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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 0-24128
BIO-PLEXUS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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CONNECTICUT 06-1211921
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
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129 RESERVOIR ROAD, VERNON, CONNECTICUT 06066
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(860) 870-6112
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
TITLE OF EACH CLASS:
COMMON STOCK, NO PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
registrant at March 31, 2000, was $37,620,383.
On March 31, 2000, there were 14,389,979 outstanding shares of the
registrant's common stock.
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FORWARD LOOKING STATEMENTS
The discussions set forth below and elsewhere herein contain certain
statements which are not historical facts and are considered forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended. The
Company's actual results could differ materially from those projected in the
forward-looking statements as a result of, among other factors, general economic
conditions and growth in the safety medical products industry, competitive
factors and pricing pressures, changes in product mix, product demand, risk of
dependence on third party suppliers, and other risk factors detailed in this
report, described from time to time in the Company's other Securities and
Exchange Commission filings, or discussed in the Company's press releases. All
forward-looking statements included in this document are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statements.
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FACTORS THAT MAY AFFECT FUTURE RESULTS
WE NEED ADDITIONAL FINANCING AND THESE FUNDS MAY NOT BE AVAILABLE TO US.
To date, our capital requirements have been significant. We have relied
upon the proceeds of sales of our securities and other financing vehicles to
continue research and development and to fund our working capital requirements.
We do not have sufficient capital to continue our daily operations beyond 2000
unless we obtain additional financing. With the exception of (i) the existence
of a call right in favor of certain holders of our 6% Convertible Debentures
which could result in up to $1 million in proceeds to us and (ii) the commitment
for $17.5 million in permanent financing with Appaloosa Management L.P., which
we expect to close on April 28, 2000 and which is described in more detail
elsewhere in this Annual Report on Form 10-K, we do not know of any other
existing commitments to us for any additional financing and we cannot assure
investors that any such commitment could be obtained on favorable terms, if at
all. Our ability to raise additional financing may be dependent on many factors
beyond our control, including the state of capital markets and the development
or prospects for development of competitive technology by other companies. Any
additional equity financing may cause dilution of our current stockholders, and
any debt financing may require restrictions on our right to declare dividends or
on other aspects of our business. See "Business -- Convertible Note Financing."
WE HAVE EXPERIENCED A HISTORY OF LOSSES AND ANY FUTURE PROFITABILITY IS
UNCERTAIN.
We were formed in 1987, and we have not yet made a profit. We cannot
guarantee that we will ever be profitable. Furthermore, we may incur additional
losses. As of December 31, 1999 we had an accumulated deficit of approximately
$68,105,000 and we cannot assure investors that we will ever achieve
profitability or positive operating cash flow. Our relatively limited history of
operations, the nature of our business, and our limited marketing and
manufacturing experience make the prediction of future operating results
difficult and highly unreliable. Our future prospects, therefore, must be
evaluated in light of the substantial risks, expenses, delays and difficulties
normally encountered by companies in the medical device industry, which is
characterized by an increasing number of participants, intense competition and a
high rate of failure. We cannot assure investors that we will be able to market
our products at prices and in quantities that will generate a profit. We cannot
assure investors that we can avoid potential delays and expenses in developing
new products, problems with production and marketing or other unexpected
difficulties. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
WE HAVE RECEIVED A "GOING CONCERN" OPINION FROM OUR ACCOUNTANTS.
We currently require substantial amounts of capital to fund current
operations and to implement our new business plan to be developed. Due to
recurring losses from operations, an accumulated deficit, and our inability
through December 31, 1999 to obtain sufficient permanent financing to support
current and anticipated levels of operations, our independent public
accountant's audit opinion states that these matters raise substantial doubt
about our ability to continue as a going concern. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
OUR SUCCESS DEPENDS ON GREATER COMMERCIAL ACCEPTANCE; WE ARE NOT ABLE TO PREDICT
FUTURE COMMERCIAL ACCEPTANCE.
Our future depends on the success of our current safety medical products
and the development of new safety medical products, which depends primarily on
health care professionals accepting our products as reliable, accurate and
cost-effective replacement for traditional medical products. We cannot predict
how quickly the market will accept our safety blood collection needle and
related accessory products that are marketed under the Punctur-Guard(R) and
Drop-It(R) trademarks. We cannot predict how quickly we will be able to
introduce new safety medical products to the market either independently or
through our strategic partnerships with other healthcare companies. Although we
continue to focus on developing additional safety medical products featuring our
patented internal blunting technology to respond to the needs of health care
professionals, we cannot guarantee that we will be able to develop enough
additional safety medical products quickly enough or in a way that is
cost-effective or at all.
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OUR MANUFACTURING IS SUBJECT TO CERTAIN RISKS.
We may face unexpected technical problems in trying to transfer product
ideas from the development stage to the manufacturing stage. These technical
problems could delay our plans for new product releases. In addition, our
manufacturing processes involve proprietary molds, machinery and systems to
manufacture our safety needle and related products which our manufacturing
personnel must continuously monitor and update, especially as we develop more
products. Also, we may not be able to predict or satisfy changing customer
demands for certain products and it could take longer than expected for us to
change the manufacturing processes to respond to these demands. As a result, we
may not have sufficient inventory to meet customer demands or we may have too
much product inventory at times, which could affect our relationships with
customers and negatively affect our working capital. In order to be profitable,
we must manufacture greater quantities of products than we have to date and we
must do this more efficiently than we have. We cannot assure investors that we
will be able to produce our products at commercially reasonable costs. Some of
our components are made by only a few outside vendors. We may not be able to
meet the demand for our products if one or more of these vendors could not
supply us with the needed components. Our Vernon, Connecticut facility is our
only manufacturing facility. If this facility were damaged or closed due to fire
or other causes, it would negatively impact our business.
WE MAY NOT BE SUCCESSFUL IN DEFENDING OUR PROPRIETARY RIGHTS.
Our commercial success depends partly upon our trade secrets, know-how,
trademarks, patents and other proprietary rights. We actively seek patent
protection for our proprietary technology in the United States and
internationally, but we cannot assure investors that third parties will not
challenge our patents or that they will not be invalidated or designed around or
that they will provide a commercially significant level of protection. We cannot
assure investors that any pending patent applications or applications filed in
the future will result in a patent being issued to us. Furthermore, once issued,
a patent is not always valid or enforceable, and a patent holder may still
infringe the patent rights of others. If our key patents are invalidated or
expire, this could lead to increased competition and would adversely affect our
business. In addition, we may be found to have infringed the proprietary rights
of others or may be required to respond to patent infringement claims and may
have to litigate to determine the priority of inventions. Litigation may be
necessary to enforce our patents, trade secrets or know-how, or to determine the
enforceability, scope and validity of the proprietary rights of others. It would
be a substantial expense to our business and a diversion of our personnel's time
and effort to defend and prosecute intellectual property suits and related legal
and administrative proceedings. A determination against us could be very costly
and/or require us to seek licenses from third parties which may not be available
on commercially reasonable terms, if at all. Furthermore, we cannot assure
investors that we will be able to maintain the confidentiality of our trade
secrets or know-how or that others may not develop or acquire trade secrets or
know-how that are similar to ours.
WE COMPETE AGAINST LARGER, STRONGER ENTITIES THAT SELL MORE ESTABLISHED SAFETY
MEDICAL PRODUCTS.
Our success depends on our ability to establish and maintain a competitive
position in the safety medical product market, particulary with respect to our
Punctur-Guard(R) safety needle and related products. We expect that
manufacturers of conventional medical products will compete intensely to
maintain their markets and revenues. Some of these manufacturers currently offer
products which many perceive to be less expensive to operate and which include a
broader range of applications than the products we offer and expect to offer. We
cannot assure investors that competitive pressures will not result in price
reductions of our products, which could adversely affect our profitability. In
addition, health care professionals may choose to maintain their current method
of blood collection, which may not rely on self-blunting needle technology. We
also face competition from manufacturers of alternative safety medical products
intended for similar use. Many of our competitors have substantially greater
capital resources, research and development staffs and facilities than ours. Our
products may become obsolete or non-competitive if rapid technological changes
or developments occur. We may need to make substantial investments in and commit
significant resources to product improvement and development in order to stay
competitive and successfully introduce new products. We cannot assure investors
that we will have the resources necessary to make such investments. If we do
have the
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required resources, we cannot assure investors that we will be able to respond
adequately to technological or market changes.
WE DEPEND ON KEY MEMBERS OF OUR STAFF AND MUST RETAIN AND RECRUIT QUALIFIED
INDIVIDUALS IF WE ARE TO BE COMPETITIVE.
Our success depends on our ability to attract and retain certain
scientific, technical, regulatory and managerial personnel. If we lose key
personnel, it could have a materially adverse effect on our business.
Competition for qualified personnel is intense and we cannot assure investors
that we will be successful in recruiting or retaining such personnel in the
future.
OUR PRODUCTS ARE REGULATED BY THE UNITED STATES FOOD AND DRUG ADMINISTRATION
(FDA).
Our products in the United States are regulated as medical devices by the
FDA. The process of obtaining United States regulatory approvals and clearances
may be lengthy, expensive and uncertain. Commercial distribution of our products
in foreign countries may be subject to varying governmental regulation which may
delay or restrict the marketing of our products in those countries. In addition,
other regulatory authorities may impose limitations on the use of our products.
FDA enforcement policy strictly prohibits the marketing of FDA-cleared or
approved medical devices for unapproved uses. Our manufacturing operations are
subject to compliance with Good Manufacturing Practices ("GMP") regulations of
the FDA and similar foreign regulations. These regulations include controls over
design, testing, production, labeling, documentation and storage of medical
devices. Enforcement of GMP regulations has increased significantly in the last
several years and the FDA has stated publicly that compliance will be more
strictly monitored in the future. Our facilities and manufacturing processes, as
well as those of current and future third party suppliers, will be subject to
periodic inspection by the FDA and other regulatory authorities. Failure to
comply with these and other regulatory requirements could result in, among other
measures, warning letters, fines, injunctions, civil penalties, recall or
seizure of products, total or partial suspension or production, refusal of the
government to grant clearance or approval for devices, withdrawal of clearances
or approvals, or criminal prosecution, which would have an adverse effect on our
business.
RISKS ASSOCIATED WITH OUR INTERNATIONAL BUSINESS.
In recent years, we experienced sales in international markets and expect
to continue to expand our product distribution internationally. We may face
difficulties and risks in our international business, including changing
economic or political conditions, export restrictions, currency risks, export
controls relating to technology, compliance with existing and changing
regulatory requirements, tariffs and other trade barriers, longer payment
cycles, problems in collecting accounts receivable, reimbursement levels, and
potentially adverse tax consequences. In addition, it may be difficult for us to
enforce and collect receivables through a foreign country's legal system and to
protect our intellectual property in foreign countries. We cannot assure
investors that one or more of these factors will not have a material and adverse
effect on our international business opportunities.
ANTITAKEOVER PROVISIONS.
We are subject to Sections 33-840 through 33-845 of the Connecticut
Business Corporation Act which generally impose restrictions upon certain
acquirers and their affiliates and associates of ten percent or more of our
Common Stock.
MANAGEMENT AND SIGNIFICANT STOCKHOLDERS CAN EXERCISE INFLUENCE OVER THE COMPANY.
As of March 31, 2000, directors, executive officers and principal
stockholders of the Company beneficially owned approximately 27% of our
outstanding voting securities. Furthermore, Appaloosa Management, L.P.
individually is the beneficial owner of 15.8% of our shares of Common Stock and
after the consummation of the permanent financing described elsewhere in this
Annual Report on Form 10-K, Appaloosa Management, L.P. could beneficially own a
greater percentage of the aggregate outstanding
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Common Stock, based on certain assumptions and calculations more fully described
in our proxy statement filed with the Securities and Exchange Commission on
April 3, 2000. As a result, the foregoing stockholders, individually and/or
acting together may be able to influence the outcome of stockholder votes.
Examples of stockholder votes include those for the election of directors,
changes in our Certificate of Incorporation and Bylaws and approving certain
mergers or other similar transactions, such as a sale of all or substantially
all of our assets. See "Security Ownership of Certain Beneficial Owners and
Management."
THE COMPANY'S STOCK PRICE IS VOLATILE AND INVESTING IN OUR COMMON STOCK INVOLVES
A HIGH DEGREE OF RISK.
The market price of our Common Stock has fluctuated significantly and as a
result, it has been described as "volatile." Future announcements concerning our
competitors, including operating results, technological innovations or new
commercial products, government regulations, developments concerning proprietary
rights, or litigation could have a significant impact on the market price of our
Common Stock. In addition, Appaloosa Management, L.P. and certain related
entities have the right to request under the Securities Act of 1933, as amended,
that we register the shares of Common Stock they beneficially own for public
sale. If we registered these shares, they would, subject to certain volume
limitations, become freely tradeable. Furthermore, the stock market has from
time to time experienced extreme price and volume fluctuations, which may
adversely affect the market price of our Common Stock. Some of these
fluctuations have particularly affected companies in the medical device industry
and they have often been unrelated to the operating performance of such
companies. In addition, general economic, political and market conditions may
also adversely affect the market price of our Common Stock. We cannot assure
investors that the trading price of our Common Stock will remain at or near its
current level.
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BIO-PLEXUS, INC.
INDEX TO ANNUAL REPORT
ON FORM 10-K
YEAR ENDED DECEMBER 31, 1999
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PART I
Item 1. Business.................................................... 7
Item 2. Properties.................................................. 16
Item 3. Legal Proceedings and Other Matters......................... 16
Item 4. Submission of Matters to a Vote of Security Holders......... 16
PART II
Market for the Registrant's Common Equity and Related
Item 5. Shareholder Matters......................................... 17
Item 6. Selected Financial Data..................................... 19
Management's Discussion and Analysis of Financial Condition
Item 7. and Results of Operations................................... 19
Item 8. Financial Statements and Supplementary Data................. 24
Changes in and Disagreements with Accountants on Accounting
Item 9. and Financial Disclosure.................................... 24
PART III
Item 10. Executive Officers and Directors of the Registrant.......... 24
Item 11. Executive Compensation...................................... 26
Security Ownership of Certain Beneficial Owners and
Item 12. Management.................................................. 32
Item 13. Certain Relationships and Related Transactions.............. 33
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K......................................................... 33
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PART I
ITEM 1. BUSINESS
General Development of Business
Bio-Plexus, Inc. was incorporated under the laws of the State of
Connecticut in September 1987 for the purpose of designing, developing,
manufacturing and selling safety medical products. Its executive offices and
manufacturing facility are located at 129 Reservoir Road, Vernon, Connecticut
06066, and its telephone number is (860) 870-6112. All references herein to the
"Company" refer to Bio-Plexus, Inc. unless otherwise indicated by context.
The Company is engaged principally in the design, development and
manufacture of safety medical products used by healthcare professionals. The
Company's initial products have been safety blood collection needles and related
accessory products that are marketed under the Punctur-Guard(R) and Drop-It(R)
trade names. The safety blood collection needle utilizes a patented technology
that greatly reduces the risk of accidental needlesticks by internally blunting
the needle prior to removal from the patient. The Company's primary focus has
been the design, development, testing and evaluation of its safety blood
collection needle, and the design and development of the molds, machinery and
systems used to manufacture the blood collection needle. The Company has also
focused its efforts on developing strategic partnerships with healthcare
companies in order to bring other products to market featuring its patented
internal blunting technology.
In June 1993, the Company completed its clinical tests of the
Punctur-Guard(R) blood collection needle and began selling the needle to
hospitals, medical centers and other large volume users on a limited basis. In
June 1994, the Company completed an initial public offering of 1,638,750 shares
of common stock at $10 per share. Net proceeds to the Company were $14,191,000.
From June 1994 through December 1996, the Company concentrated on improving and
expanding its overall manufacturing, sales and marketing operations. This
included the acquisition of a production facility, improvements to and the
expansion of its production tooling and the installation of a new needle
assembly and packaging system.
On March 16, 1995, the Company entered into a domestic distribution and
marketing agreement with Allegiance Healthcare Corporation ("Allegiance",
formerly "Baxter Healthcare Corporation"), a worldwide leader in sales,
distribution and manufacturing of medical products. Pursuant to the agreement,
the Company retains primary responsibility for marketing its products.
Allegiance supports the Company's marketing efforts with marketing promotions
for the Company's products and stocks the Company's products in Allegiance
warehouse locations throughout the United States. Allegiance is compensated
based on a percentage of sales.
In September 1995, the Company completed a secondary public offering of
securities involving the sale of 1,725,000 shares of common stock at $11.25 per
share. The net proceeds totaled $17,575,000, of which the Company utilized
$4,000,000 to repay outstanding debt obligations. The balance was used for
working capital to sustain ongoing operations, to purchase additional machinery
and equipment, and to continue to improve and expand its manufacturing and
marketing operations, as well as to support research and development.
From the latter part of 1996 through 1998, the Company focused its efforts
on establishing joint venture agreements on one or more of its major product
lines, and on January 28, 1997, the Company entered into a Development and
License Agreement and a Supply Agreement with Johnson & Johnson Medical ("JJM")
of Arlington, Texas. Under the terms of the original agreements, the Company
would develop and manufacture safety needle assemblies for JJM utilizing its
self-blunting technology, which would be used by JJM, under an exclusive
worldwide license granted by the Company, to manufacture and sell a new safety
intravenous catheter ("I.V. catheter"). The Company received licensing fees and
funding to complete the development of the safety needle assemblies and for the
development of manufacturing equipment and tooling. JJM agreed to acquire
initial production equipment, purchase certain minimum quantities of safety
needle assemblies annually, and to pay certain minimum annual royalties.
On April 9, 1998, the Company amended the original development and license
agreement and canceled its supply agreement with JJM. The amended terms included
certain changes in the licensing and royalty
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agreements as well as the transfer of manufacturing of the safety needle
assemblies to JJM, in exchange for an initial milestone payment of $3,500,000
with an additional $500,000 payable upon completion of certain additional
milestones. The revised agreement also provided for an additional $300,000
payable to the Company for initial capital equipment purchases during 1998.
In December of 1998, the Company completed the construction of an automated
assembly machine for JJM under the terms of the amended agreement, and the
equipment was transferred to JJM's facility. During the first quarter of 1999,
the Company continued to perform services for JJM under the terms of the
agreement; however, by the end of the first quarter of 1999, substantially all
of the contractual obligations had been met by the Company. During the second,
third and fourth quarters of 1999, the Company continued to provide consulting
and engineering work for JJM for the I.V. catheter project; however, revenue
recorded was outside of the original agreements with JJM.
In October 1998, the Company entered in to a distribution agreement with
Fisher HealthCare of Houston, Texas, the second largest operating unit of Fisher
Scientific. Fisher Scientific is one of the world leaders in serving science,
providing more than 245,000 products and services to research, healthcare,
industrial, educational and government customers in 145 countries. The
distribution agreement allows Fisher HealthCare to purchase and distribute all
of the Bio-Plexus blood collection products.
On October 6, 1998 the Company entered into a non-exclusive supply and
distribution agreement for the United States and Canada with Graphic Controls
Corporation (subsequently known as Kendall Healthcare Products Company
("Kendall")), a subsidiary of Tyco and a major supplier of sharps containers in
the United States. The agreement allows Kendall to purchase and distribute
Bio-Plexus Drop-It(R) Needle Disposal Containers and Drop-It(R) Quick Release
Needle Holders. The agreement has an initial term of three years, and shall be
automatically renewed for an additional year, unless either party notifies the
other of its intent not to renew.
On October 23, 1998, the Company entered into an exclusive License
Agreement and Design, Development and Asset Transfer Agreement for a safety
Peripherally Inserted Central Catheter ("PICC") introducer with TFX Medical
("TFX"), a division of Teleflex Incorporated, the industry's dominant supplier
of PICC introducers. The License Agreement includes certain minimum annual
volume requirements and ongoing royalties on the sale of PICC introducer
catheters featuring Punctur-Guard(R) technology. Under the Design, Development
and Asset Transfer Agreement, the Company would design and develop safety needle
assemblies to be used with the TFX peelable catheter, and would modify existing
manufacturing equipment to be transferred to TFX pursuant to the terms and
conditions of the agreement. On July 26, 1999, an agreement was entered into
with TFX to modify the License Agreement dated October 23, 1998. The amended
agreement included additional licensing fees and changes in royalty revenue in
exchange for TFX's right to exclusively market to one of its customers. In the
first quarter of 2000, the Company completed its obligations under the Design,
Development and Asset Transfer Agreements.
In June of 1998 the Company received ISO 9002 and EN 46002 certifications.
ISO 9002 is a general international standard for quality assurance in
production, installation and servicing. EN 46002 provides particular quality
system requirements for suppliers of medical devices that are more specific than
the general requirements specified in ISO 9002. The Company also began labeling
its products with the CE Mark during 1998, which indicates that the Company is
following Medical Device Directives in Europe which include the standards set
forth under ISO 9002 and EN 46002. In February of 2000 the Company received ISO
9001 and EN46001 registrations. This certification is an upgrade from the
previous ISO 9002 and EN 46002 status. The change indicates that the Company's
product design process also meets the international quality system standards.
The Company will continue to label product with the CE Marking which indicates
that the Company is following the European Community Medical Device Directives.
These registrations will better enable the Company to sell its products
internationally.
In January 2000, the Company entered into a distribution agreement with
Owens & Minor, a major distributor of medical products to hospitals through the
United States. Owens & Minor, a Fortune 500 company headquartered in Richmond,
Virginia, is the nation's largest distributor of national brand medical and
surgical supplies. The company's distribution centers serve hospitals,
integrated healthcare systems and
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group purchasing organizations nationwide. The distribution agreement allows
Owens & Minor to purchase and distribute all of the Bio-Plexus blood collection
products.
On February 21, 2000, the Company entered into a distribution agreement
with McKessonHBOC Medical Group of Richmond, Virginia. McKessonHBOC's Supply
Management Business is a leading distributor of medical-surgical supplies to
more than 5,000 hospitals nationwide. The agreement allows McKessonHBOC to
purchase and distribute the Company's products on a non-exclusive basis without
territorial limitations or restrictions. The agreement is in effect for a period
of five years and shall continue automatically in effect for successive terms of
five years each until terminated by either party.
The Company also has continued its research and development of new
products. Pursuant to Section 510(k) of the Food, Drug and Cosmetics Act (21
U.S.C. 360(k)) and the regulations promulgated thereunder, the Company has
received approval ("510(k) approval") from the Food and Drug Administration for
its blood collection needle, winged intravenous set, needle disposal container,
and various holders. In addition, the Company has also identified several other
potential applications for its patented self-blunting technology, which it
believes may be of interest to potential joint venture partners.
Overall product sales increased by $412,000 to $5,498,000 in 1999, compared
to $5,086,000 in the prior year. Sales of medical devices specifically increased
by $1,814,000, while product sales from joint venture arrangements decreased by
$1,402,000, due to the completion of the development project for the I.V.
catheter with JJM. The Company anticipates continued medical device sales growth
in 2000 due, in part, to legislation passed in several states including
California, Tennessee, Texas and New Jersey requiring the use of safety
products, as well as strong safety Compliance Directives issued by Federal OSHA
on November 5, 1999. However, continued losses from operations could occur while
the Company is investing in the research and development of new product lines
and the expansion of its sales and marketing capacity. Such losses could
continue until additional increases in revenues occur and further reductions in
manufacturing costs are achieved.
Convertible Note Financing
In fiscal year 2000, the Company will need to raise additional capital. On
September 21, 1999, the Company received a commitment from Appaloosa Management,
L.P., of Chatham, New Jersey ("Appaloosa") for a total financing package of
$17.5 million (the "Permanent Financing"). The Permanent Financing is currently
scheduled to be consummated in April 2000 after receipt of stockholder approval
of the Permanent Financing. A more detailed description of the Permanent
Financing is contained in the Company's Definitive Proxy Statement filed with
the Securities and Exchange Commission ("SEC") on January 31, 2000 and its
Supplemental Proxy Statement filed with the SEC on April 3, 2000.
Bridge Transactions
Pending consummation of the Permanent Financing, on October 21, 1999, the
Company issued to Appaloosa and entities affiliated therewith (the "Purchasers")
a 7.5% non-convertible secured note in the aggregate principal amount of $3
million (the "First Bridge Note"). In January 2000, the interest rate on the
First Bridge Note was increased to 12% per annum. In connection with the
issuance of the First Bridge Note the Company also issued to the Purchasers (i)
a five-year warrant to purchase up to 1.0 million shares of the Company's common
stock, no par value (the "Common Stock") at an initial exercise price of $3.00
per share (the "$3 Warrants") and (ii) a nine-year warrant to purchase up to 1.5
million shares of Common Stock at an initial exercise price of $5.00 per share
(the "$5 Warrants") (the $3 Warrants and $5 Warrants are collectively referred
to herein as the "First Bridge Warrants"). At the Purchaser's election and
contingent upon the satisfaction of certain criteria at the closing of the
Permanent Financing, or within six months and one day thereafter, the exercise
price of the $3 Warrants will increase to $4.00 per share of Common Stock. The
exercise price of the $5 Warrants will increase to $7.00 per share of Common
Stock upon the earlier of the closing of the Permanent Financing and October 21,
2000. The $5 Warrants contain a net-exercise provision.
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On January 5, 2000, the Company issued to the Purchasers a 15%
non-convertible secured note in the aggregate principal amount of $1.65 million
(the "Second Bridge Note"). In connection with the issuance of the Second Bridge
Note the Company also agreed to issue and sell on the earlier of (i) April 30,
2000 and (ii) the closing of the Permanent Financing, five-year warrants to
acquire up to 200,000 shares of Common Stock at an initial exercise price of
$3.00 per share (the "Second Bridge Warrants"). The Second Bridge Warrants
contain a net-exercise provision.
On April 3, 2000, the Company issued to the Purchasers a 15%
non-convertible secured note in the aggregate principal amount of $2.2 million
(the "Third Bridge Note"). No warrants or convertible securities were issued in
connection with the Third Bridge Note. The First Bridge Note, the Second Bridge
Note and the Third Bridge Note are collectively referred to as the "Bridge
Notes". The issuance of the Bridge Notes, the First Bridge Warrants and the
Second Bridge Warrants are collectively referred to as the "Bridge
Transactions".
The Bridge Notes are not convertible into shares of Common Stock and are
required to be paid-in-full (together with accrued interest) at the closing of
the Permanent Financing.
Permanent Financing
In order to consummate the Permanent Financing the Company is required by
the rules of The NASDAQ Stock Market ("NASDAQ") to obtain the approval of a
majority of the Company's stockholders of the terms and conditions of the
Permanent Financing (the "Investment Proposal"). In addition, the Connecticut
Business Corporation Act requires that the Company obtain stockholder approval
of (i) an amendment to the Company's certificate of incorporation (the "Charter
Amendment Proposal") and (ii) an amendment to the Company's 1991 Long-Term
Incentive Plan (the "Incentive Plan Amendment Proposal"). The Charter Amendment
and the Incentive Plan Amendment Proposal are required by the terms of the
Permanent Financing. The approval of the Company's stockholders of the
Investment Proposal, the Charter Amendment Proposal and the Incentive Plan
Amendment Proposal is collectively referred to as "Stockholder Approval".
Once Stockholder Approval is obtained the Company will issue to the
Purchasers (i) $16.75 million of zero-coupon, secured convertible notes due 2005
(the "Convertible Notes"), (ii) 250,000 shares of Common Stock at a purchase
price of $3.00 per share (the "Permanent Financing Shares") and (iii) nine-year
warrants to purchase up to 1.5 million shares of Common Stock at an initial
exercise price of $7.00 per share (the "$7 Warrants"). The Convertible Notes are
convertible into shares of Common Stock at an initial conversion priced $3.00.
The $7 Warrants contain a net exercise provision.
The Permanent Financing will generate aggregate proceeds to the Company of
$17.5 million. After repayment of the Bridge Notes, the Company will realize net
proceeds of approximately $8.4 million which will be available for general
working capital purposes, subject to the terms and conditions of the Permanent
Financing transaction agreements.
The Company is continuing to explore additional financing alternatives and
potential strategic relationships which may provide the Company with additional
sources of working capital. There can be no assurances that the Company will be
able to secure such additional sources of working capital. Failure to raise
needed capital may have a material adverse impact on the Company's operations,
development plans and cash flows.
Financial Information About Industry Segments
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and Related
Information" effective for periods beginning after December 15, 1997. SFAS 131
requires that a public enterprise report financial and descriptive information
about its reportable operating segments. Operating segments are components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. In fiscal 1998, with the onset
of the development contract with JJM, the Company began internally reporting two
distinct segments: Safety
10
<PAGE> 12
Medical Products and Accessories and Joint Venture Design and Development.
Distinct reporting by such segments was deemed necessary by management based on
the significance of reported revenues and expenses and the Company's intention
to focus operating resources in both of these areas.
The Safety Medical Products and Accessories segment includes operations
associated with the manufacture of blood collection needles, needle holders and
needle disposal containers. The Joint Venture Design & Development segment
includes operations associated with product design and development, product
licensing, and the design, development and construction of machinery and tooling
in connection with joint venture partners.
Information with respect to each of the Company's business segments is as
follows:
SEGMENT REVENUE
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Safety Medical Products and Accessories........ $5,449,000 $3,636,000 $3,542,000
Joint Venture Design & Development............. 1,575,000 5,671,000 1,500,000
---------- ---------- ----------
Total Consolidated Revenue..................... $7,024,000 $9,307,000 $5,042,000
========== ========== ==========
</TABLE>
MAJOR CUSTOMERS
There were three customers, two domestic distributors of the Company's
products, Allegiance Healthcare and Fisher HealthCare, and one foreign
distributor, FORA srl, that exceeded 10% of the Company's Safety Medical
Products and Accessories segment revenue for the periods presented. The loss of
business of any of the foregoing customers could potentially have a material
adverse effect on the business and prospects of the Company. In the Joint
Venture Design and Development segment, JJM and TFX contributed to more than 10%
of the revenues for the periods presented. The following table represents the
revenue associated with these major customers by segment:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
TOTAL REVENUE MAJOR CUSTOMERS:
Safety Medical Products and Accessories........ $4,510,000 $2,962,000 $2,766,000
Joint Venture Design & Development............. 1,575,000 5,671,000 1,500,000
OTHER DOMESTIC SALES........................... 391,000 414,000 402,000
EXPORT SALES:
Safety Medical Products and Accessories........ 548,000 260,000 374,000
Joint Venture Design & Development............. -- -- --
---------- ---------- ----------
TOTAL CONSOLIDATED REVENUE..................... $7,024,000 $9,307,000 $5,042,000
========== ========== ==========
</TABLE>
For the periods presented, there were no material intersegment revenues.
SEGMENT OPERATING PROFIT (LOSS)
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- ------------
<S> <C> <C> <C>
Safety Medical Products and Accessories.... $ 2,289,000 $ 435,000 $ (1,441,000)
Joint Venture Design & Development......... 1,706,000 3,361,000 173,000
----------- ----------- ------------
Total Consolidated Operating Profit
(Loss)................................... 3,995,000 3,796,000 (1,268,000)
----------- ----------- ------------
Selling, General and Administrative
Expenses................................. (4,937,000) (4,310,000) (6,500,000)
Other...................................... (1,924,000) (1,857,000) (758,000)
Financing Expenses......................... (2,367,000) (589,000) (3,786,000)
----------- ----------- ------------
Net Loss................................... $(5,233,000) $(2,960,000) $(12,312,000)
=========== =========== ============
</TABLE>
11
<PAGE> 13
For the Safety Medical Products and Accessories segment, operating profit
(loss) consists of total revenues less product costs and expenses. In the Joint
Venture Design and Development segment, operating profit (loss) consists of
total revenues less costs and expenses and research and development expenses
through the first quarter of 1999, as the I.V. catheter project was completed at
the end of the first quarter. Subsequent to the first quarter of 1999, operating
profit for this segment consists of total revenues less costs and expenses.
Interest expense is not reported, as it is not included in the reporting of
segment operating profit (loss) for use internally by the chief decision maker.
SEGMENT CAPITAL EXPENDITURES
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- --------
<S> <C> <C> <C>
Safety Medical Products and Accessories............. $536,000 $82,000 $718,000
Joint Venture Design & Development.................. -- -- --
-------- ------- --------
Total Consolidated Capital Expenditures............. $536,000 $82,000 $718,000
======== ======= ========
</TABLE>
Net identifiable assets related to Safety Medical Products and Accessories
were $2,198,000, $2,343,000, and $4,321,000 at December 31, 1999, 1998 and 1997,
respectively. Depreciation expense related to these assets was $269,000,
$729,000, and $1,091,000 for the periods ended December 31, 1999, 1998 and 1997,
respectively. Due to the "service" nature of the Joint Venture Design and
Development segment, identifiable assets were not material for the periods
presented.
Description of Business
The Company designs, develops, manufactures and sells safety medical
products and accessories marketed under the Punctur-Guard(R) and Drop-It(R)
brand names. The Company's Punctur-Guard(R) blood collection needle is a
patented safety needle, which reduces the risk of accidental needle sticks
through a self-blunting mechanism. The Punctur-Guard(R) needle is the only
safety needle on the market, which is activated prior to its removal from the
patient, eliminating exposure time to a contaminated sharp.
The Company's first Punctur-Guard(R) product was a safety blood collection
needle. The Company manufactures and sells three varieties of safety blood
collection needles, three types of needle holders and a needle disposal
container. The blood collection needle is similar in appearance, size,
performance and general operation to standard blood collection needles, and
works with substantially all standard blood collection accessories. Hospitals,
doctors and other health care professionals use blood collection needles to
obtain blood for a variety of diagnostic procedures.
The blood collection needle assembly consists of a mechanically activated,
hollow, internal cannula with a blunt end, called a blunting member, placed
within a blood collection needle. The blunting member advances through the
needle by applied mechanical pressure. When the needle is inserted into the
patient, the blunting member is in its retracted position. Prior to removing the
needle from the patient, the operator activates the safety feature, allowing the
blunting member to advance forward and lock into place beyond the needle's tip.
The blunting member does not cause any additional patient discomfort, and
because it is hollow, fluids flow through the needle in the same manner as
through standard blood collection needles.
