAL REDEMPTION RIGHTS, Etc.
(1) On or before the fifth Business Day after the occurrence of an Optional
Redemption Event, the Corporation shall give to each holder of outstanding
shares of Series 1998/A Preferred Stock a Corporation Notice of the occurrence
of such Optional Redemption Event and of the redemption right set forth herein
arising as a result thereof. The Corporation Notice shall set forth:
(i) the date by which the optional redemption right must be
exercised, and
(ii) a description of the procedure (set forth below) which each
such holder must follow to exercise such holder's optional redemption
right.
No failure of the Corporation to give a Corporation Notice or defect therein
shall limit the right of any holder of shares of Series 1998/A Preferred Stock
to exercise the optional redemption right or affect the validity of the
proceedings for the redemption of such holder's shares of Series 1998/A
Preferred Stock.
(2) To exercise its optional redemption right, each holder of
outstanding shares of Series 1998/A Preferred Stock shall deliver to the
Corporation on or before the thirtieth day after a Corporation Notice is given
to such holder (or if no Corporation Notice has been given to such holder,
within forty days after such holder first learns of the Optional Redemption
Event) a Holder Notice to the Corporation setting forth the name of such holder,
and number of such holder's shares of Series 1998/A Preferred Stock to be
redeemed. A Holder Notice may be revoked by such holder giving such Holder
Notice by giving notice of such revocation to the Corporation at any time prior
to the time the Corporation pays the Optional Redemption Price to such holder.
-41-
<PAGE> 42
(3) If a holder of shares of Series 1998/A Preferred Stock shall
have given a Holder Notice, on the date which is three Business Days after the
date such Holder Notice is given (or such later date as such holder surrenders
such holder's certificates for the shares of Series 1998/A Preferred Stock
redeemed) the Corporation shall make payment in immediately available funds of
the applicable Optional Redemption Price to such account as specified by such
holder in writing to the Corporation at least one Business Day prior to the
applicable redemption date. A holder of shares of Series 1998/A Preferred Stock
which are redeemed pursuant to Sections 11(a) and 11(b) shall not be entitled to
payment of the Optional Redemption Price of such shares of Series 1998/A
Preferred Stock until such holder shall have surrendered the certificate(s) for
such shares of Series 1998/A Preferred Stock to the Corporation or, in the case
of the loss, theft or destruction of any such certificate, given indemnity in
accordance with Section 15(b).
(c) REDEMPTION RIGHT UPON REGISTRATION REDEMPTION EVENT. If a
Registration Redemption Event occurs, then each holder of shares of Series
1998/A Preferred Stock shall have the right by complying with the requirements
of this Section 11(c), at such holder's option, to require the Corporation to
redeem all of such holder's shares of Series 1998/A Preferred Stock, or from
time to time any portion thereof, by making payment of the Registration
Redemption Price to such holder in immediately available funds to such account
as specified by such holder by notice to the Corporation, on the date that is
three Business Days after the date a Holder Registration Redemption Notice is
given by such holder (or such later date as such holder surrenders to the
Corporation the certificate(s) for the shares of Series 1998/A Preferred Stock
redeemed). A holder of shares of Series 1998/A Preferred Stock shall exercise
its right to require redemption pursuant to this Section 11(c) by giving a
Holder Registration Redemption Notice at any time after a Registration
Redemption Event occurs and prior to the SEC Effective Date. If a holder of
shares of Series 1998/A Preferred Stock shall have given a Holder Registration
Redemption Notice, the Corporation shall redeem such holder's shares of Series
1998/A Preferred Stock or the portion of such holder's shares of Series 1998/A
Preferred Stock as stated in such Holder Registration Redemption Notice at a
price per share equal to the Registration Redemption Price. A holder of shares
of Series 1998/A Preferred Stock which are redeemed pursuant to this Section
11(c) shall not be entitled to payment of the Registration Redemption Price of
such shares of Series 1998/A Preferred Stock until such holder shall have
surrendered the certificate(s) for such shares of Series 1998/A Preferred Stock
to the Corporation or, in the case of the loss, theft or destruction of any such
certificate, given indemnity in accordance with Section 15(b). A Holder
Registration Redemption Notice may be revoked by the holder giving such Holder
Registration Redemption Notice by giving notice of such revocation to the
Corporation at any time prior to the time the Corporation pays the Registration
Redemption Price to such holder.
(d) OTHER. (1) In connection with a redemption pursuant to this
Section 11 of less than all of the shares of Series 1998/A Preferred Stock
evidenced by a particular certificate, promptly, but in no event later than
three Business Days after surrender of such certificate to the Corporation, the
Corporation shall issue and deliver to such holder a replacement certificate for
-42-
<PAGE> 43
the shares of Series 1998/A Preferred Stock evidenced by such certificate which
have not been redeemed.
(2) A Holder Notice or Holder Registration Redemption Notice given
by a holder of shares of Series 1998/A Preferred Stock shall be deemed for all
purposes to be in proper form unless the Corporation notifies such holder in
writing within three Business Days after such Holder Notice or Holder
Registration Redemption Notice has been given (which notice shall specify all
defects in such Holder Notice or Holder Registration Redemption Notice), and any
Holder Notice or Holder Registration Redemption Notice containing any such
defect shall nonetheless be effective on the date given if such holder promptly
undertakes in writing to correct all such defects. Notwithstanding the absence
of any such undertaking from such holder, no such claim of error shall limit or
delay performance of the Corporation's obligation to redeem all shares of Series
1998/A Preferred Stock not in dispute.
(3) If on or before the applicable date for redemption the
Corporation shall have failed to pay in full the Optional Redemption Price or
the Registration Redemption Price for all shares of Series 1998/A Preferred
Stock to be redeemed in full to the holders thereof or to deposit the same with
an Eligible Bank in accordance with Section 15(c), then without in any way
relieving the Corporation of its obligation to pay such amount in accordance
herewith (except to the extent expressly provided in this Section 11(d)(3)), the
holder of any such share of Series 1998/A Preferred Stock shall have the right
to convert such share of Series 1998/A Preferred Stock into Common Stock in
accordance with Section 10(a) (subject to the Maximum Share Amount provided in
Section 7(a) and the limitation based on beneficial ownership contained in the
second sentence of Section 10(a)(7)) at any time prior to the date on which the
Corporation pays the Optional Redemption Price or Registration Redemption Price,
as the case may be, of such share of Series 1998/A Preferred Stock to such
holder (together with any amount due to such holder pursuant to Section 15(d))
or so deposits the same (together with any amount due to such holder pursuant to
Section 15(d)) and gives notice to such holder of such deposit; provided,
however, that the shares of Common Stock received by such holder upon any such
conversion in certain circumstances may be subject to restrictions on resale by
such holder arising under applicable securities laws to the extent not
registered for resale by such holder pursuant to the Registration Statement. If
a holder of shares of Series 1998/A Preferred Stock converts all or any portion
of such holder's shares of Series 1998/A Preferred Stock as permitted by this
Section 11(d)(3), the amount of the Optional Redemption Price or the
Registration Redemption Price, as the case may be, due to such holder with
respect to the number of shares of Series 1998/A Preferred Stock so converted
shall be reduced by $1,000 for each share of Series 1998/A Preferred Stock so
converted.
SECTION 12. VOTING RIGHTS; CERTAIN RESTRICTIONS.
(a) VOTING RIGHTS. Except as otherwise required by law or
expressly provided herein, shares of Series 1998/A Preferred Stock shall not be
entitled to vote on any matter.
-43-
<PAGE> 44
(b) CERTIFICATE OF INCORPORATION; CERTAIN STOCK. The affirmative
vote or written consent of the Majority Holders, voting separately as a class,
will be required for (1) any amendment, alteration, or repeal, whether by merger
or consolidation or otherwise, of the Corporation's Certificate of Incorporation
if the amendment, alteration, or repeal materially and adversely affects the
powers, preferences, or special rights of the Series 1998/A Preferred Stock, or
(2) the creation or issuance of any Senior Dividend Stock, Senior Liquidation
Stock, Parity Dividend Stock or Parity Liquidation Stock; provided, however,
that any increase in the authorized Preferred Stock of the Corporation or the
creation and issuance of any stock which is both Junior Dividend Stock and
Junior Liquidation Stock shall not be deemed to affect materially and adversely
such powers, preferences, or special rights and any such increase or creation
and issuance may be made without any such vote by the holders of Series 1998/A
Preferred Stock except as otherwise required by law; and provided further,
however, that no such amendment, alteration or repeal shall (i) reduce the
Optional Redemption Price, Redemption Price, Minimum Price Redemption Price,
Registration Redemption Price, Share Limitation Redemption Price, Business
Combination Redemption Price or the amount payable to a holder of shares of
Series 1998/A Preferred Stock pursuant to Section 5(b) or 5(c), (ii) reduce the
percentage in, or otherwise change the definition of Majority Holders, (iii)
change the method of calculating the Conversion Price in a manner adverse to the
holders of shares of Series 1998/A Preferred Stock or reduce the number of
shares of Common Stock issuable upon any conversion of shares of Series 1998/A
Preferred Stock (other than any reduction in the number of shares of Common
Stock so issuable pursuant to an amendment of the Certificate of Incorporation
which effects a combination of the outstanding shares of Common Stock and
results in an adjustment pursuant to clause (iii) of the first proviso and
clause (iii) of the second proviso to the definition of the term Conversion
Price) or (iv) amend, modify or repeal any provision of this Section 12(b),
unless in each such case referred to in the preceding clauses (i) through (iv)
such amendment, modification or repeal has been approved by the affirmative vote
or written consent of the holders of all outstanding shares of Series 1998/A
Preferred Stock, voting separately or as a class.
(c) REPURCHASES OF SERIES 1998/A PREFERRED STOCK. The Corporation
shall not repurchase or otherwise acquire any shares of Series 1998/A Preferred
Stock (other than pursuant to Section 7(a), Section 9(a), Section 9(b) or
Section 11) unless the Corporation offers to repurchase or otherwise acquire
simultaneously a pro rata portion of each holder's shares of Series 1998/A
Preferred Stock based on the total number of shares of Series 1998/A Preferred
Stock outstanding for cash at the same price per share.
(d) OTHER. So long as any shares of Series 1998/A Preferred Stock
are outstanding:
(1) LIMITATION ON INDEBTEDNESS. At all times prior to the date
which is 609 days after the Issuance Date, the Corporation will not itself, and
will not permit any subsidiary of the Corporation to, create, assume, incur, in
any manner become liable in respect of, including, without limitation, by reason
of any business combination transaction, or suffer to exist (all of which are
referred to herein as "incurring"), any Indebtedness other than Permitted
Indebtedness.
-44-
<PAGE> 45
(2) PAYMENT OF OBLIGATIONS. The Corporation will pay and
discharge, and will cause each subsidiary of the Corporation to pay and
discharge, all their respective material obligations and liabilities, including,
without limitation, tax liabilities, in the ordinary course consistent with the
Corporation's practices prior to the filing of this Certificate of Designations
with the Secretary of State of the State of Delaware, except where the same may
be contested in good faith by appropriate proceedings.
(3) MAINTENANCE OF PROPERTY; INSURANCE. (A) The Corporation will
keep, and will cause each subsidiary of the Corporation to keep, all material
property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted.
(B) The Corporation will maintain, and will cause each subsidiary
of the Corporation to maintain, with financially sound and responsible insurance
companies, insurance in at least such amounts and against such risks as are in
the Corporation's judgment reasonable, subject to customary deductibles, to the
extent such insurance is available on commercially reasonable terms.
(4) CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The
Corporation will continue, and will cause each subsidiary of the Corporation to
continue, to engage in business of the same general types as conducted by the
Corporation and its subsidiaries at the time the Certificate of Designations is
filed with the Secretary of State of the State of Delaware, and will preserve,
renew and keep in full force and effect, and will cause each subsidiary of the
Corporation to preserve, renew and keep in full force and effect, their
respective corporate existence and their respective material rights, privileges
and franchises necessary or desirable in the normal conduct of business.
(5) COMPLIANCE WITH LAWS. The Corporation will comply, and will
cause each subsidiary of the Corporation to comply, in all material respects
with all applicable laws, ordinances, rules, regulations, decisions, orders and
requirements of governmental authorities and courts (including, without
limitation, environmental laws) except (i) where compliance therewith is
contested in good faith by appropriate proceedings or (ii) where non-compliance
therewith would not have a material adverse effect on the business, financial
condition, operations, performance or properties of the Corporation and its
subsidiaries, taken as a whole.
(6) INVESTMENT COMPANY ACT. The Corporation will not be or become
an open-end investment trust, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act of 1940, as amended, or any successor provision.
(7) TRANSACTIONS WITH AFFILIATES. The Corporation will not, and
will not permit any subsidiary of the Corporation, directly or indirectly, to
pay any funds to or for the account of, make any investment (whether by
acquisition of stock or Indebtedness, by loan, advance, transfer of property,
guarantee or other agreement to pay, purchase or service, directly or
indirectly, any Indebtedness, or otherwise) in, lease, sell, transfer or
otherwise dispose of any assets, tangible or intangible, to, or participate in,
or effect any transaction in connection with,
-45-
<PAGE> 46
any joint enterprise or other joint arrangement with, any Affiliate of the
Corporation, except, on terms to the Corporation or such subsidiary which the
Board of Directors determines in good faith are in the best interests of the
Corporation and its stockholders.
SECTION 13. OUTSTANDING SHARES. For purposes of this Certificate
of Designations, all shares of Series 1998/A Preferred Stock shall be deemed
outstanding except (i) from the date a Conversion Notice is given by a holder of
Series 1998/A Preferred Stock, all shares of Series 1998/A Preferred Stock
converted into Common Stock (so long as the Corporation shall issue the shares
of Common Stock issuable upon such conversion as and when requested by this
Certificate of Designations); (ii) from the date of registration of transfer,
all shares of Series 1998/A Preferred Stock held of record by the Corporation or
any subsidiary or Affiliate (as defined herein) of the Corporation (other than
any original holder of shares of Series 1998/A Preferred Stock) and (iii) from
the applicable Share Limitation Redemption Date, Redemption Date, Minimum Price
Redemption Date, date of redemption pursuant to Section 11(c), Optional
Redemption Date or date of redemption pursuant to Section 10(b)(6)(A), all
shares of Series 1998/A Preferred Stock which are redeemed, so long as in each
case the Share Limitation Redemption Price, Redemption Price, Minimum Price
Redemption Price, Registration Redemption Price, Optional Redemption Price or
Business Combination Redemption Price, as the case may be, of such shares of
Series 1998/A Preferred Stock shall have been paid by the Corporation as and
when due hereunder or deposited in accordance with Section 15(c). If at any time
after the Issuance Date no shares of Series 1998/A Preferred Stock shall be
outstanding and the Corporation shall have satisfied all of its obligations
under this Certificate of Designations to the Persons who were holders of shares
of Series 1998/A Preferred Stock, then to the extent permitted by the General
Corporation Law of the State of Delaware this Certificate of Designations shall
cease to be of any further force or effect.
SECTION 14. FORMS OF NOTICES. The forms of certain of the notices
required or permitted under this Certificate of Designations shall be as
provided in this Section 14 or as otherwise agreed by the Corporation and the
Majority Holders.
(a) FORM OF NOTICE OF CONVERSION OF SERIES 1998/A CONVERTIBLE
PREFERRED STOCK.
NOTICE OF CONVERSION
OF
SERIES 1998/A CONVERTIBLE PREFERRED STOCK
OF
CREATIVE BIOMOLECULES, INC.