The Company assembles the purchased components of its Punctur-Guard(R)
blood collection needles on automated assembly machines. In 1996, the Company
purchased additional assembly and packaging equipment, allowing for increased
capacity and efficiencies in its manufacturing processes.
In addition to its blood collection needles, the Company manufactures
needle holders and needle disposal containers. The Drop-It(R) product line
consists of the Drop-It(R) Quick Release Needle Holder and Drop-It(R) Needle
Disposal Container. These products are designed to work in conjunction with the
blood collection needle to increase the ease-of-use for the healthcare
professional. The needle holder features simple one-handed disposal of a needle,
with a push button for quick release. The needle can also be automatically
released when used with the Drop-It(R) Needle Disposal Container. In addition,
the Company developed a needle holder, the Punctur-Guard Revolution(TM) Quick
Release Holder, which will allow for greater ease-of-use
12
<PAGE> 14
with its safety blood collection needle devices with a simple quarter turn of
the holder for activation of the internal blunt. The Company filed patent
applications and received its 510(k) approval with the Food and Drug
Administration in September of 1999. The Company began shipping limited
quantities of this holder in the fourth quarter of 1999.
The Drop-It(R) Needle Disposal Container is a one-quart, tray-mountable
container. The container offers fast, one handed needle disposal with push
button or automatic release when used with a Drop-It(R) Quick Release Needle
Holder or Punctur-Guard Revolution(TM) Needle Holder. It offers temporary and
permanent locking tabs, is injection molded for uniform thickness, and meets
OSHA Standards for needle disposal containers.
The Company also manufactures a standard needle holder, which can be used
with both Punctur-Guard(R) and standard blood collection needles.
The Company continued to focus on the design and development of new
products during 1999. The redesign and continued development of the Company's
winged intravenous set continued during 1999. The Company also fulfilled its
obligations under the development agreements with TFX for the PICC introducer
catheter during 1999 and into the beginning of 2000. The Company has also
identified several other potential applications of its self-blunting technology
to other needle products.
The Company is considering establishing joint venture agreements on one or
more of its new products, which could assist the Company in raising additional
capital and help fund the research and development costs related to these
products.
Revenues and Distribution
The Company's products are marketed and sold in the United States both
through independent distribution channels and directly to end-users. The
Company's products are marketed and sold outside of the United States primarily
through independent distributors. Order backlog is not material to the Company's
business, as orders for the Company's products are received and filled on a
current basis. Product sales revenue is recognized when products are shipped to
distributors or direct to end-user customers.
The Company's strategic partnerships with JJM and TFX resulted in the
recognition of development contract or "service" revenue during 1999. Product
and process development services were progress billed as performed, and revenue
was recognized when billed.
Products under Development
A late-stage development product featuring Punctur-Guard(R) internal blunt
technology is the I.V. catheter. An I.V. catheter is a flexible tube that is
used to inject or continuously-flow fluids into a patient. I.V. catheters are
inserted into a patient by a needle within the flexible catheter tube. As the
Punctur-Guard(R) portion of the catheter is removed, the needle is automatically
blunted and then discarded.
In January 1997, the Company entered into a Development and Licensing
Agreement with JJM. Under this agreement and its subsequent amendment in April
1998, the Company has designed and developed safety needle assemblies for JJM
which will become part of a new safety I.V. catheter to be manufactured and sold
by JJM, utilizing the Company's patented self-blunting needle design. JJM
anticipates that it will launch its new safety I.V. catheter product line,
incorporating the Punctur-Guard(R) needle, in early 2000.
Another late-stage development product is the winged intravenous set.
Prototypes for the redesigned safety winged intravenous set utilizing the
Company's self-blunting needle technology have been manufactured. A winged
intravenous set is a small needle with a pair of plastic wings which gives the
healthcare worker the ability to control the needle for very precise vein
insertion. Its primary purpose is to draw blood from patients whose veins are
more difficult to access, such as geriatric and pediatric patients. The
Company's product offers a unique third wing for easy insertion and safety blunt
activation. It also features a conventional design and appearance for easy
handling, storage and disposal. The blunt is activated with movement of the
13
<PAGE> 15
third wing to the right, rendering the needle safe prior to removal from the
patient. The Company's strategy is to complete the development of this product,
and build a production line in order to begin selling this product.
Another late-stage product in development is the PICC introducer. PICC
introducers represent the fastest growing segment of the central venous catheter
market. PICC introducers are used to place a peel apart catheter in a patient's
vein. The PICC introducer is comprised of a peel apart catheter mounted over a
hollow bore needle that is attached to a plastic housing. The peel apart
catheter and needle is inserted into the patient's vein. The needle is then
withdrawn from the patient leaving the catheter in the vein. The motion of
withdrawing the needle automatically deploys our internal blunt safety
technology. The Company has completed the design of the product and, in October
1998, entered into a Development and Sales Agreement for this product with TFX.
Pursuant to the terms of agreement, the Company has received design,
development, and licensing fees and will receive royalties from future product
sales.
The Company has also developed initial prototype designs for a number of
other applications of its self-blunting technology and intends to explore
opportunities during 2000 to establish additional joint ventures on one or more
of these new products. The Company also intends to continue its efforts to
improve production processes and reduce manufacturing costs of its safety
medical products.
The Company incurred $1,112,000 in research and development expenses during
the fiscal year ended December 31, 1999, and $463,000 and $1,056,000,
respectively, during the two immediately preceding fiscal years.
Raw Materials
The Company's Punctur-Guard(R) blood collection needle has seven
components. The component parts are purchased from outside suppliers which
manufacture the components according to drawings and specifications provided by
the Company. The majority of the materials used in the components are plastics,
rubber and stainless steel and are available from a number of sources.
The Company owns or otherwise controls all production molds and tooling
used by its suppliers to manufacture critical plastic and rubber parts. Rubber
parts are currently manufactured by a single major supplier. Subgroups of
plastic parts are manufactured by separate single major suppliers. The Company
currently has one supplier of cannula which is located in a foreign country and
has multiple manufacturing sources. Lead times on cannula orders are several
months. While alternative manufacturers are available, changes in the Company's
suppliers could disrupt production schedules and adversely affect the Company.
Competition
The blood collection needle market is highly competitive. One of the
Company's primary challenges is gaining market share against well funded and
strongly entrenched competitors as they promote their own brands of safety
needles. Today the majority of the blood collection needle market is still
non-safety with one major medical device manufacturer, Becton Dickinson and
Company, holding the largest share of the market.
In the safety blood collection needle market, the Company is a major
player. The Company believes that the Punctur-Guard(R) blood collection needle
and accessory products are superior or competitive in design, quality and
convenience-of-use to all other safety needles on the market today and can
compete effectively against other safety products, particularly given the recent
regulatory actions mandating safety needle use.
Recent regulatory actions are strongly promoting the use of safety needles.
On July 1, 1999, California, through its state OSHA program, began requiring the
use of safety needles. Other states such as Texas, Tennessee, West Virginia and
New Jersey have passed similar legislation. On November 5, 1999, Federal OSHA
issued a new Compliance Directive (the "Compliance Directive"), which requires
the use of safer needles and directs OSHA field inspectors to issue citations
for facilities that fail to follow the Compliance Directive. The Company is
encouraged by language in the Compliance Directive that directs facilities to
evaluate the commercially available safety devices and select those that will
eliminate or minimize the risk of needlestick injuries.
14
<PAGE> 16
Given this important regulatory shift toward the use of safety devices, the
Company believes it will be able to increase its share of the national blood
collection needle market that today is dominated by Becton Dickinson and
Company. However, many of the Company's competitors have longer operating
histories, are substantially larger, and are better financed than the Company.
Some of these larger competitors have multiple products, which are sold to the
Company's current and/or targeted customers, giving them a potential marketing
advantage.
Patents, Proprietary Rights and Trademark
The Company holds a United States utility patent for a self-blunting needle
using an internal cannula design, which expires in May 2006. The Company
believes the patent is broad enough to include a number of product applications
including blood collection needles, winged intravenous sets, and I.V. catheters
and similar patents have been granted in a number of foreign countries as well,
which expire on various dates ranging from September 2003 to September 2008. In
addition to its original utility patent for its self-blunting needle design, the
Company was granted a patent for its self-blunting needle design for use with a
catheter in April 1991, which expires in April 2008. In September 1999, the
Company was granted a patent for the method by which needles with self-blunting
technology can be assembled, which expires in 2016. There are also patent
applications pending in both the United States and in several foreign countries
which the Company believes will lengthen its product protection once such
patents are granted. There can be no assurance, however, that patents will be
issued for any pending patent application.
In May 1997, the Company was granted patent protection on its Drop-It(R)
holder through May 2018 and, in 1998, filed additional patent applications on
its needle disposal container, holders, and other blood collection and infusion
devices.
The Company considers the design of its needle assembly machines and
certain other features of its manufacturing systems to be proprietary
information. The Company protects such information through employee
confidentiality agreements and limited access to its facilities.
"Punctur-Guard(R)", "Drop-It(R)", "Revolution(TM)", "Bio-Plexus(R)",
"Safeguarding The Future of Healthcare Workers(R)" and the Company logo are all
trademarks registered with the United States Patent and Trademark Office. The
Company considers these marks, its patents, and other proprietary information to
be valuable assets to its business.
Seasonality of Business
Sales of the Company's products are not subject to material seasonal
variations.
Regulation
The Company's medical products and operations are subjected to regulations
by the federal Food and Drug Administration (the "FDA") and various other
federal and state agencies, as well as by a number of foreign governmental
agencies. Among other things, the FDA requires the Company to adhere to certain
"Good Manufacturing Practices" ("GMP") regulations which include validation
testing, quality assurance, quality control and documentation procedures. The
Company's facilities are also subject to periodic inspections. In addition,
performance standards may be adopted by regulatory organizations for the blood
collection needle product, which the Company believes would then be required to
meet.
In June 1998, the Company received ISO 9002 and EN 46002 certifications.
ISO 9002 is a general international standard for quality assurance in
production, installation and servicing. EN 46002 provides particular quality
system requirements for suppliers of medical devices that are more specific than
the general requirements specified in ISO 9002. The Company also began labeling
its products with the CE Mark during 1998, which indicates that the Company is
following Medical Device Directives in Europe which include the standards set
forth under ISO 9002 and EN 46002. In February of 2000, the Company received ISO
9001 and EN 46001 registrations. This certification is an upgrade from the
previous ISO 9002 and EN 46002 status. The change indicates that the Company's
product design process also meets the international quality system
15
<PAGE> 17
standards. The Company will continue to label product with the CE Marking which
indicates that the Company is following the European Community Medical Device
Directives. These registrations will better enable the Company to sell its
products internationally.
The Company believes it is in compliance in all material respects with the
regulations promulgated by these regulatory organizations, and that such
compliance has not had, and is not expected to have, a material adverse effect
on its business.
The Company also believes that its operations comply in all material
respects with applicable environmental laws and regulations. Such compliance has
not had, and is not expected to have, a material adverse effect on the Company's
business.
Employees
As of December 31, 1999, Bio-Plexus employed 67 people including 14
research and development employees, 19 production employees and 34 sales,
marketing and administrative employees. The Company's employees are not
represented by a labor union, and the Company believes its employee relations
are satisfactory.
Year 2000 Update
As previously disclosed in the Company's quarterly report on Form 10-Q for
the period ended September 30, 1999, the Company had developed plans to address
the possible business risks related to the impact of the Year 2000 on its
computer systems. Since entering the Year 2000, the Company has not experienced
any major disruptions to its business nor is it aware of any significant Year
2000-related disruptions affecting its distributors and customers, strategic
partners, and suppliers. Although the Company does not anticipate any
significant impact due to Year 2000 exposures, it will continue to monitor its
critical systems, along with distributors and customers, strategic partners, and
suppliers over the next several months. Despite these efforts, the Company can
provide no assurance that all external party Year 2000 compliance plans were
successfully completed in a timely manner, although it is not currently aware of
any problems that would significantly impact its financial position, results of
operations or cash flows. Costs incurred by the Company to achieve Year 2000
readiness were not material and were charged to expense as incurred.
ITEM 2. PROPERTIES
In October of 1994, the Company acquired a 37,500 square foot facility on
5.6 acres in Vernon, Connecticut, which houses all of the Company's
manufacturing, research and development, warehouse and general and
administrative personnel. The company relocated to the Vernon, Connecticut
facility from its facility in Tolland, Connecticut all of its manufacturing,
research and development and warehouse operations in the first quarter of 1995.
The general and administrative staff of the Company moved to the Vernon,
Connecticut facility in the fourth quarter of 1997. The Company believes that
its facility in Vernon, Connecticut is of good construction and in good physical
condition, is suitable and adequate for the operations conducted there, and
operating at a normal capacity.
ITEM 3. LEGAL PROCEEDINGS AND OTHER MATTERS
The Company is not party to any litigation or legal proceedings material to
its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of 1999.
16
<PAGE> 18
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The Company's Common Stock is traded on The Nasdaq Stock Market(R) under
the symbol BPLX. The following table shows the quarterly high and low closing
price on NASDAQ for a share of the Company's Common Stock for each quarter in
the years ended December 31, 1999 and 1998 and for the quarter ended March 31,
2000:
<TABLE>
<CAPTION>
2000 1999 1998
-------------- ---------------- --------------
YEAR ENDED DECEMBER 31, HIGH LOW HIGH LOW HIGH LOW
- ----------------------- ----- ----- ------ ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
First Quarter.................... $5.00 $3.50 $2.50 $2.125 $5.06 $3.18
Second Quarter................... -- -- $5.62 $4.563 $4.87 $2.62
Third Quarter.................... -- -- $4.375 $3.25 $3.25 $1.62
Fourth Quarter................... -- -- $4.00 $3.00 $3.93 $2.00
</TABLE>
As of March 31, 2000 there were approximately 528 holders of record of the
Company's Common Stock.
The Company has not paid any dividends on its Common Stock since its
inception and does not intend to pay any dividends in the foreseeable future.
During the first quarter of 1999, a member of the Company's Board of
Directors and a shareholder, Mr. Herman Gross, invested $100,000 in exchange for
47,058 shares of Common Stock.
During the first quarter of 1999, a member of the Company's Board of
Directors and shareholder, Mr. David Himick, invested $1,000,000 in exchange for
502,500 shares of Common Stock and 75,000 warrants to purchase Common Stock with
a maturity date of December 31, 2001 and an exercise price of $2.00 per share.
On September 3, 1998, the Company loaned $600,000 to Jordan
Pharmaceuticals, Inc. ("Jordan"), a California corporation, in exchange for a
one-year promissory note. On October 31, 1998, the Company converted the
promissory note into 120,000 shares of Jordan's Series A Preferred Stock.
Pursuant to a stock option agreement dated October 31, 1998, Jordan had a right
to repurchase the shares of Series A Preferred Stock plus any paid-in-kind
shares owned by the Company (in lieu of interest paid in cash), at a purchase
price of $5.00 per share. On March 31, 1999, Jordan exercised its option with
respect to all the shares for total consideration of $627,000.
On March 24, 1999, the Company signed a commitment for a private placement
of up to $4,500,000 aggregate principal amount of 6% Convertible Debentures due
2004 ("the 6% Debentures"). The initial purchase of $2,500,000 aggregate
principal amount of 6% Debentures was made on April 27, 1999. The 6% Debentures
accrue interest at the rate of 6% per annum, payable quarterly in arrears in
cash. The 6% Debentures are convertible at any time at the option of the holders
into shares of the Company's Common Stock at the lesser of a fixed conversion
price of $3.06 per share or a floating conversion price at the time of
conversion if the floating conversion price is less than $3.06 per share. The 6%
Debentures may be wholly or partially redeemed at the option of the Company for
an amount not to exceed 130% of the face value thereof plus accrued and unpaid
interest at any time after the date of issuance. The Company and the 6%
Debenture holders have limited put and call options, respectively, for
additional 6% Debentures. In connection with the Bridge Transactions the Company
agreed not to exercise its put right under the 6% Debentures. Net proceeds from
the financing were $2,060,000 after deducting fees and expenses. The financing
also included the issuance of a warrant to purchase 500,000 shares of Common
Stock at an initial exercise price of $3.38 per share. As of March 31, 2000, the
holders of the 6% Debentures had converted $1,808,000 of the outstanding
principal balance into 600,747 shares of Common Stock at conversion prices
ranging from $2.96 to $3.06 per share.
On March 31, 1999, the Company paid the outstanding principal balance of
$250,000, and all accrued interest thereon, of a one-year term promissory note
to an officer of the Company, Mr. Carl Sahi.
17
<PAGE> 19
On April 15, 1999, $300,000 of the Company's five-year term notes held by
existing shareholders were converted into 153,633 shares of the Company's Common
Stock at a conversion price of $1.95 per share.
On May 3, 1999, an officer of the Company, Mr. Thomas Sutton, exercised an
option to purchase 30,000 shares of Common Stock at an exercise price of $2.75.
On July 19, 1999, at the Annual Meeting of Shareholders, the Company
amended its Certificate of Incorporation to increase the authorized number of
shares of Common Stock from 18,000,000 to 25,000,000.
On September 19, 1999, an officer of the Company, Carl Sahi, exercised a
warrant to purchase 125,000 shares of common stock granted in September 1992 in
a cashless exercise in exchange for 67,470 shares of common stock.
Bridge Transactions
On October 21, 1999, the Company issued to Appaloosa and entities
affiliated therewith a 7.5% non-convertible secured note in the aggregate
principal amount of $3 million. In connection with the issuance of the $3
million note, the Company also issued to the Purchasers (i) a five-year warrant
to purchase up to 1.0 million shares of the Company's common stock, no par value
(the "Common Stock") at an initial exercise price of $3.00 per share (the "$3
Warrants") and (ii) a nine-year warrant to purchase up to 1.5 million shares of
Common Stock at an initial exercise price of $5.00 per share (the "$5
Warrants"). At the Purchaser's election and contingent upon the satisfaction of
certain criteria at the closing of the Permanent Financing, or within six months
and one day thereafter, the exercise price of the $3 Warrants will increase to
$4.00 per share of Common Stock. The exercise price of the $5 Warrants will
increase to $7.00 per share of Common Stock upon the earlier of the closing of
the Permanent Financing and October 21, 2000.
On January 5, 2000, the Company issued to the Purchasers a 15%
non-convertible secured note in the aggregate principal amount of $1.65 million.
In connection with the issuance of the $1.65 million note, the Company also
agreed to issue and sell on the earlier of (i) April 30, 2000 and (ii) the
closing of the Permanent Financing, five-year warrants to acquire up to 200,000
shares of Common Stock at an initial exercise price of $3.00 per share.
On April 3, 2000, the Company issued to the Purchasers a 15%
non-convertible secured note in the aggregate principal amount of $2.2 million.
No warrants or convertible securities were issued in connection with this note.
18
<PAGE> 20
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the Financial Statements and related Notes appearing elsewhere in this Form
10-K:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue...................... $ 7,024 $ 9,307 $ 5,042 $ 2,743 $ 914
----------- ----------- ---------- ---------- ----------
Total operating costs and
expenses......................... 9,890 11,678 13,568 14,116 12,496
Financing expenses, net............ 2,367 589 3,786 1,497 1,455
----------- ----------- ---------- ---------- ----------
Net loss before extraordinary
items............................ $ (5,233) $ (2,960) $ (12,312) $ (12,870) $ (13,037)
----------- ----------- ---------- ---------- ----------
Extraordinary item:
Loss on early extinguishment of
debt, net of income taxes of
nil........................... -- -- -- -- 979
Net loss after extraordinary
item............................. (5,233) (2,960) (12,312) (12,870) (14,016)
Less: Imputed dividend on preferred
stock............................ -- -- (500) -- --
----------- ----------- ---------- ---------- ----------
Net loss applicable to common
stock............................ $ (5,233) $ (2,960) (12,812) $ (12,870) $ (14,016)
=========== =========== ========== ========== ==========
Net loss (basic and diluted) per
common share before extraordinary
item............................. $ (0.39) $ (0.24) $ (1.37) $ (1.89) $ (2.48)
=========== =========== ========== ========== ==========
Net loss (basic and diluted) per
common share after extraordinary
item............................. $ (2.67)
==========
Weighted average common shares
outstanding...................... 13,540,922 12,263,870 9,320,800 6,815,936 5,256,997
=========== =========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency)....... $ 702 $ (754) $ (33) $ (1,413) $ 12,017
Total assets....................... 9,647 9,152 11,688 12,820 23,389
Long-term debt..................... 2,262 2,403 3,204 7,407 9,099
Total shareholders' equity
(deficit)........................ 3,728 2,477 4,158 (713) 10,751
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The discussions set forth in this Management's Discussion and Analysis of
the Results of Operations and Financial Condition and elsewhere herein contain
certain statements which are not historical facts and are considered
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934,
as amended. Forward-looking statements can be identified by the use of such
forward-looking terminology as "believes," "expects," "may," "will," "should,"
or "anticipates" or negatives thereof or other derivations thereon or comparable
terminology, or discussions of strategy that involve risks and uncertainties.
The Company's actual results could differ materially from those projected in the
forward-looking statements as a result of, among other factors, the Company's
expectation regarding gross profit and operating income, general economic
conditions and growth in the safety medical products industry, competitive
factors and pricing pressures, changes in product mix, product demand, risk of
dependence on third party suppliers, ability to obtain financing, and other risk
factors and uncertainties detailed in this report, described from time to time
in the Company's other Securities and
19
<PAGE> 21
Exchange Commission filings, or discussed in the Company's press releases. All
forward-looking statements included in this document are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statements.
OVERVIEW
Since its inception in September 1987 through December 31, 1999, the
Company has incurred cumulative ongoing losses totaling $68,105,000. During this
period, the Company's principal focus has been the design, development, testing
and evaluation of its safety blood collection needle and accessory products, and
the design and development of the molds, needle assembly machines and production
processes needed for manufacturing the blood collection safety needle, as well
as the design and development of new products. The Company has also focused its
efforts on developing strategic partnerships with other health care companies in
order to bring other products to market featuring its patented internal blunting
technology.
With the addition of a new blood collection needle assembly and packaging
system in 1996, the Company believes it will have sufficient capacity to meet
its production needs for blood collection needles for 2000. For the Company to
achieve profitability, further reductions in manufacturing costs and increases
in product sales of its blood collection needles are necessary, as well as the
addition of new product lines.
In January 1997, the Company entered into a Development and Licensing
Agreement and a Supply Agreement with Johnson & Johnson Medical ("JJM").
Pursuant to the original agreements, the Company would develop and manufacture
safety needle assemblies for JJM, to become part of a new safety I.V. catheter
to be manufactured and sold by JJM, utilizing the Company's patented
self-blunting needle design.
In April 1998, the Company amended the original Development and License
Agreement and canceled the Supply Agreement with JJM. The amended terms included
certain changes in the licensing and royalty agreements as well as the transfer
of manufacturing of the safety needle assemblies to JJM, in exchange for an
initial milestone payment of $3,500,000 with an additional $500,000 payable upon
the completion of certain milestones. The revised agreement also provided for an
additional $300,000 payable to the Company for initial capital equipment
purchases during 1998.
In December of 1998, the Company completed the construction of an automated
assembly machine for JJM under the terms of the amended agreement, and the
equipment was transferred to JJM's manufacturing facility. During the first
quarter of 1999, the Company continued to perform services for JJM under the
terms of the agreement; however, by the end of the first quarter of 1999,
substantially all of the contractual obligations had been met by the Company.
During the second, third and fourth quarters of 1999, the Company continued to
provide consulting and engineering work for JJM for the I.V. catheter project;
however, this revenue is outside of the original agreements with JJM.
On October 6, 1998 the Company entered into a non-exclusive supply and
distribution agreement for the United States and Canada with Graphic Controls
Corporation (subsequently known as Kendall Healthcare Products
Company("Kendall")), a subsidiary of Tyco and a major supplier of sharps
containers in the United States. The agreement allows Kendall to purchase and
distribute Bio-Plexus Drop-It(R) Needle Disposal Containers and Drop-It(R) Quick
Release Needle Holders. The agreement has an initial term of three years, and
will be automatically renewed for an additional year, unless either party
notifies the other of its intent not to renew.
On October 23, 1998 the Company entered into an exclusive License Agreement
and Design, Development and Asset Transfer Agreement for a PICC Introducer
Catheter with TFX Medical ("TFX"), a division of Teleflex Incorporated, the
industry's dominant supplier of PICC Introducers. The License Agreement includes
certain minimum annual volume requirements and ongoing royalties on the sale of
PICC Introducer Catheters featuring the Company's Punctur-Guard(R) technology.
Under the Design, Development and Asset Transfer Agreement, the Company will
design and develop safety needle assemblies to be used with the TFX Peelable
Catheter, and will modify existing manufacturing equipment to be transferred to
TFX pursuant to the terms and conditions of the agreement. On July 26, 1999, an
agreement was entered into with TFX to modify the License Agreement dated
October 23, 1998. The amended agreement includes additional
20
<PAGE> 22
licensing fees and changes in royalty revenue in exchange for TFX's right to
exclusively market to one of its customers.
In October 1998, the Company entered into a distribution agreement with
Fisher HealthCare of Houston, Texas, the second largest operating unit of Fisher
Scientific. Fisher Scientific is one of the world leaders in serving science,
providing more than 245,000 products and services to research, healthcare,
industrial, educational and government customers in 145 countries. The
distribution agreement allows Fisher HealthCare to purchase and distribute all
of the Bio-Plexus blood collection products.
On February 21, 2000, the Company entered into a distribution agreement
with McKessonHBOC Medical Group of Richmond, Virginia. McKessonHBOC's Supply
Management Business is a leading distributor of medical-surgical supplies to
more than 5,000 hospitals nationwide. The agreement allows McKessonHBOC to
purchase and distribute the Company's products on a non-exclusive basis without
territorial limitations or restrictions. The agreement is in effect for a period
of five years and shall continue automatically in effect for successive terms of
five years each until terminated by either party.
The Company believes that similar arrangements may be possible with one or
more healthcare companies for its blood collection needle line, the winged
intravenous set and other future products, and intends to continue to pursue
this strategy during 2000. Such arrangements could assist the Company in raising
additional capital and help fund research and development of new products, as
well as accelerate the rate of sales growth. However, such arrangements could
also decrease the revenue per unit for the Company, as a result of sharing
revenue with strategic partners. The Company believes the overall benefits and
potential for greater market share outweigh the disadvantages that may result
from such arrangements.
Years Ended December 31, 1999 and 1998
The Company had total product sales of $5,498,000 for the year ended
December 31, 1999, compared with product sales of $5,086,000 for the prior year.
The increase was attributable to increased sales of medical devices of
$1,813,000 due to the continued expansion of its domestic account base and
better pricing on its products, and was partially offset by a decrease in sales
of equipment associated with joint venture projects due to the completion of the
I.V. catheter project in the first quarter of 1999.
The Company had revenues from services totaling $1,426,000 for the year
ended December 31, 1999, compared to $4,171,000 for the prior year. The decrease
was primarily attributable to lower billable engineering time associated with
the I.V. catheter development project for JJM of $1,094,000 for the year and
decreased deferred revenue of $1,750,000 also associated with the JJM I.V.
catheter development project.
Product costs were $3,754,000 for the year ended December 31, 1999,
compared to $6,355,000 for the prior year. The decrease in these costs resulted
primarily from lower costs of $1,538,000 associated with the I.V. catheter
project for JJM and lower manufacturing costs of $1,064,000 associated with the
blood collection needle product line.
Service costs were $87,000 for the year ended December 31, 1999, compared
to $267,000 for the prior year. These costs represent engineering time billed
for various development projects The decrease in these costs is the result of
the completion of the I.V. catheter development project during the first quarter
of 1999.
Research and development expenses were $1,112,000 for the year ended
December 31, 1999, compared to $463,000 for the prior year. The increase in
these costs resulted primarily from a decrease of $841,000 in 1999 of deferred
revenue related to the development of the I.V. catheter for JJM, which was
amortized into income as a reduction in research and development expenses during
1998. Partially offsetting this increase was lower actual research and
development expenses related to projects in 1999 as compared to 1998.
Selling, general and administrative expenses were $4,937,000 for the year
ended December 31, 1999, compared with $4,593,000 for the prior year. This
increase resulted from increases of approximately $350,000 and $238,000
associated with general management and sales and marketing expenses,
respectively. These increases were partially offset by decreases in the areas of
building costs, human resource costs and accounting expenses.
21
<PAGE> 23
Financing expenses for the year ended December 31, 1999 were $2,367,000
compared to $589,000 for the prior year. The increase resulted from the
amortization of $1,245,000 of debt discount associated with the First Bridge
Warrants issued in connection with the First Bridge Note which was issued in the
fourth quarter of 1999. In addition, the Company recorded $355,000 of debt
discount associated with 500,000 warrants issued in connection with the 6%
Convertible Debenture financing in the second quarter of 1999. The Company also
recorded a $121,000 charge to interest expense to record the intrinsic value of
the conversion feature of the 6% Debentures and an additional $260,000 of
deferred financing expenses associated with the 6% Convertible Debenture
financing. Partially offsetting these charges were reductions of approximately
$136,000 in interest expense related to equipment leases.
Years Ended December 31, 1998 and 1997
The Company had product sales of $5,086,000 for the year ended December 31,
1998, compared with revenues of $3,542,000 for the prior year. The increase of
$1,544,000 included approximately $93,000 attributable to the expansion of its
domestic account base and better pricing on its products, and $1,451,000 in
sales of equipment to JJM on the I.V. catheter development project. The Company
had revenues from services totaling $4,171,000 for the year ended December 31,
1998 as compared to $0 in the prior year. Of this amount, $1,313,000 resulted
from progress payments by JJM for engineering time on the I.V. catheter capital
equipment development project, and $2,625,000 from the recognition of deferred
revenue related to the I.V. catheter development project.
Product costs were $6,355,000 for the year ended December 31, 1998,
compared to $5,764,000 for the prior year. The 1998 amount includes the cost of
equipment sales to JJM, as well as cost of goods sold related to safety medical
products. The decrease in product costs for safety medical products is primarily
the result of lower manufacturing costs associated with the blood collection
needle line.
Service costs for 1998 were $267,000 for the year ended December 31, 1998.
These costs represented engineering time billed on the I.V. catheter development
project with JJM.
Research and development expenses were $463,000 for the year ended December
31, 1998, compared to $1,056,000 for the prior year. The decrease in these costs
in 1998 resulted primarily from engineering costs billed to JJM on the capital
equipment project and recognized under costs of goods sold, and the recognition
of $841,000 of deferred revenue related to the development of the I.V. catheter
for JJM recorded as a reduction in research and development expenses during
1998.
Other operating and engineering costs were $1,857,000 for the year ended
December 31, 1998, compared with $1,053,000 for the prior year. The increase of
$804,000 in these costs represents the net increase between the write-off of
obsolete capital equipment totaling $1,359,000 in 1998 compared to $512,000 in
the prior year.
Selling, general and administrative expenses were $4,593,000 for the year
ended December 31, 1998, compared with $6,748,000 for the prior year. This
decrease resulted from decreases of approximately $1,448,000 associated with
workforce reductions in sales and marketing and general management, $595,000
associated with legal and accounting fees, professional fees and insurance
expenses, and $100,000 associated with the consolidation of its facilities into
one location.
Financing expenses for the year ended December 31, 1998 were $589,000
compared to $3,786,000 for the prior year. The decrease resulted from lower
interest expense associated with equipment lease financing, and, in the prior
year, a one-time charge of $640,000 related to the conversion of warrants to
common stock and a charge of $1,665,000 related to the amortization of the debt
discount.
LIQUIDITY AND CAPITAL RESOURCES
The Company's need for additional funds has continued from period to
period, as a result of its ongoing losses from operations and its continued
efforts to develop new products. To date, the Company has financed its
operations primarily through borrowings and the sale of equity securities.
Through December 31, 1999, the Company had received net proceeds of
approximately $34,706,000 through borrowings and the sale of debt securities and
$50,464,000 through the sale of equity securities. Of the net equity proceeds,
$17,575,000 was
22
<PAGE> 24
received from its 1995 public offering, $14,191,000 was received from the
Company's initial public offering and the balance of $18,698,000 was received
through the private placement of equity securities.
As of December 31, 1999, the Company's principal source of liquidity was
cash and short-term investments totaling $867,000. The Company invests its
excess cash with a local bank in a short-term investment account backed by
Treasury obligations and other federal agency obligations.
Cash used in operating activities for the year ended December 31, 1999
totaled $3,961,000 and was primarily due to a net loss for the period of
$5,233,000. Also contributing were increases in accounts receivable and
inventory balances of $344,000 and $238,000, respectively, due to higher sales
in 1999 and anticipated higher sales volumes in the future. In addition, there
were decreases in accrued product replacement costs of $222,000 as a result of
the completion of a product recall in the fourth quarter of 1998, and in
deferred revenue resulting from the recognition into income of $875,000 of
development funds associated with the JJM I.V. catheter project during the first
quarter of 1999. Partially offsetting these uses of cash, were depreciation and
amortization expenses of $2,565,000, the writedown of equipment totaling
$280,000, and increased accounts payable of $248,000.
Net cash used by investing activities amounted to $12,000 primarily due to
investments in fixed assets of $536,000 and patent costs of $103,000, offset by
the Company's conversion of a loan to Jordan Pharmaceuticals, Inc. in the amount
of $600,000 into shares of Jordan Series A Preferred Stock. Pursuant to the
terms of the stock option agreement, Jordan exercised its option to repurchase
the shares for total consideration to the Company of $627,000.
Net cash provided by financing activities amounted to $4,305,000 for the
year ended December 31, 1999. The increase in cash is attributable to proceeds
from the sale of stock of $1,100,000, proceeds from long-term debt of
$2,060,000, and proceeds from notes payable of $2,750,000, partially offset by
the repayment of debt totalling $1,833,000.
The Company's primary cash requirement for 2000 will be for working capital
to expand its operations for its current product lines as well as to launch new
products, to repay outstanding debt, and to continue research and development
activities on other new products. The Company is considering the development of
a strategic partnership with one or more healthcare companies to assist in
bringing additional products to market featuring the internal blunting
technology.
In order to satisfy its current and anticipated need for capital, the
Company has entered into the Bridge Transactions and, pending receipt of
Stockholder Approval, will consummate the Permanent Financing. See
"Business -- Convertible Note Financing."
Upon the closing of the Permanent Financing the Company will have issued to
the Purchasers the following securities:
- the Convertible Notes;
- the Permanent Financing Shares; and
- warrants to purchase up to 4.2 million shares of Common Stock (comprised
of the First Bridge Warrants, the Second Bridge Warrants and the $7
Warrants)
The Permanent Financing will generate aggregate proceeds to the Company of
$17.5 million. After repayment of the Bridge Notes, the Company will realize net
proceeds of approximately $8.4 million which will be available for general
working capital purposes, subject to the terms and conditions of the Permanent
Financing transaction agreements.
The Company is continuing to explore additional financing alternatives and
potential strategic relationships which may provide the Company with additional
sources of working capital. There can be no assurances that the Company will be
able to secure such additional sources of working capital. Failure to raise
needed capital may have a material adverse impact on the Company's operations,
development plans and cash flows.
23
<PAGE> 25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14 for an index to Financial Statements and Financial Statement
Schedules. Such Financial Statements and Financial Statement Schedules are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in or disagreements with Accountants during the
reporting period.
PART III
ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Richard D. Ribakove(2)(3).................... 45 Chairman of the Board and Director
Carl R. Sahi(1).............................. 43 President, Chief Executive Officer and Director
Thomas K. Sutton............................. 40 Executive Vice President
Kimberley A. Cady............................ 34 Vice President, Finance and Chief Financial
Officer
Lucio Improta................................ 55 Vice President, International Business
Development
Richard L. Higgins........................... 57 Director
David Himick(1)(2)(3)(4)..................... 74 Director
Herman Gross(2)(4)........................... 82 Director
</TABLE>
- ---------------
(1) Member of 1995 Non-Employee Directors' Stock Option Plan Committee.
(2) Member of Compensation Committee.
(3) Member of Audit Committee.
(4) Member of Finance Committee.
Mr. Ribakove is a Director of the Company and the Chairman of the Board of
Directors of the Company, and an attorney in private practice in New York City.
Mr. Ribakove has been a Director of the Company since its founding in September
1987. He is also the Vice President of Mooney-General Paper Co., a large
distributor of paper products. He is a graduate of Hofstra University with a
Bachelor's degree in Business Administration and is a graduate of Brooklyn Law
School.
Mr. Sahi is a Director of the Company and the Company's President and Chief
Executive Officer. Mr. Sahi founded the Company in September 1987 and has been a
Director since that time. Between October 1997 and December 1998, Mr. Sahi
served as the Company's Vice President, Technology and Business Development and
Treasurer and from September 1987 to October 1997, Mr. Sahi served as President
of the Company. Prior to 1987, Mr. Sahi had seven years of entrepreneurial
experience in developing products, services and small companies. His experience
includes the development of a polyvinyl chloride gasketed plastic bottle cap,
the formation and management of a company that assembled plastic immunoassay
diagnostic test kits and the formation, management and sale of a janitorial
maintenance company. Mr. Sahi is the principal inventor of the Company's
self-blunting needle and founded the Company in order to design, develop,
manufacture and market that product. Mr. Sahi has three years of undergraduate
business education, holds a Bachelor's degree in Pathobiology from the
University of Connecticut and has six years of graduate training in Chemistry.
Mr. Sutton was appointed Executive Vice President in 1998. He has
responsibility for Marketing and Sales, Human Resources, Quality Assurance,
Engineering and Operations. Mr. Sutton previously served as the Company's Vice
President, U.S. Marketing and Sales from November 1996 to March 1998. Mr. Sutton
has extensive experience in marketing and sales of safety medical needles. Prior
to his work at the Company, Mr. Sutton managed the Protectiv I.V. Catheter
Safety System brand for Johnson & Johnson Medical.
24
<PAGE> 26
("JJM"). Mr. Sutton served as Product Director for five years at JJMI
(1991-1996), and was a Sales Manager and Representative prior to holding that
position. Mr. Sutton was in commercial banking for six years with the South
Carolina National Bank, rising to the level of Vice President. Mr. Sutton holds
a Bachelor of Science degree in Business Administration and a Master's degree in
Business Administration, both from the University of South Carolina.
Ms. Cady is the Company's Vice President, Finance and Chief Financial
Officer. Between 1994 and 1996, Ms. Cady served as the Company's Cost Accountant
and between 1996 and 1998 as the Company's Controller. Ms. Cady has twelve years
of accounting and finance experience encompassing both public and private
accounting, specializing in manufacturing. From 1989 to 1994, Ms. Cady was
employed with Gerber Technology, Inc., a subsidiary of Gerber Scientific, Inc.,
most recently as their Supervisor of Cost Accounting. Prior to this, she was
employed as an auditor with the public accounting firm of Deloitte & Touche,
LLP. Ms. Cady holds a Bachelor of Science degree in Business Administration from
Bryant College.
Mr. Improta served as the Company's Vice President, International Business
Development from January 1997 until September 1999. Prior to his joining the
Company, Mr. Improta was acting as a consultant to the Company through FRC
International, to help establish distributors in Europe. His prior experience
included employment with a number of medical products companies including
Becton, Dickinson & Company, Ital-Gamma and Abbott Laboratories.
Mr. Higgins is a Director of the Company and between January 1998 and
December 1999 he served as the Company's President and Chief Executive Officer.
He joined the Company on a part-time basis as a consultant in May 1992 and
became a full time employee in September 1993. From July 1996 to January 1998,
Mr. Higgins served as the Company's Vice President, Finance. From February 1992
through September 1993, Mr. Higgins was self-employed as a business consultant.
From June 1966 through February 1992, Mr. Higgins was employed by the State of
Connecticut during which time he helped establish the Connecticut Development
Authority ("CDA"). He served as the CDA's Executive Director from 1975 to 1992.
Mr. Higgins holds a Bachelor of Arts degree from the University of Connecticut.
Mr. Himick is a Director of the Company, a retired business executive, and
a business consultant. Mr. Himick became a Director of the Company in April
1997. He was the founder of several companies including Commercial Wire Rope &
Supply of Detroit, Commercial Wire Rope & Supply of Flint, Commercial Wire Rope
& Supply of Toledo, and Detroit Chain Products Co. He was a Director for
Heritage Federal Savings Bank located in Taylor, Michigan between 1982 and 1993
and a Director of Heritage Bankcorp Inc. (the holding company of Heritage
Federal Savings), between 1989 and 1993. Mr. Himick currently serves on the
Board of Directors of Community Bank of Dearborn and the Board of Directors of
Dearborn Bancorp (the holding company of Community Bank of Dearborn), both of
which positions he assumed in 1994.
Mr. Gross is a Director of the Company and a retired business executive. He
became a Director of the Company in November 1998. He was Chairman of Elliot
International, a company that imports apparel, from 1948 to 1981. He is a
graduate of both City College of New York and Harvard Law School class of 1940.
Mr. Gross is a member of the New York Bar. He brings to the Company his
knowledge of finance, the international market and his understanding of patent
law.
There is no family relationship between any of the executive officers or
Directors of the Company.
Executive officers of the Company are elected by the Board of Directors on
an annual basis and serve at the discretion of the Board. Members of the Board
of Directors are elected annually at the annual meeting of shareholders.
The Board of Directors has a Compensation Committee, a Finance Committee,
an Audit Committee and a 1995 Non Employee Directors' Stock Option Plan
Committee. The Compensation Committee administers the Company's 1991 Long Term
Incentive Plan. The Finance Committee reviews and approves proposals for
financing the Company. The Audit Committee reviews the results and scope of the
annual audit and other services provided by the Company's independent auditors.
The 1995 Non-Employee Directors' Stock Option Plan Committee administers the
Company's 1995 Non-Employee Directors' Stock Option Plan.
25
<PAGE> 27
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934 (the "Exchange Act")
requires directors and executive officers and persons, if any, owning more than
ten percent of a class of the Company's equity securities ("10% Stockholders")
to file with the Securities and Exchange Commission (the "SEC") initial reports
of ownership and reports of changes in ownership of the Company's equity and
equity derivative securities. Based solely upon a review of the copies of such
reports furnished to the Company, or written representations from reporting
persons, the Company believes that during 1999 Mr. Gross was delinquent in
filing Form 4's. representing the conversion of loans made to the Company into
shares of Common Stock, the granting of warrants issued in connection with such
loans, and Common Stock purchase transactions. The Company also believes that
Mr. Himick was delinquent in filing a Form 4 representing the conversion of a
loan made to the Company into shares of Common Stock and the granting of
warrants issued in connection with the loan. A report on Form 3 was not timely
filed for Ms. Cady upon her becoming an officer of the Company. Each is now in
compliance.
ITEM 11. EXECUTIVE COMPENSATION
Included below are tables which set forth certain information concerning
compensation paid by the Company to its chief executive officer and all other
executive officers with annual compensation in excess of $100,000 for the year
ended December 31, 1999 (the "Named Executive Officers"). The tables include
columns related to stock options and stock appreciation rights ("SARS")
(contractual rights to compensation measured by increases in the value of the
common stock payable in stock and/or cash). No SARS have been issued by the
Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS/SARS COMPENSATION
- --------------------------- ---- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Carl R. Sahi(1)..................... 1999 180,000
President and Chief Executive
Officer 1998 190,769
1997 220,000
Richard L. Higgins(2)............... 1999 180,017 50,000
Director 1998 180,017 100,000
1997 100,000 25,000
Thomas K. Sutton(3)................. 1999 125,000 32,500
Executive Vice President 1998 119,077 30,000
1997 103,000 14,401(4) 30,000
Lucio Improta(5).................... 1999 165,318
1998 150,000
1997 144,231 30,000 4,248(6)
</TABLE>
- ---------------
(1) Mr. Sahi became President and Chief Executive Officer on September 21, 1999.
He became Treasurer of the Company on July 24, 1997 and Vice President,
Business Technology and Development on October 29, 1997. Mr. Sahi served as
President of the Company from September 1987 to October 1997.
(2) Mr. Higgins was a Named Executive Officer of the Company in 1997, holding
the office of Vice President, Finance. On January 6, 1998, Mr. Higgins was
elected to the offices of President and Chief Executive Officer of the
Company. Mr. Higgins stepped down as President and Chief Executive Officer
on September 21, 1999, subsequently retired from the Company on December 31,
1998, but continues to serve on the Company's Board of Directors.
(3) Mr. Sutton first became an employee of the Company in November 1996.
(4) Represents a signing bonus paid to Mr. Sutton in 1997.
(5) Mr. Improta terminated employment with the Company on September 16, 1999.
(6) Represents premiums paid for a personal term life insurance policy. Mr.
Improta has no interest in any cash surrender value under the insurance
policy.
26
<PAGE> 28
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF
SECURITIES TOTAL OPTIONS EXERCISE STOCK VALUE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION($)(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -------------------------
NAME GRANTED(#) 1999 ($/SH) DATE 5% 10%
- ---- ---------- ------------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Higgins...... 50,000 33% 2.16 04/01/09 $68,000 $172,000
Thomas K. Sutton........ 32,500 21% 2.16 04/01/09 $44,200 $111,800
</TABLE>
- ---------------
(1) Represents the potential realizable value of each grant assuming the market
price of the underlying security appreciates in value from the date of grant
to the end of the option term at 5% and 10% annually.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
SHARES OPTIONS/ WARRANTS AT MONEY OPTIONS/ WARRANTS AT
ACQUIRED DECEMBER 31, 1999 DECEMBER 31, 1999
ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas K. Sutton.................... 30,000 $97,500 32,500 30,000 $59,800 $37,500
</TABLE>
REPORT OF COMPENSATION COMMITTEE ON REPRICING OF OPTIONS
The Company's 1991 Long-Term Incentive Plan (the "Plan") is intended to
encourage Company employees, through their individual efforts, to improve the
Company's overall performance and to promote profitability by providing them an
opportunity to participate in the increased values they help create. In January
1999, the Compensation Committee determined that the imbalance between the
exercise price of certain of the stock options then outstanding (equal to the
respective market prices for Common Stock at the times they were granted) and
the lower market prices which prevailed for the Company's Common Stock at that
time did not provide an incentive for employees holding such options. To restore
that incentive, the Board of Directors, upon the recommendation of the
Committee, extended to all of the Company's employees, including executive
officers, holding stock options, the opportunity, at such employee's election,
to receive a repriced option under the Plan, exercisable at $2.75 per share,
which was $.50 greater than the market price of the Company's Common Stock on
the date of repricing.
The Compensation Committee, based on its assessment of the performance of
the Company's executive officers and to enhance the incentive for the executive
officers to implement the Company's business plan, also recommended, and the
Board of Directors approved, the extension to each of the executive officers
holding stock options, the opportunity, at his or her election, to exchange the
options held by such executive officer having an exercise price per share of
$4.75 or more for new options having an exercise price per share of $2.75, which
was $.50 greater than the market price of the Company's Common Stock at the time
the Board of Directors approved the repricing. Options to purchase an aggregate
of 245,000 shares of Common Stock were affected by the repricing. Except as
modified as described above, each new option continues to be governed by the
same terms as applied to the surrendered. The surrendered options were currently
exercisable.
The participation by executive officers in the repricing program is shown
in the table entitled "Ten-Year Options Repricings" below.
Compensation Committee,
Richard Ribakove
David Himick
Herman Gross
27
<PAGE> 29
TEN-YEAR OPTIONS REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF ORIGINAL
SECURITIES MARKET PRICE EXERCISE OPTION TERM
UNDERLYING OF STOCK PRICE AT REMAINING AT
OPTIONS AT TIME OF TIME OF NEW($) DATE OF
REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME DATE AMENDED AMENDMENT($) AMENDMENT($) PRICE AMENDMENT
- ---- ------- ----------- ------------ ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Higgins........... 3/15/99 5,000 2.25 9.25 2.75 5
Chief Executive Officer 3/15/99 25,000 2.25 6.25 2.75 8
3/15/99 100,000 2.25 4.75 2.75 9
Thomas K. Sutton............. 3/15/99 30,000 2.25 6.25 2.75 8
Executive Vice President 3/15/99 30,000 2.25 4.75 2.75 9
Kimberley A. Cady............ 3/15/99 2,500 2.25 9.25 2.75 5
Chief Financial Officer and 3/15/99 22,500 2.25 4.75 2.75 9
Vice President, Finance
Lucio Improta................ 10/1/99 30,000 3.313 7.75 2.75 7
Vice President,
International Business
Development
</TABLE>
EMPLOYMENT AGREEMENTS
There are no employment agreements between the Company and its executive
officers.
All employees have executed confidentiality agreements with the Company.
COMPENSATION OF DIRECTORS
Non-employee members of the Board of Directors ("Outside Directors")receive
an automatic annual grant of options for 1,000 shares of Common Stock upon their
election or re-election to the Board of Directors. The options are granted under
the 1995 Non-Employee Directors' Stock Option Plan (the "Directors' Plan") which
was adopted on July 6, 1995 at the Company's 1995 Annual Meeting of
Shareholders.
Only Outside Directors are eligible to receive grants of options under the
Directors' Plan. Participants who had served as directors prior to the adoption
of the Directors' Plan automatically received an option for 1,000 shares of
Common Stock for each calendar year they served as a director. During the term
of the Directors' Plan, Outside Directors automatically receive a grant of an
option for 1,000 shares of Common Stock on their election or re-election.
Messrs. Ribakove, Himick and Gross have all received an automatic grant for
1,000 shares of common stock for 1999. All options granted vest one (1) year
after the date of grant, are exercisable for a term that is the lesser of one
(1) year from the termination as a director or five (5) years from the date of
grant, and have an exercise price equal to the fair market value of the
underlying shares of Common Stock on the date of grant. Vesting is accelerated
upon the death, disability, or retirement of a participant. Should a participant
terminate his or her service as a director for any other reason, shares not
fully vested under an option will be forfeited. Payment of the option exercise
price may be made in cash or by transfer to the Company of shares of Common
Stock having a fair market value equal to the option exercise price, or by
withholding from the shares that would otherwise be issued under an option, that
number of shares having a fair market value equal to the option exercise price.
There are fifty thousand (50,000) shares of Common Stock reserved for
issuance under the Directors' Plan. There were 28,000 shares subject to
outstanding options as of December 31, 1999. There are also five-thousand
(5,000) shares subject to an outstanding option that was issued to an Outside
Director of the Company outside of the Director's Plan.
Outside Directors also received $2,500 per quarter, paid in Common Stock
valued at 85% of the 30 day average market price for the stock for the 30
trading days prior to the month in which payments would be made. During 1999,
17,376 shares were issued to Outside Directors as compensation.
28
<PAGE> 30
On August 20, 1999, the Board of Directors voted to approve the repricing
of existing stock options issued under the Directors' Plan that were in excess
of $4.25 per share if the market value of the stock on that date was equal to or
greater than $4.25. The options were repriced at $4.25 in an effort to more
appropriately value the options given the decline in the Company's stock price
since the original grant dates.
On October 18, 1999, the Board of Directors awarded 15,000 warrants to the
Chairman of the Board for services in connection with the Appaloosa financing
transaction.
INCENTIVE PLAN
In May 1991 the Company adopted its 1991 Long Term Incentive Plan (as
amended, the "Plan"). Pursuant to the Plan, the Compensation Committee of the
Board (the "Committee") has the power to make grants or awards to persons who,
in the judgment of the Committee, have contributed or will contribute, to the
long-term success of the Company. The Board generally may amend, suspend or
terminate the Plan in whole or in part. However, amendments which materially
increase the benefits accruing to participants under the Plan, increase the
number of shares of Common Stock reserved for purposes of the Plan or materially
modify the requirements as to eligibility to participate in the Plan must also
be approved by the Company's shareholders. Awards and grants under the Plan may
be made in a variety of forms, including warrants to purchase Common Stock,
stock options, incentive stock options within the meaning of Section 422 of the
Internal Revenue Code ("ISOs"), and restricted stock. Stock options may be
accompanied by SARS, and restricted stock may be accompanied by grants of
performance shares (contractual rights to compensation measured by increases in
the value of the Common Stock payable in cash). The Committee in its discretion
determines who receives grants or awards under the Plan, the number of warrants,
options, ISOs, SARs, performance shares, and shares of restricted stock, the
option price, and the duration of the awards. One Million (1,000,000) shares
have been reserved for issuance under the Plan, including 542,650 shares subject
to outstanding options under the Plan as of December 31, 1999. There were 32,917
options exercised under the Plan during 1999. The exercise prices of options
awarded under the Plan were the fair market value of the underlying shares at
the time of the award, as determined by the Compensation Committee of the Board
of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Ribakove, Himick and Gross are the members of the Compensation
Committee. Each is an Outside Director of the Company. No executive officers of
the Company serve on the Compensation Committee (or in a like capacity) for any
other entity.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Introduction
The Compensation Committee of the Board of Directors establishes the
general compensation policies of the Company, administers the Company's 1991
Long-Term Incentive Plan, and sets specific compensation levels for executive
officers of the Company. The goal of the Compensation Committee is to provide
such levels and forms of compensation as will allow the Company to attract,
retain, and motivate persons important to the growth and success of the Company.
Outside Directors serve as members of the Compensation Committee.
Compensation Programs
Base Salary. The Committee establishes base salaries for each of the
executive officers based upon their position with the Company, their experience
level and their individual performance. Base salaries are subject to adjustment
by the Compensation Committee, from time to time, in its discretion.
Bonuses. Each executive officer is eligible to receive a cash bonus at the
election of the Compensation Committee. The bonus may be awarded at any time
during the year and may be based on a specific goal or achievement or overall
performance of the executive officer.
29
<PAGE> 31
Incentive Plan. Executive officers are eligible to participate in the
Company's 1991 Long-Term Incentive Plan (the "Incentive Plan") Grants under the
Incentive Plan may be made in a variety of forms including warrants to purchase
Common Stock, stock options, incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and
restricted stock. Stock options may be accompanied by stock appreciation rights
and restricted stock may be accompanied by grants of performance shares
(contractual rights to compensation measured by increases in the value of Common
Stock payable in cash). Only grants of stock options have been made under the
Incentive Plan. Vesting periods for executive officers vary. Generally, the
options were provided through initial grants at or near the date of hire and
subsequent grants as the Compensation Committee deemed appropriate. The intent
of the grants was to create an incentive for the recipient to remain at the
Company and to provide a long-term incentive to achieve or exceed the Company's
goals.
Repricing of Stock Options
On January 20, 1999 at the recommendation of the Compensation Committee at
a meeting of the Board of Directors, a decision was made to reduce the exercise
prices on employee stock options as of that date which were previously awarded
under the 1991 Long Term Incentive Plan to $2.75 per share. This reduction was
made in an effort to more appropriately value the options given the decline in
the Company's stock price since the original grant dates.
Compensation of Chief Executive Officer
Mr. Higgins was the Chief Executive Officer of the Company during 1999 up
until his retirement from the Company on September 21, 1999. His compensation
consisted of a base salary plus bonus. In 1999, he received an annual base
salary of $180,017 and was awarded 50,000 stock options to purchase the
Company's Common Stock at an exercise price of $2.16 per share.
Mr. Sahi was elected to the position of Chief Executive Officer on
September 21, 1999. His compensation for 1999 consisted of a base salary of
$180,000.
Code Section 162 (m)
In 1993, the Code was amended to add Section 162(m). Section 162(m) places
a limit of $1,000,000 on the amount of compensation that may be deducted by a
public company in any year with respect to certain of the Company's higher paid
executives. Certain performance-based compensation that has been approved by
shareholders is not subject to the deduction limitation. The 1999 cash
compensation of the Company's executive officers was well below the level where
this limitation would apply. The Company believes that options granted under the
Incentive Plan are excluded from the Section 162(m) limitation as performance-
based compensation.
Compensation Committee,
Richard Ribakove
David Himick
Herman Gross
30
<PAGE> 32
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock for the fiscal year ended December 31, 1999 with the
cumulative total stockholder return on the Nasdaq Stock Market (U.S.) Index and
the S&P Healthcare Composite Index. The comparison assumes $100 was invested on
June 20, 1994, at the initial public offering price in the Company's Common
Stock and in each of the indices and assumes reinvestment of dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN
FOR THE PERIOD ENDED DECEMBER 31, 1995 TO DECEMBER 31, 1999 BETWEEN
BIO-PLEXUS, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX AND
THE S&P HEALTHCARE COMPOSITE INDEX
[LINE GRAPH]
<TABLE>
<CAPTION>
BIO-PLEXUS, INC. NASDAQ STOCK INDEX S&P HEALTHCARE
COMPOSITE
INDEX
<S> <C> <C> <C>
145.00 102.98 125.59
142.50 108.40 127.37
147.50 111.61 131.13
145.00 115.13 134.67
110.00 118.11 138.16
120.00 127.67 144.01
118.75 137.04 150.89
120.00 139.83 150.64
122.50 143.05 163.79
117.50 142.22 168.40
100.00 145.56 176.77
12/31/95 102.50 144.79 186.08
108.75 145.51 196.65
112.50 151.06 193.48
97.50 151.57 191.97
121.25 164.12 188.28
115.00 171.65 196.01
100.00 163.92 199.63
90.00 149.32 189.82
76.25 157.70 196.90
76.25 169.76 213.03
85.00 167.88 215.08
60.00 178.29 233.15
12/31/96 90.00 178.14 223.12
75.63 190.78 247.51
62.50 180.23 251.12
46.25 168.48 233.87
56.25 173.73 253.02
45.00 193.41 268.50
32.50 199.35 294.25
27.50 220.36 299.98
56.25 220.04 275.69
56.25 233.08 291.65
58.75 220.94 294.69
53.75 222.11 307.19
12/31/97 47.50 218.28 320.66
41.25 225.19 343.02
36.88 246.37 362.22
41.25 255.46 374.88
33.13 259.76 383.74
30.00 245.34 376.34
28.75 262.48 403.87
26.25 259.41 406.01
23.75 208.13 360.43
17.50 237.03 403.22
28.75 247.26 417.81
26.25 272.27 443.32
12/31/98 23.75 307.59 462.43
21.25 352.32 464.71
25.00 320.74 470.34
22.50 344.07 482.91
56.25 353.74 452.88
48.75 345.59 439.87
45.63 376.45 460.49
43.75 370.97 434.35
40.00 385.66 450.08
32.50 385.04 414.71
30.00 413.02 464.68
40.00 457.08 466.36
12/31/99 40.00 555.69 424.32
</TABLE>
31
<PAGE> 33
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of March 31, 2000 (unless otherwise
specified) for: (i) each person who is known by the Company to beneficially own
more than 5% of the Common Stock; (ii) each of the Company's directors; (iii)
each of the Company's Named Executive Officers; and (iv) all of the directors
and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF CLASS
NAME AND ADDRESS(1) OF BENEFICIAL BENEFICIALLY
OF BENEFICIAL OWNER OWNERSHIP(2) OWNED
- ------------------- ----------------- ----------------
<S> <C> <C>
Appaloosa Management L.P. and David A. Tepper(3)............ 2,700,000 15.8%
Herman Gross(4)............................................. 1,672,110 11.6%
Richard L. Higgins.......................................... 63,625 *
Carl R. Sahi................................................ 500,970 3.5%
David Himick(5)............................................. 1,604,396 11.1%
Kimberley A. Cady(6)........................................ 85,000 *
Richard D. Ribakove(7)...................................... 62,614 *
Thomas K. Sutton(8)......................................... 24,950 *
All directors and executive officers as a group (7
persons).................................................. 3,956,165 27.0%
</TABLE>
- ---------------
* Less than 1% of the class.
(1) Unless otherwise indicated, the address of each named holder is c/o
Bio-Plexus, Inc., 129 Reservoir Road, Vernon, Connecticut 06066.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to options, warrants and convertible notes currently exercisable or
convertible, or exercisable or convertible within sixty (60) days, are
deemed outstanding for computing the percentage of the person holding such
options but are not deemed outstanding for computing the percentage of any
other person. Except as indicated by footnote, and subject to community
property laws where applicable, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock shown
as beneficially owned by them.
(3) Based on the Schedule 13D filed jointly with the Commission on November 1,
1999, as amended by Amendment No. 1 filed jointly on January 5, 2000, by
Appaloosa and David A. Tepper, the sole stockholder and President of
Appaloosa Partners Inc., the general partner of Appaloosa. Includes 1
million shares of Common Stock issuable upon the exercise of the $3 warrants
and 1.5 million shares of common stock issuable upon exercise of the $5
warrants issued to the purchasers upon the closing of the first bridge loan
and 200,000 shares issuable upon the exercise of the warrants that will be
issued in connection with a second bridge loan.
(4) Includes 75,000 shares of Common Stock issuable upon the exercise of
warrants and 2,000 shares issuable upon the exercise of options owned by Mr.
Gross which are presently exercisable.
(5) Includes 145,378 shares of Common Stock owned jointly by Mr. Himick and his
wife and as to which they share voting and investment power and 77,000
shares of Common Stock issuable upon the exercise of warrants and options
owned by Mr. Himick which are presently exercisable.
(6) Includes 85,000 shares of Common Stock issuable upon the exercise of options
owned by Ms. Cady which are presently exercisable.
(7) Includes 28,430 shares of Common Stock owned jointly by Mr. Ribakove and his
wife in tenancy by their entirety. As to such shares, Mr. Ribakove and his
wife share voting and investment power. Also includes 29,000 shares of
Common Stock issuable upon the exercise of warrants and options owned by Mr.
Ribakove which are presently exercisable, and 600 shares of Common Stock
held in custodial accounts for the Ribakoves' minor children.
32
<PAGE> 34
(8) Includes 10,000 shares of Common Stock issuable upon the exercise of options
owned by Mr. Sutton which are presently exercisable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) FINANCIAL STATEMENTS
Listed on page F-1 of the Financial Statements.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the fourth
quarter ended December 31, 1999.
A report on Form 8-K was filed on February 24, 2000 reporting an
adjournment of a Special Shareholders Meeting that was to be held on
February 28, 2000.
A report on Form 8-K was filed on March 31, 2000 reporting the Company's
1999 financial results.
(c) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION METHOD OF FILING
- ------- --------------------------------------- ---------------------------------------
<C> <S> <C>
1.2 Form of Advest, Inc. Warrant........... Incorporated by reference to Exhibit
1.2 to the Registrant's registration
statement on Form S-1 filed on April 1,
1994 (File No. 33-77202).
1.3 Form of Advest, Inc. Registration
Rights Agreement....................... Incorporated by reference to Exhibit
1.3 to the Registrant's registration
statement on Form S-1 filed on April 1,
1994 (File No. 33-77202).
3.1 Certificate of Incorporation of the
Company, as amended.................... Incorporated by reference to Exhibit
3.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarter
ended September 30, 1998 (File No.
0-24128).
3.2 Bylaws of the Company, as amended...... Incorporated by reference to Exhibit
3.2 to the Registrant's Annual Report
on Form 10-K filed on April 13, 1998
(File No. 0-24128).
4.5 Promissory Note, dated October 28,
1994, between the Company and Victor
and Margaret DeMattia.................. Incorporated by reference to Exhibit
4.5 to the Registrant's Annual Report
on Form 10-K filed on March 30, 1995
(File No. 0-24128).
10.1 Lease, dated March 7, 1989, between the
Company and T&S Limited Partnership, as
amended................................ Incorporated by reference to Exhibit
10.1 to the Registrant's registration
statement on Form S-1 filed on April 1,
1994 (File No. 33-77202).
</TABLE>
33
<PAGE> 35
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION METHOD OF FILING
- ------- --------------------------------------- ---------------------------------------
<C> <S> <C>
10.4 Purchase and Sale Agreement, as
amended, for 129 Reservoir Road,
Vernon, Connecticut, dated October 28,
1994, between the Company and Victor
and Margaret DeMattia.................. Incorporated by reference to Exhibit
10.4 to the Registrant's Annual Report
on Form 10-K filed on March 30, 1995
(File No. 0-24128).
10.6 Marketing and Distribution Agreement
dated March 16, 1995, between the
Company and Allegiance................. Incorporated by reference to Exhibit
10.6 to the Registrant's Amendment No.
2 to Annual Report on Form 10-K filed
on June 30, 1995 (File No. 0-24128).
10.7 1991 Long-Term Incentive Plan.......... Incorporated by reference to Exhibit
10.7 to the Registrant's Amendment No.
2 to Annual Report on Form 10-K filed
on June 30, 1995 (File No. 0-24128).
10.12 Master Equipment Lease Agreement dated
as of March 8, 1995, between the
Company and Financing for Science
International, Inc. ................... Incorporated by reference to Exhibit
10.12 to the Registrant's Quarterly
Report on Form 10-Q for the quarter
ended on June 30, 1995 (File No.
0-24128).
10.13 1995 Non-Employee Directors' Stock
Option Plan............................ Incorporated by reference to Exhibit
10.13 to the Registrant's Quarterly
Report on Form 10-Q for the quarter
ended on June 30, 1995 (File No.
0-24118).
10.15 Letter Agreement with Aberlyn Capital
Management Limited Partnership......... Incorporated by reference to Exhibit
10.15 to the Registrant's Quarterly
Report on Form 10-Q for the quarter
ended on June 30, 1995 (File No.
0-24128).
10.16 Employment Agreement dated January 13,
1997 between the Company and Lucio
Improta................................ Incorporated by reference to Exhibit
10.15 to the Registrant's Quarterly
Report on Form 10-Q for the quarter
ended on March 31, 1997 (File No.
0-24128).
10.17 Term Sheet dated August 1, 1997
describing arrangement between the
Company and Ronald Haverl.............. Incorporated by reference to Exhibit
10.17 to the Registrant's Annual Report
on Form 10-K/A filed on April 30, 1998
(File No. 0-24128).
10.18 Development and License Agreement dated
January 28, 1997 by and between the
Company and Johnson & Johnson Medical,
Inc. .................................. Incorporated by reference to Exhibit
10.18 to the Registrant's Quarterly
Report on Form 10-Q for the quarter
ended on September 30, 1998 (File No.
0-24128).
</TABLE>
34
<PAGE> 36
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION METHOD OF FILING
- ------- --------------------------------------- ---------------------------------------
<C> <S> <C>
10.19 Supply Agreement dated January 28, 1997
by and between the Company and Johnson
& Johnson Medical, Inc. ............... Incorporated by reference to Exhibit
10.18 to the Registrant's Quarterly
Report on Form 10-Q for the quarter
ended on September 30, 1998 (File No.
0-24128).
10.20 Term Promissory Note issued to Carl R.
Sahi*.................................. Incorporated by reference to Exhibit
10.20 to the Registrant's Quarterly
Report on Form 10-Q for the quarter
ended on September 30, 1998 (File No.
0-24128).
10.21 Warrant for shares of common stock
issued to Carl R. Sahi*................ Incorporated by reference to Exhibit
10.21 to the Registrant's Quarterly
Report on Form 10-Q for the quarter
ended on September 30, 1998 (File No.
0-24128).
10.22 Subscription Agreement dated April 27,
1999 by and between the Company and
Ramius Capital Group, LLC.............. Incorporated by reference to Exhibit
10.22 to the Registrant's Form S-3
filed on May 18, 1999, as amended (File
No. 333-79671).
10.23 Form of Debenture dated April 27, 1999
by and between the Company and Ramius
Capital Group, LLC..................... Incorporated by reference to Exhibit
10.23 to the Registrant's Form S-3
filed on May 18, 1999, as amended (File
No. 333-79671).
10.23a Letter Agreement dated September 13,
1999 between the Company and Ramius
Capital Group, LLC..................... Incorporated by reference to Exhibit
10.23a to the Registrant's Form S-3
filed on May 18, 1999, as amended (File
No. 333-79671).
10.24 Form of Warrant granted by the Company
to Ramius Capital Group, LLC........... Incorporated by reference to Exhibit
10.24 to the Registrant's Form S-3
filed on May 18, 1999, as amended (File
No. 333-79671).