TO: Creative BioMolecules, Inc. with a copy to:
45 South Street
Hopkinton, Massachusetts 01748 ChaseMellon Shareholder Services,
L.L.C., as Conversion Agent
Attention: Chief Financial Officer 111 Founders Plaza, Suite 1100
-46-
<PAGE> 47
East Hartford, Connecticut 06108
Facsimile No: (617) 912-2991
Attention: Ms. Lee Tinto
Facsimile No.: (860) 289-6069
(1) Pursuant to the terms of the Series 1998/A Convertible
Preferred Stock (the "Preferred Stock"), of Creative BioMolecules, Inc., a
Delaware corporation (the "Corporation"), the undersigned (the "Holder") hereby
elects to convert _____________ shares of the Preferred Stock, including the
aggregate Accrual Amount of $ ___________ into shares of Common Stock, $.01 par
value (the "Common Stock"), of the Corporation, at a Conversion Price per share
of Common Stock of $ __________, or such other securities into which the
Preferred Stock is currently convertible. Capitalized terms used in this Notice
and not otherwise defined herein have the respective meanings provided in the
Certificate of Designations of Series 1998/A Convertible Preferred Stock.
(2) The number of shares of Common Stock issuable upon the
conversion of the shares of Preferred Stock to which this Notice relates is
________________.
(3) Set forth below or on a schedule which accompanies this Notice
are the Market Prices during the Measurement Period applicable to this Notice
and an indication of the five Market Prices used to determine the Conversion
Price set forth above.
Date Market Price
---- ------------
1. ___________, ____ $___________
2. ___________, ____ $___________
3. ___________, ____ $___________
4. ___________, ____ $___________
5. ___________, ____ $___________
6. ___________, ____ $___________
7. ___________, ____ $___________
8. ___________, ____ $___________
9. ___________, ____ $___________
10. ___________, ____ $___________
-47-
<PAGE> 48
11. ___________, ____ $___________
12. ___________, ____ $___________
13. ___________, ____ $___________
14. ___________, ____ $___________
15. ___________, ____ $___________
16. ___________, ____ $___________
17. ___________, ____ $___________
18. ___________, ____ $___________
19. ___________, ____ $___________
20. ___________, ____ $___________
(4) Please issue certificates for the number of shares of Common
Stock or other securities into which such number of shares of Preferred Stock is
convertible in the name(s) specified immediately below or, if additional space
is necessary, on an attachment hereto:
Name Name
Address Address
SS or Tax ID Number SS or Tax ID Number
(5) The undersigned hereby represents to the Corporation that the
exercise of conversion rights contained in this Notice does not violate the
provisions of Section 10(a) of the Certificate of Designations relating to
beneficial ownership in excess of 4.9% of the Common Stock.
(6) If the shares of Common Stock issuable upon conversion of the
Preferred Stock have not been registered for resale under the 1933 Act and this
Notice is given prior to the end of the Registration Period under the
Subscription Agreement by which the Holder is bound, the Holder represents and
warrants that (i) the shares of Common Stock not so registered are
-48-
<PAGE> 49
being acquired for the account of the Holder for investment, and not with a view
to, or for resale in connection with, the public distribution thereof other than
pursuant to registration under the 1933 Act or an exemption from registration
under the 1933 Act, and that the Holder has no present intention of distributing
or reselling the shares of Common Stock not so registered other than pursuant to
registration under the 1933 Act or an exemption from registration under the 1933
Act and (ii) the Holder is an "accredited investor" as defined in Regulation D
under the 1933 Act. The Holder further agrees that (A) the shares of Common
Stock not so registered shall not be sold or transferred unless either (i) they
first shall have been registered under the 1933 Act or (ii) the Corporation
first shall have been furnished with an opinion of legal counsel reasonably
satisfactory to the Corporation to the effect that such sale or transfer is
exempt from the registration requirements of the 1933 Act and (B) until such
shares are registered for resale under the 1933 Act, the Corporation may place a
legend on the certificate(s) for the shares of Common Stock not so registered to
that effect and place a stop-transfer restriction in its records relating to the
shares of Common Stock not so registered, all in accordance with the
Subscription Agreement by which the Holder is bound.
Date _________________________ ____________________________________________
Signature of Holder
(Must be signed exactly as name
appears on the Preferred Stock Certificate.)
(b) FORM OF CORPORATION INCONVERTIBILITY NOTICE.
CORPORATION INCONVERTIBILITY NOTICE
(SECTION 7(a)(2) OF THE CERTIFICATE OF DESIGNATIONS OF
SERIES 1998/A CONVERTIBLE PREFERRED STOCK)
TO: __________________________
(Name of Holder)
(1) Pursuant to the terms of the Series 1998/A Convertible
Preferred Stock (the "Preferred Stock"), Creative BioMolecules, Inc., a Delaware
corporation (the "Corporation"), hereby notifies the above-named holder (the
"Holder") of shares of Preferred Stock that on _____________________ (fill in
date) an Inconvertibility Day or a Registration Restriction Inconvertibility had
occurred and on such date __________ (fill in number) shares of Preferred Stock
became inconvertible by reason of such occurrence.
(2) Check (a) or (b):
[ ] (a) This Notice relates to an Inconvertibility Day
-49-
<PAGE> 50
[ ] (b) This Notice related to a Registration Restriction
Inconvertibility and the five Trading Days resulting in such
Registration Restriction Inconvertibility and the applicable
Conversion Price on each such Trading Day are as follows:
1. ___________, ____ $___________
2. ___________, ____ $___________
3. ___________, ____ $___________
4. ___________, ____ $___________
5. ___________, ____ $___________
(3) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Certificate of Designations of
Series 1998/A Convertible Preferred Stock.
Date _________________________ CREATIVE BIOMOLECULES, INC.
By______________________________
Title:
(c) FORM OF HOLDER INCONVERTIBILITY NOTICE.
HOLDER INCONVERTIBILITY NOTICE
(SECTION 7(a)(2) OF THE CERTIFICATE OF DESIGNATIONS OF
SERIES 1998/A CONVERTIBLE PREFERRED STOCK)
TO: CREATIVE BIOMOLECULES, INC.
(1) Pursuant to the terms of the Series 1998/A Convertible
Preferred Stock (the "Preferred Stock"), the undersigned (the "Holder"), hereby
notifies Creative BioMolecules, Inc., a Delaware corporation (the
"Corporation"), that on ________________ (fill in date) an Inconvertibility Day
or a Registration Restriction Inconvertibility had occurred and on such date
_____________ (fill in number) shares of Preferred Stock became inconvertible by
reason of such occurrence.
(2) Check (a) or (b):
-50-
<PAGE> 51
[ ] (a) This Notice relates to an Inconvertibility Day
[ ] (b) This Notice related to a Registration Restriction
Inconvertibility and the five Trading Days resulting in such
Registration Restriction Inconvertibility and the applicable
Conversion Price on each such Trading Day are as follows:
1. ___________, ____ $___________
2. ___________, ____ $___________
3. ___________, ____ $___________
4. ___________, ____ $___________
5. ___________, ____ $___________
(3) If the following date and amounts are completed in this
Notice, the Holder hereby directs the Corporation to redeem the number of shares
of Preferred Stock set forth below in accordance with Section 7(a) of the
Certificate of Designations of Series 1998/A Convertible Preferred Stock (the
"Certificate of Designations") as set forth below:
(a) Number of shares of Preferred Stock to be redeemed: _________
(fill in)
(b) On ____________ (fill in Share Limitation Redemption Date) or
such later date as the Holder shall surrender to the Corporation the
certificates for the shares of Preferred Stock redeemed, the Corporation
shall pay to the Holder the Share Limitation Redemption Price per share
of Preferred Stock to be redeemed of $__________. The Share Limitation
Redemption Price is equal to the sum of (1) $1,000.00 plus (2)
$____________ for the Accrual Amount on such share to such Share
Limitation Redemption Date.
(4) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Certificate of Designations.
Date _________________________ NAME OF HOLDER:
________________________________
By______________________________
Title:
-51-
<PAGE> 52
(d) FORM OF REDEMPTION ELECTION.
HOLDER REDEMPTION NOTICE
(SECTION 7(a)(2) OF THE CERTIFICATE OF DESIGNATIONS OF
SERIES 1998/A CONVERTIBLE PREFERRED STOCK)
TO: CREATIVE BIOMOLECULES, INC.
(1) Pursuant to the terms of the Series 1998/A Convertible
Preferred Stock (the "Preferred Stock"), the undersigned (the "Holder") hereby
notifies Creative BioMolecules, Inc., a Delaware corporation (the
"Corporation"), that the Holder is exercising its right to require the
Corporation to redeem _____________ shares of Preferred Stock in accordance with
Section 7(a) of the Certificate of Designations of Series 1998/A Convertible
Preferred Stock (the "Certificate of Designations"). On _________________ (fill
in Share Limitation Redemption Date) or such later date as the Holder shall
surrender to the Corporation the certificates for the shares of Preferred Stock
redeemed, the Corporation shall pay the Holder the Share Limitation Redemption
Price per share of Preferred Stock to be redeemed of $__________. The Share
Limitation Redemption Price is equal to the sum of (1) $1,000.00 plus (2)
$__________ for the Accrual Amount on such share to such Share Limitation
Redemption Date.
(2) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Certificate of Designations.
Date _________________________ NAME OF HOLDER:
_________________________________
By _____________________________
(e) FORM OF MANDATORY REDEMPTION WAIVER.
MANDATORY REDEMPTION WAIVER
(SECTION 7(a)(2) OF THE CERTIFICATE OF DESIGNATIONS OF
SERIES 1998/A CONVERTIBLE PREFERRED STOCK)
Creative BioMolecules, Inc., a Delaware corporation (the
"Corporation"), and the undersigned holder (the "Holder") of shares of the
Corporation's Series 1998/A Convertible Preferred Stock (the "Preferred Stock")
hereby agree as follows:
-52-
<PAGE> 53
1. The Corporation's or the Holder's Inconvertibility Notice given
on ______________ (the "Waiver Commencement Date"), if any, is hereby rescinded
and the Holder's shares of Preferred Stock shall not be redeemed pursuant to
Section 7(a) of the Certificate of Designations of Series 1998/A Convertible
Preferred Stock (the "Certificate of Designations") by reason of such
Inconvertibility Notice or any inconvertibility of any of the Holder's shares of
Preferred Stock which may arise pursuant to Section 7(a) of the Certificate of
Designations during the period ending on the date set forth below in this
Section 1 (the "Waiver Period").
Date for end of Waiver Period: ______________, ____
2. If this Mandatory Redemption Waiver is given in connection with
a Registration Restriction Inconvertibility, promptly, but in no event later
than the date which is 15 days after the date of this Mandatory Redemption
Waiver, the Corporation shall file a Registration Statement with the SEC
relating to the resale by the Holder of the number of Registrable Securities (as
defined in the Holder's Subscription Agreement) set forth below in this Section
2, which Registration Statement may be constituted in any manner which does not
have the effect of suspending or terminating the effectiveness of any and all
Registration Statements filed by the Corporation pursuant to Section 8(b)(1) of
the Subscription Agreement or otherwise with respect to the Registrable
Securities which names the Holder as a selling stockholder, and shall thereafter
use its best efforts to obtain effectiveness of such Registration Statement.
Such Registration Statement shall in all respects be deemed a Registration
Statement (as defined in the Certificate of Designations).
Number of Registrable Securities: _______________
3. If the Corporation shall default in the performance of its
obligations set forth herein or shall fail to comply in any material respects
with any of its obligations under the Certificate of Designations, the
Subscription Agreements, the Transfer Agent Instruction or any document or
instrument executed and delivered by the Corporation in connection therewith,
this Mandatory Redemption Waiver shall cease to be of further force and effect
and the rights, liabilities and obligations of the parties shall be restored to
those which would have existed in the absence of this Mandatory Redemption
Waiver.
4. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts, without regard to its conflict of laws
provisions. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings provided in the Certificate of Designations.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective officers or other representatives
thereunto duly authorized as of the respective dates set forth below.
CREATIVE BIOMOLECULES, INC.
-53-
<PAGE> 54
By: ______________________________________
Title:
Date: ____________________________________
NAME OF HOLDER:
__________________________________________
By: ______________________________________
Title:
Date: ____________________________________
(f) FORM OF REDEMPTION NOTICE.
REDEMPTION NOTICE
(SECTION 9(a) OF THE CERTIFICATE OF DESIGNATIONS OF
SERIES 1998/A CONVERTIBLE PREFERRED STOCK)
TO: ______________________
(Name of Holder)
(1) Pursuant to the terms of the Series 1998/A Convertible
Preferred Stock (the "Preferred Stock"), Creative BioMolecules, Inc., a Delaware
corporation (the "Corporation"), hereby notifies the above-named holder (the
"Holder") that the Corporation is exercising its right to redeem ____________
shares of Preferred Stock held by the Holder in accordance with Section 9(a) of
the Certificate of Designations of the Series 1998/A Convertible Preferred Stock
(the "Certificate of Designations").
(2) The Redemption Date is ______________.
(3) The Redemption Price per share of Preferred Stock is
$_________.
(4) Upon surrender to the Corporation of the certificate(s) for
the shares of Preferred Stock to be redeemed (but in no event earlier than the
Redemption Date), the Corporation will make payment of the applicable Redemption
Price in accordance with the Certificate of Designations.
-54-
<PAGE> 55
(5) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Certificate of Designations.
CREATIVE BIOMOLECULES, INC.
By _____________________________
Title:
(g) FORM OF REDEMPTION NOTICE.
MINIMUM PRICE REDEMPTION NOTICE
(SECTION 9(b) OF THE CERTIFICATE OF DESIGNATIONS OF
SERIES 1998/A CONVERTIBLE PREFERRED STOCK)
TO: _________________________
(Name of Holder)
(1) Pursuant to the terms of the Series 1998/A Convertible
Preferred Stock (the "Preferred Stock"), Creative BioMolecules, Inc., a Delaware
corporation (the "Corporation"), hereby notifies the above-named holder (the
"Holder") that the Corporation is exercising its right to redeem ___________
shares of Preferred Stock held by the Holder in accordance with Section 9(b) of
the Certificate of Designations of the Series 1998/A Convertible Preferred Stock
(the "Certificate of Designations").
(2) The Minimum Price Redemption Event by reason of which this
Notice is given occurred on __________________ and the Volume-Weighted Trading
Price of the Common Stock during the Period ________________ to ________________
was $______________.
(3) The Redemption Date is _________________.
(4) The Minimum Price Redemption Price per share of Preferred
Stock is $_________.
(5) Upon surrender to the Corporation of the certificate(s) for
the shares of Preferred Stock to be redeemed (but in no event earlier than the
Minimum Price Redemption Date), the Corporation will make payment of the
applicable Minimum Price Redemption Price in accordance with the Certificate of
Designations.
(6) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Certificate of Designations.
-55-
<PAGE> 56
CREATIVE BIOMOLECULES, INC.
By _____________________________
Title:
(h) FORM OF CORPORATION NOTICE.
CORPORATION NOTICE
(SECTION 11(b)(1) OF THE CERTIFICATE OF DESIGNATIONS OF
SERIES 1998/A CONVERTIBLE PREFERRED STOCK)
TO: ________________________
(Name of Holder)
(1) An Optional Redemption Event described in the Certificate of
Designations (the "Certificate of Designations") of Series 1998/A Convertible
Preferred Stock (the "Preferred Stock") of Creative BioMolecules, Inc., a
Delaware corporation (the "Corporation"), occurred on ____________, ____. As a
result of such Optional Redemption Event, the above-named holder (the "Holder")
is entitled to exercise its optional redemption rights pursuant to Section
11(b)(2) of the Certificate of Designations.
(2) The Holder's optional redemption rights must be exercised on
or before ____________, ____.
(3) On or before the date set forth in the preceding paragraph
(2), the Holder must deliver to the Corporation:
(a) a Holder Notice, in the form set forth in Section 14(i) of the
Certificate of Designations; and
(b) the certificates for the shares of Preferred Stock to be
redeemed, duly endorsed for transfer to the Corporation the shares to be
redeemed.
(4) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Certificate of Designations.
Date _________________________ CREATIVE BIOMOLECULES, INC.