10.25 Registration Rights Agreement by and
between the Company and Ramius Capital
Group, LLC............................. Incorporated by reference to Exhibit
10.25 to the Registrant's Form S-3
filed on May 18, 1999, as amended (File
No. 333-79671).
10.30 7.5% Secured Note dated as of October
21, 1999 between the Company and
Appaloosa Investment Limited
Partnership I, L.P..................... Filed with this Report.
10.30(1a) First Amendment to 7.5% Secured Note
dated as of December 30, 1999.......... Filed with this Report.
10.30(2a) Second Amendment to 7.5% Secured note
dated as of April 3, 2000.............. Filed with this Report.
10.31 Form of Warrant to Purchase Shares of
Common Stock of the Company at a
Purchase Price of $3.00 per Share...... Filed with this Report.
</TABLE>
35
<PAGE> 37
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION METHOD OF FILING
- ------- --------------------------------------- ---------------------------------------
<C> <S> <C>
10.32 Form of Warrant to Purchase Shares of
Common Stock of the Company at a
Purchase Price of $5.00 per Share...... Filed with this Report.
10.33 Form of Convertible Note Purchase
Agreement.............................. Filed with this Report.
10.34 Form of Warrant to Purchase Shares of
Common Stock of the Company at a
Purchase Price of $7.00 per Share...... Filed with this Report.
10.35 Registration Rights Agreement between
the Company, Appaloosa Investment
Limited Partnership I, L. P. and
certain entities related thereto....... Filed with this Report.
10.36 Form of Rollover Registration Rights
Agreement.............................. Filed with this Report.
10.37 Security Agreement between the Company
and Appaloosa Investment Limited
Partnership I, L.P. ................... Filed with this Report.
10.38 Letter Agreement dated October 21, 1999
between the Company and Appaloosa
Investment Limited Partnership I,
L.P.................................... Filed with this Report.
10.39 Form of Warrant to Purchase Shares of
Common Stock of the Company at a
Purchase Price of $3.00 per Share...... Filed with this Report.
10.40 15% Secured Note dated as of January 5,
2000 between the Company and Appaloosa
Investment Limited Partnership I,
L.P.................................... Filed with this Report.
10.40(1a) First Amendment to 15% Secured Note
dated as of April 3, 2000 between the
Company and Appaloosa Investment
Limited Partnership I, L.P............. Filed with this Report.
10.41 Form of Warrant to Purchase Shares of
Common Stock of the Company............ Filed with this Report.
10.42 15% Secured Note dated as of April 3,
2000 between the Company and Appaloosa
Investment Limited Partnership I,
L.P.................................... Filed with this Report.
10.43 Letter Agreement dated as of April 3,
2000 between the Company and Appaloosa
Investment Limited Partnership I,
L.P.................................... Filed with this Report.
23 Consent of Mahoney Sabol & Company,
L.L.P.................................. Filed with this report.
27 Financial Data Schedule................ Filed with this report.
</TABLE>
- ---------------
* This exhibit is a management or employment contract required to be filed as an
exhibit to this Form 10-K pursuant to Item 14(c).
36
<PAGE> 38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BIO-PLEXUS, INC. (REGISTRANT)
By: /s/ CARL R. SAHI
------------------------------------
Carl R. Sahi
President, Chief Executive Officer
and Director
By: /s/ KIMBERLEY A. CADY
------------------------------------
Kimberley A. Cady
Chief Financial Officer and
Vice President, Finance
Dated: April 14, 2000
Pursuant to the requirements of Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
By: /s/ CARL R. SAHI President, Chief Executive April 14, 2000
---------------------------------------------- Officer and Director
Carl R. Sahi
By: /s/ RICHARD D. RIBAKOVE Chairman and Director April 14, 2000
----------------------------------------------
Richard D. Ribakove
By: /s/ RICHARD L. HIGGINS Director April 14, 2000
----------------------------------------------
Richard L. Higgins
By: /s/ DAVID HIMICK Director April 14, 2000
----------------------------------------------
David Himick
By: /s/ HERMAN GROSS Director April 14, 2000
----------------------------------------------
Herman Gross
</TABLE>
37
<PAGE> 39
BIO-PLEXUS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS: PAGE
- --------------------- ----
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheets at December 31, 1999 and 1998................ F-3
Statements of Operations for the years ended December 31,
1999, 1998 and 1997....................................... F-4
Statements of Changes in Shareholders' Equity (Deficit) for
the years ended December 31, 1999, 1998 and 1997.......... F-5
Statements of Cash Flows for the years ended December 31,
1999, 1998, and 1997...................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
All schedules are omitted because they are not applicable or the required
information is shown in the Financial Statements or Notes thereto.
F-1
<PAGE> 40
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Bio-Plexus, Inc.
We have audited the balance sheets of Bio-Plexus, Inc. as of December 31,
1999 and 1998 and the related statements of operations, shareholders' equity
(deficit) and cash flows for each of the three years ended December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Bio-Plexus, Inc. as of December 31, 1999 and
1998, and the results of its operations and its cash flows for each of the three
years ended December 31, 1999 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has an accumulated deficit due to recurring
net losses, and will require additional capital in 2000 to fund continuing
operations. These items raise substantial doubt about the Company's ability to
continue as a going concern through December 31, 2000. Management's plans in
regards to these matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
MAHONEY SABOL & COMPANY, LLP
Hartford, Connecticut
March 17, 2000
F-2
<PAGE> 41
BIO-PLEXUS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 867,000 $ 535,000
Accounts receivable....................................... 908,000 564,000
Inventories:
Raw materials.......................................... 621,000 1,164,000
Work-in-process........................................ 474,000 470,000
Finished goods......................................... 1,167,000 390,000
------------ ------------
2,262,000 2,024,000
------------ ------------
Other current assets...................................... 173,000 246,000
------------ ------------
Total current assets.............................. 4,210,000 3,369,000
------------ ------------
Investment in Jordan Pharmaceuticals (Note 3)............... -- 600,000
Fixed assets, net (Note 4).................................. 4,384,000 4,661,000
Deferred debt financing expenses............................ 465,000 10,000
Patents, net of amortization................................ 335,000 252,000
Other assets................................................ 253,000 260,000
------------ ------------
$ 9,647,000 $ 9,152,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (Note 5)................ $ 899,000 $ 1,811,000
Note payable (Note 5)..................................... 1,340,000 250,000
Accounts payable and accrued expenses..................... 786,000 528,000
Accrued interest payable.................................. 55,000 28,000
Accrued vacation.......................................... 202,000 196,000
Other accrued employee costs.............................. 226,000 213,000
Product replacement costs................................. -- 222,000
Deferred revenue (Note 12)................................ -- 875,000
------------ ------------
Total current liabilities......................... 3,508,000 4,123,000
------------ ------------
Other long-term debt, net (Note 5).......................... 2,262,000 2,403,000
Redeemable common stock warrants (Note 7)................... 149,000 149,000
Commitments and contingencies (Note 10)..................... -- --
Shareholders' equity (Note 7):
Convertible preferred stock, no par value, 3,000,000
authorized, no shares issued and outstanding........... -- --
Common stock, no par value, 25,000,000 authorized,
14,083,807 and 12,793,165 shares issued and
outstanding............................................ 71,833,000 65,349,000
Accumulated deficit....................................... (68,105,000) (62,872,000)
------------ ------------
Total shareholders' equity........................ 3,728,000 2,477,000
------------ ------------
$ 9,647,000 $ 9,152,000
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 42
BIO-PLEXUS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997
----------- ----------- ------------
<S> <C> <C> <C>
Revenue:
Product.......................................... $ 5,498,000 $ 5,086,000 $ 3,542,000
Services......................................... 1,426,000 4,171,000 --
Licensing fees (Note 12)......................... 100,000 50,000 1,500,000
----------- ----------- ------------
Total revenue............................ 7,024,000 9,307,000 5,042,000
----------- ----------- ------------
Costs and expenses:
Product.......................................... 3,754,000 6,355,000 5,764,000
Services......................................... 87,000 267,000 --
Research and development......................... 1,112,000 463,000 1,056,000
Selling, general and administrative.............. 4,937,000 4,593,000 6,748,000
----------- ----------- ------------
Total operating costs and expenses....... 9,890,000 11,678,000 13,568,000
----------- ----------- ------------
Operating Loss..................................... (2,866,000) (2,371,000) (8,526,000)
----------- ----------- ------------
Financing Expenses:
Amortization of deferred debt financing.......... 266,000 63,000 382,000
Other financing expense (Note 5)................. 2,158,000 633,000 3,551,000
Other income..................................... (57,000) (107,000) (147,000)
----------- ----------- ------------
Total financing expenses................. 2,367,000 589,000 3,786,000
----------- ----------- ------------
Net loss........................................... (5,233,000) (2,960,000) (12,312,000)
Less: Imputed dividend on preferred stock (Note
7)............................................... -- -- 500,000
----------- ----------- ------------
Net loss applicable to common stock................ $(5,233,000) $(2,960,000) $(12,812,000)
=========== =========== ============
Net loss (basic and diluted) per common share...... $ (0.39) $ (0.24) $ (1.37)
=========== =========== ============
Weighted average common shares outstanding......... 13,540,922 12,263,870 9,320,800
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 43
BIO-PLEXUS, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CONVERTIBLE
COMMON STOCK PREFERRED STOCK
------------------------ ------------------------ ACCUMULATED
SHARES AMOUNT SHARES AMOUNT DEFICIT TOTAL
---------- ----------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance -- December 31, 1996... 7,046,552 $46,887,000 $ -- $(47,600,000) $ (713,000)
Exercise of stock options...... 36,000 50,000 50,000
Cash proceeds from sale........ 997,000 2,493,000 1,250,000 5,000,000 7,493,000
Conversion of preferred
stock........................ 1,931,291 4,929,000 (1,250,000) (5,000,000) (71,000)
Conversion of notes payable.... 1,791,627 7,145,000 7,145,000
Conversion of warrants......... 335,317 2,566,000 2,566,000
Net loss before imputed
dividend..................... (12,312,000) (12,312,000)
---------- ----------- ---------- ----------- ------------ ------------
Balance -- December 31, 1997... 12,137,787 64,070,000 -- -- (59,912,000) 4,158,000
Exercise of stock options...... 21,000 29,000 29,000
Cash proceeds from sale........ 634,378 1,250,000 1,250,000
Net loss....................... (2,960,000) (2,960,000)
---------- ----------- ---------- ----------- ------------ ------------
Balance -- December 31, 1998... 12,793,165 65,349,000 -- -- (62,872,000) 2,477,000
Exercise of stock options...... 32,917 89,000 89,000
Cash proceeds from sale........ 549,558 1,100,000 1,100,000
Board of Directors' fees....... 17,376 43,000 43,000
Conversion of notes payable.... 544,753 1,467,000 1,467,000
Conversion of warrants......... 146,038 -- --
Warrants issued with debt...... 3,785,000 3,785,000
Net loss....................... (5,233,000) (5,233,000)
---------- ----------- ---------- ----------- ------------ ------------
Balance -- December 31, 1999... 14,083,807 $71,833,000 -- $ -- $(68,105,000) $ 3,728,000
========== =========== ========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 44
BIO-PLEXUS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997
----------- ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.............................................. $(5,233,000) $(2,960,000) $(12,812,000)
Adjustments to reconcile net loss to cash used by
operating activities:
Depreciation and amortization....................... 552,000 923,000 1,343,000
Inducement expense on conversion.................... 640,000
Imputed dividend.................................... 500,000
Writedown of equipment to net realizable value (Note
4)................................................ 280,000 1,359,000 512,000
Amortization of deferred debt financing expenses.... 266,000 63,000 382,000
Amortization of debt discount (Note 5).............. 1,747,000 59,000 1,819,000
Decrease (increase) in assets:
Accounts receivable............................... (344,000) (169,000) (9,000)
Inventories....................................... (238,000) (117,000) (51,000)
Notes receivable.................................. 152,000
Increase (decrease) in liabilities:
Accounts payable and accrued expenses............. 248,000 (91,000) (1,074,000)
Accrued interest payable.......................... 27,000 2,000 (1,000)
Accrued vacation and other accrued employee
costs.......................................... 19,000 (43,000) (10,000)
Accrued product replacement costs (Note 14)....... (222,000) 222,000
(Decrease) increase in deferred revenue (Note
12)............................................ (875,000) 34,000 841,000
Other............................................... (188,000) 155,000 164,000
----------- ----------- ------------
Net cash used in operating activities............. (3,961,000) (411,000) (7,756,000)
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases and construction of fixed assets............ (536,000) (82,000) (409,000)
Long-term investment (Note 3)......................... 627,000 (600,000)
Cost of patents....................................... (103,000) (115,000) (108,000)
----------- ----------- ------------
Net cash used in investing activities............. (12,000) (797,000) (517,000)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of convertible preferred stock..... 5,000,000
Proceeds from sale of common stock (Note 7)........... 1,100,000 1,250,000 2,493,000
Proceeds from exercise of common stock warrants....... 282,000
Proceeds from exercise of common stock options........ 91,000 29,000 50,000
Redemption of common stock (Note 7)................... (20,000)
Proceeds from long-term debt (Note 5)................. 2,060,000 300,000 4,700,000
Increase in notes payable (Note 5).................... 2,750,000 250,000
Proceeds from sale and leaseback...................... 137,000 369,000
Repayments of long-term debt.......................... (1,833,000) (1,568,000) (4,441,000)
----------- ----------- ------------
Net cash provided by financing activities......... 4,305,000 241,000 8,453,000
----------- ----------- ------------
Net (decrease) increase in cash and cash
Equivalents.................................... 332,000 (967,000) 180,000
Cash and cash equivalents, beginning of Period.... 535,000 1,502,000 1,322,000
----------- ----------- ------------
Cash and cash equivalents, end of period.......... $ 867,000 $ 535,000 $ 1,502,000
=========== =========== ============
Supplemental cash flow disclosures:
Cash payments of interest........................... $ 412,000 $ 572,000 $ 1,093,000
Cash payments of income taxes....................... 4,000 4,000 9,000
Surrender of debt upon warrant exercise............. 2,265,000
Surrender of debt upon conversion to equity......... 83,000 5,787,000
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
F-6
<PAGE> 45
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS
1. FORMATION AND OPERATIONS OF THE COMPANY
Bio-Plexus, Inc. (the "Company") was incorporated in Connecticut on
September 4, 1987. The Company was formed for the purpose of the design,
development, manufacture and sale of medical products. The Company's operations
consist of two business segments: Safety Medical Products and Accessories and
Joint Venture Design and Development.
The products included in the Company's Safety Medical Products and
Accessories segment include safety blood collection needles, needle holders, and
needle disposal containers. The Company sells its products to hospitals, medical
centers, and certain distributors both domestically and internationally. Since
its inception, the Company has devoted substantially all of its efforts to the
development and marketing of a series of safety blood collection needles and
accessories marketed under the Punctur-Guard(R) trademark and the development
and construction of needle assembly systems used to manufacture the
Punctur-Guard(R) needles. The Company has funded its operating losses since
inception through loans and the sale of debt and equity securities.
The Joint Venture Design and Development segment includes all contract
design and development revenue and associated costs resulting from joint
ventures and strategic partnerships with other healthcare companies. The primary
source of these revenues to date has been the development contract with Johnson
& Johnson Medical ("JJM") for the design and development of a new safety I.V.
catheter to be manufactured and sold by JJM. (See Note 12).
Product sales growth continued to expand in 1999 and the Company continued
to achieve increased manufacturing capacity and reduce costs, which will enable
the Company to meet the expected increased demand for its products in 2000. The
Company also plans to pursue new opportunities for additional strategic
partnerships to assist with the funding and development costs of other new
products. However, in order to generate adequate cash flows to fund operations,
the Company will need to achieve significant revenue growth and continue to
reduce manufacturing costs. Accordingly, the Company will require additional
capital in 2000 to fund operations.
Convertible Note Financing
On September 21, 1999, the Company received a commitment from Appaloosa
Management, L.P., of Chatham, New Jersey ("Appaloosa") for a total financing
package of $17.5 million (the "Permanent Financing"). The Permanent Financing is
currently scheduled to be consummated in April 2000 after receipt of stockholder
approval.
Bridge Transactions
Pending consummation of the Permanent Financing, on October 21, 1999, the
Company issued to Appaloosa and entities affiliated therewith (the "Purchasers")
a 7.5% non-convertible secured note in the aggregate principal amount of $3
million (the "First Bridge Note"). In January 2000, the interest rate on the
First Bridge Note was increased to 12% per annum. In connection with the
issuance of the First Bridge Note, the Company also issued to the Purchasers (i)
a five-year warrant to purchase up to 1.0 million shares of the Company's common
stock, no par value (the "Common Stock") at an initial exercise price of $3.00
per share (the "$3 Warrants") and (ii) a nine-year warrant to purchase up to 1.5
million shares of Common Stock at an initial exercise price of $5.00 per share
(the "$5 Warrants") (the $3 Warrants and $5 Warrants are collectively referred
to herein as the "First Bridge Warrants"). At the Purchaser's election and
contingent upon the satisfaction of certain criteria at the closing of the
Permanent Financing, or within six months and one day thereafter, the exercise
price of the $3 Warrants will increase to $4.00 per share of Common Stock. The
exercise price of the $5 Warrants will increase to $7.00 per share of Common
Stock upon the earlier of
F-7
<PAGE> 46
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
the closing of the Permanent Financing and October 21, 2000. The $5 Warrants
contain a net-exercise provision.
On January 5, 2000, the Company issued to the Purchasers a 15%
non-convertible secured note in the aggregate principal amount of $1.65 million
(the "Second Bridge Note"). In connection with the issuance of the Second Bridge
Note, the Company also agreed to issue and sell on the earlier of (i) April 30,
2000 and (ii) the closing of the Permanent Financing, five-year warrants to
acquire up to 200,000 shares of Common Stock at an initial exercise price of
$3.00 per share (the "Second Bridge Warrants"). The Second Bridge Warrants
contain a net-exercise provision.
On April 3, 2000, the Company issued to the Purchasers a 15%
non-convertible secured note in the aggregate principal amount of $2.2 million
(the "Third Bridge Note"). No warrants or convertible securities were issued in
connection with the Third Bridge Note. The First Bridge Note, the Second Bridge
Note and the Third Bridge Note are collectively referred to as the "Bridge
Notes". The issuance of the Bridge Notes, the First Bridge Warrants and the
Second Bridge Warrants are collectively referred to as the "Bridge
Transactions".
The Bridge Notes are not convertible into shares of Common Stock and are
required to be paid-in-full (together with accrued interest) at the closing of
the Permanent Financing.
Permanent Financing
In order to consummate the Permanent Financing, the Company is required by
the rules of The NASDAQ Stock Market ("NASDAQ") to obtain the approval of a
majority of the Company's stockholders of the terms and conditions of the
Permanent Financing (the "Investment Proposal"). In addition, the Connecticut
Business Corporation Act requires that the Company obtain stockholder approval
of (i) an amendment to the Company's certificate of incorporation (the "Charter
Amendment Proposal") and (ii) an amendment to the Company's 1991 Long-Term
Incentive Plan (the "Incentive Plan Amendment Proposal"). The Charter Amendment
and the Incentive Plan Amendment Proposal are required by the terms of the
Permanent Financing. The approval of the Company's stockholders of the
Investment Proposal, the Charter Amendment Proposal and the Incentive Plan
Amendment Proposal is collectively referred to as "Stockholder Approval".
If Stockholder Approval is obtained, the Company will issue to the
Purchasers (i) $16.75 million of zero-coupon, secured convertible notes due 2005
(the "Convertible Notes"), (ii) 250,000 shares of Common Stock at a purchase
price of $3.00 per share (the "Permanent Financing Shares") and (iii) nine-year
warrants to purchase up to 1.5 million shares of Common Stock at an initial
exercise price of $7.00 per share (the "$7 Warrants"). The Convertible Notes are
convertible into shares of Common Stock at an initial conversion priced $3.00.
The $7 Warrants contain a net-exercise provision.
The Permanent Financing will generate aggregate proceeds to the Company of
$17.5 million. After repayment of the Bridge Notes, the Company will realize net
proceeds of approximately $8.4 million which will be available, along with
existing resources, for general working capital purposes, subject to the terms
and conditions of the Permanent Financing transaction agreements.
Going Concern
The Company is continuing to explore additional financing alternatives and
potential strategic relationships which may provide the Company with additional
sources of working capital. The Company has an accumulated deficit due to
recurring net losses from its inception of $68,105,000. Furthermore, the Company
will need to raise working capital in addition to that anticipated from
Appaloosa to fund operations during 2000. The Appaloosa agreements contain
certain restrictions with regard to the Company's ability to raise
F-8
<PAGE> 47
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
funds from other sources. Accordingly, there can be no assurances that the
Company will be able to secure any additional sources of working capital.
There are risks and uncertainties surrounding management's plans. The
Company's failure to successfully implement its plan, including raising
sufficient capital, through a strategic partnership or otherwise, would have an
unfavorable effect on the Company's ability to continue as a going concern. The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern through December 31, 2000. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
initial maturity of three months or less to be cash equivalents.
Short-Term Investments
The Company may invest its excess cash with a local bank in a short-term
investment account backed by either US Treasury bonds or federal agency
obligations.
Inventories
All inventories are stated at cost using the weighted average valuation
method. Included in inventory totals were allowance for obsolescence of $299,000
and $56,000 at December 31, 1999 and 1998, respectively.
Revenue Recognition
Product sales and related costs are recorded by the Company upon shipment
of product to the customer or distributor.
Equipment sales as a result of strategic partnerships are progress billed
and revenue is recognized in the billing period.
The Company's strategic partnerships resulted in the recognition of
development contract or "service" revenue. Pursuant to the terms of the
agreements with these strategic partners, product and process development
services are progress billed as performed and revenue is recognized over the
estimated project period.
Long-Term Investments
The company utilized the cost method in connection with the valuation of
its long-term investment (see Note 3).
F-9
<PAGE> 48
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Fixed Assets
Fixed assets are stated at cost and are depreciated using the straight-line
method over the estimated useful lives of the assets, which range from 3-30
years. Maintenance and repair expenditures are charged to expense as incurred.
Deferred Debt Financing Expenses and Debt Discount
Financing expenses and debt discount incurred in connection with the
issuance of long-term debt are amortized using the interest method over the term
of the debt.
Income Taxes
The Company uses the liability method of accounting for income taxes, as
set forth in Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." Under this method, deferred tax liabilities and assets are
recognized for the expected future tax consequences of temporary differences
between the carrying amounts and the tax basis of assets and liabilities.
Patents
Patent costs are capitalized as incurred and amortized on a straight-line
basis over the shorter of the legal term or estimated economic life of the
patent.
Effect of New Accounting Standards
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128 ("SFAS 128"), "Earnings per Share", which establishes new
standards for the computation and disclosure of earnings per share ("EPS"). The
new statement requires dual presentation of "basic" EPS and "diluted" EPS. Basic
EPS is based on the weighted average number of common shares outstanding for the
period, excluding any dilutive common share equivalents. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted. The Company adopted SFAS 128 for
the periods presented. In determining net loss per common share, common stock
equivalents (see Note 8) are excluded from the computation as their effect is
anti-dilutive.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and Related
Information" effective for periods beginning December 15, 1997. The Statement
requires that a public enterprise report financial and descriptive information
about its reportable operating segments. Operating segments are components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision-maker in deciding how to
allocate resources and in assessing performance. In fiscal 1998, with the onset
of the development contract with JJM, the Company began internally reporting two
distinct segments: Safety Medical Products and Joint Venture Design and
Development. The Company adopted SFAS 131 for the periods presented (see Note
13).
Reclassification
Certain reclassifications have been made to the 1997 and 1998 financial
statements to conform to the 1999 presentation.
3. LONG-TERM INVESTMENT
On September 2, 1998, the Company loaned $600,000 to Jordan
Pharmaceuticals, Inc. ("Jordan"), a California corporation, in exchange for a
one-year promissory note. On October 31, 1998, the Company
F-10
<PAGE> 49
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
converted the promissory note into 120,000 shares of Jordan Series A Preferred
Stock. Interest that had accrued on the note from September 2, 1998 until the
date of conversion was paid in 526 shares of Jordan Series A Preferred Stock.
For the period September 30, 1998 through December 31, 1998, the Company
received a dividend in the amount of 2,411 shares of Jordan Series A Preferred
Stock.
Pursuant to a stock option agreement dated October 31, 1998, Jordan had the
right to repurchase the shares of Series A Preferred Stock plus any paid-in-kind
shares owned by the Company (in lieu of interest paid in cash), at a purchase
price of $5.00 per share. On March 31, 1999, Jordan exercised its option with
respect to all of the shares for total consideration of $627,000. The investment
was valued in the financial statements using the cost method, as the percentage
of the voting stock held as an investment by the Company was insufficient to
exercise significant influence over Jordan.
4. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Fixed assets under capital lease:
Machinery and equipment......................... $ 2,580,000 $ 2,580,000
Production molds................................ 2,029,000 1,892,000
Office furniture and equipment.................. 472,000 472,000
----------- -----------
Total under capital lease.................... 5,081,000 4,944,000
Land and building............................... 2,438,000 2,438,000
Machinery and equipment......................... 120,000 155,000
Construction-in-progress........................ 311,000 336,000
Production molds................................ 910,000 779,000
Office furniture and equipment.................. 226,000 191,000
Leasehold improvements.......................... -- 169,000
----------- -----------
9,086,000 9,012,000
Less: accumulated depreciation.................. (4,702,000) (4,351,000)
----------- -----------
$ 4,384,000 $ 4,661,000
=========== ===========
</TABLE>
At December 31, 1999 and 1998, the Company had approximately $5,081,000 and
$4,944,000, respectively, of fixed assets subject to a sale-leaseback
arrangement with third party lessors (see Note 5).
Depreciation expense was $532,000 in 1999, $909,000 in 1998, and $1,333,000
in 1997.
Beginning in 1996 and continuing into 1999, certain of the Company's fixed
assets were written down to net realizable value and were subsequently written
off, as the manner in which these assets were used by the Company had changed.
These fixed assets consisted of primarily the Company's first generation
production machinery and equipment used to manufacture its blood collection
needle product line. This machinery and equipment was internally constructed,
lower volume equipment that was phased out over this time period in favor of
higher volume, more automated, more efficient production machinery and
equipment. Total losses resulting from these write-downs and subsequent
write-offs amounted to $280,000 in 1999, $1,359,000 in 1998, and $512,000 in
1997, and such losses were reported in product costs on the statements of
operations in those years.
F-11
<PAGE> 50
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. DEBT
Secured Term Notes Payable
Pending consummation of the Permanent Financing, on October 21, 1999, the
Company issued to the Purchasers the First Bridge Note. In January 2000, the
interest rate on the First Bridge Note was increased to 12% per annum. In
connection with the issuance of the First Bridge Note the Company also issued to
the Purchasers (i) the $3 Warrants and (ii) the $5 Warrants. At the Purchaser's
election and contingent upon the satisfaction of certain criteria at the closing
of the Permanent Financing, or within six months and one day thereafter, the
exercise price of the $3 Warrants will increase to $4.00 per share of Common
Stock. The exercise price of the $5 Warrants will increase to $7.00 per share of
Common Stock upon the earlier of the closing of the Permanent Financing and
October 21, 2000. The $5 Warrants contain a net-exercise provision. The fair
value of the Bridge Warrants of approximately $2,905,000 at the date of issuance
was recorded as a discount against the Note Payable obligation. Such discount is
charged to interest expense over the term of the First Bridge Note.
The balance of long-term debt is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
6% Convertible Debenture, net of unamortized
discount of $405,000............................. $ 928,000 $ --
Capital lease obligations, net of unamortized
discount of $9,000 and $35,000................... 969,000 1,909,000
Facility mortgage payable.......................... 1,264,000 1,295,000
Unsecured Term Notes............................... -- 710,000
Term notes......................................... -- 300,000
---------- ----------
3,161,000 4,214,000
Less: current portion.............................. 899,000 1,811,000
---------- ----------
$2,262,000 $2,403,000
========== ==========
</TABLE>
The aggregate maturities of long-term debt, including capital lease
obligations, over the next five years and thereafter are as follows:
2000 -- $907,000; 2001 -- $62,000; 2002 -- $68,000; 2003 -- $74,000; 2004 --
$1,400,000; thereafter -- $1,063,000.
Convertible Debentures
On January 30, 1997, pursuant to Regulation S of the Securities Act of
1933, the Company issued 5% Convertible Debentures (the "5% Debentures") due
February 4, 1999 in the aggregate principal sum of $5,000,000. Of the 5%
Debenture proceeds, approximately $1,665,000 was allocated to common stock
during the first quarter to reflect the intrinsic value of the conversion
feature. This amount was calculated at the date of the issue as the difference
between the most beneficial conversion price and the then fair value of the
common stock. The corresponding debt discount was charged to other financing
expenses. At December 31, 1997, all outstanding 5% Debentures had been converted
into shares of common stock. Under the terms of the 5% Debentures, if the
conversions resulted in total shares issued greater than 1,350,000 shares in
aggregate, then the Company would redeem any remaining 5% Debentures at the
price paid plus accrued interest thereon. Based upon the total debenture
conversions, the number of shares exceeded 1,350,000. Upon reaching the limit of
1,350,000 shares, the Company satisfied the remaining outstanding 5% Debentures
balance of $1,537,000 by issuing 100,000 shares at a value of $2.73 per share
and a cash payment of $1,264,000.
F-12
<PAGE> 51
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On March 24, 1999, the Company signed a commitment for a private placement
of up to $4,500,000 aggregate principal amount of its 6% Convertible Debentures
due June 30, 2004 ("the 6% Debentures"). The initial purchase of $2,500,000
aggregate principal amount of 6% Debentures was made on April 27, 1999. The 6%
Debentures accrue interest at the rate of 6% per annum, payable quarterly in
arrears in cash. The 6% Debentures are convertible at any time at the option of
the holders into shares of the Company's common stock at the lesser of a fixed
conversion price of $3.06 per share or a floating conversion price at the time
of the conversion if the floating price is less than $3.06 per share. The 6%
Debentures may be wholly or partially redeemed at the option of the Company for
an amount not to exceed 130% of the face value thereof plus accrued and unpaid
interest at any time after the date of issuance. The Company and the 6%
Debenture holders have limited put and call options, respectively, for
additional debentures. In connection with the Bridge Transactions, the Company
agreed not to exercise its put right under the Debentures. Net proceeds from the
financing were $2,060,000 after deducting fees and expenses. Approximately
$121,000 was allocated to common stock during the second quarter to reflect the
intrinsic value of the conversion feature. This amount was calculated at the
commitment date as the difference between the most beneficial conversion price
and the then fair value of the common stock. The corresponding debt discount was
charged to interest expense. The financing also included a warrant to purchase
500,000 shares of common stock at an exercise price of $3.38. The fair value of
the warrants at the date of issuance was recorded as a discount on the debenture
which will be amortized over the term of the debenture. During 1999, the holder
of the Debentures converted a total of approximately $1,167,000 of the
outstanding principal balance into 391,120 shares of common stock.
Capital Lease Obligations
On April 1, 1994, the Company and a lessor agreed to a $2,000,000 expansion
to a previous sale-leaseback agreement for certain machinery and molds. The
lease term was 42 months from the date specific equipment is leased with
interest at a rate of 15%. As an inducement, the Company issued the lessor and
its affiliate warrants to purchase 47,500 shares of common stock at $9 per
share. The warrants are exercisable through April 30, 2001. The fair value of
the warrants on the date of issuance was recorded as a deferred financing
expense.
On March 8, 1995, the Company entered a five-year sale-leaseback financing
agreement in amounts up to $2,000,000 with an equipment lessor on certain
machinery and molds. Monthly rent expense equals 2.14% of the equipment leased
and is payable monthly in advance. The Company has the option to purchase all
but not less than all of the leased equipment at the end of the lease term for
the then current market value of the equipment, which shall not be less than 10%
or more than 15% of the equipment cost. In June 1995, the Company utilized
approximately $1,000,000 of the commitment, and as an inducement, the Company
issued the lessor warrants to purchase 6,355 shares of Common Stock at an
exercise price of $13.63 per share with an exercise period of five years. The
fair value of the warrants at the date of issuance was recorded as a discount on
the lease obligation.
On June 28, 1996, the Company and the lessor agreed to a $2,000,000
expansion of the sale-leaseback financing agreement to finance the purchase of a
new needle production machine. The lease term was four years and monthly rent
payments equal 2.50% of the equipment leased and is payable monthly in advance.
The Company has the option to purchase all but not less than all of the leased
equipment at the end of the lease term for the then current market value of the
equipment, which shall not be less than 15% or more than 20% of the equipment
cost. At December 31,1999, the Company had approximately $849,000 outstanding
under the expanded $2,000,000 financing agreement. As an inducement, the Company
issued the lessor warrants to purchase 16,851 shares of common stock at an
exercise price of $11.28 per share with an exercise period of five years. The
fair value of the warrants at the date of issuance was recorded as a discount on
the lease obligation.
F-13
<PAGE> 52
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In addition, the Company entered into a Reserve Pledge and Security
Agreement with the lessor requiring the Company to establish a Security Reserve
of $250,000, as additional collateral for the lessor which was recorded within
other assets in the Company's financial statements.
On September 19, 1996, the Company entered a three-year sale-leaseback
Master Lease Agreement for amounts up to $150,000 with an equipment lessor for
certain machinery and equipment. Monthly rent expense equaled 3.32% of the
equipment leased and was payable monthly in advance. The Company exercised its
option to purchase certain leased equipment at the end of the lease term for the
then current market value of the equipment. On July 23, 1999, the Company
extended the Master Lease Agreement for sixty months through an additional lease
agreement of approximately $137,000 for the purchase of production tooling. The
Company has the option to purchase the tooling at the end of the lease term for
$1.00. The lease requires monthly payments and incurs interest at approximately
9.7% per annum. At December 31, 1999 the Company had approximately $129,000
outstanding under the additional lease agreement.
Facility Mortgage
On October 28, 1994, the Company acquired a manufacturing and warehouse
facility for $1,500,000. The seller in the form of a note, which bears interest
at 9% per annum, provided financing of $1,350,000 of the purchase price.
Interest only was payable for the first two years of the note. Principal and
interest payments began in October 1996, and are based on a twenty-year
amortization schedule with a balloon payment due on November 1, 2009. The note
is secured by a first mortgage on the facility.
Unsecured Term Notes
During 1993, the Company sold $4,230,000 of unsecured term notes with
detachable warrants to purchase 469,996 shares of common stock at $9 per share.
Subsequent to December 31, 1993 and through February 15, 1994, the Company sold
an additional $628,000 of unsecured term notes with warrants to purchase 69,814
shares of common stock at $9 per share. The term notes bear interest at 8%.
One-third of the principal amount of the notes matured on December 31, 1997 and
the remainder matured on December 31, 1998. The warrants were exercisable until
December 31, 1998.
During 1996, certain warrant holders exercised warrants for shares of
common stock, simultaneously surrendering $1,109,500 of unsecured term notes,
with a net book value of $849,500 in lieu of paying cash.
On January 16, 1997, the Company advised certain holders of warrants that
it was reducing the exercise price from $9.00 to $7.00 on warrants issued with
the unsecured term notes. At the same time, the Company advised the warrant
holders that if the warrants were exercised into shares of common stock by
simultaneously surrendering the related unsecured term notes, the Company would
make payments in lieu of interest through 1997 at a rate of 8%. As a result of
the transaction, warrant holders surrendered approximately $2,184,000 of the
term notes, and exercised warrants for 311,967 shares of common stock. A one
time 1997 charge of $640,000 resulted due to the reduction in the warrant
exercise price and cash payments in lieu of interest through 1997.
In January 1999, the principal balance remaining of $710,000 was paid to
retire the debt. All outstanding warrants expired on December 31, 1998, and none
were exercised during 1998.
Term Notes
On September 8, 1998, the Company received $250,000 from an officer of the
Company in exchange for a one-year promissory term note with warrants to
purchase common stock. The term note incurred interest at 8% per annum and was
payable quarterly in arrears commencing on December 8, 1998. With the note,
there were 30,000 common stock warrants issued with a three-year life and an
exercise price of $2.09 per share. On
F-14
<PAGE> 53
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
March 31, 1999, the Company paid the outstanding principal balance of $250,000
and all accrued interest thereon.
In December 1998, the Company received $300,000 in exchange for five-year
term notes with warrants. The term notes incurred interest at a rate of 8% per
annum, and interest was payable quarterly in arrears. On April 15, 1999 the term
notes were converted in entirety into 153,633 shares of the Company's common
stock (see Note 7).
6. INCOME TAXES
Deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
Costs capitalized for tax purposes................ $ 26,000 $ 133,000
Research tax credits............................ 659,000 612,000
Net operating losses............................ 25,738,000 24,965,000
----------- -----------
Gross deferred tax assets......................... 26,423,000 25,710,000
Less: valuation allowance......................... 26,423,000 25,710,000
----------- -----------
Net deferred tax assets........................... $ -- $ --
=========== ===========
</TABLE>
The Company has provided a valuation allowance for the full amount of
deferred tax assets since the realization of these future benefits cannot be
reasonably assured as of the end of each related year. If the Company achieves
profitability, the deferred tax assets would be available to offset future
income taxes.
At December 31, 1999, the Company has available federal net operating loss
carryforwards of approximately $67,469,000 and research and development tax
credit carryforwards of approximately $659,000. The federal carryforwards expire
in years 2002 through 2019. State of Connecticut net operating loss
carryforwards of approximately $56,550,000 expire in years 2000 through 2004.
As defined in the Internal Revenue Code, certain substantial ownership
changes limit the utilization of the available net operating loss and tax credit
carry forwards. The Company has experienced a number of substantial ownership
changes, which limit the amount of pre-change loss carry forwards that can be
utilized in any one taxable year as follows:
<TABLE>
<CAPTION>
DATE NOL FEDERAL LOSS
WAS GENERATED CARRY FORWARD ANNUAL LIMITATION
- ------------- ------------- -----------------
<S> <C> <C>
9/87 -- 12/89.................................. $ 333,000 $ 32,000
1/90 -- 12/91.................................. $ 1,807,000 $ 386,000
1/92 -- 06/94.................................. $11,749,000 $1,437,000
</TABLE>
The remaining $53,580,000 of federal net operating loss carry forwards is
not limited unless a substantial ownership change occurs in the future.
7. SHAREHOLDERS' EQUITY
Capital Stock Transactions
On July 30, 1997, the Company initiated a private offering of up to 250
units of its Series A convertible preferred stock and common stock. Each unit
consisted of 5,000 shares of Series A preferred stock and 1,000 shares of common
stock. Under the terms of the offering, each unit had a purchase price of
$20,000, and, if fully subscribed, would raise $5,000,000 before offering
expenses. The preferred shares were convertible to common stock at any time at
the option of the holder, at the greater of $2.50, or 85% of the average closing
bid
F-15
<PAGE> 54
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
price of the common stock for the ten days prior to the date the Company
received a conversion notice. Of the offering proceeds, $500,000 was recorded as
a dividend to reflect the intrinsic value of the preferred shares' conversion
feature. As of December 31, 1997, the initial private placement offering was
fully subscribed at $5,000,000, and 1,250,000 shares of Series A preferred stock
were issued and immediately converted into 1,931,291 shares of common stock.
On July 19, 1999, at the Annual Meeting of Shareholders, the Company
amended its Certificate of Incorporation to increase the authorized number of
shares of common stock from 18,000,000 to 25,000,000. On July 20, 1998, at the
Annual Meeting of Shareholders, the Company increased the authorized number of
shares of common stock from 15,000,000 to 18,000,000 and amended its
Certification of Incorporation to include the elimination of the Class A Common
Stock and the elimination of the Series A Preferred Stock.
On September 11, 1998, a member of the Company's board of directors and
shareholder invested $250,000 in exchange for 124,378 shares of common stock
issued at $2.01 per share.
On November 10, 1998, a member of the Company's board of directors invested
$1,000,000 in exchange for 510,000 shares of common stock and 75,000 warrants
with a maturity date of December 31, 2001 and an exercise price of $2.00 per
share.
On January 4, 1999, a member of the Company's board of directors and
existing shareholder invested $1,000,000 in exchange for 502,500 shares of
common stock and 75,000 warrants with a maturity date of December 31, 2001 and
an exercise price of $2.00 per share.
On March 24, 1999, a member of the Company's board of directors and
existing shareholder invested $100,000 in exchange for 47,058 shares of common
stock.
In connection with the issuance of the 6% Convertible Debentures on March
24, 1999 (see Note 5), approximately $121,000 was allocated to common stock
during 1999 to reflect the intrinsic value of the conversion feature of the
Debentures. This amount was calculated at the commitment date as the difference
between the most beneficial conversion price and the then fair value of the
common stock. The corresponding debt discount was charged to interest expense.
During 1999, the holder of the Debentures converted a total of approximately
$1,167,000 of the outstanding principal balance into 391,120 shares of common
stock.
On April 15, 1999, the holders of $300,000 term notes converted the notes
in their entirety into 153,633 shares of the Company's common stock.
On May 3, 1999, an officer of the Company exercised an option to purchase
30,000 shares of common stock at an exercise price of $2.75 per share.
On September 19, 1999, an officer and existing shareholder of the Company
exercised a warrant to purchase 125,000 shares of common stock in a cashless
transaction in exchange for 67,470 shares of common stock.
Class A Common
During 1992, 10,000 shares each of Class A common stock was awarded to two
principal officers of the Company and entitled them to 500 votes for each share
of Class A common stock held on any matter submitted to the shareholders of the
Company for action. The Class A Common Stock was mandatorily redeemable by the
Company on January 1, 1998, and cash payments in the amounts of $10,000 were
made to each of two individuals during the second quarter of 1998.
Warrants
In September 1992, the Company granted warrants to purchase 125,000 shares
of common stock at $6 per share to each of its two principal officers. These
warrants are exercisable for a period of five years from the
F-16
<PAGE> 55
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
date of grant. On July 24, 1997, the warrant exercise period was extended to
September 19, 1999. On September 1, 1998, one of the officers exercised the
warrant in a cashless exercise in exchange for 78,559 shares of common stock. On
September 19, 1999 the second officer exercised the warrant in a cashless
exercise in exchange for 67,470 shares of common stock.
On April 30, 1993, the Company entered into a $2,000,000 sale-leaseback
agreement with a lessor primarily to finance the purchase and construction of
needle assembly machines and production molds. As an inducement, the Company
issued the lessor and its affiliate warrants to purchase up to 47,500 shares of
common stock at $9 per share. The warrants are exercisable through April 30,
2000.
On July 27, 1993, the Company and the Connecticut Development Authority
("CDA"), an instrumentality of the State of Connecticut, entered into a
$1,000,000 loan agreement, of which $600,000 was advanced in 1993. As an
inducement, the Company issued the CDA a warrant to purchase 100,200 shares of
common stock at $9 per share ("1993 CDA Warrant"). The 1993 CDA Warrant is
exercisable through August 1, 2000. The CDA may require the Company to purchase
the 1993 CDA Warrant at any time between July 27, 1998 and August 1, 2000 at a
price of $3.40 per share.
On October 28, 1993, the Company and a lessor agreed to a $575,000 increase
in a sale-leaseback agreement for certain machinery and molds. As an inducement,
the Company issued the lessor and its affiliate warrants to purchase 11,876
shares of common stock at $9 per share. The warrants are exercisable through
December 1, 2000.
In connection with the sale of $4,858,000 of unsecured term notes in 1993
through February 15, 1994 (see Note 5), the Company issued warrants to purchase
539,810 shares of common stock at $9 per share. On January 16, 1997, the Company
advised certain holders of warrants that it was reducing the exercise price from
$9.00 to $7.00 on warrants issued with the unsecured term notes. At the same
time, the Company advised the warrant holders that if the warrants were
exercised into shares of common stock by simultaneously surrendering the related
unsecured term notes, the Company would make payments in lieu of interest
through 1997 at a rate of 8%. As a result of the transaction, warrant holders
surrendered approximately $2,184,000 of the term notes, and exercised warrants
for 311,967 shares of common stock. A one-time charge of $640,000 resulted in
1997 due to the reduction in the warrant exercise price and cash payments in
lieu of interest through 1997. The warrants were exercisable until December 31,
1998. No warrants were exercised during 1998, and on December 31, 1998, the
balance of the warrants expired.
In March 1994, the Company granted warrants to purchase 16,667 shares of
common stock at $9 per share to a financing company. The warrants were granted
in consideration for a commitment by the financing company to purchase any
shares which may have been returned by investors if the Company had been
required to make a rescission offer to certain investors of its common stock and
convertible preferred stock. The warrants are exercisable at any time until
April 30, 2001.
On April 1, 1994, the Company and a lessor agreed to a $2,000,000 expansion
of a sale-leaseback agreement for certain machinery and molds. As an inducement,
the Company issued the lessor and its affiliate warrants to purchase 47,500
shares of common stock at $9 per share. The warrants are exercisable through
April 30, 2001.
On March 7, 1995, the Company issued the CDA warrants to purchase 40,000
shares of common stock at $14.66 per share ("1995 CDA Warrant") in connection
with a $2,500,000 loan from the CDA. The fair value of the warrants on the date
of issuance of $204,000 was recorded as a discount on the debt and a
corresponding increase to common stock. The warrants are exercisable through
March 6, 2002.
On June 15, 1995, as an inducement for a sale-leaseback commitment with an
equipment leasing company (see Note 5), the Company issued warrants to purchase
6,355 shares of common stock at an exercise price of $13.63 per share with an
exercise period of five years.
F-17
<PAGE> 56
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On June 15, 1995 the Company and the CDA entered into a Warrant
Modification Agreement pursuant to which: (i) each of the CDA Warrants may be
exercised by surrender of the instruments evidencing the Company's indebtedness
incurred in connection with the issuance of such warrant; (ii) the Company
agreed to permit the CDA's net exercise of the CDA Warrants based upon the
difference between the fair market value (as defined) of the Company's common
stock on the date of such exercise and the respective exercise price; provided,
however, that the CDA shall exercise its warrants first by surrender of debt, as
described above; (iii) the CDA waived the right to redeem the 1995 CDA Warrant;
and (iv) the CDA agreed to partially exercise the 1993 CDA Warrant by
surrendering the CDA Notes in exchange for shares of common stock and agreed to
receive a replacement redeemable warrant exercisable at $9.00 per share for the
balance of the shares subject to the 1993 CDA Warrant. The warrants are
exercisable at any time between July 27, 1998 and August 1, 2000. Effective July
1, 1995, the CDA partially exercised the 1993 CDA Warrant for 57,531 shares of
common stock and received a replacement warrant for the unexercised portion of
the 1993 CDA Warrant or 42,669 shares of common stock.
On August 4, 1995 the Company sold to certain investors in a private
placement $4,000,000 of notes with detachable warrants for common stock. The
161,551 Private Placement Warrants are exercisable at $12.38 per share. They are
not exercisable until the first anniversary of issuance and expire on the fifth
anniversary of issuance. On January 29, 1997, certain warrants related to these
Private Placement Notes were exercised for 35,714 shares of common stock at an
exercise price of $7 per common share. Net proceeds to the Company as a result
of the exercise were $250,000.
On August 7, 1995, the Company received a commitment to provide $1,000,000
of additional financing from one of its equipment lenders. As an inducement to
obtain the commitment, the Company granted warrants to purchase 12,255 shares of
Common Stock at an exercise price of $12.24 per share. The warrants are
exercisable from August 7, 1996 through August 6, 2003.
On June 28, 1996, as an inducement for a sale-leaseback commitment with an
equipment leasing company (see Note 5), the Company issued warrants to purchase
16,851 shares of common stock at an exercise price of $11.28 per share with an
exercise period of five years.
On September 8, 1998, the Company received $250,000 from an officer of the
company in exchange for a one-year promissory term note with warrants. With the
note, there were 30,000 common stock warrants issued with a three-year life and
an exercise price of $2.09 per share.
On November 10, 1998, a member of the Company's board of directors and
existing shareholder invested $1,000,000 in exchange for 510,000 shares of
common stock and 75,000 warrants with a maturity date of December 31, 2001 and
an exercise price of $2.00 per share.
On January 4, 1999, a member of the Company's board of directors and
existing shareholder invested $1,000,000 in exchange for 502,500 shares of
common stock and 75,000 warrants with a maturity date of December 31, 2001 and
an exercise price of $2.00 per share.
On April 27, 1999, in connection with the issuance of the 6% Convertible
Debentures (see Note 5), the Company granted to the holder of the Debentures a
warrant to purchase 500,000 shares of the Company's common stock at an exercise
price of $3.38 per share.
On April 27, 1999, the Company granted warrants to certain investment
banking firms and professionals to purchase an aggregate of 28,572 shares of the
Company's common stock at an exercise price of $4.38 per share and an aggregate
of 56,547 shares of the Company's common stock at an exercise price of $3.54 per
share. The warrants are exercisable through April 27, 2004.
On October 18, 1999, the Company granted warrants to purchase 15,000 shares
of the Company's common stock to its Chairman of the Board. The warrants are
exercisable through October 18, 2004 at an exercise price of $3.81.
F-18
<PAGE> 57
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Pending consummation of the Permanent Financing, on October 21, 1999, the
Company issued to the Purchasers the First Bridge Note. In January 2000, the
interest rate on the First Bridge Note was increased to 12% per annum. In
connection with the issuance of the First Bridge Note the Company also issued to
the Purchasers (i) the $3 Warrants and (ii) the $5 Warrants. At the Purchaser's
election and contingent upon the satisfaction of certain criteria at the closing
of the Permanent Financing, or within six months and one day thereafter, the
exercise price of the $3 Warrants will increase to $4.00 per share of Common
Stock. The exercise price of the $5 Warrants will increase to $7.00 per share of
Common Stock upon the earlier of the closing of the Permanent Financing and
October 21, 2000. The $5 Warrants contain a net-exercise provision.
Pursuant to the provisions of certain of the warrant documents, the Company
must recalculate the number of shares and exercises prices of the warrants if
the Company subsequently issues shares of stock at prices lower than the
original exercise prices of the warrants. Because the Company has issued shares
below the warrant exercises prices of certain of the above warrants, a
recalculation was performed as of December 31, 1999. This recalculation resulted
in 267,712 additional warrants outstanding with adjusted exercise prices ranging
from $3.30 to $8.46.
The Company has reserved shares of common stock as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Warrants........................................... 3,957,704 850,693
Stock Options...................................... 809,083 842,000
--------- ---------
4,766,787 1,692,693
========= =========
</TABLE>
8. STOCK PLAN
The Company established the 1991 Long Term Incentive Plan (the "Plan")
under which the Board of Directors may grant awards to employees and directors
of the Company. Awards will be granted at the fair value of the common stock at
the time of grant, as determined by the Board of Directors. Awards under the
Plan may be made in a variety of forms, including stock options, incentive stock
options (within the meaning of Section 422A of the Internal Revenue Code of
1986) and restricted stock. Stock appreciation rights may accompany stock
options, and restricted stock may be accompanied by grants of performance
shares. All awards under the Plan have been stock options. Such options
generally vest over a period of three to five years and are exercisable over a
period of ten years from the date of grant.
On July 17, 1996 at the Annual Meeting of Shareholders, an amendment to the
1991 Long-Term Incentive Plan was adopted which increased the number of shares
of common stock subject to the Incentive Plan from 750,000 to 1,000,000. A
committee of outside directors administers the Incentive Plan; imposes limits on
awards to executives; eliminates sequential exercise of outstanding options;
imposes restrictions on the cash exercise of stock appreciation rights in
certain circumstances; and effects certain other technical and conforming
changes.
A summary of stock option activity under the Plan is as follows:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
OPTIONS PRICE
--------- -----------
<S> <C> <C>
Outstanding at December 31, 1996..................... 326,100
Granted -- 1997...................................... 189,800 4.00 - 9.50
Canceled -- 1997..................................... (53,750) 9.25
Exercised -- 1997.................................... (36,000) 1.38
--------
</TABLE>
F-19
<PAGE> 58
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
OPTIONS PRICE
--------- -----------
<S> <C> <C>
Outstanding at December 31, 1997..................... 426,150
Granted -- 1998...................................... 192,500 4.00 - 4.75
Canceled -- 1998..................................... (168,750) 4.00 - 9.25
Exercised -- 1998.................................... (21,000) 1.38
--------
Outstanding at December 31, 1998..................... 428,900
Granted -- 1999...................................... 153,000 2.16 - 2.56
Canceled -- 1999..................................... (6,833) 2.75 - 9.25
Exercised -- 1999.................................... (32,917) 2.75
--------
Outstanding at December 31, 1998..................... 542,150
========
</TABLE>
There are 483,816 stock options exercisable under the Plan at December 31,
1999.
The following summarizes additional information about stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS
OUTSTANDING OPTIONS
-------------- WEIGHTED EXERCISABLE
NUMBER AVERAGE NUMBER
OUTSTANDING AT REMAINING WEIGHTED EXERCISABLE AT WEIGHTED
EXERCISE DECEMBER 31, CONTRACTUAL AVERAGE DECEMBER 31, AVERAGE
PRICE 1999 LIFE EXERCISE PRICE 1999 EXERCISE PRICE
- -------- -------------- ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
1.38 23,000 1.42 1.38 23,000 1.38
2.16 150,000 9.25 2.16 150,000 2.16
2.56 3,000 9.25 2.56 -- 2.56
2.75 343,650 7.11 2.75 288,316 2.75
6.00 22,500 2.67 6.00 22,500 6.00
------- -------
542,150 483,816
======= =======
</TABLE>
The Company follows Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB 25) and related Interpretations in
accounting for its employee stock options. Under APB 25, because the exercise
price of the Company employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
Had compensation expense been recognized based on the fair value of the
options at their grant dates, as prescribed in Financial Accounting Standard No.
123, the Company's net loss and net loss per share would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
Net loss:
As reported.............................. $(5,233,000) $(2,960,000)
Pro forma under FAS 123.................. $(7,338,000) $(3,137,000)
Net loss per share:
As reported.............................. (.39) (.24)
Pro forma under FAS 123.................. (.54) (.26)
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions for
options granted from 1995 to 1999: dividend yield of 0%, risk
F-20
<PAGE> 59
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
free interest rate ranged from 5.4% to 6.23%, expected volatility factor ranged
from 114% to 118%, and an expected option term of ten years.
On January 20, 1999, the Board of Directors voted favorably to reduce the
exercise prices effective on March 15, 1999 on existing employee stock options
awarded under the 1991 Long Term Incentive Plan to $2.75 per share. This
reduction was made in an effort to more appropriately value the options given
the decline in the Company's stock price since the original grant dates.
At the Annual Meeting of Shareholders in 1997, the shareholders approved
the adoption of the 1995 Non-Employee Director's Stock Option Plan (the
"Directors' Plan"). The Directors' Plan includes 50,000 shares of common stock
reserved for issuance to non-employee directors. Eligible directors will receive
options for 1,000 shares of common stock upon their election and subsequent
reelection. Current non-employee directors received an option for 1,000 shares
for each calendar year they served as a director prior to the adoption of the
Directors' Plan. All options granted vest one year after the grant and have an
exercise price equal to the fair market value of the shares at the time of the
grant.
A summary of the stock option activity under the Plan is as follows:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SHARES PRICE
--------- ------------
<S> <C> <C>
Outstanding at December 31, 1996..................... 18,000
Granted -- 1997...................................... 5,000 3.00
------
Outstanding at December 31, 1997..................... 23,000
Granted -- 1998...................................... 5,000 3.00 - 3.25
Canceled -- 1998..................................... (7,000) 3.00 - 11.75
------
Outstanding at December 31, 1998..................... 21,000
Granted -- 1999...................................... 3,000 4.25
Canceled -- 1999..................................... (1,000) 3.25
------
Outstanding at December 31, 1999..................... 23,000
======
</TABLE>
9. LEASES
At December 31, 1999, the Company was committed under operating leases.
Minimum lease payments under these noncancelable leases in the next five years
are: 2000 -- $38,000; 2001 -- $11,000; thereafter -- $0. Rent expense was
$306,000 in 1997, $191,000 in 1998, and $62,000 in 1999.
10. COMMITMENTS AND CONTINGENCIES
As of December 31, 1999 the Company had capital expenditure purchase
commitments outstanding of approximately $716,000, which were comprised of new
machinery & equipment and tooling for production of product.
11. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount for cash and cash equivalents approximates fair value
because of the short-term nature of these instruments. The carrying amount for
accounts receivable, note payable, accounts payable, accrued expenses, product
replacement costs and deferred revenues are deemed reasonable because of the
short-term nature of these items.
F-21
<PAGE> 60
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following table represents the fair value of the Company's long-term
debt. Such values are estimated based upon the current rates that would be
offered to the Company on similar debt.
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
- --------------------------------- -----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
- --------------------- ---------- ---------- ----------
<S> <C> <C> <C>
$2,192,000 $1,740,000 $2,305,000 $1,963,000
</TABLE>
12. LICENSING AND DISTRIBUTION AGREEMENTS
On January 28, 1997 the Company entered into a Development and License
Agreement and a Supply Agreement with Johnson & Johnson Medical, Inc. ("JJM") of
Arlington, Texas. Under the terms of the agreements, the Company would develop
and manufacture safety needle assemblies for JJM utilizing its self-blunting
technology, which would be used by JJM, under an exclusive world-wide license
granted by the Company, to manufacture and sell a new safety I.V. catheter. The
Company received $2,900,000 in licensing fees and funding to complete the
development of the safety needle assemblies and for the development of the
manufacturing equipment and tooling. JJM agreed to acquire initial production
equipment and tooling which was completed in 1998. During 1997, $1,500,000 in
licensing fee revenue was recognized. Development funding of $841,000 and
$559,000 were recognized as a reduction in research and development expenses
during 1998 and 1997, respectively.
On April 9, 1998, the Company amended the Development and License Agreement
and canceled the Supply Agreement with JJM. The amended terms include certain
changes in the licensing and royalty agreements as well as the transfer of
manufacturing of the safety needle assemblies to JJM, in exchange for an initial
milestone payment of $3,500,000, with an additional $500,000 payable upon the
completion of certain milestones. The $3,500,000 payment was recorded as
deferred revenue and $875,000 and $2,625,000 was recognized into income during
1999 and 1998, respectively. The revised agreement also provided for an
additional $300,000 payable to the Company for initial capital equipment
purchases and the payment of certain minimum annual royalties. Capital equipment
sales to JJM amounted to approximately $164,000 during 1999.
In December of 1998, the Company completed the construction of an automated
assembly machine for JJM under the terms of the amended agreement, and the
equipment was transferred to JJM's manufacturing facility. During the first
quarter of 1999, the Company continued to perform services for JJM under the
terms of the agreement; however, by the end of the first quarter of 1999,
substantially all of the contractual obligations had been met by the Company.
During the second and third quarters of 1999, the Company has continued to
provide consulting and engineering work for JJM for the I.V. catheter project;
however, this revenue is outside of the original agreements with JJM.
In October 1998, the Company entered in to a distribution agreement with
Fisher HealthCare of Houston, Texas, the second largest operating unit of Fisher
Scientific. Fisher Scientific provides more than 245,000 products and services
to research, healthcare, industrial, educational and government customers in 145
countries. The distribution agreement allows Fisher HealthCare to purchase and
distribute all of the Bio-Plexus blood collection products.
On October 6, 1998 the Company entered into a non-exclusive supply and
distribution agreement for the United States and Canada with Graphic Controls
Corporation (subsequently known as Kendall Healthcare Products Company
("Kendall")), a subsidiary of Tyco and a major supplier of sharps containers in
the United States. The agreement allows Kendall to purchase and distribute
Bio-Plexus Drop-It(R) Needle Disposal Containers and Drop-It(R) Quick Release
Needle Holders. The agreement has an initial term of three years, and shall be
automatically renewed for an additional year, unless either party notifies the
other of its intent not to renew.
F-22
<PAGE> 61
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On October 23, 1998, the Company entered into an exclusive License
Agreement and Design, Development and Asset Transfer Agreement for a safety
Peripherally Inserted Central Catheter ("PICC") introducer with TFX Medical
("TFX"), a division of Teleflex Incorporated, a supplier of PICC introducers.
The License Agreement includes certain minimum annual volume requirements and
ongoing royalties on the sale of PICC introducer catheters featuring
Punctur-Guard(R) technology. Under the Design, Development and Asset Transfer
Agreement, the Company would design and develop safety needle assemblies to be
used with the TFX peelable catheter, and would modify existing manufacturing
equipment to be transferred to TFX pursuant to the terms and conditions of the
agreement. On July 26, 1999, an agreement was entered into with TFX to modify
the License Agreement dated October 23, 1998. The amended agreement included
additional licensing fees and changes in royalty revenue in exchange for TFX's
right to exclusively market to one of its customers. In the first quarter of
2000, the Company completed its obligations under the Design, Development and
Asset Transfer Agreements.
13. SEGMENT FINANCIAL DATA
The Company's operations consist of two worldwide business segments: Safety
Medical Products and Accessories and Joint Venture Design & Development. The
Safety Medical Products and Accessories segment includes operations associated
with the manufacture of blood collection needles, needle holders and needle
disposal containers. The Joint Venture Design & Development segment includes
operations associated with product design and development, product licensing,
and the design, development and construction for machinery and tooling in
connection with joint venture partners.
Distinct reporting by such segments was deemed necessary by management
based on the significance of reported revenues and expenses and the Company's
intention to focus operating resources in both of these areas.
Information with respect to each of the Company's business segments is as
follows:
Segment Revenue
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Safety Medical Products and Accessories........ $5,449,000 $3,636,000 $3,542,000
Joint Venture Design & Development............. 1,575,000 5,671,000 1,500,000
---------- ---------- ----------
Total Consolidated Revenue..................... $7,024,000 $9,307,000 $5,042,000
========== ========== ==========
</TABLE>
Major Customers
The Company had one customer in the Safety Medical Products and Accessories
segment, a domestic distributor of product, which accounted for approximately
52%, 31% and 48% of consolidated revenues for 1999, 1998 and 1997, respectively.
Another domestic distributor of product in this segment accounted for
approximately 13% of consolidated revenues for 1999. The Company had export
sales in this segment of approximately $548,000 in 1999, $260,000 in 1998, and
$385,000 in 1997.
The Company had one customer in the Joint Venture Design & Development
segment which accounted for approximately 18%, 60% and 30% of consolidated
revenues in 1999, 1998 and 1997, respectively.
F-23
<PAGE> 62
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Segment Operating Profit (Loss)
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- ------------
<S> <C> <C> <C>
Safety Medical Products and Accessories.... $ 2,289,000 $ 435,000 $ (1,441,000)
Joint Venture Design & Development......... 1,706,000 3,361,000 173,000
----------- ----------- ------------
Total Consolidated Operating Profit
(Loss)................................... 3,995,000 3,796,000 (1,268,000)
----------- ----------- ------------
Selling, General and Administrative
Expenses................................. (4,937,000) (4,310,000) (6,500,000)
Other...................................... (1,924,000) (1,857,000) (758,000)
Financing Expenses......................... (2,367,000) (589,000) (3,786,000)
----------- ----------- ------------
Net Loss................................... $(5,233,000) $(2,960,000) $(12,312,000)
=========== =========== ============
</TABLE>
For the Safety Medical Products and Accessories segment, operating profit
(loss) consists of total revenues less cost and expenses. In the Joint Venture
Design and Development segment, operating profit consists of total revenues less
costs and expenses and research and development expenses.
Segment Capital Expenditures
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- --------
<S> <C> <C> <C>
Safety Medical Products and Accessories............. $501,000 $82,000 $718,000
Joint Venture Design & Development.................. -- -- --
-------- ------- --------
Total Consolidated Capital Expenditures............. $501,000 $82,000 $718,000
======== ======= ========
</TABLE>
Net identifiable assets related to Safety Medical Products and Accessories
were $2,198,000, $2,343,000, and $4,321,000 at December 31, 1999, 1998 and 1997,
respectively. Depreciation expense related to these assets was $269,000,
$729,000, and $1,091,000 for the years ended December 31, 1999, 1998 and 1997,
respectively. Due to the "service" nature of the Joint Venture Design and
Development segment, identifiable assets were not material for the periods
presented.
14. PRODUCT RECALL
During the fourth quarter of 1998, the Company recalled certain of its
blood collection needle products due to mislabeling pertaining to the shelf-life
of certain product manufactured during the latter part of 1996 and in 1997. The
number of units was estimated to be approximately 1,600,000 units, of which
1,333,000 units were located at a foreign distributor. Domestically, replacement
product was shipped to customers, or credit was granted towards future product
shipments. These costs were recorded in cost of goods sold during the fourth
quarter of 1998. The Company agreed to ship replacement product to its foreign
distributor regarding the product in Europe. The total estimated cost of the
product in Europe was approximately $222,000, and was recorded as cost of goods
sold expense in the fourth quarter of 1998 with a corresponding short-term
liability recorded on the Company's balance sheet. Ultimately, the Company
replaced the product at its distributor in Europe. Total costs related to the
recall were approximately $275,000.
15. SUBSEQUENT EVENTS
In January 2000, the Company entered into a distribution agreement with
Owens & Minor, a major distributor of medical products to hospitals through the
United States. Owens & Minor, a Fortune 500 company headquartered in Richmond,
Virginia, is a distributor of national brand medical and surgical supplies. The
company's distribution centers serve hospitals, integrated healthcare systems
and group purchasing organizations nationwide. The distribution agreement allows
Owens & Minor to purchase and distribute all of the Bio-Plexus blood collection
products.
F-24
<PAGE> 63
BIO-PLEXUS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On February 21, 2000, the Company entered into a distribution agreement
with McKessonHBOC Medical Group of Richmond, Virginia. McKessonHBOC's Supply
Management Business is a distributor of medical-surgical supplies to more than
5,000 hospitals nationwide. The agreement allows McKessonHBOC to purchase and
distribute the Company's products on a non-exclusive basis without territorial
limitations or restrictions. The agreement is in effect for a period of five
years and shall continue automatically in effect for successive terms of five
years each until terminated by either party.
On February 29, 2000, a director of the Company effected a net exercise of
180,000 stock options in exchange for 63,625 shares of common stock.
On January 5, 2000, the Company issued to the Purchasers a 15%
non-convertible secured note in the aggregate principal amount of $1.65 million
(the "Second Bridge Note"). In connection with the issuance of the Second Bridge
Note the Company also agreed to issue and sell on the earlier of (i) April 30,
2000 and (ii) the closing of the Permanent Financing, five-year warrants to
acquire up to 200,000 shares of Common Stock at an initial exercise price of
$3.00 per share (the "Second Bridge Warrants"). The Second Bridge Warrants
contain a net-exercise provision.
On April 3, 2000, the Company issued to the Purchasers a 15%
non-convertible secured note in the aggregate principal amount of $2.2 million
(the "Third Bridge Note"). No warrants or convertible securities were issued in
connection with the Third Bridge Note. The First Bridge Note, the Second Bridge
Note and the Third Bridge Note are collectively referred to as the "Bridge
Notes". The issuance of the Bridge Notes, the First Bridge Warrants and the
Second Bridge Warrants are collectively referred to as the "Bridge
Transactions".
The Bridge Notes are not convertible into shares of Common Stock and are
required to be paid-in-full (together with accrued interest) at the closing of
the Permanent Transaction.
F-25
<PAGE> 64
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
INDEX
NO. DESCRIPTION METHOD OF FILING
- ------- --------------------------------------- ---------------------------------------
<C> <S> <C>
1.2 Form of Advest, Inc. Warrant........... Incorporated by reference to Exhibit
1.2 to the Registrant's registration
statement on Form S-1 filed on April 1,
1994 (File No. 33-77202).
1.3 Form of Advest, Inc. Registration
Rights Agreement....................... Incorporated by reference to Exhibit
1.3 to the Registrant's registration
statement on Form S-1 filed on April 1,
1994 (File No. 33-77202).
3.1 Certificate of Incorporation of the
Company, as amended.................... Incorporated by reference to Exhibit
3.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarter
ended September 30, 1998 (File No.