-56-
<PAGE> 57
By______________________________
Title:
(i) FORM OF HOLDER NOTICE.
HOLDER NOTICE
(SECTION 11(b)(2) OF THE CERTIFICATE OF DESIGNATIONS OF
SERIES 1998/A CONVERTIBLE PREFERRED STOCK)
TO: CREATIVE BIOMOLECULES, INC.
(1) Pursuant to the terms of the Series 1998/A Convertible
Preferred Stock (the "Preferred Stock") of Creative BioMolecules, Inc., a
Delaware corporation (the "Corporation"), the undersigned hereby elects to
exercise its right to require redemption by the Corporation pursuant to Sections
11(a) and 11(b) of the Certificate of Designations of Series 1998/A Convertible
Preferred Stock (the "Certificate of Designations") of _________ shares of
Preferred Stock at an Optional Redemption Price per share in cash equal to the
sum of (a) the product obtained by multiplying (i) $1,000 times (ii) 110% plus
(b) an amount equal to $________ for the Accrual Amount on each share of Series
1998/A Preferred Stock to be redeemed to the date of redemption.
(2) The aggregate Optional Redemption Price of all shares of
Preferred Stock to be redeemed is $________.
(3) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Certificate of Designations.
Date: ___________________ NAME OF HOLDER:
By _____________________________________
Signature of Registered Holder
(Must be signed exactly as name
appears on the stock certificate.)
(j) FORM OF HOLDER REGISTRATION REDEMPTION NOTICE.
HOLDER REGISTRATION REDEMPTION NOTICE
-57-
<PAGE> 58
(SECTION 11(c) OF THE CERTIFICATE OF DESIGNATIONS
OF SERIES 1998/A CONVERTIBLE PREFERRED STOCK)
TO: CREATIVE BIOMOLECULES, INC.
(1) Pursuant to the terms of the Series 1998/A Convertible
Preferred Stock (the "Preferred Stock") of Creative BioMolecules, Inc., a
Delaware corporation (the "Corporation"), the undersigned (the "Holder") hereby
elects to exercise its right to require redemption by the Corporation pursuant
to Section 11(c) of the Certificate of Designations of the Preferred Stock (the
"Certificate of Designations") of _____________ shares of Preferred Stock at a
Registration Redemption Price per share in cash equal to the sum of (a) the
product obtained by multiplying (i) $1,000 times (ii) 105% plus (b) the Accrual
Amount on each share of Series 1998/A Preferred Stock to be redeemed to the date
of such redemption in accordance with Section 11(c) of the Certificate of
Designations equal to $__________.
(2) The aggregate Registration Redemption Price of all shares of
Preferred Stock to be redeemed from the Holder is $__________.
(3) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Certificate of Designations.
Date: ___________________ NAME OF HOLDER:
By _____________________________________
Signature of Registered Holder
(Must be signed exactly as name
appears on the stock certificate.)
SECTION 15. MISCELLANEOUS.
(a) NOTICES. Any notices required or permitted to be given under
the terms of this Certificate of Designations shall be in writing and shall be
delivered by telephone line facsimile transmission or if no telephone line
facsimile transmission number shall have been provided for such purpose, shall
be delivered personally or by courier or by mail and shall be deemed given upon
receipt, if delivered by telephone line facsimile transmission, personally or by
courier or five days after being placed in the mail (certified mail, return
receipt requested, in the case of any such notice to a Person at an address in
the United States of America), if mailed (a) in the case of the Corporation,
addressed to the Corporation at 45 South Street, Hopkinton, Massachusetts 01748,
Attention: Chief Financial Officer (telephone line facsimile transmission number
(508) 782-1544), or, (b) in the case of any holder of shares of Series 1998/A
Preferred
-58-
<PAGE> 59
Stock, at such holder's address or telephone line facsimile transmission number
shown on the stock books maintained by the Corporation with respect to the
Series 1998/A Preferred Stock or such other address or telephone line facsimile
transmission number as the Corporation shall have provided by notice to the
holders of shares of Series 1998/A Preferred Stock in accordance with this
Section 15(a) or any holder of shares of Series 1998/A Preferred Stock shall
have provided to the Corporation in accordance with this Section 15(a).
(b) REPLACEMENT OF CERTIFICATES. Upon receipt by the Corporation
of evidence reasonably satisfactory to the Corporation of the ownership of and
the loss, theft, destruction or mutilation of any certificate for shares of
Series 1998/A Preferred Stock and (1) in the case of loss, theft or destruction,
of indemnity from the record holder of the certificate for such shares of Series
1998/A Preferred Stock reasonably satisfactory in form to the Corporation (and
without the requirement to post any bond or other security) or (2) in the case
of mutilation, upon surrender and cancellation of the certificate for such
shares of Series 1998/A Preferred Stock, the Corporation will execute and
deliver to such holder a new certificate for such shares of Series 1998/A
Preferred Stock without charge to such holder.
(c) PAYMENT ON REDEMPTION; DEPOSIT OF REDEMPTION PRICE. If any
share of Series 1998/A Preferred Stock is to be redeemed as provided in Section
7(a), 9(a), (9b), 10(b)(6) or 11 and any notice required in connection therewith
shall have been timely given as provided therein, the applicable redemption
price of such share of Series 1998/A Preferred Stock to be so redeemed and with
respect to which any such notice has been given shall become due and payable on
the applicable redemption date. On and after such redemption date, provided that
the Corporation shall have paid such redemption price to the respective holders
of shares of Series 1998/A Preferred Stock who are entitled thereto on or prior
to the applicable redemption date or shall have deposited with an Eligible Bank
on or prior to such redemption date, to be held in trust for the respective
holders of shares of Series 1998/A Preferred Stock entitled thereto, an amount
sufficient to pay the applicable redemption price, then on such redemption date
the Accrual Amount on such share of Series 1998/A Preferred Stock shall cease to
accrue, and such share of Series 1998/A Preferred Stock shall be deemed not to
be outstanding and the holder thereof shall not be entitled to any rights of a
holder of shares of Series 1998/A Preferred Stock except to receive payment of
the applicable redemption price and all other rights hereunder with respect to
such share of Series 1998/A Preferred Stock shall cease. So long as the
Corporation shall have so paid or deposited the full amount of the applicable
redemption price on a timely basis, no holder of shares of Series 1998/A
Preferred Stock shall be entitled to interest on the amount so held by such
Eligible Bank and, so long as the Corporation shall be in compliance in all
material respects with its obligations to the holders of shares of Series 1998/A
Preferred Stock (including, without limitation, its obligations under the
Transaction Documents), the Corporation shall be entitled to any interest paid
by such Eligible Bank on the funds so deposited, subject to applicable abandoned
property and escheat laws. On presentation and surrender of the certificate for
such share of Series 1998/A Preferred Stock, such share shall be redeemed at the
applicable redemption price.
(d) OVERDUE AMOUNTS. If the Corporation fails to pay when due or
to deposit with an Eligible Bank in accordance with Section 15(c) the full
amount of the Share Limitation
-59-
<PAGE> 60
Redemption Price, the Redemption Price, the Minimum Price Redemption Price, the
Business Combination Redemption Price, the Optional Redemption Price or the
Registration Redemption Price on or before the respective Share Limitation
Redemption Date, the Redemption Date, the Minimum Price Redemption Date, the
date specified in Section 10(b)(6), the date of redemption specified in Section
11(b) or the date of redemption specified in Section 11(c), in each such case
for the number of shares of Series 1998/A Preferred Stock to be redeemed on such
date or to pay any other amount to any holder of shares of Series 1998/A
Preferred Stock when due, then the amount thereof shall bear interest at the
rate of 12% per annum (or such lesser rate as shall be the maximum rate allowed
by applicable law) from such date until paid or so deposited in full or until
such share of Series 1998/A Preferred Stock is converted in accordance with this
Certificate of Designations (in which case such interest shall remain due and
payable).
(e) CERTAIN CHANGES IN LAW. To the extent that the 1933 Act or the
1934 Act or any statutes, rules or regulations promulgated thereunder relating
to the registration for public sale of securities and/or the registration of
issuers thereof are superseded, replaced or repealed, the requirements of this
Certificate of Designations relating to such statutes, rules and regulations
shall be applied as nearly as practicable with respect to such successor
statutes, rules or regulations, if any, to achieve the purposes intended hereby.
-60-
<PAGE> 61
IN WITNESS WHEREOF, Creative BioMolecules, Inc., has caused this
certificate to be signed by one of its officers thereunto duly authorized as of
the 26th day of May, 1998.
CREATIVE BIOMOLECULES, INC.
By: /s/ Wayne E. Mayhew III
---------------------------------
Title: Vice President and Chief
Financial Officer
-61-
<PAGE> 1
EXHIBIT 10.54
================================================================================
SUBSCRIPTION AGREEMENT
DATED AS OF MAY 22, 1998
BY AND BETWEEN
CREATIVE BIOMOLECULES, INC.
AND
DELTA OPPORTUNITY FUND, LTD.
--------------------
SERIES 1998/A CONVERTIBLE PREFERRED STOCK
--------------------
Placement Agent:
DIAZ & ALTSCHUL CAPITAL, LLC
================================================================================
<PAGE> 2
CREATIVE BIOMOLECULES, INC.
SUBSCRIPTION AGREEMENT
SERIES 1998/A CONVERTIBLE PREFERRED STOCK
TABLE OF CONTENTS
PAGE
- --------------------------------------------------------------------------------
1. DEFINITIONS..........................................................1
2. AGREEMENT TO SUBSCRIBE...............................................6
(a) Subscription..................................................6
(b) Closing.......................................................6
3. BUYER'S REPRESENTATIONS, WARRANTIES, ETC.............................6
(a) Purchase for Investment.......................................6
(b) Accredited Investor...........................................6
(c) Reoffers and Resales..........................................6
(d) Company Reliance..............................................6
(e) Information Provided..........................................7
(f) Absence of Approvals..........................................7
(g) Subscription Agreement........................................7
(h) Absence of Brokers, Finders, Etc..............................7
4. COMPANY'S REPRESENTATIONS, WARRANTIES, ETC...........................8
(a) Organization and Authority....................................8
(b) Qualifications................................................8
(c) Capitalization................................................8
(d) Concerning the Shares and the Common Stock....................9
(e) Corporate Authorization.......................................9
(f) Non-contravention.............................................9
(g) Approvals.....................................................10
(h) Information Provided..........................................10
(i) SEC Filings...................................................10
(j) Conduct of Business...........................................10
(k) Absence of Certain Proceedings................................10
(l) Liabilities...................................................11
(m) Absence of Certain Changes....................................11
(n) Material Losses...............................................11
(o) Properties....................................................11
(p) Intellectual Property.........................................11
<PAGE> 3
(q) Compliance with Law...........................................12
(r) Absence of Brokers, Finders, Etc..............................12
(s) No Solicitation...............................................12
(t) Certain Issuances of Securities...............................12
(u) Tax Matters...................................................13
(v) Investment Company............................................13
(w) Absence of Rights Agreement...................................13
5. CERTAIN COVENANTS AND ACKNOWLEDGMENTS................................13
(a) Transfer Restrictions.........................................13
(b) Restrictive Legends...........................................13
(c) Transfer Agent Instruction....................................14
(d) Form D........................................................15
(e) Nasdaq Listing................................................15
(f) Use of Proceeds...............................................15
(g) State Securities Laws.........................................16
(h) Certain Issuances of Securities...............................16
(i) Limitation on Certain Actions.................................16
(j) Certain Registration Rights...................................17
(k) Best Efforts..................................................17
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE.............17
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.....................17
8. REGISTRATION RIGHTS..................................................18
(a) Mandatory Registration........................................18
(b) Obligations of the Company....................................19
(c) Obligations of the Buyer and other Investors..................22
(d) Reports under 1934 Act........................................23
9. INDEMNIFICATION AND CONTRIBUTION.....................................24
(a) Indemnification...............................................24
(b) Contribution..................................................25
(c) Other Rights..................................................25
10. MISCELLANEOUS........................................................25
(a) Governing Law.................................................25
(b) Headings......................................................25
(c) Severability..................................................26
(d) Notices.......................................................26
(e) Counterparts..................................................26
(f) Entire Agreement..............................................26
<PAGE> 4
(g) Waiver........................................................26
(h) Amendment.....................................................27
(i) Further Assurances............................................27
(j) Assignment of Rights..........................................27
(k) Certain Expenses..............................................27
(l) Survival......................................................28
(m) Public Statements, Press Releases, Etc........................28
(n) Construction..................................................28
SCHEDULES
Schedule 4(c) Registration Rights
ANNEXES
Annex I Form of Certificate of Designations
Annex II Form of Transfer Agent Instruction
Annex III Form of Opinion of Counsel to Be Delivered on Closing Date
Annex IV Form of Irrevocable Instruction to Be Given by the Company to
the Transfer Agent Upon Effectiveness of SEC Registration
Annex V Form of Opinion of Counsel to Be Delivered to Transfer Agent
Upon Effectiveness of SEC Registration
<PAGE> 5
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of May 22, 1998 (this
"Agreement"), by and between CREATIVE BIOMOLECULES, INC., a Delaware corporation
(the "Company"), with headquarters located at 45 South Street, Hopkinton,
Massachusetts 01748, and [INVESTOR] (the "Buyer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company wishes to sell, and the Buyer wishes to
purchase, upon the terms and subject to the conditions of this Agreement, shares
of non-voting Series 1998/A Convertible Preferred Stock of the Company which
will be convertible into shares of Common Stock (such capitalized term and all
other capitalized terms used in this Agreement having the respective meanings
provided in Section 1);
WHEREAS, the Company and the Buyer are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by Rule 506 of Regulation D; and
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. DEFINITIONS
(a) As used in this Agreement, the terms "Agreement," "Buyer" and
"Company" shall have the respective meanings assigned to such terms in the
introductory paragraph of this Agreement.
(b) All the agreements or instruments herein defined shall mean
such agreements or instruments as the same may from time to time be supplemented
or amended or the terms thereof waived or modified to the extent permitted by,
and in accordance with, the terms thereof and of this Agreement.
(c) The following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Accrual Amount" shall have the meaning to be provided or
provided in the Certificate of Designations.
"Affiliate" means, with respect to any Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by or under common control with the subject Person. For purposes of
the term "Affiliate," the term "control" (including the terms "controlling,"
"controlled by" and "under common control with") means the
<PAGE> 6
possession, direct or indirect, of the power to direct or to cause the direction
of the management and policies of a Person, whether through the ownership of
securities, by contract or otherwise.
"Blackout Period" means the period of up to 15 consecutive
Trading Days after the date the Company notifies the Investors that they are
required, pursuant to Section 8(c)(4), to suspend offers and sales of
Registrable Securities pursuant to the Registration Statement as a result of an
event or circumstance described in Section 8(b)(5)(A), during which period, by
reason of Section 8(b)(5)(B), the Company is not required to amend the
Registration Statement or to supplement the Prospectus.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in The City of New York are authorized or
required by law to remain closed.
"Certificate of Designations" means the Certificate of
Designations of Series 1998/A Convertible Preferred Stock in the form attached
hereto as Annex I, as the same is filed with the Secretary of State of the State
of Delaware.
"Claims" means any losses, claims, damages, liabilities or
expenses, including, without limitation, reasonable fees and expenses of legal
counsel (joint or several), actually incurred by a Person or entity.
"Closing Date" means 12:00 noon, New York City time, on May 27,
1998 or such other time as is mutually agreed between the Company and the Buyer.
"Code" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder and published opinions of general applicability
thereof.
"Common Shares" means the shares of Common Stock issued or
issuable upon conversion of the Preferred Shares.
"Common Stock" means the Common Stock, $.01 par value per share,
of the Company.
"Conversion Notice" means the Notice of Conversion of Series
1998/A Convertible Preferred Stock substantially in the form of Section 14(a) of
the Certificate of Designations.