0-24128).
3.2 Bylaws of the Company, as amended...... Incorporated by reference to Exhibit
3.2 to the Registrant's Annual Report
on Form 10-K filed on April 13, 1998
(File No. 0-24128).
10.3 Master Lease Agreement, dated April 30,
1993, between the Company and Aberlyn
Capital Management and its Affiliate,
Aberlyn................................ Incorporated by reference to Exhibit
10.3 to the Registrant's registration
statement on Form S-1 filed on April 1,
1994 (File No. 33-77202).
10.4 Purchase and Sale Agreement, as
amended, for 129 Reservoir Road,
Vernon, Connecticut, dated October 28,
1994, between the Company and Victor
and Margaret DeMattia.................. Incorporated by reference to Exhibit
10.4 to the Registrant's Annual Report
on Form 10-K filed on March 30, 1995
(File No. 0-24128).
10.6 Marketing and Distribution Agreement
dated March 16, 1995, between the
Company and Allegiance................. Incorporated by reference to Exhibit
10.6 to the Registrant's Amendment No.
2 to Annual Report on Form 10-K filed
on June 30, 1995 (File No. 0-24128).
10.7 1991 Long-Term Incentive Plan.......... Incorporated by reference to Exhibit
10.7 to the Registrant's Amendment No.
2 to Annual Report on Form 10-K filed
on June 30, 1995 (File No. 0-24128).
10.12 Master Equipment Lease Agreement dated
as of March 8, 1995, between the
Company and Financing for Science
International, Inc. ................... Incorporated by reference to Exhibit
10.12 to the Registrant's Quarterly
Report on Form 10-Q for the quarter
ended on June 30, 1995 (File No.
0-24128).
10.13 1995 Non-Employee Directors' Stock
Option Plan............................ Incorporated by reference to Exhibit
10.13 to the Registrant's Quarterly
Report on Form 10-Q for the quarter
ended on June 30, 1995 (File No.
0-24118).
</TABLE>
<PAGE> 65
<TABLE>
<CAPTION>
EXHIBIT
INDEX
NO. DESCRIPTION METHOD OF FILING
- ------- --------------------------------------- ---------------------------------------
<C> <S> <C>
10.15 Letter Agreement with Aberlyn Capital
Management Limited Partnership......... Incorporated by reference to Exhibit
10.15 to the Registrant's Quarterly
Report on Form 10-Q for the quarter
ended on June 30, 1995 (File No.
0-24128).
10.16 Employment Agreement dated January 13,
1997 between the Company and Lucio
Improta................................ Incorporated by reference to Exhibit
10.15 to the Registrant's Quarterly
Report on Form 10-Q for the quarter
ended on March 31, 1997 (File No.
0-24128).
10.17 Term Sheet dated August 1, 1997
describing arrangement between the
Company and Ronald Haverl.............. Incorporated by reference to Exhibit
10.17 to the Registrant's Annual Report
on Form 10-K/A filed on April 30, 1998
(File No. 0-24128).
10.18 Development and License Agreement dated
January 28, 1997 by and between the
Company and Johnson & Johnson Medical,
Inc. .................................. Incorporated by reference to Exhibit
10.18 to the Registrant's Quarterly
Report on Form 10-Q for the quarter
ended on September 30, 1998 (File No.
0-24128).
10.19 Supply Agreement dated January 28, 1997
by and between the Company and Johnson
& Johnson Medical, Inc. ............... Incorporated by reference to Exhibit
10.18 to the Registrant's Quarterly
Report on Form 10-Q for the quarter
ended on September 30, 1998 (File No.
0-24128).
10.20 Term Promissory Note issued to Carl R.
Sahi*.................................. Incorporated by reference to Exhibit
10.20 to the Registrant's Quarterly
Report on Form 10-Q for the quarter
ended on September 30, 1998 (File No.
0-24128).
10.21 Warrant for shares of common stock
issued to Carl R. Sahi*................ Incorporated by reference to Exhibit
10.21 to the Registrant's Quarterly
Report on Form 10-Q for the quarter
ended on September 30, 1998 (File No.
0-24128).
10.22 Subscription Agreement dated April 27,
1999 by and between the Company and
Ramius Capital Group, LLC.............. Incorporated by reference to Exhibit
10.22 to the Registrant's Form S-3
filed on May 18, 1999 and amended on
June 23, 1999, July 30, 1999, August
24, 1999 and September 15, 1999 (File
No. 333-79671).
10.23 Form of Debenture dated April 27, 1999
by and between the Company and Ramius
Capital Group, LLC..................... Incorporated by reference to Exhibit
10.23 to the Registrant's Form S-3
filed on May 18, 1999 and amended on
June 23, 1999, July 30, 1999, August
24, 1999 and September 15, 1999 (File
No. 333-79671).
</TABLE>
<PAGE> 66
<TABLE>
<CAPTION>
EXHIBIT
INDEX
NO. DESCRIPTION METHOD OF FILING
- ------- --------------------------------------- ---------------------------------------
<C> <S> <C>
10.23a Letter Agreement dated September 13,
1999 between the Company and Ramius
Capital Group, LLC..................... Incorporated by reference to Exhibit
10.23a to the Registrant's Form S-3
filed on May 18, 1999 and amended on
June 23, 1999, July 30, 1999, August
24, 1999 and September 15, 1999 (File
No. 333-79671).
10.24 Form of Warrant granted by the Company
to Ramius Capital Group, LLC........... Incorporated by reference to Exhibit
10.24 to the Registrant's Form S-3
filed on May 18, 1999 and amended on
June 23, 1999, July 30, 1999, August
24, 1999 and September 15, 1999 (File
No. 333-79671).
10.25 Registration Rights Agreement by and
between the Company and Ramius Capital
Group, LLC............................. Incorporated by reference to Exhibit
10.25 to the Registrant's Form S-3
filed on May 18, 1999 and amended on
June 23, 1999, July 30, 1999, August
24, 1999 and September 15, 1999 (File
No. 333-79671).
10.30 7.5% Secured Note dated as of October
21, 1999 between the Company and
Appaloosa Investment Limited
Partnership I, L.P..................... Filed with this Report.
10.30(1a) First Amendment to 7.5% Secured Note
dated as of December 30, 1999.......... Filed with this Report.
10.30(2a) Second Amendment to 7.5% Secured note
dated as of April 3, 2000.............. Filed with this Report.
10.31 Form of Warrant to Purchase Shares of
Common Stock of the Company at a
Purchase Price of $3.00 per Share...... Filed with this Report.
10.32 Form of Warrant to Purchase Shares of
Common Stock of the Company at a
Purchase Price of $5.00 per Share...... Filed with this Report.
10.33 Form of Convertible Note Purchase
Agreement.............................. Filed with this Report.
10.34 Form of Warrant to Purchase Shares of
Common Stock of the Company at a
Purchase Price of $7.00 per Share...... Filed with this Report.
10.35 Registration Rights Agreement between
the Company, Appaloosa Investment
Limited Partnership I, L. P. and
certain entities related thereto....... Filed with this Report.
10.36 Form of Rollover Registration Rights
Agreement.............................. Filed with this Report.
10.37 Security Agreement between the Company
and Appaloosa Investment Limited
Partnership I, L.P. ................... Filed with this Report.
10.38 Letter Agreement dated October 21, 1999
between the Company and Appaloosa
Investment Limited Partnership I,
L.P.................................... Filed with this Report.
10.39 Form of Warrant to Purchase Shares of
Common Stock of the Company at a
Purchase Price of $3.00 per Share...... Filed with this Report.
10.40 15% Secured Note dated as of January 5,
2000 between the Company and Appaloosa
Investment Limited Partnership I,
L.P.................................... Filed with this Report.
</TABLE>
<PAGE> 67
<TABLE>
<CAPTION>
EXHIBIT
INDEX
NO. DESCRIPTION METHOD OF FILING
- ------- --------------------------------------- ---------------------------------------
<C> <S> <C>
10.40(1a) First Amendment to 15% Secured Note
dated as of April 3, 2000 between the
Company and Appaloosa Investment
Limited Partnership I, L.P............. Filed with this Report.
10.41 Form of Warrant to Purchase Shares of
Common Stock of the Company............ Filed with this Report.
10.42 15% Secured Note dated as of April 3,
2000 between the Company and Appaloosa
Investment Limited Partnership I,
L.P.................................... Filed with this Report.
10.43 Letter Agreement dated as of April 3,
2000 between the Company and Appaloosa
Investment Limited Partnership I,
L.P.................................... Filed with this Report.
23 Consent of Mahoney, Sabol & Company,
LLP.................................... Filed with this report.
27 Financial Data Schedule................ Filed with this report.
</TABLE>
- ---------------
* This exhibit is a management contract or employment contract required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(c).
<PAGE> 1
Exhibit 10.30
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF
SUCH ACT OR SUCH LAWS.
BIO-PLEXUS, INC.
7.5% SECURED NOTE
No. R-1 Dated as of October 21, 1999
$3,000,000
FOR VALUE RECEIVED, the undersigned, BIO-PLEXUS, INC. (herein called the
"Company"), a corporation organized and existing under the laws of the State of
Connecticut, hereby unconditionally promises to pay to the order of Appaloosa
Investment Limited Partnership I, L.P., or its registered assigns (the
"Holder"), the principal sum of THREE MILLION DOLLARS ($3,000,000) in
immediately available lawful money of the United States of America, together
with interest on the unpaid balance hereof, in accordance with the terms and
conditions set forth below.
<PAGE> 2
1. Payment.
1.1. Principal. The entire unpaid principal balance of this Note
shall be paid in full by the Company on the Due Date.
1.2. Home Office Payment. The Company will pay to each Holder or any
transferee thereof all sums becoming due on this Note at the account/address to
be specified by such Holder or transferee for such purpose by notice to the
Company, by wire transfer of immediately available funds, or at such other
address or by such other method as such Holder or transferee shall have
designated by notice to the Company.
1.3. Prepayment. Subject to Section 8.8, (i) upon at least ten days
prior notice to the Holder, this Note may be prepaid, without premium or
penalty, in whole or in part by the Company at any time and from time to time
and (ii) concurrently with the receipt of any proceeds received by the Company
in respect of any sale of Debentures pursuant to section 1.4 of the Subscription
Agreement, the Company shall make a mandatory prepayment of the Note in an
amount equal to 100% of such proceeds; provided, that, upon any prepayment under
(i) or (ii) above, all accrued and unpaid interest shall be paid on the
principal of the Note being repaid.
1.4. Interest. The unpaid principal balance of this Note outstanding
at any time shall accrue interest, at a rate per annum equal to 7.5%. Interest
shall begin to accrue from the date hereof and shall be computed on the basis of
a year of 360 days and actual days elapsed and shall be payable in one lump sum
on the Due Date.
1.5. Default Interest. If the Company shall fail to pay any principal
amount of, or interest on, or other amount payable under, this Note when due and
payable (whether at the Due Date, the Acceleration Date or otherwise), such
principal amount, interest or other amount shall thereafter bear interest, until
paid in full (after as well as before judgment) to the extent lawful, at a rate
per annum equal to 12%. The Company shall pay such default interest in cash on
demand from time to time.
1.6. Limitation on Interest. No provision of this Note shall require
the payment or permit the collection of interest in excess of the maximum rate
which is permitted by Law. If any such excess interest is provided for herein,
or shall be adjudicated to be so provided for, then the Company shall not be
obligated to pay such interest in excess of the maximum rate permitted by Law,
and the right to demand payment of any such excess interest is hereby waived,
any other provisions in this Note to the contrary notwithstanding.
2. Deliveries by the Company. Simultaneously with the execution of this
Note, the Company is delivering to the Holder the following:
<PAGE> 3
(a) an opinion of the Company's counsel, dated as of the date hereof,
addressed to such Holder in the form of Exhibit 2(a) hereto;
(b) a good standing certificate for the Company, dated no earlier than
seven days prior to the date hereof, from the State of Connecticut;
(c) a copy of the resolutions of the Board of Directors authorizing
the execution of each of the Transaction Documents and the performance of the
transactions contemplated by the Transaction Documents which shall be certified
as true, correct and effective as of the date hereof by an officer of the
Company;
(d) a duly executed copy of the Security Agreement in the form
attached hereto as Exhibit 2(d), and copies of any other Collateral
Documentation including Financing Statements required to perfect the Holder's
security interest in the Collateral;
(e) duly executed warrants to purchase 1,000,000 shares of Common
Stock in the aggregate with an exercise price of $3 per share in the form
attached hereto as Exhibit 2(e)(i) (the "$3 Warrants") and duly executed
warrants to purchase 1,500,000 shares of Common Stock in the aggregate with an
exercise price of $5 per share in the form attached hereto as Exhibit 2(e)(ii)
(the "$5 Warrants", together with the $3 Warrants, the "Warrants"); and
(f) the Holder's costs and expenses (including the reasonable fees and
expenses of its counsel, Fried, Frank, Harris, Shriver & Jacobson, in an
aggregate amount not to exceed $50,000 which amounts shall be deducted from the
proceeds of this Note and shall be wired transferred by the Holder, on behalf of
the Company, to one or more accounts designated by such party on or prior to the
date hereof) incurred in connection with the transactions contemplated hereby.
3. Representations and Warranties of the Company. The Company represents
and warrants to the Holder as follows:
3.1. Organization; Subsidiaries. (a) The Company is a corporation duly
organized and existing in good standing under the laws of the State of
Connecticut and has the corporate power to own its property and to carry on its
business as now being conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary and where the failure to so qualify could, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(b) The Company does not have any Subsidiaries. Except as set forth on
Schedule 3.1(b), the Company does not own, directly or indirectly, or have the
right or obligation to acquire, any interest in any business
<PAGE> 4
association or other Person.
3.2. Due Authorization. The Company has all right, power and authority
to enter into, deliver and perform the Transaction Documents to which it is a
party and to consummate the transactions contemplated thereby. The execution and
delivery of each Transaction Document by the Company and the performance by it
of the transactions contemplated thereby (including, without limitation, the
issuance and sale of this Note and the Warrants and issuance of shares of Common
Stock upon exercise of the Warrants) and compliance by the Company with all the
provisions of each Transaction Document (as applicable) has been duly authorized
by all requisite corporate proceedings on the part of the Company. Each of the
Transaction Documents has been duly executed and delivered on behalf of the
Company, and each such Transaction Document constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its respective terms, except to the extent that such enforceability (i) may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors' rights generally or (ii) is subject to
general principles of equity. The shares of Common Stock issuable upon exercise
of the Warrants have been validly reserved for issuance, and upon issuance, will
be validly issued and outstanding, fully paid and nonassessable.
3.3. Capitalization. The authorized capital stock of the Company
consists of (i) 25,000,000 shares of Common Stock, of which, as of the date
hereof, 13,643,308 shares were issued and outstanding, 579,650 shares were
reserved for issuance upon the exercise of outstanding stock options pursuant to
the Company's option plans, 1,395,386 shares were reserved for issuance upon the
exercise of the outstanding warrants, and 2,472,876 shares were reserved for
issuance upon the conversion of certain 6% Convertible Debentures due 2004 and
(ii) 3,000,000 shares of Preferred Stock, no par value (the "Preferred Stock"),
of which, as of the date hereof, no shares were issued and outstanding. All of
the outstanding shares of Common Stock are validly issued and are fully paid and
nonassessable. No class of Capital Stock of the Company is entitled to
preemptive rights. Except as set forth on Schedule 3.3, there are no outstanding
options, warrants, preemptive rights, subscription rights, calls or commitments
of any character whatsoever relating to, or securities or rights convertible
into, shares of any class of Capital Stock of the Company, or Contracts, by
which the Company is or may become bound to issue additional shares of its
Capital Stock or options, warrants or other rights to purchase or acquire any
shares of its Capital Stock. Except as set forth on Schedule 3.3, no warrants,
bonds, debentures, notes or other Indebtedness or other security having the
right to vote (or convertible into or exercisable for securities having the
right to vote) on any matters on which stockholders may vote were issued or
outstanding. Except as set forth on Schedule 3.3 or as contemplated by the
Transaction Documents, the Company is not a party to, and, to the Company's best
knowledge, there are, and immediately after the Closing, there will be, no
agreement,
<PAGE> 5
restriction or encumbrance (such as a preemptive or similar right of first
refusal, right of first offer, proxy, voting agreement, voting trust,
registration rights agreement, shareholders' agreement, etc., whether or not the
Company is a party thereto) with respect to the purchase, sale or voting of any
shares of Capital Stock of the Company (whether outstanding or issuable upon
conversion, exchange or exercise of outstanding securities) or other securities
of the Company pursuant to any provision of Law, the Certificate of
Incorporation or By-Laws, any agreement or otherwise. Except as set forth on
Schedule 3.3, no person has the right to nominate or elect one or more directors
of the Company. Immediately following the transactions contemplated hereby, the
Company's capitalization will be as set forth on Schedule 3.3. The Company has
not declared or paid any dividend or made any other distribution of cash, stock
or other property to its stockholders since January 1, 1996.
3.4. SEC Reports Correspondence. The Company has filed all proxy
statements, reports and other documents required to be filed by it under the
Exchange Act from and after January 1, 1995 (collectively, the "SEC Reports").
Each SEC Report was in compliance in all material respects with the requirements
of its respective report form and did not on the date of filing contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and as of the date
hereof there is no fact or facts not disclosed in the SEC Reports which relate
specifically to the Company and which could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
3.5. Financial Statements. The financial statements (including any
related schedules and/or notes) included in the SEC Reports have been prepared
in accordance with GAAP consistently followed (except as indicated in the notes
thereto) throughout the periods involved and fairly present the consolidated
financial condition, results of operations, cash flows and changes in
stockholders' equity of the Company as of the respective dates thereof and for
the respective periods then ended (in each case subject, as to interim
statements, to changes resulting from year-end adjustments, none of which were
material in amount or effect). Except as set forth on Schedule 3.5, the Company
is not subject to any Liabilities, except (i) Liabilities in the respective
amounts reflected or reserved against in the Company's balance sheet as of
December 31, 1998 included in the SEC Reports or (ii) Liabilities incurred in
the ordinary course of business since
<PAGE> 6
December 31, 1998 which could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
3.6. No Material Adverse Change. Since December 31, 1998, no event has
occurred or failed to occur which could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
3.7. Intellectual Property Rights. Schedule 3.7 sets forth a complete
and correct list of all Intellectual Property of the Company (the "Company
Intellectual Property"). Except as set forth on Schedule 3.7, the Company owns
and possesses all right, title and interest in, or possesses adequate licenses
to (without the making of any payment to others or the obligation to grant
rights to others in exchange) all the Company Intellectual Property, free and
clear of any Liens, licenses or other restrictions. The Company has the right to
require the applicant of any Company Intellectual Property which is an
application, including but not limited to patent applications, trademark
applications, service mark applications, copyright applications, or mask work
applications, to transfer ownership to the Company of the application and of the
registration once it issues. All registered patents, trademarks, service marks
and copyrights listed on Schedule 3.7 are valid and subsisting and in full force
and effect. The Company Intellectual Property is all the Intellectual Property
that is necessary for the ownership, maintenance and operation of the Company's
properties and assets and the Company has the right to use all of the Company
Intellectual Property in all jurisdictions in which the Company conducts or
proposes to conduct its business, and the consummation of the transactions
contemplated hereby will not alter or impair any such rights. The Company has
never agreed to indemnify any person for or against any interference,
infringement, misappropriation or other conflict with respect to any Company
Intellectual Property. Except as set forth in Schedule 3.7, no third party has
interfered with, infringed upon, misappropriated or otherwise come into conflict
with any Company Intellectual Property. The Company has taken all reasonably
necessary and desirable action to maintain and protect each item of Company
Intellectual Property. The validity, ownership, enforceability, use or legality
of the Company Intellectual Property is not being questioned or opposed in any
Litigation or Order to which the Company or any Person who has granted a license
of Intellectual Property to the Company, is a party or subject, nor, to the
knowledge of the Company, is any such Litigation or Order threatened. The
conduct of the Company as currently conducted and as currently proposed to be
conducted does not and will not infringe, interfere with, misappropriate or
otherwise come into conflict with any Intellectual Property of any other Person,
and the Company has not received any charge, complaint, claim, demand or notice
alleging any such infringement, interference, misappropriation or conflict
(including any claim that the Company must license or refrain from using any
Intellectual Property of any other Person). Except as set forth on Schedule 3.7,
the Company has not granted any licenses of Intellectual Property to any Person.
<PAGE> 7
3.8. Existing Indebtedness; Future Liens. (a) Schedule 3.8 sets forth
a complete and correct list of all outstanding Indebtedness of the Company as of
the date hereof. Except as set forth on Schedule 3.8, the Company has not
defaulted and no waiver of default is currently in effect, in the payment of any
principal or interest on any such Indebtedness and no event or condition exists
with respect to any such Indebtedness that would permit (or that with notice or
the lapse of time, or both, would permit) one or more Persons to cause such
Indebtedness to become due and payable before its stated maturity or before its
regularly scheduled dates of payment. The Company has not received any notice
from any Person declaring or threatening to declare any Indebtedness owed by the
Company to such Person due and payable prior to the stated maturity of such
Indebtedness or before its regularly scheduled dates of payment.
(b) The Company has not agreed or consented to cause or permit in
the future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to any Lien
(other than Permitted Liens).
3.9. Litigation. (a) Except as set forth on Schedule 3.9, there is no
Litigation pending or, to the knowledge of the Company, threatened against the
Company or any of its properties or assets by or before any court, arbitrator or
other Governmental Entity.
(b) The Company is not in default under or in breach of any Order of
any court, arbitrator or other Governmental Entity, and the Company is not
subject to or a party to any Order of any court, arbitrator or other
Governmental Entity arising out of any claim, demand, notice, action, suit or
proceeding under any Law.
3.10. Compliance with Laws. The Company is in compliance with all
applicable Laws including, without limitation, all rules, regulations and other
Laws of the Food and Drug Administration relating to the design, development,
manufacturing, sales and distribution of safety medical products and
accessories, except where the failure to comply could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect. No
Order has been issued nor any Law enacted which prevents, nor does any Law
prohibit the consummation of the transactions contemplated by any of the
Transaction Documents.
3.11. Offering of the Securities. In connection with offering of this
Note and the issuance of the Warrants, neither the Company nor any Person acting
on its behalf has offered the Note, the Warrants or any similar securities of
the Company for sale to, solicited any offers to buy the Note, the Warrants or
any similar securities of the Company from or otherwise approached or negotiated
with respect to the Company with any Person other than the Purchasers and other
"accredited investors" (as defined in Rule 501(a) under the Securities Act).
Neither the Company
<PAGE> 8
nor any Person acting on its behalf has taken or, except as contemplated hereby
will take any action (including, without limitation, any offering of any
securities of the Company under circumstances which would require the
integration of such offering with the offering of the Note and the issuance of
the Warrants under the Securities Act) which could reasonably be expected to
subject the offering, issuance or sale of the Note and the Warrants to the
registration requirements of Section 5 of the Securities Act or violate the
provisions of any securities, "blue sky", or similar law of any applicable
jurisdiction.
3.12. Solvency. The Company is not, and after giving effect to the
issuance of this Note and the application of the proceeds therefrom will not be,
insolvent within the meaning of Title 11 of the United States Code or any
comparable state law provision.
3.13. Security Documents. Except as set forth in Schedule 3.13, upon
proper filing of the Financing Statements (or assignments thereof) in the
offices of the Secretary of State of Connecticut with respect to the Company (or
assignments thereof) and in the locations identified in the Security Agreement,
the Liens granted under the Transaction Documents shall constitute a fully
perfected first priority security interest in all right, title and interest of
the Company in and to the personal property therein prior to any other security
interests against such property or interests therein.
3.14. Disclosure. Neither any Transaction Document nor any Schedule
hereto and thereto, nor any certificate furnished to any Holder by or on behalf
of the Company in connection with the transactions contemplated hereby and
thereby, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein not misleading. The financial forecasts furnished by the Company to the
Holder has been prepared in good faith based upon reasonable assumptions. There
is no fact or information relating to the Company that could reasonably be
expected to be material to the Company that has not been disclosed to the
Holder.
4. Covenants of the Company. The Company covenants that for so long as this
Note is outstanding or any amounts are due and unpaid hereunder:
4.1. Limitation on Indebtedness. The Company shall not, and shall not
permit any of its Subsidiaries to, create, incur, assume or directly or
indirectly guarantee or in any other manner become directly or indirectly liable
for the payment of any Indebtedness (excluding Permitted Indebtedness and
Indebtedness which is a Guaranty of an Indebtedness of the Company or any of its
Subsidiaries that is otherwise Permitted
<PAGE> 9
Indebtedness).
4.2. Limitation on Encumbrances. The Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, create, incur, assume
or otherwise suffer to exist or cause or otherwise suffer to become effective
any Lien in or on any right, title or interest to any property (real or
personal) that constitutes all or any portion of the Collateral (a "Restricted
Encumbrance," which term excludes the Lien created in favor of the Holder)
unless such Restricted Encumbrance is a Permitted Lien.
4.3. Limitation on Dividends; Stock Issuances. The Company shall not
offer or issue any shares of Preferred Stock or Common Stock for any purpose
whatsoever, except for (i) shares of Common Stock issuable upon the exercise of
the Warrants and (ii) pursuant to Schedule 4.3. The Company shall not declare
any dividends on any shares of its Capital Stock, or make any payment on account
of, or set apart assets for a sinking or other analogous fund for, the purchase,
redemption, retirement, exchange or other acquisition of any shares of its
Capital Stock, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash,
securities, property or in obligations of the Company or any of its
Subsidiaries.
4.4. Stockholders' Meetings. As promptly as practicable hereafter but
in no event no later than December 31, 1999, the Company shall take all action
necessary, in accordance with applicable Law and its Certificate of
Incorporation and By-laws, to convene a special meeting of its stockholders (the
"Company Meeting") for the purpose of considering and voting upon the approval
of the Rollover Transactions, including, without limitation, the issuance and
sale of the Convertible Notes, the Shares and the Rollover Warrant, and any
other transactions contemplated in furtherance thereof under applicable Law. The
Company will use its best efforts to obtain such stockholders' approval,
including, without limitation, taking all lawful actions to solicit such
approval. The Board of Directors will recommend that its stockholders vote in
favor of and approve the Rollover Transactions, including, without limitation,
the issuance and sale of the Convertible Notes, the Shares and the Warrants, and
any other transactions contemplated in furtherance thereof under applicable Law.
4.5. Proxy Statement. The Company shall promptly prepare and file with
the SEC as soon as practicable the Proxy Statement, which shall comply as to
form in all material respects with the applicable provisions of the Exchange Act
and the rules and regulations thereunder. The Company shall use its best
efforts, and the Holder will cooperate with the Company, to have the Proxy
Statement cleared by the SEC as promptly as practicable. The Company shall, as
promptly as practicable, provide copies of any written
<PAGE> 10
comments received from the SEC with respect to the Proxy Statement to the Holder
and advise the Holder of any oral comments with respect to the Proxy Statement
received from the SEC. The Holder agrees that none of the information supplied
or to be supplied by it for inclusion or incorporation by reference in the Proxy
Statement and each amendment or supplement thereto, at the time of mailing
thereof and at the time of the Company Meeting, will contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company agrees
that none of the information supplied or to be supplied by the Company for
inclusion or incorporation by reference in the Proxy Statement and each
amendment or supplement thereto, at the time of mailing thereof and at the time
of the Company Meeting, will contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Company will provide the Holder with a reasonable
opportunity to review and comment on the Proxy Statement and any amendment or
supplement thereto prior to filing such with the SEC, and will provide the
Holder with a copy of all such filings made with the SEC. No amendment or
supplement to the information supplied by the Holder for inclusion in the Proxy
Statement shall be made without the approval of such Holder, which approval
shall not be unreasonably withheld or delayed.
4.6. Operations in Accordance with the Business Plan. The business and
operations of the Company and its Subsidiaries shall be conducted in accordance
with a business plan of the Company approved by the Holder.
4.7. Proceeds. The proceeds of the sale of this Note shall be used for
the purposes set forth on Schedule 4.7. No part of the proceeds from the sale of
this Note hereunder shall be used, directly or indirectly, for the purpose of
"purchasing" or "carrying" any "margin stock" within the respective meanings of
Regulation U of the Board of Governors of the Federal Reserve System or for any
purpose which violates or would be inconsistent with the provisions of
Regulations T, U or X of said Board.
4.8. Additional Offerings of Securities. The Company shall not seek
financing from any third party consisting of an issuance of Equity Securities
without the written consent of the Holder (which may be withheld at the Holder's
absolute discretion).
4.9. Existence. Neither the Company nor any of its Subsidiaries shall
enter into any transaction for the acquisition of, or merger or consolidation or
amalgamation with, any other Person (including any Subsidiary or Affiliate of
the Company or any of its Subsidiaries), or enter into any transaction or series
of transactions that could result in a Change of Control, or sell, transfer or
otherwise dispose of
<PAGE> 11
("Transfer") all or substantially all of its assets in one transaction or series
of transactions to any Person, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or make any material change in the
present method of conducting business or engage in any type of business other
than of same general type now conducted by it. The Company shall not, and shall
not permit any of its Subsidiaries to, Transfer any property or assets, unless
the property or asset that is the subject of such Transfer constitutes (i)
inventory held for sale, (ii) marketable securities available for sale, or (iii)
real estate, equipment, fixtures, supplies or materials no longer required in
the operation of the business of the Company or such Subsidiary or that is
obsolete, and, in the case of any Transfer described in clause (i) or (iii),
such Transfer is in the ordinary course of business consistent with past
practice.
4.10. Access. Subject to a written confidentiality agreement, the
Company shall, and shall cause the Company's officers, directors, employees and
agents to, afford to the Holder and each of its Affiliates, officers, directors,
employees, counsel, investment bankers, accountants, advisors, agents and other
representatives (collectively, "Representatives"), reasonable access during
normal business hours to its officers, employees, accountants, agents,
properties, offices and other facilities, and to the books and records of the
Company (including, without limitation, all interim financial statements, tax
returns and work papers of its accountants), legal documents of the Company, and
shall furnish the Holder and its Representatives all financial, operating,
technical and other data and information which any of them may from time to time
reasonably request.
4.11. Release of Liens. The Company shall take all actions necessary
to promptly (but in no event later than seven days from the date hereof) file
necessary documentation to remove evidence of any prior liens and/or security
interests on any Company Intellectual Property (other than security interests on
any Company Intellectual Property granted to Holder in connection with the
transactions contemplated hereby), including, without limitation, all prior
liens and/or security interests on any Company Intellectual Property on record
with the United States Patent and Trademark Office.
4.12. 6% Convertible Debentures due 2004. The Company shall not
exercise its Put Option without the written consent of the Holder.
5. Events of Default and Remedies.
<PAGE> 12
5.1. Events of Default and Remedies. "Event of Default," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any Order of any court or any Order, rule or
regulation of any Governmental Entity) (or if the giving of notice or lapse of
time or both is required, then, prior to such notice or lapse of time, a
"Default"):
(a) default in the payment of any interest upon this Note
when it becomes due and payable; or
(b) default in the payment of any principal of this Note when it
becomes due and payable; or
(c) default in the performance of any agreement or covenant in,
or provision of, this Note or the other documents executed and delivered in
connection with this Note (including any other Transaction Document) and to
which the Company or any of its Subsidiaries is a party (other than a
covenant or a default in whose performance is elsewhere in this Section
specifically dealt with) which is not cured within thirty (30) days, or any
representation or warranty made in any document executed and delivered in
connection with this Note (including any other Transaction Document) was
false in any material respect on the date as of which made or deemed made;
or
(d) the Company Meeting shall not have been held on or prior to
December 31, 1999 or the approval of the Company's stockholders described
in Section 4.4 shall not have been obtained at the Company Meeting on or
prior to December 31, 1999; or
(e) the Company or any of its Subsidiaries shall: (A) default in
any payment of principal of or interest on any Indebtedness (other than
this Note and any intercompany debt) or in the payment of any Guarantee,
beyond the period of grace, if any, provided in the instrument or agreement
under which such Indebtedness or Guarantee was created; or (B) default in
the observance or performance of any other agreement or condition relating
to any such Indebtedness or Guarantee or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Guarantee (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with
<PAGE> 13
the giving of notice if required, such Indebtedness to become due prior to
its stated maturity, any applicable grace period having expired, or such
Guarantee to become payable, any applicable grace period having expired,
provided that the aggregate principal amount of all such Indebtedness and
Guarantee which would then become due or payable as described in this
Section 5.1(e) would equal or exceed $100,000; or
(f) a final judgment or judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company
or any of its Subsidiaries and such remains undischarged for a period
(during which execution shall not effectively be stayed) of 60 days,
provided that the aggregate of all such judgments that are not covered by
insurance under which the Company or a Subsidiary is a beneficiary exceeds
$100,000, or the Holder shall determine that any regulatory body having
jurisdiction over the Company or any of its Subsidiaries including, without
limitation, the SEC, shall have taken or proposed to take any action that
the Holder believes could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect or that adversely affects the
Holder's security interest in the Collateral; or
(g) the Company or any of its Subsidiaries (i) is generally not
paying, or admits in writing its inability to pay, its debts as they become
due, (ii) files, or consents by answer or otherwise to the filing against
it of, a petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, reorganization, moratorium or other similar law of
any jurisdiction, (iii) makes an assignment for the benefit of its
creditors, (iv) consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property, (v) is adjudicated as
insolvent or to be liquidated, or (vi) takes corporate action for the
purpose of any of the foregoing; or
(h) a court or other Governmental Entity of competent
jurisdiction enters an Order appointing, without consent by the Company or
any of its Subsidiaries, a custodian, receiver, trustee or other officer
with similar powers with respect to it or with respect to any substantial
part of its property, or constituting an order for relief or approving a
petition for relief or reorganization or any other petition in bankruptcy
or for liquidation or to take advantage of any bankruptcy or insolvency law
of any jurisdiction, or ordering the dissolution, winding-up or liquidation
of the Company or any of its Subsidiaries, or any such petition shall be
filed against the Company or any of its Subsidiaries and such petition
shall not be
<PAGE> 14
dismissed within 60 days; or
(i) a court or other Governmental Entity of competent
jurisdiction enters a final judgment holding this Note or any of the
documents delivered in connection with this Note (including any other
Transaction Document) to be invalid or unenforceable and such judgment
remains unstayed and in effect for a period of 20 consecutive days; or the
Company or any of its Subsidiaries shall assert, in any pleading filed in
such a court, that this Note or any of the documents delivered in
connection with this Note (including any other Transaction Document) are
invalid or unenforceable; or
(j) any material provision of any Transaction Document shall for
any reason cease to be valid, binding and enforceable in accordance with
its terms (or the Company or any of its Subsidiaries shall challenge the
enforceability of any Transaction Document or shall assert in writing, or
engage in any action or inaction based on any such assertion, that any
provision of any of the Transaction Documents has ceased to be or otherwise
is not valid, binding and enforceable in accordance with its terms), or any
first priority security interest created under any Transaction Document
shall cease to be a valid and perfected security interest, or Lien in any
of the Collateral purported to be covered thereby; or
(k) the Company or any of its Subsidiaries shall default in the
payment of any amounts due pursuant to the terms of any document executed
and delivered by the Company or such Subsidiary in connection with this
Note (other than payments elsewhere in this Section specifically dealt
with).
5.2. Acceleration of Maturity. If any Event of Default (other than an
Event of Default specified in clause (g), (h), (i) or (j) of Section 5.1) shall
have occurred and be continuing, the Holder may, by notice to the Company,
declare the entire unpaid principal amount of this Note, plus all accrued and
unpaid interest thereon (together with the Holder's costs and expenses pursuant
to Section 8.8) , to be immediately due and payable, and upon such declaration
all of such amount shall be immediately due and payable (the "Declared
Acceleration Date"), in each and every case without presentment, demand, protest
or further notice, all of which are hereby waived, anything in this Note to the
contrary notwithstanding; provided that if an Event of Default under clause (g),
(h), (i) or (j) of Section 5.1 shall have occurred, the entire unpaid principal
amount of this Note (to the full extent permitted by applicable Law), plus all
accrued and unpaid interest thereon (together with the Holder's costs and
expenses pursuant to Section 8.8), shall immediately become due and payable (the
"Automatic Acceleration Date"), without any declaration and without presentment,
demand, protest or further notice, all
<PAGE> 15
of which are hereby waived, anything in this Note to the contrary
notwithstanding.
5.3. Other Remedies. If any Event of Default shall have occurred and
be continuing, from and including the date of such Event of Default to but not
including the date such Event of Default is cured or waived, each Holder may
enforce its rights by suit in equity, by action at law, or by any other
appropriate proceedings, whether for the specific performance (to the extent
permitted by Law) of any covenant or agreement contained in this Note or in aid
of the exercise of any power granted in this Note, and each Holder may enforce
the payment of any Note held by such Holder and any of its other legal or
equitable rights.
5.4. Conduct; No Waiver; Collection Expenses. No course of dealing on
the part of the Holder, nor any delay or failure on the part of the Holder to
exercise any of its rights, shall operate as a waiver of such right or otherwise
prejudice the Holder's rights, powers and remedies. If the Company fails to pay,
when due, any payment in respect of this Note, the Company will pay such Holder,
to the extent permitted by Law, on demand, all costs and expenses incurred by
such Holder in the collection of any amount due in respect of this Note
hereunder, including reasonable legal fees incurred by such Holder in enforcing
its rights hereunder.
5.5. Annulment of Acceleration. If a declaration is made in accordance
with Section 5.2, then and in every such case, the Holder may, by an instrument
delivered to the Company, annul such declaration and the consequences thereof.
5.6. Remedies Cumulative. No right or remedy conferred upon or
reserved to the Holder under this Note is intended to be exclusive of any other
right or remedy, and every right and remedy shall be cumulative and in addition
to every other right and remedy given hereunder or now and hereafter existing
under applicable Law. Every right and remedy given by this Note or by applicable
Law to the Holder may be exercised from time to time and as often as may be
deemed expedient by such Holder.
6. Rollover.
6.1. Rollover. Within five Business Days after the stockholders'
approval referred to in Section 4.4 has been obtained (the "Rollover Date"),
subject to Section 6.2, the Company and the Purchasers shall enter into (i) the
Convertible Note Purchase Agreement substantially in the form attached hereto as
Exhibit 6.1(i) (the "Convertible Note Purchase Agreement"), (ii) a warrant to
purchase 1,500,000 shares of Common Stock with an exercise price of $7
substantially in the form attached hereto as Exhibit 6.1(ii) (the "Rollover
Warrant"), (iii) the Registration Rights Agreement substantially in the form
attached hereto
<PAGE> 16
as Exhibit 6.1(iii) (the "Rollover Registration Rights Agreement") and (iv) the
Convertible Note Security Agreement substantially in the form attached hereto as
Exhibit 6.1(iv) (the "Convertible Note Security Agreement"); provided, however,
that if a Governmental Entity shall determine that any of the transactions
contemplated by the Rollover Transactions violate any applicable rules or
regulations of such Governmental Entity, the Holder shall, at the Holder's sole
discretion, either (i) abandon the Rollover Transactions or (ii) modify the
structure of the Rollover Transactions in a manner to comply with such rule or
regulation. Concurrently with the foregoing, subject to Section 6.2, the Company
shall issue 250,000 shares of Common Stock (the "Shares") to the Holder or one
or more of its Affiliates at $3.00 per share.
6.2. Conditions to Rollover. (a) The obligation of each party to
consummate the Rollover Transactions shall be subject to there having been no
enactment, issuance, promulgation, enforcement or entering into of any Law by a
Governmental Entity that effects or has the effect of making any of the Rollover
Transactions illegal or otherwise restraining or prohibiting such transactions.
(b) The obligation of the Purchasers to consummate the Rollover
Transactions shall be subject to the following conditions:
(i) no change (or any condition, event or development
involving a prospective change) shall have occurred or be threatened
that could, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect;
(ii) no Default shall have occurred and be continuing;
(iii) concurrently with the consummation of the Rollover
Transactions, the principal amount of this Note, plus all accrued and
unpaid interest on this Note, shall have been repaid in full;
(iv) the final forms of the Convertible Note Purchase
Agreement, the Rollover Warrant, the Rollover Registration Rights
Agreement and the Convertible Note Security Agreement shall be
satisfactory to the Purchasers in their sole discretion;
(v) the Company shall have delivered to the Purchasers any
document, instrument or certificate required to be delivered by the
Company pursuant to the Rollover Transaction Documents; and
(vi) each Purchaser shall have received such other
instruments and documents reasonably requested by such Purchaser.
(c) The obligation of the Company to consummate the
<PAGE> 17
Rollover Transactions shall be subject to the delivery by each Purchaser to the
Company of any document, instrument or certificate required to be delivered by
such Purchaser pursuant to the Rollover Transaction Documents.
6.3. Failure to Consummate the Rollover Transactions. Notwithstanding
anything herein to the contrary, if the Company shall fail to consummate the
Rollover Transactions described in Section 6.1 for any reason whatsoever, then
the Company's sole liability to the Holder will be the: (i) payment of the
Holder's costs and expenses pursuant to Section 8.8; (ii) payment of principal
and interest under this Note (and default interest, if applicable); and (iii)
execution of the Registration Rights Agreement by the Company pursuant to
Section 6.4. In addition, for the avoidance of doubt, the Company acknowledges
and agrees that the Warrants are fully vested as of the date hereof and that
they shall remain in full force and effect even if the Rollover Transactions are
not consummated for any reason.
6.4. Registration Rights Agreement. In the event the approval of the
Company's stockholders described in Section 4.4 shall not have been obtained at
the Company Meeting on or prior to December 31, 1999, or in the event that the
Rollover Transactions shall not have occurred on or prior to the Rollover Date,
the Company shall immediately execute the Registration Rights Agreement attached
hereto as Exhibit 6.3 (the "Registration Rights Agreement") and deliver such
executed Registration Rights Agreement by fax to the Holder.
7. Interpretation.
7.1. Definitions.
"$3 Warrants" shall have the meaning ascribed thereto in Section
1.4(vii).
"$5 Warrants" shall have the meaning ascribed thereto in Section
1.4(vii).
"Acceleration Date" shall mean the Declared Acceleration Date or the
Automatic Acceleration Date, as the case may be.
"Action" shall have the meaning ascribed thereto in Section
8.1(b)(i).
"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act. "Affiliate" shall also include partners of a Person.
Notwithstanding the foregoing, "Affiliate" shall not include the limited
partners of the Holder or any limited partners of a limited
<PAGE> 18
partner of the Holder.
"Automatic Acceleration Date" shall have the meaning ascribed thereto
in Section 5.2.
"Board of Directors" shall mean the Board of Directors of the
Company.
"Business Day" shall mean any day other than a Saturday, Sunday, or a
day on which banking institutions in the State of New York are authorized or
obligated by Law or executive order to close.
"Capital Stock" means, in the case of the Company, any and all shares
(however designated) of the capital stock of the Company now or hereafter
outstanding.
"Capitalized Lease" shall mean, with respect to any Person, any lease
or any other agreement for the use of property which, in accordance with
generally accepted accounting principles, should be capitalized on the lessee's
or user's balance sheet.
"Capitalized Lease Obligation" of any Person shall mean and include,
as of any date as of which the amount thereof is to be determined, the amount of
the liability capitalized or disclosed (or which should be disclosed) in a
balance sheet of such Person in respect of a Capitalized Lease of such Person.
"Change of Control" shall mean
(a) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30% or more of the combined
voting power of the then outstanding Voting Securities of the Company,
but excluding, for this purpose, any such acquisition by (i) the
Company or any Subsidiary), (ii) any Benefit Plan (or related trust)
of the Company or any Subsidiary or (iii) the Holder or any of its
Affiliates or in connection with the Rollover Transactions; or
(b) the Incumbent Board shall cease for any reason to
constitute at least 50% of the members of the Board.
"Collateral" means all real and personal property and interests in
real and personal property including, without limitation, Intellectual Property,
rights under leases and royalty rights and agreements, now owned or hereafter
acquired by the Company or its Subsidiaries in or upon which a Lien is granted
or made under the Collateral Documentation.
<PAGE> 19
"Collateral Documentation" means the Security Agreement, the Financing
Statements, and all other deeds of trust, assignments, endorsements, pledged
stock, collateral assignments and other instruments, documents, agreements or
conveyances at any time creating or evidencing Liens or assigning Liens to the
Holder, to secure the obligations of the Company or any of its Subsidiaries
under this Note and the Registration Rights Agreement.
"Common Stock" shall mean the Common Stock, no par value, of the
Company.
"Company" shall have the meaning ascribed thereto in the
Preamble.
"Company Meeting" shall have the meaning ascribed thereto in
Section 4.4.
"Contracts" shall mean all agreements, contracts, leases, purchase
orders, arrangements, commitments and licenses to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound.
"Convertible Note Purchase Agreement" shall have the meaning ascribed
thereto in Section 6.1.
"Convertible Note Security Agreement" shall have the meaning ascribed
thereto in Section 6.1.
"Debentures" shall have the meaning ascribed thereto in the
Subscription Agreement.
"Declared Acceleration Date" shall have the meaning ascribed thereto
in Section 5.2.
"Default" shall have the meaning ascribed thereto in Section 5.1.
"Due Date" shall mean the earlier of the Maturity Date and the
Acceleration Date, as applicable.
"Environmental Laws" means any and all Laws, permits, concessions,
grants, franchises, licenses, agreements or governmental restrictions relating
to pollution and the protection of the environment or the release of any
materials into the environment, including but not limited to those related to
hazardous substances or wastes, air emissions and discharges to waste or public
systems.
"Equity Interests" means any capital stock, partnership interest,
joint venture interest or other equity interest or warrants, options or other
rights to acquire any capital stock, partnership interest, joint venture
interest or other equity interest.
"Equity Securities" shall mean with respect to any Person, shares of
capital stock or other equity interest of such Person, and any rights, options
or warrants to purchase stock or other securities exchangeable for or
convertible into capital stock of or other equity interest in the Company.
<PAGE> 20
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Event of Default" shall have the meaning ascribed thereto in
Section 5.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
SEC thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include reference to the comparable section, if any, of any such successor
federal statute.
"Financing Statements" means Form UCC-1 financing statements to be
filed in all jurisdictions necessary or desirable in order to perfect the
Holder's security interest in the Collateral and shall include any Form UCC-1
financing statements assigned to the Holder and filings to be made in the U.S.
Patent and Trademark Office and the U.S. Copyright Office.
"GAAP" shall mean U.S. generally accepted accounting principles.
"Governmental Entity" shall mean any supernational, national, foreign,
federal, state or local judicial, legislative, executive, administrative or
regulatory or self-regulatory body or authority.
"Guaranty" or "Guarantee" by any Person shall mean all obligations
(other than endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) of any Person guaranteeing, or in effect
guaranteeing, any Indebtedness, dividend or other obligation of any other Person
(the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, all obligations incurred through an agreement,
contingent or otherwise, by such Person: (i) to purchase such Indebtedness or
obligation or any property or assets constituting security therefor, (ii) to
advance or supply funds (x) for the purchase or payment of such Indebtedness or
obligation, (y) to maintain working capital or other balance sheet condition or
otherwise to advance or make available funds for the purchase or payment of such
Indebtedness or obligation, (iii) to lease property or to purchase securities or
other property or services primarily for the purpose of assuring the owner of
such Indebtedness or obligation of the ability of the primary obligor to make
payment of such Indebtedness or obligation, or (iv) otherwise to assure the
owner of the Indebtedness or obligation of the primary obligor against loss in
respect thereof. For the purposes of any computations made under this Note, a
Guarantee in respect of any Indebtedness for borrowed money shall be deemed to
be Indebtedness equal to the outstanding amount of the Indebtedness for borrowed
money which has
<PAGE> 21
been guaranteed, and a Guarantee in respect of any other Liability or any
dividend shall be deemed to be Indebtedness equal to the maximum aggregate
amount of such Liability or dividend.
"Holder" shall have the meaning ascribed thereto in the Preamble.
"Incumbent Board" shall mean the individuals who, immediately after
the Closing, constitute the Board of Directors; provided, however, that any
individual becoming a director subsequent to the Closing whose election, or
nomination for election by the Company's stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be deemed to be a member of the Incumbent Board.
"Indebtedness" shall mean, with respect to any Person, (i) all
obligations of such Person for borrowed money, or with respect to deposits or
advances of any kind, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (iii) all obligations of such Person
under conditional sale or other title retention agreements relating to property
purchased by such Person, (iv) all obligations of such Person issued or assumed
as the deferred purchase price of property or services (other than accounts
payable to suppliers and similar accrued liabilities incurred in the ordinary
course of business and paid in a manner consistent with industry practice), (v)
all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any lien or security interest on property owned or acquired by such Person
whether or not the obligations secured thereby have been assumed, (vi) all
Capitalized Lease Obligations of such Person, (vii) all Guarantees of such
Person, (viii) all obligations (including but not limited to reimbursement
obligations) relating to the issuance of letters of credit for the account of
such Person, (ix) all obligations arising out of foreign exchange contracts, and
(x) all obligations arising out of interest rate and currency swap agreements,
cap, floor and collar agreements, interest rate insurance, currency spot and
forward contracts and other agreements or arrangements designed to provide
protection against fluctuations in interest or currency exchange rates.
"Indemnified Person" shall have the meaning ascribed thereto in
Section 8.1(b).
"Intellectual Property" means (a) Patents, (b) all trademarks, service
marks, trade dress, logos, trade names, domain names and corporate names,
together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith, (c) all copyrightable works,
all copyrights and all applications, registrations and renewals in connection
therewith, (d) all mask works and all applications, registrations
<PAGE> 22
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information and business and marketing plans and proposals),
(f) all computer software (including data and related documentation), (g) all
other proprietary rights, (h) all copies and tangible embodiments of the
foregoing (in whatever form or medium) and (i) all licenses, sublicenses,
permissions or agreements in connection with the foregoing.
"Law" shall include any foreign, federal, state, or local law,
statute, rule, regulation, Order or other restriction of any court or other
Governmental Entity.
"Liability" shall mean any debt, liability or obligation, whether
known or unknown, asserted or unasserted, accrued, absolute, contingent or
otherwise, whether due or to become due.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"Litigation" shall mean any claim, demand, notice, action, suit,
proceeding, arbitration, investigation, civil, criminal or administrative
action, audit, inquiry or hearing by or before any Governmental Entity or
private arbitration tribunal.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the properties, business, prospects, operations, earnings, assets, Liabilities
or the condition (financial or otherwise) of the Company and its Subsidiaries
taken as a whole, whether or not in the ordinary course of business, (b) the
ability of the Company or any of its Subsidiaries to perform its obligations
under any of the Transaction Documents to which it is a party, (c) the validity
or enforceability of any of the Transaction Documents, (d) the rights, remedies,
powers and privileges of the Holder under any of the Transaction Documents or
(e) the timely payment or performance of the Secured Obligations.
"Maturity Date" shall mean the earlier of December 31, 1999 and the
Rollover Date.
<PAGE> 23
"Order" shall mean any judgment, order, injunction, ruling, decree,
stipulation or award of any Governmental Entity or private arbitration tribunal.
"Patents" shall mean, collectively, (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice) and all
improvements thereon, (b) all patents, patent applications and patent
disclosures, (c) all reissues, divisions, continuations, revisions
reexaminations, renewals, extensions and continuations-in-part thereof) and (d)
all rights, now existing or hereafter coming into existence, (i) to all income,
royalties, damages, and other payments (including in respect of all past,
present and future infringements) now or hereafter due or payable under or with
respect to any of the foregoing, (ii) to sue for all past, present and future
infringements with respect to any of the foregoing and (iii) otherwise accruing
under or pertaining to any of the foregoing throughout the world, including all
inventions and improvements described or discussed in all such patents and
patent applications.
"Permitted Indebtedness" means, without duplication, any of the
following Indebtedness of the Company or any of its Subsidiaries, as the case
may be: (i) Indebtedness and obligations under this Note; (ii) any Indebtedness
and obligations outstanding on the date hereof, as set forth on Schedule 4.1; or
(iii) Indebtedness incurred in the ordinary course of business and consistent
with past practice not to exceed $10,000 individually or in the aggregate.
"Permitted Liens" means: (i) Liens existing on the date hereof and set
forth on Schedule 4.2, all of which are subordinate to the Lien of the
Collateral Documentation except as set forth in Schedule 4.2; (ii) Liens (other
than any Lien imposed under ERISA or any Environmental Laws) for taxes,
assessments or charges of any Governmental Entity for claims not yet due or
which are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted, and with respect to which adequate reserves
or other appropriate provisions are being maintained in accordance with the
provisions of GAAP and enforcement thereof is stayed; (iii) Liens of landlords,
carriers, warehousemen, mechanics, materialmen and other Liens (other than any
Lien imposed under ERISA) not voluntarily granted for amounts not yet due or
which are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted, and with respect to which adequate reserves
or other appropriate provisions are being maintained in accordance with the
provisions of GAAP, and enforcement thereof is stayed; (iv) Liens (other than
any Lien imposed under ERISA), incurred or deposited made in the ordinary course
of business, including without limitation, surety bonds and appeal bonds, in
connection with workers' compensation, unemployment insurance and other types of
social security benefits or to secure the
<PAGE> 24
performance of tenders, bids, leases, contracts (other than for the repayment of
indebtedness), statutory obligations and other similar obligations or arising as
a result of progress payments under government contracts; (v) easements
(including without limitation reciprocal easement agreements and utility
agreements), rights-of-way, covenants, consents, reservations, encroachments,
variations and other similar restrictions, charges or encumbrances (whether or
not recorded) and other Liens incurred in the ordinary course of business, which
do not secure indebtedness or the deferred purchase price of any asset and which
do not interfere materially with the ordinary conduct of the business of the
Company or any Subsidiary of the Company and which do not materially detract
from the value of the property to which they attach or materially impair the use
thereof to the Company or any Subsidiary of the Company; and (vi) building
restrictions, zoning laws and other statutes, laws, rules, regulations,
ordinances and restrictions, and any amendments thereto, now or at any time
hereafter adopted by any Governmental Entity having jurisdiction.
"Person" shall mean any individual, firm, corporation, limited
liability company, partnership, company or other entity, and shall include any
successor (by merger or otherwise) of such entity.
"Preferred Stock" shall have the meaning ascribed thereto in
Section 3.3.
"Proxy Statement" shall mean the proxy statement in a definitive form
relating to the Company Meeting.
"Put Option" shall have the meaning ascribed thereto in the
Subscription Agreement.
"Purchaser" shall mean the purchasers listed on Exhibit A to the
Convertible Note Purchase Agreement.
"Registration Rights Agreement" shall have the meaning ascribed
thereto in Section 6.3.
"Representatives" shall have the meaning ascribed thereto in
Section 4.10.
"Restricted Encumbrance" shall have the meaning ascribed thereto
in Section 4.2.
"Rollover Date" shall have the meaning ascribed thereto in
Section 6.1.
"Rollover Registration Rights Agreement" shall have the meaning
ascribed
thereto in Section 6.1.
"Rollover Transactions" shall mean the transactions contemplated by
Section 6 of this Note.
<PAGE> 25
"Rollover Transaction Documents" shall mean the Convertible Note
Purchase Agreement, the Rollover Warrant, the Rollover Registration Rights
Agreement, the Convertible Note Security Agreement and any documents and
instruments required to be executed or delivered pursuant to any of the
foregoing agreements.
"Rollover Warrant" shall have the meaning ascribed thereto in
Section 6.1.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SEC Reports" shall have the meaning ascribed thereto in Section
3.4.
"Secured Obligations" shall mean any and all obligations of the
Company or any of its Subsidiaries at any time and from time to time for the
performance of its agreements, covenants and undertakings under or in respect of
the Transaction Documents to which it is a party.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Act shall include reference to the
comparable section, if any, of such successor federal statute.
"Security Agreement" shall mean the agreement, dated as of the date
hereof, between Appaloosa Investment Limited Partnership I, L.P. and the
Company, providing for a security interest in the Collateral.
"Shares" shall have the meaning ascribed thereto in Section 6.1.
"Subscription Agreement" shall mean the Subscription Agreement, dated
as of April 21, 1999, by and among the Company and certain subscribers thereto.
"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of whose capital stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such Person,
by one or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries thereof, (ii) any other Person (other than a corporation),
including without limitation a joint venture, in which such Person, one or more
Subsidiaries thereof or such Person and one or more Subsidiaries thereof,
directly or indirectly, at the date of determination thereof, has at least
majority ownership interest entitled to vote in the election of directors,
managers or trustees thereof (or other Persons performing similar functions),
(iii) the management of which is
<PAGE> 26
otherwise controlled, directly or indirectly, by such Person or (iv) any other
Person required to be consolidated with such Person in accordance with generally
accepted accounting principles. For purposes of this definition (and for the
determination of whether or not a Subsidiary is a wholly-owned Subsidiary of a
Person), any directors' qualifying shares or investment by foreign nationals
mandated by applicable law shall be disregarded in determining the ownership of
a Subsidiary.
"Transaction Documents" shall mean this Note, the Warrants, the
Security Agreement, the Voting Agreement and the Registration Rights
Agreement.
"Transfer" shall have the meaning ascribed thereto in 4.9.
"Voting Securities" shall mean at any time shares of any class of
Capital Stock of the Company (or other corporation) which are then entitled to
vote generally in the election of directors of the Company (or such other
corporation).
"Warrants" shall have the meaning ascribed thereto in Section
2(f).
7.2. Accounting Principles. The character or amount of any asset,
liability, capital account or reserve and of any item of income or expense
required to be determined pursuant to this Note, and any consolidation or other
accounting computation required to be made pursuant to this Note, and the
construction of any definition in this Note containing a financial term, shall
be determined or made, as the case may be, in accordance with GAAP, to the
extent applicable, unless such principles are inconsistent with the express
requirements of this Note.
8. Miscellaneous.
8.1. Payment; Indemnity; Taxes. (a) If the date on which any payment
under this Note is required to be made occurs on a day other than a Business
Day, such payment shall be due and payable on the next succeeding Business Day.
(b) (i) The Company and its Subsidiaries shall jointly and severally
indemnify and hold harmless the Holder and its Representatives (each, an
"Indemnified Person") from and against any and all suits, actions, proceedings,
claims (collectively, "Actions"), damages, losses, Liabilities and out-of-pocket
expenses (including reasonable attorneys' fees and disbursements and other costs
of investigation or defense, including those incurred upon any appeal) which may
be instituted or asserted against or incurred by any such Indemnified Person as
the result of credit having been extended, suspended or terminated under this
Note and the other Transaction Documents and the administration of such credit,
and in connection with or arising out of the transactions contemplated
<PAGE> 27
hereunder and thereunder and any actions or failures to act in connection
therewith.
(ii) Upon receipt by any Indemnified Person of any Action against
such Indemnified Person with respect to which indemnity may be sought under this
Note or any other Transaction Document, such Indemnified Person shall promptly
notify the Company in writing, provided that failure so to notify the Company
shall not relieve the Company from any liability which the Company may have on
account of this indemnity or otherwise, except to the extent the Company shall
have been materially prejudiced by such failure. The Company shall, at its
option, assume the defense of any Action including the employment of counsel
reasonably satisfactory to the Indemnified Person. Any Indemnified Person shall
have the right to employ separate counsel in any such action and participate in
the defense thereof but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person, unless: (i) the Company has failed promptly
to assume the defense and employ counsel or (ii) the named parties to such
Action (including any impleaded parties) include such Indemnified Person and the
Company, and such Indemnified Person and the Company shall have been advised by
counsel that there may be one or more legal defenses available to it which are
different from or in addition to those available to the Company or there is or
may be a conflict between the Company and any Indemnified Person (in which case
the Company may not assume the defense). In the event that any Indemnified
Person shall become entitled to separate counsel under this Note or any other
Transaction Document, the Company shall not in such event be responsible
hereunder for the fees and expenses of more than one firm of separate counsel in
connection with any Action in the same jurisdiction, in addition to any local
counsel. In addition, the Company will not, without prior written consent of the
Indemnified Person, settle, compromise or consent to the entry of any judgment
in or otherwise seek to terminate any pending or threatened Action in which
indemnification may be sought hereunder (whether or not any Indemnified Person
is a party thereto) unless such settlement, compromise, consent or termination
includes an unconditional release of such Indemnified Person from all
liabilities and expenses arising out of such Action.
(c) The Company shall bear all sales, documentary, transfer, stamp or
other similar taxes and all filing fees and expenses incurred in connection with
the transactions contemplated by this Note and shall indemnify and hold harmless
each Indemnified Purchaser from and against any such taxes.
<PAGE> 28
8.2. Severability. If any term, provision, covenant or restriction of
this Note or any exhibit hereto is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Note and such exhibits shall remain in full
force and effect and shall in no way be affected, impaired or invalidated. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such which may be hereafter declared invalid, void or
unenforceable.
8.3. Specific Enforcement. The Holder, on the one hand, and the
Company, on the other, acknowledge and agree that irreparable damage would occur
in the event that any of the provisions of this Note were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the Holder shall be entitled to an injunction to prevent
breaches of the provisions of this Note and to enforce specifically the terms
and provisions hereof in any court of the United States or any state thereof
having jurisdiction, this being in addition to any other remedy to which they
may be entitled at Law or equity.
8.4. Entire Agreement. The Transaction Documents (including the
Schedules and Exhibits hereto and thereto) contain the entire understanding of
the parties with respect to the transactions contemplated hereby and thereby.
8.5. Notices and other Communications. All notices, consents,
requests, instructions, approvals, financial statements, proxy statements,
reports and other communications provided for herein shall be deemed given, if
in writing and delivered personally, by telecopy or sent by registered mail,
postage prepaid, if to:
The Company, to:
129 Reservoir Road
Vernon, CT 06066
Attention: Carl Sahi
Fax: (860) 870-6118
With a copy to:
Pepe & Hazard LLP
Goodwin Square
Hartford, CT 06103
Attention: Walter W. Simmers, Esq.
Fax: (860) 522-2796
The Holder, to:
c/o Appaloosa Management, L.P.
26 Main Street, 1st Floor
<PAGE> 29
Chatham, New Jersey 07928
Attention: Mr. James Bolin
Fax: (973) 701-7055
With a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Attention: Robert C. Schwenkel, Esq.
Fax: (212) 859-4000
or to such other address as any party may, from time to time, designate in a
written notice given in a like manner.
8.6. Successors and Assigns. All covenants and agreements contained
herein shall bind and inure to the benefit of the Holder and its respective
successors and assigns. The Company many not assign this Note without the
written consent of the Holder.
8.7. Amendments. No amendment or waiver of any provision of this Note,
nor consent to any departure by the Company therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Holder and then
such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
8.8. Expenses. The Company agrees to promptly (but in no event later
than 2 business days) pay the Holder all costs and expenses (including the fees
and expenses of its counsel) incurred by it in connection with the transactions
contemplated hereby (to the extent not already paid by the Company on the date
hereof) and the Rollover Transactions (regardless of whether the Rollover
Transactions are consummated) upon the earlier to occur of (i) the prepayment of
the entire outstanding principal amount of the Note in accordance Section 1.3
and (ii) the Due Date. In addition, the Company agrees to pay to the Holder all
reasonable costs and expenses incurred by such Holder relating to any future
amendment or supplement to any of the Transaction Documents (or any proposal by
the Company for such amendment or supplement) whether or not consummated or any
waiver or consent with respect thereto (or any proposal for such waiver or
consent) whether or not consummated, and all costs and expenses of such Holder
relating to the enforcement of any of the Transaction Documents
8.9 Survival. All covenants, agreements, representations and
warranties contained herein in connection with the transactions contemplated
hereby shall survive the date hereof and the delivery of the Transaction
Documents, regardless of any investigation made by or on behalf of any party;
provided, that, all covenants, agreements, representations and warranties
contained herein shall terminate when this Note and any amounts due hereunder
have been indefeasibly repaid in full; provided, however, that notwithstanding
anything to the contrary contained herein, Sections 6.3, 8.1(b), 8.2, 8.3, 8.4,
8.5 and 8.8 shall survive forever.
<PAGE> 30
8.10. Public Announcements. Neither the Company nor the Holder shall
make any public statements, including, without limitation, any press releases,
with respect to this Note or the other Transaction Documents and the
transactions contemplated hereby or thereby without the prior written consent of
the other party (which consent shall not be unreasonably withheld) except as may
be required by Law. If a public statement is required to be made by Law, the
parties shall consult with each other in advance as to the contents and timing
thereof.
8.11. Governing Law. thIS NOTE AND THE OTHER TRANSACTION DOCUMENTS
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the law of the State of NEW YORK EXCluding
choice-of-law principles of the law of such State that would require the
application of the laws of a jurisdiction other than such State.
8.12. Submission to Jurisdiction. If any Litigation shall be brought
by the Holder in order to enforce any right or remedy under this Note or any of
the other Transaction Documents, the Company hereby consents and will submit,
and will cause each of its Subsidiaries to submit, to the jurisdiction of any
state or federal court of competent jurisdiction sitting within the area
comprising the Southern District of New York on the date of this Note. The
Company hereby irrevocably waives any objection, including, but not limited to,
any objection to the laying of venue or based on the grounds of forum non
conveniens, which it may now or hereafter have to the bringing of any such
Litigation in such jurisdiction.
8.13. Service of Process. Nothing herein shall affect the right of the
Holder to serve process in any other manner permitted by Law or to commence
legal proceedings or otherwise proceed against the Company in any other
jurisdiction.
8.14. Waiver of Jury Trial. The Company hereby waives any right it may
have to a trial by jury in respect of any action, proceeding or litigation
directly or indirectly arising out of, under or in connection with, THIS NOTE OR
ANY OF THE OTHER TRANSACTION DOCUMENTS
<PAGE> 31
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed as of the date first above written.
BIO-PLEXUS, INC.
By: /s/ Carl Sahi
------------------------------
Name: Carl Sahi
Title: President & CEO
<PAGE> 1
EXHIBIT 10.30(1a)
FIRST AMENDMENT TO THE 7.5 % SECURED NOTE
FIRST AMENDMENT, dated as of December 30, 1999 (this "First
Amendment"), to the 7.5% Secured Note (the "Note") issued by Bio-Plexus,
Inc. (the "Company") to Appaloosa Investment Limited Partnership I (the
"Holder") on October 21, 1999.
W I T N E S S E T H:
WHEREAS, the Company has issued the Note to the Holder;
WHEREAS, the Company wishes to induce the Holder to make
additional loans to the Company pursuant to the 15% Secured Note (as
defined herein), and in furtherance thereof the Company and the Holder have
agreed to amend the Note, subject to the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, the Company and the Holder hereby agree as
follows:
1. Defined Terms. Unless otherwise defined herein, capitalized
terms which are defined in the Note are used herein as therein defined.
2. Amendment to Note.
(a) Subsection 1.4 of the Note is amended by deleting the first
sentence thereof in its entirety and substituting in lieu therefor the
following:
The unpaid principal balance of this Note outstanding at any
time shall accrue interest at a rate per annum equal to (i)
from October 21, 1999 to the date preceding the date hereof,
7.5% and (ii) from the date hereof, 12%, in each case
including during the pendency of any bankruptcy or similar
proceeding, whether or not a claim for post-petition
interest is allowed as a claim in any such bankruptcy or
proceeding.
(b) Subsection 1.5 of the Note is amended by deleting the
percentage at the end of the first sentence thereof and substituting in
lieu therefor the following:
15% (including during the pendency of any bankruptcy or
similar proceeding, whether or not a claim for post-petition
interest is allowed as a claim in any such bankruptcy or
proceeding)
(c) Subsection 3.2 of the Note is amended by adding the letter
"(a)" before the first sentence thereof and adding the following new
subsection (b):
(b) The Board of Directors has taken all necessary action
<PAGE> 2
so that no "fair price," "moratorium," "control share
acquisition," "interested holder" or other similar anti-takeover
statute or regulation (including, without limitation, Sections
33-840 through 33-845 of the Connecticut Business Corporation
Act) or any applicable anti-takeover provision in the Company's
Certificate of Incorporation or By-Laws is applicable to the
transactions contemplated by the Transaction Documents. To the
knowledge of the Company, no other state takeover statute is
applicable to the transactions contemplated by the Transaction
Documents.