"Conversion Price" shall have the meaning provided in the
Certificate of Designations.
"Equity Securities" means Common Stock or securities convertible
into, exchangeable for, or otherwise entitling the holder to acquire, any Common
Stock.
2
<PAGE> 7
"Indemnified Party" means the Company, each of its directors,
each of its officers who signs the Registration Statement, each Person, if any,
who controls the Company within the meaning of the 1933 Act or the 1934 Act, any
underwriter (as defined in the 1933 Act) and any other stockholder selling
securities pursuant to the Registration Statement or any of its directors or
officers or any Person who controls such stockholder or underwriter within the
meaning of the 1933 Act or the 1934 Act.
"Indemnified Person" means each Investor, the directors, if any,
of such Investor, the officers or agents, if any, of such Investor, each Person,
if any, who controls any Investor within the meaning of the 1933 Act or the 1934
Act, any underwriter (as defined in the 1933 Act) acting on behalf of an
Investor who participates in the offering of Registrable Securities of such
Investor in accordance with the plan of distribution contained in the
Prospectus, the directors, if any, of such underwriter and the officers, if any,
of such underwriter, and each Person, if any, who controls any such underwriter
within the meaning of the 1933 Act or the 1934 Act.
"Inspector" means any attorney, accountant or other agent
retained by an Investor for the purposes provided in Section 8(b)(9).
"Investor" means the Buyer and any permitted transferee or
assignee who agrees to become bound by the provisions of Sections 5(a), 5(b), 8,
9, and 10 of this Agreement.
"Majority Holders" shall have the meaning to be provided or
provided in the Certificate of Designations.
"Margin Stock" shall have the meaning provided in Regulation G of
the Board of Governors of the Federal Reserve System (12 C.F.R. Part 207).
"NASD" means the National Association of Securities Dealers, Inc.
"Nasdaq" means the Nasdaq National Market.
"Nasdaq Stock Market" means The Nasdaq Stock Market, Inc.
"1997 10-K" means the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997.
"1934 Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute.
"1933 Act" means the Securities Act of 1933, as amended, or any
successor statute.
"Non-Responsive Investor" means an Investor who does not provide
the Required Information to the Company at least three Business Days prior to
the filing of the Registration Statement.
3
<PAGE> 8
"Optional Redemption Event" shall have the meaning to be provided
or provided in the Certificate of Designations.
"Other Buyers" means each of the several holders of the Preferred
Stock of the Company who purchased the Preferred Stock pursuant to the Other
Subscription Agreements.
"Other Subscription Agreements" means the several Subscription
Agreements, dated as of the date hereof, by and between the Company and the
several buyers named therein relating to the sale and purchase of shares of
Preferred Stock.
"Permitted Transferee" means any Person who is (1) an "accredited
investor" as defined in Regulation D under the 1933 Act and (2) (A) an Affiliate
of the Buyer, (B) a Person who, immediately prior to the re-transfer or
assignment pursuant to this Agreement is a holder of shares of Preferred Stock
or an Affiliate of any such holder or (C) is a Person who has the same principal
investment adviser as the Buyer or any other holder of shares of Preferred Stock
or whose principal investment adviser is any Affiliate of any such principal
investment adviser.
"Person" means any natural person, corporation, partnership,
limited liability company, trust, incorporated organization, unincorporated
association or similar entity or any government, governmental agency or
political subdivision.
"Placement Agent" means Diaz & Altschul Capital, LLC, a New York
limited liability company.
"Preferred Shares" means the shares of Preferred Stock to be
purchased by the Buyer pursuant to this Agreement, as set forth on the signature
page of this Agreement.
"Preferred Stock" shall mean the Series 1998/A Convertible
Preferred Stock, $.01 par value per share, of the Company.
"Prospectus" means the prospectus, including any preliminary
prospectus, used in connection with the Registration Statement and any amendment
or supplement thereto (including any documents or information incorporated
therein by reference, whether before or after the SEC Effective Date).
"Purchase Price" means the aggregate purchase price for the
Preferred Shares set forth on the signature page of this Agreement.
"Questionnaire" means the Prospective Purchaser Questionnaire
completed by the Buyer and furnished to the Company in connection with this
Agreement.
"Records" shall mean all pertinent financial and other records,
pertinent corporate documents and facilities of the Company and the Subsidiaries
subject to inspection for the purposes provided in Section 8(b)(9).
4
<PAGE> 9
"register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415, and the
declaration or ordering of effectiveness of such Registration Statement by the
SEC.
"Registrable Securities" means (1) the Common Shares, (2) if the
Common Stock is changed, converted or exchanged by the Company or its successor,
as the case may be, into any other stock or other securities on or after the
date the Certificate of Designations is filed with the Secretary of State of the
State of Delaware, such other stock or other securities which are issued or
issuable in respect of or in lieu of the Common Shares and (3) if any other
securities are issued to holders of the Common Stock (or such other shares or
other securities into which or for which the Common Stock is so changed,
converted or exchanged as described in the immediately preceding clause (2))
upon any reclassification, share combination, share subdivision, share dividend,
merger, consolidation or similar transaction or event, such other securities
which are issued or issuable in respect of or in lieu of the Common Shares.
"Registration Period" means the period from the Closing Date to
the earliest of (i) the date which is three years after the Closing Date, (ii)
the date on which the Investors no longer own or have any right to acquire any
Registrable Securities and (iii) the date on which each Investor may sell,
pursuant to Rule 144, all Registrable Securities owned by such Investor or which
such Investor has any right to acquire without the filing of any notice with the
SEC and without restriction on the manner of sale or amount of securities sold.
"Registration Rights Agreement" means the Second Amended and
Restated Registration Rights Agreement, dated as of January 31, 1992, by and
among the Company and the other parties thereto, as amended.
"Registration Statement" means a registration statement on Form
S-3 of the Company under the 1933 Act, including any amendment thereto, which
names the Investors as selling stockholders (including any documents or
information incorporated therein by reference, whether before or after the SEC
Effective Date).
"Regulation D" means Regulation D promulgated by the SEC under
the 1933 Act.
"Required Information" means, with respect to each Investor, all
information regarding such Investor, the Registrable Securities held by such
Investor or which such Investor has the right to acquire and the intended method
of disposition of the Registrable Securities held by such Investor or which such
Investor has the right to acquire as shall be required by the 1933 Act to effect
the registration of the resale by such Investor of such Registrable Securities.
"Rule 415" means Rule 415 under the 1933 Act or any successor
rule providing for offering securities on a delayed or continuous basis.
5
<PAGE> 10
"Rule 144" means Rule 144 promulgated by the SEC under the 1933
Act or any other similar rule or regulation of the SEC that may at any time
permit a holder of any securities to sell such securities to the public without
registration under the 1933 Act.
"SEC" means the Securities and Exchange Commission.
"SEC Effective Date" means the date the Registration Statement is
declared effective by the SEC.
"SEC Reports" means (1) the Company's Current Report on Form 8-K,
dated October 10, 1997, (2) the 1997 10-K, (3) the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1998, and (4) to the extent
incorporated by reference in the 1997 10-K, the Company's definitive proxy
statement for its 1998 Annual Meeting of Stockholders, in each case as filed
with the SEC.
"Shares" means the Preferred Shares and the Common Shares.
"Subsidiary" means any corporation or other entity of which a
majority of the capital stock or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other Persons
performing similar functions are at the time directly or indirectly owned by the
Company.
"Trading Day" means a day on whichever of (x) the national
securities exchange, (y) the Nasdaq or (z) such other securities market, which
at the time constitutes the principal securities market for the Common Stock, is
open for general trading of securities.
"Transaction Documents" means, individually or collectively, this
Agreement, the Certificate of Designations and the Transfer Agent Instruction.
"Transfer Agent" means ChaseMellon Shareholder Services, L.L.C.,
or any successor thereof, serving as transfer agent and registrar for the Common
Stock and conversion agent for the Preferred Stock.
"Transfer Agent Instruction" means the instruction from the
Company to the Transfer Agent for the benefit of the Buyer and the Other Buyers,
in substantially the form attached hereto as ANNEX II.
"Violation" means
(i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any post-effective
amendment thereof or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading at the time the Registration Statement or post-effective
amendment was declared effective by the SEC,
6
<PAGE> 11
(ii) any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (as amended or supplemented, if the
Company files any amendment thereof or supplement thereto with the SEC) or the
omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading,
(iii) any violation or alleged violation by the Company of the
1933 Act, the 1934 Act, any state securities law or any rule or regulation under
the 1933 Act, the 1934 Act or any state securities law, or
(iv) any breach or alleged breach by any Person other than the
Buyer of any representation, warranty, covenant, agreement or other term of any
of the Transaction Documents.
2. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(a) SUBSCRIPTION. The Buyer hereby agrees to purchase from the Company, and
the Company hereby agrees to sell to the Buyer, on the Closing Date, the number
of Preferred Shares set forth on the signature page of this Agreement, having
the terms and conditions as set forth in the form of Certificate of Designations
attached hereto as ANNEX I, at the price per share and for the Purchase Price
set forth on the signature page of this Agreement. The Purchase Price shall be
payable in United States Dollars.
(b) CLOSING. The issuance and sale of the Preferred Shares shall occur on
the Closing Date at the Law Offices of Brian W Pusch, Penthouse Suite, 29 West
57th Street, New York, New York. At the closing, upon the terms and subject to
the conditions of this Agreement (1) the Company shall issue and deliver to the
Buyer the Preferred Shares, registered in the name of the Buyer or its nominee,
against payment by the Buyer to the Company of an amount equal to the Purchase
Price, and (2) the Buyer shall pay the Purchase Price to the Company by wire
transfer of immediately available funds to such account within the United States
of America as the Company shall have specified by notice to the Buyer at least
one Business Day prior to the Closing Date, against delivery by the Company to
the Buyer of the Preferred Shares. The closing shall be deemed to occur
simultaneous with the execution and delivery of this Agreement by the Company
and the Buyer, and vice versa.
3. BUYER'S REPRESENTATIONS, WARRANTIES, ETC.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
(a) PURCHASE FOR INVESTMENT. The Buyer is purchasing the Preferred Shares
for its own account for investment only and not with a view towards the public
sale or distribution thereof;
(b) ACCREDITED INVESTOR. The Buyer is an "accredited investor" as that term
is defined in Rule 501 of Regulation D by reason of Rule 501(a)(3) or 501(a)(8)
thereof;
7
<PAGE> 12
(c) REOFFERS AND RESALES. All subsequent offers and sales of the Shares by
the Buyer shall be made pursuant to registration of the Shares being offered and
sold under the 1933 Act or pursuant to an exemption from registration;
(d) COMPANY RELIANCE. The Buyer understands that the Preferred Shares are
being offered and sold, and the Common Shares are being offered, to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying upon
the truth and accuracy of, and the Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein and in the Questionnaire, a true and accurate copy of which has
been delivered by the Buyer to the Company, in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Preferred Shares and to receive an offer of the Common Shares; and the
information with respect to the Buyer set forth in the Questionnaire is accurate
and complete in all material respects;
(e) INFORMATION PROVIDED. The Buyer and its advisors, if any, have
requested, received and considered all information relating to the business,
properties, operations, condition (financial or other), results of operations
and prospects of the Company and the Subsidiary and information relating to the
offer and sale of the Preferred Shares and the offer and, upon conversion of the
Preferred Shares, sale of the Common Shares deemed relevant by them; the Buyer
and its advisors, if any, have been afforded the opportunity to ask questions of
the Company concerning the terms of the Shares and the business, properties,
operations, condition (financial or other), results of operations and prospects
of the Company and the Subsidiary and have received satisfactory answers to any
such inquiries (assuming no material misstatement or omission to state a
material fact in the SEC Reports and the Company's responses to requests for
information by the Buyer and its advisors, if any); without limiting the
generality of the foregoing, the Buyer has had the opportunity to obtain and to
review the SEC Reports; the Buyer has, in connection with its decision to
purchase the Preferred Shares, relied solely upon the SEC Reports, the
representations, warranties, covenants and agreements of the Company set forth
in this Agreement and to be contained in the Certificate of Designations and the
Transfer Agent Instruction, as well as any investigation of the Company and the
Subsidiary completed by the Buyer or its advisors, if any; the Buyer understands
that its investment in the Shares involves a high degree of risk; and the Buyer
understands that the offering of the Preferred Shares is being made to the Buyer
as part of an offering without any minimum or maximum amount of the offering
(subject, however, to the right of the Company at any time prior to execution
and delivery of this Agreement by the Company, in its sole discretion, to accept
or reject an offer by the Buyer to purchase the Preferred Shares);
(f) ABSENCE OF APPROVALS. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Shares; and
(g) SUBSCRIPTION AGREEMENT. The Buyer has all requisite power and authority,
corporate or otherwise, to execute, deliver and perform its obligations under
this Agreement and the other
8
<PAGE> 13
agreements executed or to be executed by the Buyer in connection herewith and to
consummate the transactions contemplated by the Transaction Documents; and this
Agreement has been duly and validly authorized, duly executed and delivered on
behalf of the Buyer and, assuming due execution and delivery by the Company, is
a valid and binding agreement of the Buyer enforceable in accordance with its
terms, except as the enforceability hereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and general
principles of equity, regardless of whether enforcement is considered in a
proceeding in equity or at law.
(h) ABSENCE OF BROKERS, FINDERS, ETC. No broker, finder or similar Person
(other than the Placement Agent) is entitled to any commission, fee or other
compensation by reason of action taken by the Buyer in connection with the
transactions contemplated by this Agreement and the Buyer shall pay and
indemnify and hold harmless the Company from, any claim made against the Company
by any Person other than the Placement Agent for any such commission, fee or
other compensation based on action taken by the Buyer in connection with the
transactions contemplated by this Agreement.
4. COMPANY'S REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to, and covenants and agrees
with, the Buyer that:
(a) ORGANIZATION AND AUTHORITY. Each of the Company and the Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, and (i) each of the Company and the
Subsidiary has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as described in the SEC
Reports and as currently conducted, and (ii) the Company has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and the other Transaction Documents to be executed and
delivered by the Company in connection herewith, and to consummate the
transactions contemplated hereby and thereby; and the Company does not have any
equity investment in any other Person other than the Subsidiary listed in
Exhibit 21 to the 1997 10-K.
(b) QUALIFICATIONS. The Company and the Subsidiary are duly qualified to do
business as foreign corporations and are in good standing in all jurisdictions
wherein such qualification is necessary and where failure so to qualify would
have a material adverse effect on the business, properties, operations,
financial condition, results of operations or, to the Company's knowledge after
due inquiry, prospects of the Company and the Subsidiary, taken as a whole.
(c) CAPITALIZATION. The authorized capital stock of the Company consists of
(a) 50,000,000 shares of Common Stock of which 33,505,850 shares were
outstanding as of the close of business on the date of this Agreement, all of
which are fully paid and nonassessable; and (b) 10,000,000 shares of Preferred
Stock, $.01 par value, none of which is outstanding, and of which 25,000 shares
will be designated as Preferred Stock and issued pursuant to this Agreement and
the Other Subscription Agreements. The 1997 10-K discloses as of December 31,
1997 all
9
<PAGE> 14
outstanding options or warrants for the purchase of, or other rights to purchase
or subscribe for, or securities convertible into or exchangeable for, or
otherwise entitling the holder to acquire Common Stock or other capital stock of
the Company, or any contracts or commitments to issue or sell Common Stock or
other capital stock of the Company or any such options, warrants, rights or
other securities; and from such date to the date hereof there has been no
material change in the amount or terms of any of the foregoing except for the
grant of options to purchase shares of Common Stock pursuant to the Company's
stock option plans in effect on the date of this Agreement. The Company has duly
reserved from its authorized and unissued shares of Common Stock the full number
of shares required for (a) all options, warrants, convertible securities,
exchangeable securities, and other rights to acquire shares of Common Stock
which are outstanding and (b) all shares of Common Stock and options and other
rights to acquire shares of Common Stock which may be issued or granted under
the stock option and similar plans which have been adopted by the Company or any
Subsidiary; and, immediately following the closing on the Closing Date, the
total number of shares of Common Stock reserved and required to be reserved from
the authorized and unissued shares of Common Stock for purposes of all such
options, warrants, convertible securities, puts, other rights and stock option
and similar plans (excluding the Preferred Shares and the shares of Preferred
Stock to be issued pursuant to the Other Subscription Agreements) will be
10,197,801. No antidilution or similar adjustment with respect to any
outstanding security of the Company will result from the issuance of the
Preferred Stock or the conversion of shares of Preferred Stock. The outstanding
shares of Common Stock and outstanding options, warrants and other securities
entitling the holders to purchase or otherwise acquire Common Stock have been
duly and validly authorized and issued. None of the outstanding shares of Common
Stock or options, warrants and other such securities has been issued in
violation of the preemptive rights of any securityholder of the Company. The
offers and sales of the outstanding shares of Common Stock and options, warrants
and other rights to acquire Common Stock were at all relevant times either
registered under the 1933 Act and applicable state securities laws or exempt
from such requirements. Except as set forth on SCHEDULE 4(c), no holder of any
of the Company's securities has any rights, "demand," "piggy-back" or otherwise,
to have such securities registered by reason of the intention to file, filing or
effectiveness of the Registration Statement.
(d) CONCERNING THE SHARES AND THE COMMON STOCK. The Shares have been duly
authorized and the Preferred Shares, when issued and paid for in accordance with
this Agreement, and the Common Shares, when issued upon conversion of the
Preferred Shares, will be duly and validly issued, fully paid and non-assessable
and will not subject the holder thereof to personal liability by reason of being
such holder. There are no preemptive or similar rights of any stockholder of the
Company or any other Person to acquire any of the Shares. The Company has duly
reserved 5,500,000 shares of Common Stock for conversion of the shares of
Preferred Stock, and such shares shall remain so reserved (subject to reduction
from time to time for shares of Common Stock issued upon conversion of shares of
Preferred Stock), and the Company shall from time to time reserve such
additional shares of Common Stock as shall be required to be reserved pursuant
to the Certificate of Designations, so long as the Preferred Stock is
convertible. The Common Stock is listed for trading on Nasdaq and (1) the
Company and the Common Stock meet the criteria for continued listing and trading
on Nasdaq; (2) the Company has not been notified since January 1, 1996 by the
NASD or the Nasdaq Stock Market of any failure or
10
<PAGE> 15
potential failure to meet the criteria for continued listing and trading on
Nasdaq and (3) no suspension of trading in the Common Stock is in effect. The
Company knows of no reason that the Common Shares will not be eligible for
listing on Nasdaq.
(e) CORPORATE AUTHORIZATION. The Transaction Documents have been duly and
validly authorized by the Company, this Agreement has been duly executed and
delivered on behalf of the Company and this Agreement is, the Certificate of
Designations, when executed by the Company and filed with the Secretary of State
of the State of Delaware, will be, and the Transfer Agent Instruction, when
executed and delivered by the Company, will be, valid and binding obligations of
the Company enforceable in accordance with their respective terms, except as the
enforceability hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally and general principles of equity,
regardless of whether enforcement is considered in a proceeding in equity or at
law.
(f) NON-CONTRAVENTION. The execution and delivery of the Transaction
Documents by the Company and the consummation by the Company of the issuance of
the Shares as contemplated by this Agreement and the other transactions
contemplated by the Transaction Documents do not and will not, with or without
the giving of notice or the lapse of time, or both, (i) result in any violation
of any term of the certificate of incorporation or by-laws of the Company or the
Subsidiary, (ii) conflict with or result in a breach by the Company or the
Subsidiary of any of the terms or provisions of, or constitute a default under,
or result in the modification of, or result in the creation or imposition of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company or the Subsidiary pursuant to, any indenture, mortgage,
deed of trust or other agreement or instrument to which the Company or the
Subsidiary is a party or by which the Company or the Subsidiary or any of their
respective properties or assets is bound or affected, (iii) violate or
contravene any applicable law, rule or regulation or any applicable decree,
judgment or order of any court, United States federal or state regulatory body,
administrative agency or other governmental body having jurisdiction over the
Company or the Subsidiary or any of their respective properties or assets, or
(iv) have any material adverse effect on any permit, certification,
registration, approval, consent, license or franchise necessary for the Company
or the Subsidiary to own or lease and operate any of their respective properties
and to conduct any of their respective businesses or the ability of the Company
or the Subsidiary to make use thereof.
(g) APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company or the Subsidiary for (1) the execution, delivery and performance
by the Company of the Transaction Documents, (2) the issuance and sale of Common
Shares upon conversion of the Preferred Shares as contemplated by this Agreement
and the other Transaction Documents and (3) the performance by the Company of
its other obligations under the Transaction Documents, other than (1) listing of
the Common Shares on Nasdaq, (2) registration of the resale of the Common Shares
under the 1933 Act as contemplated by Section 8, (3) as may be required under
applicable state securities or
11
<PAGE> 16
"blue sky" laws, and (4) filing of one or more Forms D with respect to the
Shares as required under Regulation D.
(h) INFORMATION PROVIDED. The SEC Reports and the Transaction Documents do
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were and are made, not misleading, it being
understood that for purposes of this Section 4(h), any statement contained in
the SEC Reports shall be deemed to be modified or superseded for purposes of
this Section 4(h) to the extent such statement is modified or replaced by a
statement in any SEC Report which was filed with the SEC on a later date,
whether or not such later filed statement so states.
(i) SEC FILINGS. The Company has timely filed all reports required to be
filed under the 1934 Act and any other material reports or documents required to
be filed with the SEC since May 1, 1997. The SEC Reports complied, when filed,
in all material respects, with all applicable requirements of the 1934 Act. The
Company meets the requirements for the use of Form S-3 for the registration of
the resale of the Common Shares by the Buyer and any other Investor. The Company
has not filed any reports with the SEC under the 1934 Act since December 31,
1997 other than the SEC Reports.
(j) CONDUCT OF BUSINESS. Except as set forth in the SEC Reports, since
December 31, 1997, neither the Company nor the Subsidiary has (i) sold,
assigned, transferred, abandoned, mortgaged, pledged or subjected to lien any of
its material properties, tangible or intangible, or rights under any material
contract, permit, license, franchise or other agreement or (ii) consummated, or
entered into any agreement with respect to, any transaction or event which would
constitute an Optional Redemption Event. Except as disclosed in the SEC Reports,
the Company and the Subsidiary own, possess or have obtained all governmental,
administrative and third party licenses, permits, certificates, registrations,
approvals, consents and other authorizations necessary to own or lease (as the
case may be) and operate their respective properties, whether tangible or
intangible, and to conduct their respective businesses or operations as
currently conducted, except such licenses, permits, certificates, registrations,
approvals, consents and authorizations the failure of which to obtain would not
have a material adverse effect on the business, properties, operations,
financial condition, results of operations or, to the Company's knowledge after
due inquiry, prospects of the Company and the Subsidiary, taken as a whole.
(k) ABSENCE OF CERTAIN PROCEEDINGS. Except as disclosed in the SEC Reports,
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board or body or governmental agency pending or, to the knowledge
of the Company and the Subsidiary, threatened against the Company or the
Subsidiary, in any such case wherein an unfavorable decision, ruling or finding
could have a material adverse effect on the business, properties, operations,
financial condition, results of operations or, to the knowledge of the Company
after due inquiry, prospects of the Company and the Subsidiary, taken as a
whole, or the transactions contemplated by the Transaction Documents or which
could adversely affect the validity or enforceability of, or the authority or
ability of the Company to perform its obligations under, the
12
<PAGE> 17
Transaction Documents; the Company does not have pending before the SEC any
request for confidential treatment of information and to the Company's knowledge
no such request will be made by the Company prior to the time the Registration
Statement relating to the Common Shares which is contemplated by Section 8 of
this Agreement is first ordered effective by the SEC; and to the Company's
knowledge there is not pending or contemplated, and there has been no,
investigation by the SEC involving the Company or any current or former director
or officer of the Company.
(l) LIABILITIES. Except as and to the extent disclosed, reflected or
reserved against in the financial statements of the Company and the notes
thereto included in the 1997 10-K or disclosed in the SEC Reports, neither the
Company nor the Subsidiary has any material (individually or in the aggregate)
liabilities, debts or obligations whether accrued, absolute, contingent or
otherwise, and whether due or to become due. Except as disclosed or contemplated
in the SEC Reports, subsequent to December 31, 1997, neither the Company nor the
Subsidiary has incurred any liabilities, debts or obligations of any nature
whatsoever which are individually or in the aggregate material to the Company
and the Subsidiaries, taken as a whole, other than those incurred in the
ordinary course of their respective businesses.
(m) ABSENCE OF CERTAIN CHANGES. Since December 31, 1997, there has been no
material adverse change and no material adverse development in the business,
properties, operations, financial condition, results of operations or, to the
Company's knowledge after due inquiry, prospects of the Company and the
Subsidiary, taken as a whole, except as disclosed in the SEC Reports.
(n) MATERIAL LOSSES. Since December 31, 1997, neither the Company nor the
Subsidiary has sustained any loss or interference with its business or
properties from fire, flood, hurricane, accident or other calamity, whether or
not covered by insurance, or from any labor dispute or court or governmental
action, order or decree, which loss or interference have a material adverse
effect on the business, properties, operations, financial condition, results of
operations or, to the Company's knowledge after due inquiry, prospects of the
Company and the Subsidiary, taken as a whole.
(o) PROPERTIES. Each of the Company and the Subsidiary has marketable title
to all property, real and personal (tangible and intangible), and other assets
owned by it, free and clear of all security interests, charges, mortgages, liens
or other encumbrances, except such as are described in the SEC Reports or such
as do not materially interfere with the use of such property made, or proposed
to be made, by the Company or the Subsidiary. The leases, licenses or other
contracts or instruments under which the Company and the Subsidiary leases,
holds or is entitled to use any property, real or personal, are valid,
subsisting and enforceable with only such exceptions as do not materially
interfere with the use of such property made, or proposed to be made, by the
Company or the Subsidiary. Since January 1, 1996, neither the Company nor the
Subsidiary has received notice of any material violation of any applicable law,
ordinance, regulation, order or requirement relating to its owned or leased
properties.
13
<PAGE> 18
(p) INTELLECTUAL PROPERTY. Except as disclosed in the SEC Reports, each of
the Company and the Subsidiary owns, or possesses rights to use, all patents,
patent rights, inventions, trade secrets, know-how, proprietary techniques,
including processes and substances, trademarks, service marks, trade names and
copyrights described or referred to in the SEC Reports or owned or, to the
Company's knowledge after due inquiry, used by it or which, to the Company's
knowledge after due inquiry, are necessary for the conduct of the business of
the Company and the Subsidiary as it is presently conducted or proposed to be
conducted, except where the failure to own or possess adequate rights to use
such patents, patent rights, inventions, trade secrets, service marks, trade
names and copyrights would not have a material adverse effect on the business,
properties, operations, financial condition, results of operations or, to the
Company's knowledge after due inquiry, prospects of the Company and the
Subsidiary, taken as a whole. Except as disclosed in the SEC Reports, neither
the Company nor the Subsidiary has received any notice of infringement of or
conflict with asserted rights of others with respect to, any patents, patent
rights, inventions, trade secrets, know-how, proprietary techniques, including
processes and substances, trademarks, service marks, trade names or copyrights
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, could have a material adverse effect on the business,
properties, operations, financial condition, results of operations or, to the
Company's knowledge after due inquiry, prospects of the Company and the
Subsidiary, taken as a whole.
(q) COMPLIANCE WITH LAW. Neither the Company nor the Subsidiary is in
violation of or has any liability under any statute, law, rule, regulation,
ordinance, decision or order of any governmental agency or body or any court,
domestic or foreign, including, without limitation, those relating to the use,
operation, handling, transportation, disposal or release of hazardous or toxic
substances or wastes or relating to the protection or restoration of the
environment or human exposure to hazardous or toxic substances or wastes, except
where such violation or liability would not individually or in the aggregate
have a material adverse effect on the business, properties, operations,
financial condition, results of operations or, to the Company's knowledge after
due inquiry, prospects of the Company and the Subsidiary, taken as a whole; and
neither the Company nor the Subsidiary is aware of any pending investigation
which would reasonably be expected to lead to such a claim.
(r) ABSENCE OF BROKERS, FINDERS, ETC. No broker, finder or similar Person
other than the Placement Agent is entitled to any commission, fee or other
compensation by reason of action taken by or on behalf of the Company in
connection with the transactions contemplated by this Agreement, and the Company
shall pay, and indemnify and hold harmless the Buyer from, any claim made
against the Buyer by any Person for any such commission, fee or other
compensation.
(s) NO SOLICITATION. No form of general solicitation or general advertising
was used by the Company or, to its knowledge, any other Person acting on behalf
of the Company, in respect of the Shares or in connection with the offer and
sale of the Shares. Neither the Company nor, to its knowledge, any Person acting
on behalf of the Company has, either directly or indirectly, sold or offered for
sale to any Person any of the Shares or, within the six months prior to the date
hereof, any other similar security of the Company except as contemplated by this
Agreement and the
14
<PAGE> 19
Other Subscription Agreements; and neither the Company nor any Person authorized
to act on its behalf will sell or offer for sale any shares of Preferred Stock,
shares of Common Stock or other securities of the Company, or solicit any offers
to buy any shares of Preferred Stock, shares of Common Stock or other securities
of the Company so as thereby to cause the issuance or sale of any of the Shares
to be in violation of Section 5 of the 1933 Act.
(t) CERTAIN ISSUANCES OF SECURITIES. The Company has not issued any shares
of Common Stock or shares of any series of preferred stock (other than the
Preferred Shares and the shares of Preferred Stock being issued pursuant to the
Other Subscription Agreements) or other securities convertible into,
exchangeable for or otherwise entitling the holder to acquire shares of Common
Stock which are subject to Section 4460(i)(1)(D) of the rules of the NASD (or
any successor or replacement provision thereof) and which would be integrated
with the sale of the Preferred Shares to the Buyer or the issuance of Common
Shares upon conversion thereof for purposes of such Section 4460(i)(1)(D) (or
any successor or replacement provision thereof).
(u) TAX MATTERS. Each of the Company and the Subsidiary has filed all
federal, state and material local income and franchise tax returns required to
be filed and has paid all taxes shown by such returns to be due, and no tax
deficiency has been determined adversely to the Company or the Subsidiary which
has had (nor does the Company or the Subsidiary have any knowledge of any tax
deficiency which, if determined adversely to the Company or any Subsidiary might
have) a material adverse effect on the business, properties, operations,
financial condition, results of operations or, to the Company's knowledge after
due inquiry, prospects of the Company and the Subsidiary, taken as a whole.
(v) INVESTMENT COMPANY. Neither the Company nor the Subsidiary is an
"investment company" within the meaning of such term under the Investment
Company Act of 1940, as amended and the rules and regulations of the SEC
thereunder.
(w) ABSENCE OF RIGHTS AGREEMENT. The Company has not adopted a shareholder
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company.
5. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(a) TRANSFER RESTRICTIONS. The Buyer acknowledges and agrees that (1) the
Preferred Shares have not been and are not being registered under the provisions
of the 1933 Act or any state securities laws and, except as provided in
Section 8, the Common Shares have not been and are not being registered under
the 1933 Act or any state securities laws, and that the Preferred Shares and the
Common Shares may not be transferred unless the Buyer shall have delivered to
the Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the Shares to be transferred may be
transferred without such registration; (2) no sale, assignment or other transfer
of the Preferred Shares or any interest therein may be made except in accordance
with the terms hereof; (3) the Common Shares may not be resold by the Buyer
unless the resale has been registered under the 1933 Act or is made pursuant to
an exemption from such registration; (4) any sale of the Shares made in reliance
on
15
<PAGE> 20
Rule 144 may be made only in accordance with the terms of said Rule and further,
if the exemption provided by Rule 144 is not available, any resale of the Shares
under circumstances in which the seller, or the Person through whom the sale is
made, may be deemed to be an underwriter, as that term is used in the 1933 Act,
may require compliance with some other exemption under the 1933 Act or the rules
and regulations of the SEC thereunder; and (5) the Company is under no
obligation to register the Shares (other than registration of the resale of the
Common Shares in accordance with Section 8) under the 1933 Act or to comply with
the terms and conditions of any exemption thereunder except as provided in
Sections 5(e) and 8. The Buyer may not transfer the Common Shares in a
transaction which does not constitute a transfer thereof pursuant to the
Registration Statement in accordance with the plan of distribution set forth
therein or in any supplement to the Prospectus forming part of the Registration
Statement unless the Buyer shall have delivered to the Company an opinion of
counsel, reasonably satisfactory in form, scope and substance to the Company,
that such Common Shares may be transferred without registration under the 1933
Act.
(b) RESTRICTIVE LEGENDS. (1) The Buyer acknowledges and agrees that the
certificates for the Preferred Shares shall bear restrictive legends in
substantially the following form (and a stop-transfer order may be placed
against transfer of the Preferred Shares):
These securities have not been registered under the Securities Act of
1933, as amended (the "Act"). The issuance to the holder of these
securities of the shares of common stock issuable upon conversion of
these securities are not covered by a registration statement under the
Act. These securities have been acquired, and such shares of common
stock must be acquired, for investment and may not be sold, transferred
or assigned in the absence of an effective registration statement under
the Act or an opinion of counsel, reasonably satisfactory in form, scope
and substance to the Company, that registration is not required under
the Act.
The number of shares constituting the portion of the Maximum Share
Amount, as defined in the Certificate of Designations (the "Certificate
of Designations"), allocated to the shares represented by this
certificate for purposes of conversion thereof is ________. The number
of shares constituting the portion of the Converted Restriction Amount,
as defined in the Certificate of Designations, allocated to the shares
represented by this certificate is ___________ through the date which is
365 days after the Issuance Date and _____________ thereafter. The
number of shares represented by this certificate constituting the
portion of the Aggregate Threshold Price Conversion Amount, as defined
in the Certificate of Designations, allocated to this Certificate is
___________. The number of shares constituting the portion of the
Redemption Exempt Amount, as defined in the Certificate of Designations,
allocated to the shares represented by this certificate is
______________.
SECTION 10(b)(3)(A) OF THE CERTIFICATE OF DESIGNATIONS PERMITS A HOLDER
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE TO CONVERT SUCH
SECURITIES IN ACCORDANCE WITH THE CERTIFICATE OF DESIGNATIONS WITHOUT
BEING REQUIRED PHYSICALLY TO SURRENDER
16
<PAGE> 21
THIS CERTIFICATE TO THE COMPANY UNLESS ALL OF THE SECURITIES REPRESENTED
HEREBY ARE SO CONVERTED. CONSEQUENTLY, FOLLOWING CONVERSION OF ANY OF
THE SECURITIES REPRESENTED BY THIS CERTIFICATE, THE NUMBER OF SHARES
REPRESENTED BY THIS CERTIFICATE MAY BE LESS THAN THE NUMBER OF SHARES
STATED HEREON.
(2) The Buyer further acknowledges and agrees that until such
time as the Common Shares have been registered for resale under the 1933 Act as
contemplated by Section 8, the certificates for the Common Shares may bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for the Common Shares):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"). The securities
have been acquired for investment and may not be sold, transferred or
assigned in the absence of an effective registration statement for the
securities under the Act, or an opinion of counsel reasonably
satisfactory in form, scope and substance to the Company that
registration is not required under the Act.
(3) Once the Registration Statement required to be filed by the
Company pursuant to Section 8 has been declared effective, thereafter (1) upon
request of the Buyer the Company will substitute certificates without
restrictive legend for certificates for any Common Shares issued prior to the
SEC Effective Date which bear such restrictive legend and remove any
stop-transfer restriction relating thereto promptly, but in no event later than
three Trading Days after surrender of such certificates by the Buyer and (2) the
Company shall not place any restrictive legend on certificates for Common Shares
issued on conversion of the Preferred Shares or impose any stop-transfer
restriction thereon.
(c) TRANSFER AGENT INSTRUCTION. Prior to the closing on the Closing Date,
the Company will (1) execute and deliver to the Transfer Agent the Transfer
Agent Instruction substantially in the form attached hereto as ANNEX II and
pursuant thereto irrevocably instruct the Transfer Agent to issue certificates
for the Common Shares from time to time upon conversion of the Preferred Shares
in such amounts as specified from time to time in the Conversion Notices
surrendered in connection with such conversions and (2) appoint the Transfer
Agent the conversion agent for the Preferred Stock. The certificates for the
Common Shares may bear the restrictive legend specified in Section 5(b) of this
Agreement prior to registration of the resale of the Common Shares under the
1933 Act. The Common Shares shall be registered in the name of the Buyer or its
nominee and in such denominations to be specified by the Buyer in connection
with each conversion of Preferred Shares. The Company warrants that, except as
otherwise expressly permitted by the Transfer Agent Instruction, no instruction
other than (x) such instructions referred to in this Section 5(c), (y) stop
transfer instructions to give effect to Section 5(a) hereof prior to
registration of the resale of the Common Shares under the 1933 Act and (z) the
instructions required by Section 8(b)(12) hereof will be given by the Company to
the Transfer Agent and that the Common Shares shall otherwise be freely
transferable on the books and
17
<PAGE> 22
records of the Company as and to the extent provided in this Agreement. Nothing
in this Section 5(c) shall limit in any way the Buyer's obligations and
agreement to comply with the registration requirements of the 1933 Act or an
exemption therefrom upon resale of the Shares. If the Buyer provides the Company
with an opinion of counsel reasonably satisfactory in form, scope and substance
to the Company that registration of a resale by the Buyer of any of the Shares
in accordance with Section 5(a) of this Agreement is not required under the 1933
Act, the Company shall permit the transfer of such Shares and, in the case of
the Common Shares, promptly, but in no event later than three Business Days
after receipt of such opinion, instruct the Transfer Agent to issue upon
transfer one or more share certificates in such name and in such denominations
as specified by the Buyer. Nothing in this Section 5(c) shall limit the
obligations of the Company under Section 8 of this Agreement.
(d) FORM D. The Company agrees to file with the SEC on a timely basis a
Form D with respect to the Shares as required under Regulation D and to provide
a copy thereof to the Buyer promptly after such filing.
(e) NASDAQ LISTING; REPORTING STATUS. The Company shall timely file with the
Nasdaq Stock Market an application for listing of additional shares covering the
Common Shares and shall provide evidence of such filing to the Buyer. The
Company shall use its best efforts to obtain the timely listing of the Common
Shares on Nasdaq in accordance with the rules of the Nasdaq Stock Market. So
long as the Buyer beneficially owns any Preferred Shares or Common Shares, the
Company will use its best efforts to maintain the listing of the Common Stock on
Nasdaq or a registered national securities exchange. During the Registration
Period, the Company shall timely file all reports required to be filed with the
SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination. So long as the Buyer owns any Shares, the Company shall furnish to
the Buyer copies of all (x) Current Reports on Form 8-K and (y) upon request of
the Buyer, other reports and other information, in each such case filed by the
Company with the SEC pursuant to Sections 13, 14(a), 14(c) and 15(d) of the 1934
Act promptly, but in no event later than five days after the same are filed with
the SEC or so requested, as the case may be.
(f) USE OF PROCEEDS. The Company does not own or have any present intention
of acquiring any Margin Stock. The proceeds of sale of the Preferred Shares will
be used for general working capital purposes and in the operation of the
Company's business. None of such proceeds will be used, directly or indirectly
(1) to make any loan to or investment in any other Person other than a Person
engaged in a business of a type similar to the business engaged in by the
Company and the Subsidiary or otherwise in the ordinary course of the Company's
business or (2) for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any Margin Stock or for the purpose of maintaining,
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any stock that is a Margin Stock or for any other purpose which might
constitute the transactions contemplated by this Agreement a "purpose credit"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System. Neither the Company nor any agent acting on its behalf has taken
or will take any action which might cause this Agreement or the transactions
contemplated hereby to violate Regulation T, U, X or any
18
<PAGE> 23
other regulation of the Board of Governors of the Federal Reserve System or to
violate the 1934 Act, in each case as in effect now or as the same may hereafter
be in effect.
(g) STATE SECURITIES LAWS. On or before the Closing Date, the Company shall
take such action as shall be necessary to qualify, or to obtain an exemption
for, the Preferred Shares for sale to the Buyer pursuant to this Agreement, and
the Common Shares for issuance to the Buyer on conversion of the Preferred
Shares, under such of the securities or "blue sky" laws of jurisdictions as
shall be applicable to the sale of the Preferred Shares pursuant to this
Agreement and the issuance to the Buyer of Common Shares on conversion of the
Preferred Shares. In connection with the foregoing obligations of the Company in
this Section 5(g), the Company shall not be required (1) to qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 5(g), (2) to subject itself to general taxation in any such
jurisdiction, (3) to file a general consent to service of process in any such
jurisdiction, (4) to provide any undertakings that cause more than nominal
expense or burden to the Company, or (5) to make any change in its charter or
by-laws which the Board of Directors of the Company determines to be contrary to
the best interests of the Company and its stockholders. The Company shall
furnish to the Buyer copies of all filings, applications, orders and grants or
confirmations of exemptions relating to such securities or "blue sky" laws on or
prior to the Closing Date to the extent obtained.
(h) CERTAIN ISSUANCES OF SECURITIES. (1) Unless the Company obtains the
Stockholder Approval (as defined in the Certificate of Designations) or a waiver
thereof from the Nasdaq Stock Market, the Company will not issue any shares of
Common Stock or shares of any other series of preferred stock or other
securities convertible into, exchangeable for, or otherwise entitling the holder
to acquire, shares of Common Stock which would be subject to the requirements of
Section 4460(i)(1)(D) of the rules of the NASD (or any successor or replacement
provision thereof) and which would be integrated with the sale of the Preferred
Shares to the Buyer or the issuance of Common Shares upon conversion thereof or
in payment of dividends thereon for purposes of such Section 4460(i)(1)(D) (or
any successor or replacement provision thereof).
(2) During the period from the date of execution and delivery of
this Agreement by the parties hereto to the date which is 90 days after the
Closing Date, without the prior written consent of the Majority Holders the
Company shall not offer, sell, contract to sell or issue (or engage any Person
to assist the Company in taking any such action) (A) any securities having
conversion terms similar to the Preferred Stock or (B) any Equity Securities
which are Common Stock, or which entitle the holder to acquire Common Stock, at
a price below the market price of the Common Stock; provided, however, that
nothing in this Section 5(h)(2) shall prohibit the Company from issuing
securities (w) pursuant to compensation plans for employees, directors,
officers, advisers or consultants of the Company and in accordance with the
terms of such plans as in effect as of the date of this Agreement, (x) upon
exercise of conversion, exchange, purchase or similar rights issued, granted or
given by the Company and outstanding on the date of this Agreement, (y) in
connection with a strategic alliance, collaboration, joint venture, partnership,
or other similar arrangement of the Company with another Person which is
19
<PAGE> 24
engaged in a business similar or related to the business of the Company and the
Subsidiary and (z) pursuant to an underwritten offering for cash on a firm
commitment basis.
(i) LIMITATION ON CERTAIN ACTIONS. From the date of execution and delivery
of this Agreement by the parties hereto to the date of issuance of the Preferred
Shares, the Company (1) shall comply with Sections 5 and 12 of the Certificate
of Designations as if the Preferred Shares were outstanding and (2) shall not
take any action which, if the Preferred Shares were outstanding, would
constitute an Optional Redemption Event or, with the giving of notice or the
passage of time or both, would constitute an Optional Redemption Event.
(j) CERTAIN REGISTRATION RIGHTS. The Company shall give timely notice to the
Persons who have rights to registration of securities pursuant to the
Registration Rights Agreement of the proposed filing of the Registration
Statement. Prior to filing the Registration Statement with the SEC, the Company
shall execute and deliver, and use its best efforts to obtain the agreement of a
sufficient number of persons entitled to registration rights under the
Registration Rights Agreement to, an amendment or waiver of such rights in
respect of the filing of the Registration Statement. If prior to the filing of
the Registration the Company is unable to effect such amendment or waiver, then
in lieu of inclusion in the Registration Statement of securities of the persons
entitled to such registration rights under the Registration Rights Agreement,
the Company shall include such securities in a registration statement separate
from the Registration Statement, which registration statement shall be filed
with the SEC when required by the Registration Rights Agreement. The Company
shall provide a copy of any such amendment or waiver promptly after the same
becomes effective and shall notify the Buyer prior to filing the Registration
Statement with the SEC if such amendment or waiver has not been obtained prior
to such filing.
(k) BEST EFFORTS. Each of the parties shall use its best efforts timely to
satisfy each of the conditions to the other party's obligations to sell and
purchase the Preferred Shares set forth in Section 6 or 7, as the case may be,
of this Agreement on or before the Closing Date.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE.
The Buyer understands that the Company's obligation to sell the
Preferred Shares to the Buyer on the Closing Date is conditioned upon the
satisfaction of the following conditions precedent on or before the Closing Date
(any or all of which may be waived by the Company in its sole discretion):
(a) On the Closing Date, no legal action, suit or proceeding
shall be pending or threatened which seeks to restrain or prohibit the
transactions contemplated by this Agreement; and
(b) The representations and warranties of the Buyer contained in
this Agreement and in the Questionnaire shall be true and correct on the Closing
Date as if made on the Closing Date and the Buyer shall have performed on or
before the Closing Date all covenants and agreements of the Buyer required to be
performed on or before the Closing Date.
20
<PAGE> 25
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase
the Preferred Shares on the Closing Date is conditioned upon the satisfaction of
the following conditions precedent on or before the Closing Date (any or all of
which may be waived by the Buyer in its sole discretion):
(a) The Transfer Agent shall have agreed to and accepted the
Transfer Agent Instruction in the form attached hereto as ANNEX II as evidenced
by its execution thereof and returning a copy thereof to the Company, and the
Company shall have furnished a copy thereof to the Buyer;
(b) On the Closing Date, no legal action, suit or proceeding
shall be pending or threatened which seeks to restrain or prohibit the
transactions contemplated by this Agreement;
(c) The representations and warranties of the Company contained
in this Agreement and each other agreement or instrument executed and delivered
by the Company in connection with this Agreement shall be true and correct on
the Closing Date as if made on the Closing Date; and on or before the Closing
Date the Company shall have performed all covenants and agreements of the
Company contained herein or therein and required to be performed by the Company
on or before the Closing Date;
(d) No event which, if the Preferred Shares were outstanding,
would constitute an Optional Redemption Event or, with the giving of notice or
the lapse of time, or both, would constitute an Optional Redemption Event shall
have occurred and be continuing;
(e) The Company shall have delivered to the Buyer its
certificate, dated the Closing Date, duly executed by its Chief Executive
Officer or Chief Financial Officer, to the effect set forth in subparagraphs
(b), (c), and (d) of this Section 7;
(f) The Buyer shall have received satisfactory confirmation of
the filing with the Secretary of State of the State of Delaware of the
Certificate of Designations;
(g) The Buyer shall have received a certificate, dated the
Closing Date, of the Secretary of the Company certifying (1) the Certificate of
Incorporation and By-Laws of the Company as in effect on the Closing Date, (2)
all resolutions of the Board of Directors (and committees thereof) of the
Company relating to this Agreement and the transactions contemplated hereby and
(3) such other matters as reasonably requested by the Buyer;
(h) The Buyer shall have received on the Closing Date an opinion
of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., counsel for the Company,
dated the Closing Date, addressed to the Buyer, in form, scope and substance
reasonably satisfactory to the Buyer, to the effect set forth in ANNEX III
attached hereto; and
21
<PAGE> 26
(i) On the Closing Date, (i) trading in securities on the New
York Stock Exchange, Inc., the American Stock Exchange, Inc. or Nasdaq shall not
have been suspended or materially limited and (ii) a general moratorium on
commercial banking activities in the Commonwealth of Massachusetts or the State
of New York shall not have been declared by either federal or state authorities.
8. REGISTRATION RIGHTS.
(a) MANDATORY REGISTRATION. (1) The Company shall prepare promptly and, on
or prior to the date which is 20 days after the Closing Date, file with the SEC
a Registration Statement on Form S-3 covering the resale by the Buyer of a
number of shares of Common Stock equal to at least the number of Common Shares
issuable to the Buyer upon conversion of the Preferred Shares, determined at the
Conversion Price which is applicable on the day the Registration Statement is
filed with the SEC and as if the Accrual Amount had accrued for 18 months on
such Preferred Shares (and determined without regard to the limitation on
beneficial ownership contained in the second sentence of Section 10(a)(1) of the
Certificate of Designations) and which Registration Statement shall state that,
in accordance with Rule 416 under the 1933 Act, such Registration Statement also
covers such indeterminate number of additional shares of Common Stock as may
become issuable upon conversion of the Preferred Shares to prevent dilution
resulting from stock splits, stock dividends or similar transactions. If,
notwithstanding Rule 416 under the 1933 Act, the Registration Statement is not
deemed to cover such indeterminate number of additional shares of Common Stock
as shall be issuable upon conversion of the Preferred Shares based on changes
from time to time in the Conversion Price such that at any time the number of
additional shares of Common Stock included in the Registration Statement
required to be filed as provided in the first sentence of this Section 8(a)
shall be insufficient to cover the number of shares of Common Stock issuable on
conversion in full of the unconverted Preferred Shares, then promptly, but in no
event later than 20 days after such insufficiency shall occur, the Company shall
file with the SEC an additional Registration Statement on Form S-3 (which shall
not constitute a post-effective amendment to the Registration Statement filed
pursuant to the first sentence of this Section 8(a)) covering such number of
shares of Common Stock as shall be sufficient to permit such conversion;
provided, however, that nothing in this Section 8(a) shall limit the rights of
the holders of the Preferred Shares to have all or a portion of the Preferred
Shares redeemed pursuant to Section 11 of the Certificate of Designations. For
all purposes of this Agreement each such additional Registration Statement shall
be deemed to be the Registration Statement required to be filed by the Company
pursuant to this Section 8(a), and the Company and the Investors shall have the
same rights and obligations with respect to such additional Registration
Statement as they shall have with respect to the initial Registration Statement
required to be filed by the Company pursuant to this Section 8(a).
(2) Prior to the SEC Effective Date or during any time subsequent
to the SEC Effective Date when the Registration Statement for any reason is not
available for use by any Investor for the resale of any of Registrable
Securities, the Company shall not file any other registration statement or any
amendment thereto with the SEC under the 1933 Act or request the
22
<PAGE> 27
acceleration of the effectiveness of any other registration statement previously
filed with the SEC, other than any registration statement on Form S-8 and except
that prior to the SEC Effective Date the Company may file one or more
Registration Statements in accordance with Section 5(j).
(b) OBLIGATIONS OF THE COMPANY. In connection with the registration of the
Registrable Securities, the Company shall:
(1) use its best efforts to cause the Registration Statement
referred to in the first sentence of Section 8(a)(1) to become effective as
promptly as possible after the Closing Date, and keep the Registration Statement
effective pursuant to Rule 415 at all times during the Registration Period. The
Company shall submit to the SEC, within three Business Days after the Company
learns that no review of the Registration Statement will be made by the staff of
the SEC or that the staff of the SEC has no further comments on the Registration
Statement, as the case may be, a request for acceleration of effectiveness of
the Registration Statement to a time and date not later than 48 hours after the
submission of such request. The Company shall notify the Investors of the
effectiveness of the Registration Statement on the SEC Effective Date. The
Company represents and warrants to the Investors that (a) the Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein and any reports filed by the Company under the 1934 Act which
are incorporated by reference therein), at the time it is first filed with the
SEC, at the time it is ordered effective by the SEC and at all times during
which it is required to be effective hereunder (and each such amendment and
supplement at the time it is filed with the SEC and at all times during which it
is available for use in connection with the offer and sale of the Registrable
Securities) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading and (b) the Prospectus (including any reports
filed by the Company under the 1934 Act which are incorporated by reference
therein and any amendments or supplements thereto), at the time the Registration
Statement is declared effective by the SEC and at all times that the Prospectus
(and each such amendment or supplement) is required by this Agreement to be
available for use by any Investor, shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading;
(2) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
Prospectus as may be necessary to keep the Registration Statement effective, and
the Prospectus current, at all times during the Registration Period (other than
during any Blackout Period in which the provisions of Section 8(b)(5)(B) are
applicable), and, during the Registration Period, comply with the provisions of
the 1933 Act applicable to the Company in order to permit the disposition by the
Investors of all Registrable Securities covered by the Registration Statement;
(3) furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel, (1) promptly after
the same is prepared and publicly distributed, filed with the SEC or received by
the Company, one copy of the Registration Statement and any amendment thereto,
each Prospectus and each amendment or supplement
23
<PAGE> 28
thereto, (2) one copy of each letter written by or on behalf of the Company to
the SEC or the staff of the SEC and each item of correspondence from the SEC or
the staff of the SEC relating to such Registration Statement (other than any
portion of any thereof which contains information for which the Company has
sought confidential treatment), each of which the Company hereby determines to
be confidential information and which the Buyer hereby agrees to keep
confidential as a confidential Record in accordance with Section 8(b)(9), and
(3) such number of copies of a Prospectus and all amendments and supplements
thereto and such other documents, as such Investor may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
Investor;
(4) use its best efforts to (i) to register and qualify the
Registrable Securities covered by the Registration Statement under the
securities or blue sky laws of such jurisdictions as the Investors who hold a
majority in interest of the Registrable Securities reasonably request, (ii) to
prepare and to file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at all
times during the Registration Period and (iii) to take all other actions
reasonably necessary or advisable to qualify the Registrable Securities for sale
by the Investors in such jurisdictions; provided, however, that the Company
shall not be required in connection therewith or as a condition thereto (I) to
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 8(b)(4), (II) to subject itself to
general taxation in any such jurisdiction, (III) to file a general consent to
service of process in any such jurisdiction, (IV) to provide any undertakings
that cause more than nominal expense or burden to the Company, or (V) to make
any change in its charter or by-laws which the Board of Directors of the Company
determines to be contrary to the best interests of the Company and its
stockholders;
(5) (A) as promptly as practicable after becoming aware of such
event or circumstance, notify each Investor of any event or circumstance of
which the Company has knowledge, as a result of which the Prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and, subject to Section 8(b)(5)(B), use
its best efforts promptly to prepare a supplement or amendment to the
Registration Statement and Prospectus to correct such untrue statement or
omission, and deliver a number of copies of such supplement or amendment to each
Investor as such Investor may reasonably request;
(B) notwithstanding Section 8(b)(5)(A) above, if at the time the
Company notifies the Investors as contemplated by Section 8(b)(5)(A) the Company
also notifies the Investors that the event giving rise to such notice relates to
a development involving the Company which occurred subsequent to the later of
(x) the SEC Effective Date and (y) the latest date prior to such notice on which
the Company has amended or supplemented the Registration Statement, then the
Company shall not be required to use best efforts to make such amendment during
a Blackout Period; provided, however, that in any period of 365 consecutive days
the Company shall not be entitled to avail itself of its rights under this
Section 8(b)(5)(B) with
24
<PAGE> 29
respect to more than two Blackout Periods and; provided further, however, that
no Blackout Period may commence sooner than 90 days after the end of another
Blackout Period.
(6) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold of the
issuance by the SEC of any stop order or other suspension of effectiveness of
the Registration Statement at the earliest possible time;
(7) permit the Investors who hold Registrable Securities being
included in the Registration Statement and a single firm of counsel designated
as selling stockholders' counsel by the Investors who hold a majority in
interest of the Registrable Securities being sold to review the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing with the SEC and shall not file any such document which
contains information about such Investor or the Registrable Securities in a form
to which any Investor or such counsel reasonably objects; provided, however,
that, if the Company shall have so provided any such document for prior review,
any delay in filing caused by any such objection as to which there is a bona
fide disagreement with the Company shall operate to extend any deadline for
filing applicable to the Company until a reasonable period of time following the
date upon which such disagreement is resolved.
(8) make generally available to its security holders as soon as
practical, but not later than 90 days after the close of the period covered
thereby, an earning statement (in form complying with the provisions of Rule 158
under the 1933 Act) covering a 12-month period beginning not later than the
first day of the Company's fiscal quarter next following the effective date of
the Registration Statement;
(9) make available for inspection by any Investor and any
Inspector retained by any such Investor, at such Investor's sole expense, all
Records as shall be reasonably necessary to enable such Investor to exercise its
due diligence responsibility and cause the Company's and the Subsidiaries'
officers, directors and employees to supply all information which such Investor
or Inspector may reasonably request for purposes of such due diligence;
provided, however, that such Investor shall hold in confidence and shall not
make any disclosure of any Record or other information which the Company
determines in good faith to be confidential, and of which determination such
Investor is so notified, unless (i) the disclosure of such Record is necessary
to avoid or correct a misstatement or omission in any Registration Statement,
(ii) the release of such Record is ordered pursuant to a subpoena or other order
from a court or government body of competent jurisdiction or (iii) the
information in such Record has been made generally available to the public other
than by disclosure in violation of this or any other agreement. The Company
shall not be required to disclose any confidential information in such Records
to any Inspector until and unless such Inspector shall have entered into a
confidentiality agreement with the Company with respect thereto, substantially
in the form of this Section 8(b)(9), which agreement shall permit such Inspector
to disclose such information to the Investor who has retained such Inspector.
Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company,
25
<PAGE> 30
at the Company's expense, to undertake appropriate action to prevent disclosure
of, or to obtain a protective order for, the Records deemed confidential. The
Company shall hold in confidence and shall not make any disclosure of
information concerning an Investor provided to the Company pursuant to this
Agreement unless (i) the disclosure of such information is necessary to comply
with federal or state securities laws, (ii) the disclosure of such information
is necessary to avoid or correct a misstatement or omission in any Registration
Statement, (iii) the release of such information is ordered pursuant to a
subpoena or other order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to such
Investor and allow such Investor, at such Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information;
(10) use its best efforts to cause all the Registrable Securities
covered by the Registration Statement to be listed on Nasdaq at such time as
required by the rules of the Nasdaq Stock Market or such other principal
securities market on which securities of the same class or series issued by the
Company are then listed or traded;
(11) provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the SEC Effective
Date;
(12) cooperate with the Investors who hold Registrable Securities
being offered to facilitate the timely preparation and delivery of certificates
(not bearing any restrictive legends) representing Registrable Securities to be
offered pursuant to the Registration Statement and enable such certificates to
be in such denominations or amounts as the Investors may reasonably request and
registered in such names as the Investors may request; and, not later than the
SEC Effective Date, the Company shall (i) deliver to the Transfer Agent (with
copies to the Investors whose Registrable Securities are included in such
Registration Statement) an instruction substantially in the form attached hereto
as ANNEX IV and (ii) cause legal counsel selected by the Company to deliver to
the Investors whose Registrable Securities are included in such Registration
Statement and to the Transfer Agent an opinion of such counsel, in the form
attached hereto as ANNEX V;
(13) during the Registration Period, the Company shall not bid
for or purchase any Common Stock or any right to purchase Common Stock or
attempt to induce any Person to purchase any such security or right if such bid,
purchase or attempt would in any way limit the right of the Investors to sell
Registrable Securities by reason of the limitations set forth in Regulation M
under the 1934 Act; and
(14) take all other reasonable actions necessary to expedite and
facilitate disposition by the Investors of the Registrable Securities pursuant
to the Registration Statement.
(c) OBLIGATIONS OF THE BUYER AND OTHER INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
26
<PAGE> 31
(1) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such of the Required Information as shall be reasonably
requested by the Company to effect the registration of such Registrable
Securities and shall execute such documents in connection with such registration
as the Company may reasonably request. At least five Business Days prior to the
first filing date of the Registration Statement, the Company shall notify each
Investor of the Required Information if any of such Investor's Registrable
Securities are eligible for inclusion in the Registration Statement. If at least
three Business Days prior to the filing date the Company has not received the
Required Information from an Investor, then the Company may file the
Registration Statement without including Registrable Securities of such
Non-Responsive Investor but shall not be relieved of its obligation to file a
Registration Statement with the SEC relating to the Registrable Securities of
such Non-Responsive Investor promptly after such Non-Responsive Investor
provides the Required Information and any Other Buyer who did not timely provide
information for inclusion in the Registration Statement pursuant to any Other
Subscription Agreement provides such information and thereafter to comply with
the provisions of this Agreement and the other Transaction Documents with
respect to such Registration Statement;
(2) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(3) Each Investor agrees that it will not effect any disposition
of the Registrable Securities except as contemplated in the Registration
Statement or as shall otherwise be in compliance with the registration
requirements of applicable securities laws or an exemption therefrom and that it
will promptly notify the Company of any material changes in the information set
forth in the Registration Statement regarding such Investor or its plan of
distribution; each Investor agrees (a) to notify the Company in writing in the
event that such Investor enters into any material agreement with a broker or a
dealer for the sale of the Registrable Securities through a block trade, special
offering, exchange distribution or a purchase by a broker or dealer and (b) in
connection with such agreement, to provide to the Company in writing the
information necessary to prepare any supplemental prospectus pursuant to Rule
424(c) under the 1933 Act which is required with respect to such transaction;
(4) Each Investor acknowledges that there may occasionally be
times as specified in Section 8(b)(5) or 8(b)(6) when the Company must suspend
the use of the Prospectus until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the SEC, the
Company has prepared a supplement to the Prospectus or the Company has filed an
appropriate report with the SEC pursuant to the 1934 Act. Each Investor hereby
covenants that it will not sell any Registrable Securities pursuant to the
Prospectus during the period commencing at the time at which the Company gives
such Investor notice of the suspension of the use of the Prospectus in
accordance with Section 8(b)(5) or
27
<PAGE> 32
8(b)(6) and ending at the time the Company gives such Investor notice that such
Investor may thereafter effect sales pursuant to the Prospectus, or until the
Company delivers to such Investor an amended or supplemented Prospectus; and
(5) In connection with any sale of Registrable Securities which
is made by an Investor pursuant to the Registration Statement (A) if such sale
is made through a broker, such Investor shall instruct its broker or brokers to
deliver the Prospectus to the purchaser (or the broker therefor) in connection
with such sale and shall supply copies of such Prospectus to such Investor's
broker; (B) if such sale is made in a transaction directly with a purchaser and
not through the facilities of any securities exchange or market, such Investor
shall deliver, or cause to be delivered, the Prospectus to such purchaser; and
(C) if such sale is made by any means other than those described in the
immediately preceding clauses (A) and (B), such Investor shall otherwise use its
reasonable best efforts to comply with the prospectus delivery requirements of
the 1933 Act applicable to such sale.
(d) REPORTS UNDER 1934 ACT. With a view to making available to the Investors
the benefits of Rule 144, the Company agrees to:
(1) so long as each Investor owns or has the right to acquire
Registrable Securities, promptly upon request, furnish to such Investor such
information as may be necessary, and otherwise reasonably cooperate with such
Investor, to permit such Investor to sell its Registrable Securities pursuant to
Rule 144 without registration; and
(2) if at any time the Company is not required to file reports
with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, use its best
efforts to, upon the request of an Investor, make publicly available other
information so long as is necessary to permit publication by brokers and dealers
of quotations for the Common Stock and sales of the Registrable Securities in
accordance with Rule 15c2-11 under the 1934 Act.
9. INDEMNIFICATION AND CONTRIBUTION.
(a) INDEMNIFICATION. (1) To the extent not prohibited by applicable law, the
Company will indemnify and hold harmless each Indemnified Person against any
Claims to which any of them may become subject under the 1933 Act, the 1934 Act
or otherwise, insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
Violation or any of the transactions contemplated by this Agreement. Subject to
the restrictions set forth in Section 9(a)(3) with respect to the number of
legal counsel, the Company shall reimburse the Investors and each such
controlling Person, promptly as such expenses are incurred and are due and
payable, for any reasonable legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 9(a)(1) shall not apply to: (I) a Claim
arising out of or based upon a Violation which occurs in reliance upon and in
conformity with information relating to an Indemnified Person furnished in
writing to the Company by any Indemnified Person or underwriter for such
Indemnified Person expressly for use in connection with the preparation of
28
<PAGE> 33
the Registration Statement or any such amendment thereof or supplement thereto,
if the Prospectus or such amendment or supplement thereto was timely made
available by the Company pursuant to Section 8(b)(3) hereof; (II) any Claim
arising out of or based on any statement or omission in any Prospectus which was
corrected in any subsequent Prospectus that was delivered to the Indemnified
Person prior to the pertinent sale or sales by the Indemnified Person; (III)
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of the Company; and (IV) an Indemnified Person with
respect to a Claim which arises solely from the failure of such Indemnified
Person to comply in any material respect with Section 8(c)(5). Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors.
(2) In connection with the Registration Statement, each Investor
agrees to indemnify and hold harmless, to the same extent and in the same manner
set forth in Section 9(a)(1), each Indemnified Party against any Claim to which
any of them may become subject, under the 1933 Act, the 1934 Act or otherwise,
insofar as such Claim arises out of or is based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished to the Company by such
Investor expressly for use in connection with such Registration Statement or any
amendment thereof or supplement thereto; provided, however, that the indemnity
agreement contained in this Section 9(a)(2) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld;
provided, further, however, that the Investor shall be liable under this Section
9(a)(2) for only that amount of a Claim as does not exceed the amount by which
the proceeds to such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement exceeds the price paid by such Investor
for such Registrable Securities. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Indemnified
Party and shall survive the transfer of the Registrable Securities by the
Investors. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 9(a)(2) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the Prospectus, as
then amended or supplemented.
(3) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 9(a) of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 9(a), deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel reasonably satisfactory to the
Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by
29
<PAGE> 34
such counsel of the Indemnified Person or Indemnified Party and the indemnifying
party would be inappropriate due to actual or potential differing interests
between such Indemnified Person or Indemnified Party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any liability to
the Indemnified Person or Indemnified Party under this Section 9(a), except to
the extent that the indemnifying party is prejudiced in its ability to defend
such action. The indemnification required by this Section 9(a) shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as such expense, loss, damage or liability is incurred and is due
and payable.
(b) CONTRIBUTION. To the extent any indemnification by an indemnifying party
as set forth in Section 9(a) above is applicable by its terms but is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 9(a) to the fullest extent permitted by law. In determining the
amount of contribution to which the respective parties are entitled, there shall
be considered the relative fault of each party, the parties' relative knowledge
of and access to information concerning the matter with respect to which the
claim was asserted, the opportunity to correct and prevent any statement or
omission and any other equitable considerations appropriate under the
circumstances; provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 9(a), (b) no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any other Person who was not guilty
of such fraudulent misrepresentation and (c) contribution by any Investor shall
be limited to the amount by which the proceeds received by such Investor from
the sale of such Registrable Securities exceeds the amount paid by such Investor
for such Registrable Securities.
(c) OTHER RIGHTS. The indemnification and contribution provided in this
Section shall be in addition to any other rights and remedies available at law
or in equity.
10. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts, without regard to
its conflicts of laws provisions.
(b) HEADINGS. The headings, captions and footers of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(c) SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
30
<PAGE> 35
(d) NOTICES. Any notices required or permitted to be given under the terms
of this Agreement shall be sent by mail or delivered personally (which shall
include telephone line facsimile transmission) or by courier and shall be
effective five days after being placed in the mail, if mailed, or upon receipt,
if delivered personally or by courier, in the case of the Company addressed to
the Company at its address shown in the introductory paragraph of this
Agreement, Attention: Chief Financial Officer (telephone line facsimile
transmission number (617) 912-2991) or, in the case of the Buyer, at its address
or telephone line facsimile transmission number shown on the signature page of
this Agreement with a copy to Diaz & Altschul Advisors, LLC, 745 Fifth Avenue,
Suite 3001, New York, New York 10151 (telephone line facsimile transmission
number (212) 751-5757) or such other address as a party shall have provided by
notice to the other party in accordance with this provision. The Buyer hereby
designates as its address for any notice required or permitted to be given to
the Buyer pursuant to the Certificate of Designations the address shown on the
signature page of this Agreement, with a copy to: Diaz & Altschul Advisors, LLC,
745 Fifth Avenue, Suite 3001, New York, New York 10151 (telephone line facsimile
transmission number (212) 751-5757), until the Buyer shall designate another
address for such purpose. In each case, a copy shall be sent to: Diaz & Altschul
Capital, LLC, 745 Fifth Avenue, Suite 3001, New York, New York 10151 (telephone
line facsimile transmission number (212) 751-5757).
(e) COUNTERPARTS; DATING. This Agreement may be executed in counterparts and
by the parties hereto on separate counterparts, each of which shall be deemed an
original and all of which together shall constitute one and the same instrument.
A telephone line facsimile transmission of this Agreement bearing a signature on
behalf of a party hereto shall be legal and binding on such party. Although this
Agreement is dated as of the date first set forth above, the actual date of
execution and delivery of this Agreement by each party is the date set forth
below such party's signature on the signature page hereof. Any reference in this
Agreement or in any of the documents executed and delivered by the parties
hereto in connection herewith to (1) the date of execution and delivery of this
Agreement by the Buyer shall be deemed a reference to the date set forth below
the Buyer's signature on the signature page hereof, (2) the date of execution
and delivery of this Agreement by the Company shall be deemed a reference to the
date set forth below the Company's signature on the signature page hereof and
(3) the date of execution and delivery of this Agreement, or the date of
execution and delivery of this Agreement by the Buyer and the Company, shall be
deemed a reference to the later of the dates set forth below the signatures of
the parties on the signature page hereof.
(f) ENTIRE AGREEMENT; BENEFIT. This Agreement, including the Annexes and
Schedules hereto, constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof. There are no restrictions, promises,
warranties, or undertakings, other than those set forth or referred to herein.
This Agreement, including the Annexes and Schedules hereto, supersedes all prior
agreements and understandings, whether written or oral among the parties hereto
with respect to the subject matter hereof. This Agreement and the terms and
provisions hereof are for the sole benefit of the Company, the Buyer and their
respective successors and permitted assigns.
31
<PAGE> 36
(g) WAIVER. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
or any course of dealings between the parties, shall not operate as a waiver
thereof or an amendment hereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or
exercise of any other right or power.
(h) AMENDMENT. No amendment, modification, waiver, discharge or termination
of any provision of this Agreement nor consent to any departure by the Buyer or
the Company therefrom shall in any event be effective unless the same shall be
in writing and signed by the party to be charged with enforcement, and then
shall be effective only in the specific instance and for the purpose for which
given. No course of dealing between the parties hereto shall operate as an
amendment of this Agreement.
(i) FURTHER ASSURANCES. Each party to this Agreement will perform any and
all acts and execute any and all documents as may be necessary and proper under
the circumstances in order to accomplish the intents and purposes of this
Agreement and to carry out its provisions.
(j) ASSIGNMENT OF RIGHTS. The rights of the Buyer or any other Investor
under Sections 5(a), 5(b), 8, 9, and 10 shall be automatically assigned by such
Investor to any Permitted Transferee of all or any portion of such Investor's
Registrable Securities (or all or any portion of the Preferred Shares) only if:
(1) such Investor agrees in writing with such Permitted Transferee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (2) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (A) the
name and address of such Permitted Transferee and (B) the securities with
respect to which such rights are being transferred or assigned, (3) in the case
of any assignment of rights under Section 8, immediately following such transfer
or assignment the further disposition of such securities by such Permitted
Transferee is restricted under the 1933 Act and applicable state securities
laws, and (4) at or before the time the Company received the written notice
contemplated by clause (2) of this sentence such Permitted Transferee agrees in
writing with the Company to be bound by all of the provisions contained in
Sections 5(a), 5(b), 8, 9, and 10 hereof. Upon any such assignment, the Company
shall be obligated to such Permitted Transferee to perform all of its covenants
under Sections 5, 8, 9, and 10 as if such Permitted Transferee were the Buyer.
Neither the Buyer nor any other Investor shall transfer the Preferred Shares to
any Person other than a Permitted Transferee without the prior written consent
of the Company, which consent may not be unreasonably withheld. In the case of
any assignment of rights under Section 8, the Company shall, at its sole cost
and expense, promptly after such assignment take such actions as shall be
reasonably acceptable to the Buyer or other Investor and such Permitted
Transferee to assure that the Registration Statement and related Prospectus are
available for use by such Permitted Transferee for sales of the Registrable
Securities in respect of which the rights to registration have been so assigned.
(k) CERTAIN EXPENSES. The Company and the Buyer shall be responsible for
their expenses (including, without limitation, their respective legal fees and
expenses of their counsel) incurred
32
<PAGE> 37
by them in connection with the negotiation and execution of, and closing under,
this Agreement. All reasonable expenses incurred in connection with securities
registrations, filings or qualifications pursuant to this Agreement shall be
paid by the Company, including, without limitation, all registration, listing
and qualifications fees, printers and accounting fees and the fees and
disbursements of counsel for the Company, but excluding (a) fees , discounts,
commissions, and expenses of investment bankers retained by any Investor, (b)
brokerage commissions incurred by any Investors and (c) fees and expenses of
counsel for the Investors. The Company shall pay on demand all expenses incurred
by the Buyer, including reasonable attorneys' fees and expenses, as a
consequence of, or in connection with (1) any default or breach of any of the
Company's obligations set forth in any of the Transaction Documents and (2) the
enforcement or restructuring of any right of, including the collection of any
payments due, the Buyer under any of the Transaction Documents, including any
action or proceeding relating to such enforcement or any order, injunction or
other process seeking to restrain the Company from paying any amount due the
Buyer. Except as provided in this Section 10(k), each of the Company and the
Buyer shall bear its own expenses in connection with the Transaction Documents
and the transactions contemplated thereby. Nothing herein shall limit the rights
of Diaz & Altschul Capital, LLC under its Engagement Agreement with the Company.
(l) SURVIVAL. The respective representations, warranties, covenants and
agreements of the Buyer and the Company contained in this Agreement or made by
or on behalf of them, respectively, pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the delivery of and payment for the
Preferred Shares and shall remain in full force and effect (as of the dates made
and deemed to be made) regardless of any investigation made by or on behalf of
the Buyer or any Person controlling or acting on behalf of the Buyer or by the
Company or any Person controlling or acting on behalf of the Company, except
that, in the case of the representations and warranties such survival shall be
limited to the period of six years following the Closing Date (other than with
respect to any claim by a third party against the party to this Agreement who
seeks to assert a claim based on such representations and warranties).
(m) PUBLIC STATEMENTS, PRESS RELEASES, ETC. The Company and the Buyer shall
have the right to approve before issuance any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of the
Buyer, to make any press release or other public disclosure with respect to such
transactions as is required by applicable law and regulations or the Nasdaq
Stock Market.
(n) CONSTRUCTION. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules
of strict construction will be applied against any party.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
33
<PAGE> 38
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto by their respective officers thereunto duly authorized on the
date first set forth above.
NUMBER OF SHARES:
PRICE PER SHARE: $1,000.00
AGGREGATE PURCHASE PRICE: $
[INVESTOR]
By:
-------------------------------------
Name:
Title:
Address:
Facsimile No:
CREATIVE BIOMOLECULES, INC.
By:
-------------------------------------
Name:
Title:
34
<PAGE> 1
EXHIBIT 99.1
[CBM LOGO]
Contact: Karla MacDonald
Communications Specialist
Creative BioMolecules, Inc.
(617) 912-2953
Wayne E. Mayhew III
V.P. and Chief Financial Officer
Creative BioMolecules, Inc.
(508) 782-1120
FOR IMMEDIATE RELEASE
CREATIVE BIOMOLECULES, INC. RAISES $25 MILLION
TO ENHANCE PRODUCT PIPELINE
HOPKINTON, MA, MAY 29, 1998-Creative BioMolecules (NASDAQ: CBMI) announced
today the closing of a private placement of $25 million convertible
preferred stock. The Company plans to use the proceeds for general
purposes, including the development of new therapies based on its
proprietary technology in tissue and organ regeneration and repair. The
preferred stock, which carries no dividend, is convertible into common
stock of the Company at $10 per share through May 1999, and at higher
conversion prices thereafter. In addition, subject to strict volume limits,
the preferred stock is convertible on a market price formula at prices
below $10 per share. The Company at its option may redeem the preferred
stock under certain circumstances.
"As we approach the launch of our first product, this financing enables us
to expand the development of our proprietary research programs to create a
pipeline of new therapies. Our orthopaedic partner, Stryker Corporation,
has recently initiated a modular submission of a Pre-Market Approval (PMA)
application for the OP-1 bone graft device. In addition to moving our lead
product toward commercialization, Stryker has expanded clinical trials to
include new indications. Our second corporate partner Biogen, Inc. is
pursuing the development of our renal program and we are working to create
additional shareholder value by enhancing our pipeline with new product
candidates. Development activities are expanding in stroke recovery where
our proteins have demonstrated preclinical efficacy and we are exploring
the application of our proteins in several other important therapeutic
areas," commented Michael M. Tarnow, President and Chief Executive Officer.
Diaz & Altschul Capital, LLC, of New York City was the placement agent in
the transaction. Delta Opportunity Fund, Ltd., which is advised by Diaz &
Altschul Advisors, LLC, is the lead investor in the transaction. Creative
BioMolecules has agreed to file a registration statement for the shares of
Creative BioMolecules Common Stock to be acquired on future conversion of
the preferred stock.
(more)
CREATIVE BIOMOLECULES, INC.
101 HUNTINGTON AVENUE, SUITE 2400 BOSTON, MASSACHUSETTS 02199
TELEPHONE 617-912-2910 FACSIMILE 617-912-2992
<PAGE> 2
PAGE 2
Creative BioMolecules, Inc. is a discovery and development company focused
on proprietary protein-based therapeutics for human tissue regeneration and
restoration. The Company's morphogenic protein programs include a late
stage development effort in orthopaedic reconstruction with Stryker
Corporation, ongoing research to develop treatments for renal disease with
Biogen, Inc., and the development of proprietary new therapies for stroke
and other neurological disorders.
This news release includes forward-looking statements that involve risks
and uncertainties. Factors which could cause actual results to differ from
the Company's expectations include, without limitation, the course of the
research and development programs, including the achievement of development
milestones by the Company and completion of clinical testing, the impact of
competitive products, the timely receipt of regulatory clearances required
for clinical testing, manufacturing and marketing of products and the other
risks and uncertainties detailed from time to time in the Company's
periodic reports.
NOTE: Creative BioMolecules, Inc. makes available its latest news releases
on the Internet at http://www.prnewswire.com or by facsimile by calling Fax
On Demand at 1-800-758-5804, extension 212213.
###