(d) Subsection 4.4 of the Note is amended by (i) deleting the
date at the end of the first clause of the first sentence thereof and
substituting in lieu therefor "February 28, 2000" and (ii) deleting the
period at the end of the first sentence thereof and substituting in lieu
therefor the following:
; provided, however, that the Company shall adjourn the
Company Meeting from time to time until all of the
conditions set forth in Section 6.2 are satisfied or waived
(other than those conditions that by their nature are to be
satisfied on the Rollover Date), such that the Company
Meeting shall take place on the same day as the Rollover
Date in accordance with Section 6.1.
(e) A new subsection 4.13 is added to the end of subsection 4.12:
4.13 Security. The Secured Obligations have been, and will
continue to be, secured by the Collateral, subject to the
terms and conditions of the Collateral Documentation.
(f) Subsection 5.1(d) of the Note is amended by deleting all
references therein to "December 31, 1999" and substituting in lieu therefor
"February 28, 2000".
(g) Subsection 6.1 of the Note is amended by deleting the first
sentence thereof in its entirety and substituting in lieu therefor the
following:
On the same day that the stockholders' approval referred to
in Section 4.4 has been obtained (the "Rollover Date"),
subject to Section 6.2, the Company and the Purchasers shall
enter into (i) the Convertible Note Purchase Agreement
attached as an exhibit to the Proxy Statement (the
"Convertible Note Purchase Agreement"), (ii) warrants to
purchase 1,500,000 shares of Common Stock at an exercise
price of $7 attached as an exhibit to the Proxy Statement
(the "Rollover Warrant"), (iii) the Registration Rights
Agreement attached as an exhibit to the Proxy Statement (the
"Rollover Registration Rights Agreement") and (iv) the
Convertible Note Security Agreement attached as an exhibit
<PAGE> 3
to the Proxy Statement (the "Convertible Note Security
Agreement"); provided, however, that if a Governmental Entity
shall determine that any of the transactions contemplated by the
Rollover Transactions violate any applicable rules or regulations
of such Governmental Entity, the Holder shall, at the Holder's
sole discretion, either (i) abandon the Rollover Transactions or
(ii) modify the structure of the Rollover Transactions in a
manner to comply with such rule or regulation.
(h) Subsection 6.2(b) of the Note is amended by:
(I) adding the following phrase after the word "continuing"
in clause (ii) thereof:
"under this Note and no Default (as defined in the 15%
Secured Note) shall have occurred and be continuing
under the 15% Secured Note";
(II) clause (iii) thereof shall be amended by adding the
following after the word "full":
"and the principal amount of the 15% Secured Note, plus
all accrued and unpaid interest on the 15% Secured
Note, shall have been repaid in full"; and
(III)deleting clause (iv) thereof in its entirety and
renumbering the original clause (v) to clause (iv) and
clause (vi) to clause (v).
(i) Subsection 6.4 of the Note is amended by deleting the
reference to "December 31, 1999" and substituting in lieu therefor
"February 28, 2000"
(j) Subsection 7.1 of the Note is amended by (i) adding the
following definitions in proper alphabetical order:
"15% Secured Note" means the 15% Secured Note in the initial
aggregate principal amount of $1,650,000 to be issued by the
Company to the Holder after the date hereof in accordance
with the terms of the side letter, dated the date hereof,
between the Company and the Holder, as such 15% Secured Note
may be amended from time to time.
"Note" shall mean this Note as amended hereby and from time
to time in accordance with its terms.
and (ii) the definitions of "$3 Warrants," "$5 Warrants," "Maturity Date,"
"Registration Rights Agreement," "Rollover Transactions," "Transaction
Documents" and "Warrants" are deleted in their entirety and substituting in
lieu therefor the following definitions:
"$3 Warrants" shall have the meaning ascribed thereto in
<PAGE> 4
Section 2(e).
"$5 Warrants" shall have the meaning ascribed thereto in
Section 2(e).
"Maturity Date" shall mean the earlier of February 28, 2000
and the Rollover Date.
"Registration Rights Agreement" shall have the meaning
ascribed thereto in Section 6.4.
"Rollover Transactions" shall mean the transactions
contemplated by Section 6.1 of this Note.
"Transaction Documents" shall mean this Note, the 15%
Secured Note, the side letter, dated the date hereof,
between the Company and the Holder, the Security Agreement,
the Registration Rights Agreement, the warrants to be issued
to Affiliates of the Holder pursuant to section (c) of the
aforesaid side letter and the Warrants.
"Warrants" shall have the meaning ascribed thereto in
Section 2(e).
(k) Subsection 8.4 of the Note is amended by deleting it in its
entirety and substituting in lieu therefor the following:
8.4. Entire Agreement. The Transaction Documents (including
the Schedules and Exhibits thereto) contain the entire
understanding of the parties with respect to the
transactions contemplated hereby and thereby.
3. Representations and Warranties. The Company hereby confirms,
reaffirms and restates the representations and warranties set forth in
Section 3 of the Note. The Company represents and warrants that as of the
date hereof and, after giving effect to this First Amendment and the
transactions contemplated hereby, no Default or Event of Default has
occurred and is continuing.
4. Effectiveness. The First Amendment shall become effective as of the
date upon which the Holder receives the counterpart of this First Amendment
duly executed by the Company and a duly executed copy of the side letter,
dated the date hereof, between the Company and the Holder.
5. Continuing Effect of the Transaction Documents. This First
Amendment shall not constitute an amendment of any other provisions of the
Note or any other Transaction Documents not expressly referred to herein
and shall not be construed as a waiver or consent to any further or future
action on the part of the Company that would require a waiver or consent of
the Holder. Except as expressly amended hereby, the provisions of the
Note and the other Transaction Documents are and shall remain in full force
<PAGE> 5
and effect.
6. Counterparts. This First Amendment may be executed by the parties
hereto in any number of separate counterparts, each of which shall be
deemed to be an original, and all of which taken together shall be deemed
to constitute one and the same instrument.
7. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed and delivered by their respective proper and
duly authorized officers as of the day and year first above written.
BIO-PLEXUS, INC.
By: /s/ Carl Sahi
--------------------------------
Name: Carl Sahi
Title:
APPALOOSA INVESTMENT LIMITED
PARTNERSHIP I
By: Appaloosa Management L.P., its
General Partner
By: Appaloosa Partners Inc., its General
Partner
By: /s/ James E. Bolin
--------------------------------
Name: James E. Bolin
Title: Vice President
<PAGE> 1
Exhibit 10.30(2a)
SECOND AMENDMENT TO THE 7.5 % SECURED NOTE
SECOND AMENDMENT, dated as of April 3, 2000 (this "Second Amendment"),
to the 7.5% Secured Note issued by Bio-Plexus, Inc. (the "Company") to Appaloosa
Investment Limited Partnership I (the "Holder") on October 21, 1999 (as such
Note may be amended and restated from time to time, the "Note")
W I T N E S S E T H:
WHEREAS, the Company has issued the Note to the Holder;
WHEREAS, the Company and the Holder have entered into a First
Amendment to the Note on December 30, 1999, which provided, among other things,
that the interest on the Note would accrue, beginning on December 30, 1999, at a
rate of 12%;
WHEREAS, the Company has requested that the Holder further amend
certain provisions of the Note;
WHEREAS, the Holder is willing to agree to the requested
amendments, but upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Company and the Holder hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms
which are defined in the Note are used herein as therein defined.
2. Amendment to Note.
(a) Subsection 4.4 of the Note is further amended by deleting the date
at the end of the first clause of the first sentence thereof and substituting in
lieu therefor "April 30, 2000".
(b) Subsection 5.1(d) of the Note is further amended by deleting all
references therein to "February 28, 2000" and substituting in lieu therefor
"April 30, 2000".
(c) Subsection 6.4 of the Note is further amended by deleting the
reference to "February 28, 2000" and substituting in lieu therefor "April 30,
2000".
(d) Subsection 7.1 of the Note is further amended by deleting the
definitions of "15% Secured Note," "Maturity Date," "Proxy Statement" and
"Transaction Documents" in their entirety and substituting in lieu therefor
the following:
"Maturity Date" shall mean the earlier of April 30, 2000 and the
Rollover Date.
"Proxy Statement" shall mean the proxy statement in a definitive
form relating to the Company Meeting and any amendments,
supplements or other solicitation materials relating thereto.
<PAGE> 2
"Second Bridge Loan" means the 15% Secured Note in the initial
aggregate principal amount of $1,650,000 issued by the Company to
the Holder on January 5, 2000, as such 15% Secured Note may be
amended from time to tome.
"Third Bridge Loan" means the 15% Secured Note, in the initial
aggregate principal amount of $2,200,000, issued by the Company
to the Holder on the date hereof, as such 15% Secured Note may be
amended from time to time.
"Transaction Documents" shall mean this Note, the Second Bridge
Loan, the Third Bridge Loan, the side letter, dated December 30,
1999, between the Company and the Holder (as such side letter may
be amended and restated from time to time), the Security
Agreement, the Registration Rights Agreement, the warrants to be
issued to Affiliates of the Holder pursuant to section (c) of the
aforesaid side letter, the Warrants and the side letter, dated
April 3, 2000, between the Company and the Holder (as such side
letter may be amended and restated from time to time).
3. Representations and Warranties. The Company hereby confirms,
reaffirms and restates the representations and warranties set forth in Section 3
of the Note. The Company represents and warrants that as of the date hereof and,
after giving effect to this Second Amendment and the transactions contemplated
hereby, no Default or Event of Default has occurred and is continuing.
4. Effectiveness. The Second Amendment shall become effective as of
the date upon which the Holder receives the counterpart of this Second Amendment
duly executed by the Company and a duly executed copy of the side letter, dated
the date hereof, between the Company and the Holder.
5. Continuing Effect of the Transaction Documents. This Second
Amendment shall not constitute an amendment of any other provisions of the Note
or any other Transaction Documents not expressly referred to herein and shall
not be construed as a waiver or consent to any further or future action on the
part of the Company that would require a waiver or consent of the Holder. Except
as expressly amended hereby, the provisions of the Note and the other
Transaction Documents are and shall remain in full force and effect.
6. Counterparts. This Second Amendment may be executed by the parties
hereto in any number of separate counterparts, each of which shall be deemed to
be an original, and all of which taken together shall be deemed to constitute
one and the same instrument.
7. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed and delivered by their respective proper and duly
authorized officers as of the day and year first above written.
BIO-PLEXUS, INC.
By: /s/ Carl R. Sahi
--------------------------------
Name: Carl R. Sahi
Title: President and Chief
Executive Officer
APPALOOSA INVESTMENT LIMITED
PARTNERSHIP I
By: Appaloosa Management L.P., its
General Partner
By: Appaloosa Partners Inc., its
General Partner
By: /s/ James E. Bolin
--------------------------------
Name: James E. Bolin
Title: Vice President
<PAGE> 1
Exhibit 10.31
WARRANT
To Purchase Shares of Common Stock of
BIO-PLEXUS, INC.
At a Purchase Price of
$3.00 per Share
(Subject to Adjustment as Provided herein)
No. of Shares of Common Stock: __________
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. DEFINITIONS 1
- ----------------------------------------------------------------------------
2. EXERCISE OF WARRANT 4
- ----------------------------------------------------------------------------
2.1. MANNER OF EXERCISE. 4
2.2. PAYMENT OF TAXES. 5
2.3. FRACTIONAL SHARES. 5
3. TRANSFER, DIVISION AND COMBINATION 5
- ----------------------------------------------------------------------------
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
3.1. TRANSFER. 5
3.2. DIVISION AND COMBINATION. 5
3.3. EXPENSES. 6
3.4. MAINTENANCE OF BOOKS. 6
4. ADJUSTMENTS 6
- ----------------------------------------------------------------------------
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. 6
4.2. CERTAIN OTHER DISTRIBUTIONS. 6
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. 7
4.4. ISSUANCE OF WARRANTS OR OTHER RIGHTS. 8
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. 9
4.6. SUPERSEDING ADJUSTMENT. 9
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION. 10
4.8. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. 12
4.9. OTHER ACTION AFFECTING COMMON STOCK. 12
4.10. CERTAIN LIMITATIONS. 13
5. NOTICES TO WARRANT HOLDERS 13
- ----------------------------------------------------------------------------
5.1. NOTICE OF ADJUSTMENTS. 13
5.2. NOTICE OF CORPORATE ACTION. 13
6. RIGHTS OF HOLDERS 14
- ----------------------------------------------------------------------------
6.1 NO IMPAIRMENT. 15
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH
OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY 15
- ----------------------------------------------------------------------------
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS 15
- ----------------------------------------------------------------------------
9. RESTRICTIONS ON TRANSFERABILITY 15
- ----------------------------------------------------------------------------
9.1. RESTRICTIVE LEGEND. 16
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION. 16
10. REDEMPTION 17
- ----------------------------------------------------------------------------
11. SUPPLYING INFORMATION 17
- ----------------------------------------------------------------------------
12. LOSS OR MUTILATION 17
- ----------------------------------------------------------------------------
13. LIMITATION OF LIABILITY 17
- ----------------------------------------------------------------------------
14. MISCELLANEOUS 18
- ----------------------------------------------------------------------------
14.1. NONWAIVER AND EXPENSES. 18
14.2. NOTICE GENERALLY. 18
14.3. REMEDIES. 18
14.4. SUCCESSORS AND ASSIGNS. 19
14.5. AMENDMENT. 19
14.6. SEVERABILITY. 19
14.7. HEADINGS. 19
14.8. ROLLOVER TRANSACTIONS. 19
14.9. GOVERNING LAW. 19
</TABLE>
<PAGE> 5
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR
SUCH LAWS
No. of Shares of Common Stock: ________
WARRANT
To Purchase Shares of Common Stock of
BIO-PLEXUS, INC.
THIS IS TO CERTIFY THAT _________________, or its registered assigns
(the "Holder"), is entitled, at any time prior to the Expiration Date (as
hereinafter defined), to purchase from BIO-PLEXUS, INC., a Connecticut
corporation (the "Company"), ________ (subject to adjustment as provided herein)
shares of Common Stock (as hereinafter defined), in whole or in part, at a
purchase price of $3.00 per share (subject to adjustment as provided herein),
all on the terms and conditions and pursuant to the provisions hereinafter set
forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than Warrant Stock and
shares of Common Stock issuable upon the conversion of the Convertible Notes
issued under the Convertible Note Purchase Agreement.
"Average Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the daily volume weighted average sale price
per share of Common Stock for such date. The closing price for each day shall be
the last quoted sale price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc., Automated Quotation System or such
other system then in use, or, if on any such date the Common Stock or such other
securities are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Common Stock selected by the Board of Directors of the Company. If the
Common Stock is listed or admitted to trading on a national securities exchange,
the closing price shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case
<PAGE> 6
as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Common Stock is not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Common Stock is listed or admitted to trading.
"Business Day" shall mean any day that is not a Saturday or Sunday or
a day on which banks are required or permitted to be closed in the State of New
York.
"Capital Stock" means, in the case of the Company, any and all shares
(however designated) of the capital stock of the Company now or hereafter
outstanding.
"Closing Date" shall mean October 21, 1999.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, no par value, of the Company as constituted on the
Closing Date, and any capital stock into which such Common Stock may thereafter
be changed, and shall also include (i) capital stock of the Company of any other
class (regardless of how denominated) issued to the holders of shares of Common
Stock upon any reclassification thereof and (ii) shares of common stock of any
successor or acquiring corporation (as defined in Section 4.8) received by or
distributed to the holders of Common Stock of the Company in the circumstances
contemplated by Section 4.8.
"Convertible Notes" shall mean the notes to be issued pursuant to the
Convertible Note Purchase Agreement (as defined in the Note).
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable or
exercisable, with or without payment of additional consideration in cash or
property, for Additional Shares of Common Stock, either immediately or upon the
occurrence of a specified date or a specified event.
"Current Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the average of the Average Market Price for
the twenty Business Days ending five days prior to such date.
"Current Warrant Price" shall mean, in respect of a share of Common
Stock at any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date. The Current Warrant
Price as of the date of the issuance of this Warrant is $3; provided, however,
that upon the earlier of (i) the closing of the Rollover Transactions (as
defined in the Note) and (ii) the anniversary of the issuance of this Warrant,
the Current Warrant Price shall automatically
<PAGE> 7
be increased to $5 (as appropriately adjusted to give effect to any
anti-dilution adjustments made to the Current Warrant Price prior to the
occurrence of any increase in the Current Warrant Price as provided herein).
"Expiration Date" shall mean a date which is five years from the
issuance of this Warrant.
"Holder" shall mean the Person in whose name this Warrant is
registered on the books of the Company maintained for such purpose. "Holders"
shall mean, collectively, each Holder of a Warrant, in the event of any division
of this Warrant.
"Majority Holders" shall mean the holders of Warrants exercisable for
in excess of 50% of the aggregate number of shares of Warrant Stock then
purchasable upon exercise of all Warrants.
"Note" shall mean the 7.5% Secured Note issued by the Company to the
Holder on the Closing Date.
"Other Property" shall have the meaning set forth in Section 4.8.
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company or any subsidiary thereof, and shall include all shares
issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock. For the purposes of Sections
4.3, 4.4, 4.5, 4.6 and 4.7, Common Stock Outstanding shall include all shares of
Common Stock issuable in respect of options or warrants to purchase, or
securities convertible into, shares of Common Stock, the exercise or conversion
price of which is less than the Current Market Price as of any date on which the
number of shares of Common Stock Outstanding is to be determined.
"Permitted Issuances" shall mean issuances of shares of Common Stock
and upon exercise of the warrants and options and other convertible securities,
in each case listed on Schedule 1.
"Person" shall mean any individual, firm, corporation, partnership or
other entity, and shall include any successor by merger or otherwise of such
entity.
"Restricted Common Stock" shall mean shares of Common Stock which are,
or which upon their issuance on the exercise of this Warrant would be, evidenced
by a certificate bearing the restrictive legend set forth in Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations
<PAGE> 8
of the Commission thereunder, all as the same shall be in effect at the time.
"Security" or "Securities" shall mean any equity or debt security of
the Company (including, without limitation, subscriptions, options, warrants,
rights, stock-based or stock-related awards or convertible or exchangeable
securities to which the Company is a party or by which the Company may be bound
of any character relating to, or obligating the Company to issue, grant, award,
transfer or sell any issued or unissued shares of the Company's Capital Stock or
other securities of the Company).
"Trading Day" means a Business Day or, if the Common Stock is listed
or admitted to trading in any national securities exchange, a day on which such
exchange is open for the transaction of business.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof, which would constitute a sale thereof
within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section
9.2.
"Warrants" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, any thereof. All
Warrants shall at all times be identical as to terms and conditions and date,
except as to the number of shares of Common Stock for which they may be
exercised.
"Warrant Stock" shall mean the shares of Common Stock purchased by the
holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1. MANNER OF EXERCISE. At any time or from time to time from and after
the Closing Date and until 5:00 P.M., New York time, on the Expiration Date,
Holder may exercise this Warrant, on any Business Day, for all or any part of
the number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at its principal office at 129 Reservoir Road, Vernon, CT
06066 (i) a written notice of Holder's election to exercise this Warrant, which
notice shall specify the number of shares of Common Stock to be purchased, (ii)
payment of the aggregate Current Warrant Price for such shares and (iii) this
Warrant. Such notice shall be substantially in the form appearing at the end of
this Warrant as Exhibit A, duly executed by Holder. Thirty days after receipt of
the items specified in the second preceding sentence, the Company shall execute
or cause to be executed and
<PAGE> 9
deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate or certificates so delivered shall
be in such denomination or denominations as Holder shall request in the notice
and shall be registered in the name of Holder or, subject to Section 9, such
other name as shall be designated in the notice. This Warrant shall be deemed to
have been exercised and such certificate or certificates shall be deemed to have
been issued, and Holder or any other Person so designated shall be deemed to
have become a holder of record of such shares for all purposes, as of the date
which is thirty days after the date of the notice, together with the Current
Warrant Price and this Warrant, are received by the Company as described above.
If this Warrant shall have been exercised in part, the Company shall, at the
time of delivery of the certificate or certificates representing Warrant Stock,
deliver to Holder a new Warrant evidencing the right of Holder to purchase the
unpurchased shares of Common Stock called for by this Warrant, which new Warrant
shall in all other respects be identical with this Warrant, or, at the request
of Holder, appropriate notation may be made on this Warrant and the same
returned to Holder.
Payment of the Current Warrant Price shall be made at the option of Holder
by (i) certified or official bank check or (ii) wire transfer of immediately
available funds.
2.2. PAYMENT OF TAXES. All shares of Common Stock issuable upon the
exercise of this Warrant shall be validly issued, fully paid and nonassessable.
The Company shall pay all expenses in connection with, and all taxes (other than
income taxes or capital gain tax of the Holder) and other governmental charges
that may be imposed with respect to, the issue or delivery thereof.
2.3. FRACTIONAL SHARES. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of this Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such
fraction in an amount equal to the same fraction of the Current Market Price per
share of Common Stock on the date of exercise.
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject to compliance with Section 9, transfer of this
Warrant and all rights hereunder, in whole or in part, shall be registered on
the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Company referred
<PAGE> 10
to in Section 2.1, together with a written assignment of this Warrant
substantially in the form of Exhibit B hereto duly executed by Holder and funds
sufficient to pay any transfer taxes payable upon the making of such transfer.
Upon such surrender and, if required, such payment, the Company shall, subject
to Section 9, execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the portion
of this Warrant not so assigned, and this Warrant shall promptly be canceled. A
Warrant, if properly assigned in compliance with Section 9, may be exercised by
a new Holder for the purchase of shares of Common Stock without having a new
Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9, this Warrant may be
divided into multiple Warrants or combined with other Warrants upon presentation
hereof at the aforesaid office or agency of the Company, together with a written
notice specifying the names and denominations in which new Warrants are to be
issued, signed by Holder. Subject to compliance with Section 3.1 and with
Section 9, as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 3.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at its
aforesaid office, books for the registration and the registration of
transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable and/or the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give each Holder notice of any event
described below which requires an adjustment pursuant to this Section 4 at the
time of such event.
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time
the Company shall:
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution
of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
<PAGE> 11
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
per share shall be adjusted to equal (A) the Current Warrant Price multiplied by
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
4.2. CERTAIN OTHER DISTRIBUTIONS. If at any time the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of:
(a) cash,
(b) any evidences of its indebtedness, any shares of stock or any
other securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock), or
(c) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock),
then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
adjustment and a fraction (A) the numerator of which shall be the Current Market
Price per share of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Current Market Price per share of Common
Stock minus the amount allocable to one share of Common Stock of any such cash
so distributable and of the fair value (as determined in good faith by the Board
of Directors of the Company) of any and all such evidences of indebtedness,
shares of stock, other securities or property or warrants or other subscription
or purchase rights so distributable, and (ii) the Current Warrant Price shall be
adjusted to equal (A) the Current Warrant Price multiplied by the number of
shares of Common Stock for which this Warrant is exercisable immediately prior
to the adjustment divided by (B) the number of shares for which this Warrant is
exercisable immediately after such adjustment. A reclassification of the Common
Stock (other than a change in par value, or from par value to no par
<PAGE> 12
value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by the Company to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 4.2 and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4.1.
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. (a) If at any time the
Company shall (except as hereinafter provided) issue or sell any Additional
Shares of Common Stock, other than Permitted Issuances, in exchange for
consideration in an amount per Additional Share of Common Stock less than (a)
the greater of the Current Market Price per share of Common Stock for the period
of 20 Trading Days preceding the earlier of the issuance or public announcement
of the issuance of such Additional Shares of Common Stock and (b) the Current
Warrant Price at the time the Additional Shares of Common Stock are issued, then
(i) the Current Warrant Price as to the number of shares for which this Warrant
is exercisable prior to such adjustment shall be reduced to a price determined
by multiplying the Current Warrant Price by (A) a fraction, the numerator of
which shall be the sum of (x) the number of shares of Common Stock Outstanding
immediately prior to such issue or sale multiplied by the greater of (1) the
then applicable Current Warrant Price and (2) the Current Market Price per share
of Common Stock for the period of 20 Trading Days preceding the earlier of the
issuance or public announcement of the issuance of such Additional Shares of
Common Stock (the greater of (1) and (2) above hereinafter referred to as the
"Adjustment Price") and (y) the aggregate consideration receivable by the
Company for the total number of shares of Common Stock so issued (or into or for
which the rights, warrants or other Convertible Securities may convert or be
exercisable), and the denominator of which shall be the sum of (a) the total
number of shares of Common Stock Outstanding on such date and (b) the number of
Additional Shares issued (or into or for which the rights, warrants or
convertible securities may be converted or exercised), multiplied by the
Adjustment Price; and (ii) the number of shares of Common Stock for which this
Warrant is exercisable shall be adjusted to equal the product obtained by
multiplying the Current Warrant Price in effect immediately prior to such issue
or sale by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such issue or sale and dividing the product
thereof by the Current Warrant Price resulting from the adjustment made pursuant
to clause (i) above. For purposes of this Section 4.3 and for the purposes of
making adjustments of the number of shares of Common Stock for which this
Warrant is exercisable and the Current Warrant Price as provided in this Section
4, the aggregate consideration receivable by the Company in connection with the
issuance of shares of Common Stock
<PAGE> 13
or of rights, warrants or other securities convertible into shares of Common
Stock shall be deemed to be equal to the sum of the aggregate offering price
(before deduction of underwriting discounts or commissions and expenses payable
to third parties) of all such Common Stock, rights, warrants and convertible
securities plus the aggregate amount (as determined on the date of issuance), if
any, payable upon exercise or conversion of any such rights, warrants and
convertible securities into shares of Common Stock. If, subsequent to the date
of issuance of such rights, warrants or Convertible Securities, the exercise or
conversion price thereof is reduced, such aggregate amount shall be recalculated
and the Current Warrant Price and number of shares of Common Stock for which the
Warrant is exercisable adjusted retroactively to give effect to such reduction.
If Common Stock is sold as a unit with other securities, the aggregate
consideration received for such Common Stock shall be deemed to be net of the
Fair Market Value of such other securities.
4.4. ISSUANCE OF WARRANTS OR OTHER RIGHTS. If at any time the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a distribution of, or shall in any manner (whether directly or
by assumption in a merger in which the Company is the surviving corporation)
issue or sell, any warrants or other rights to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Securities (other than
Permitted Issuances), whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such warrants or other rights or upon
conversion or exchange of such Convertible Securities shall be less than the
greater of (1) the Current Market Price per share of Common Stock for the period
of 20 Trading Days preceding the earlier of the issuance or public announcement
of the issuance of such Additional Shares of Common Stock, warrants or other
rights and (2) the Current Warrant Price in effect immediately prior to the time
of such issue or sale, then the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be adjusted as provided in
Section 4.3 on the basis that the maximum number of Additional Shares of Common
Stock issuable pursuant to all such warrants or other rights or necessary to
effect the conversion or exchange of all such Convertible Securities shall be
deemed to have been issued and outstanding and the Company shall have received
all of the consideration payable therefor, if any, as of the date of the actual
issuance of the number such warrants or other rights. No further adjustments of
the Current Warrant Price shall be made upon the actual issue of such Common
Stock or of such Convertible Securities upon exercise of such warrants or other
rights or upon the actual issue of such Common Stock upon such conversion or
exchange of such Convertible Securities. Notwithstanding the foregoing, no
adjustment shall be required under this Section 4.4 solely by reason of the
issuance or distribution of stock purchase rights pursuant to a shareholder
<PAGE> 14
rights plan or any other rights plan of the Company, provided that the
adjustments required by this Section 4.4 shall be made if any "flip-in" or
"flip-over" event shall occur under such stockholder rights plan.
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a distribution of, or shall in any manner (whether directly or
by assumption in a merger in which the Company is the surviving corporation)
issue or sell, any Convertible Securities (other than Permitted Issuances),
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange shall be less than the greater of (a) the Current
Market Price per share of Common Stock for the period of 20 Trading Days
preceding the earlier of the issuance or Public announcement of the issuance of
such Convertible Securities and (b) the Current Warrant Price in effect
immediately prior to the time of such issue or sale, then the number of shares
for which this Warrant is exercisable and the Current Warrant Price shall be
adjusted as provided in Section 4.3 on the basis that the maximum number of
Additional shares of Common Stock necessary to effect the conversion or exchange
of all such Convertible Securities shall be deemed to have been issued and
outstanding and the Company shall have received all of the consideration payable
therefor, if any, as of the date of actual issuance of such Convertible
Securities. No adjustment of the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be made under this Section 4.5
upon the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any such adjustment shall previously have been made upon the issuance of such
warrants or other rights pursuant to Section 4.4. No further adjustments of the
number of shares for which this Warrant is exercisable and the Current Warrant
Price shall be made upon the actual issue of such Common Stock upon conversion
or exchange of such Convertible Securities and, if any issue or sale of such
Convertible Securities is made upon exercise of any warrant or other right to
subscribe for or to purchase any such Convertible Securities for which
adjustments of the number of shares for which this Warrant is exercisable and
the Current Warrant Price have been or are to be made pursuant to other
provisions of this Section 4, no further adjustments of the number of shares for
which this Warrant is exercisable and the Current Warrant Price shall be made by
reason of such issue or sale.
4.6. SUPERSEDING ADJUSTMENT. If, at any time after any adjustment of the
number of shares for which this Warrant is exercisable and the
<PAGE> 15
Current Warrant Price shall have been made pursuant to Section 4.4 or Section
4.5 as the result of any issuance of warrants, rights or Convertible Securities,
such warrants or rights, or the right of conversion or exchange in such other
Convertible Securities, shall expire, and all of such warrants or rights, or the
right of conversion or exchange with respect to all or a portion of such other
Convertible Securities, as the case may be, shall not have been exercised and no
outstanding Warrant shall have been exercised (in whole or in part), then for
each outstanding Warrant such previous adjustment shall be rescinded and
annulled and the Additional Shares of Common Stock which were deemed to have
been issued by virtue of the computation made in connection with the adjustment
so rescinded and annulled shall no longer be deemed to have been issued by
virtue of such computation.
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price provided for in this Section 4:
(a) Computation of Consideration. To the extent that any Additional
Shares of Common Stock or any Convertible Securities or any warrants or other
rights to subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Securities shall be issued for cash consideration, the consideration
received by the Company therefor shall be the amount of the cash received by the
Company therefor, or, if such Additional Shares of Common Stock or Convertible
Securities are offered by the Company for subscription, the subscription price,
or, if such Additional Shares of Common Stock or Convertible Securities are sold
to underwriters or dealers for public offering without a subscription offering,
the public offering price (in any such case subtracting any amounts paid or
receivable for accrued interest or accrued dividends). To the extent that such
issuance shall be for a consideration other than cash, then, except as herein
otherwise expressly provided, the amount of such consideration shall be deemed
to be the fair value of such consideration at the time of such issuance as
determined in good faith by the Board of Directors of the Company. In case any
Additional Shares of Common Stock or any Convertible Securities or any warrants
or other rights to subscribe for or purchase such Additional Shares of Common
Stock or Convertible Securities shall be issued in connection with any merger in
which the Company issues any securities, the amount of consideration therefor
shall be deemed to be the fair value, as determined in good faith by the Board
of Directors of the Company, of such portion of the assets and business of the
nonsurviving corporation as such Board in good faith shall determine to be
attributable to such Additional Shares of Common Stock, Convertible Securities,
warrants or other rights, as the case may be. The
<PAGE> 16
consideration for any Additional Shares of Common Stock issuable pursuant to any
warrants or other rights to subscribe for or purchase the same shall be the
consideration received by the Company for issuing such warrants or other rights
plus the additional consideration payable to the Company upon exercise of such
warrants or other rights. The consideration for any Additional Shares of Common
Stock issuable pursuant to the terms of any Convertible Securities shall be the
consideration received by the Company for issuing warrants or other rights to
subscribe for or purchase such Convertible Securities, plus the consideration
paid or payable to the Company in respect of the subscription for or purchase of
such Convertible Securities, plus the additional consideration, if any, payable
to the Company upon the exercise of the right of conversion or exchange in such
Convertible Securities. In case of the issuance at any time of any Additional
Shares of Common Stock or Convertible Securities in payment or satisfaction of
any dividends upon any class of stock other than Common Stock, the Company shall
be deemed to have received for such Additional Shares of Common Stock or
Convertible Securities a consideration equal to the amount of such dividend so
paid or satisfied.
(b) When Adjustments to Be Made. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except that any adjustment of the number of shares of
Common Stock for which this Warrant is exercisable that would otherwise be
required may be postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 4.1) up to, but not
beyond the date of exercise if such adjustment either by itself or with other
adjustments not previously made results in an increase or decrease of less than
1% of the shares of Common Stock for which this Warrant is exercisable
immediately prior to the making of such adjustment. Any adjustment representing
a change of less than such minimum amount (except as aforesaid) which is
postponed shall be carried forward and made as soon as such adjustment, together
with other adjustments required by this Section 4 and not previously made, would
result in a minimum adjustment or on the date of exercise. For the purpose of
any adjustment, any specified event shall be deemed to have occurred at the
close of business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments under this Section
4, fractional interests in Common Stock shall be taken into account to the
nearest 1/100th of a share.
(d) When Adjustment Not Required. If the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to receive
a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be
<PAGE> 17
required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.
(e) Escrow of Warrant Stock. If Holder exercises this Warrant after
any property becomes distributable pursuant to this Section 4 by reason of the
taking of any record of the holders of Common Stock, but prior to the occurrence
of the event for which such record is taken, any additional shares of Common
Stock issuable upon exercise by reason of such adjustment shall be deemed the
last shares of Common Stock for which this Warrant is exercised (notwithstanding
any other provision to the contrary herein) and such shares or other property
shall be held in escrow for Holder by the Company to be issued to Holder when
and to the extent that the event actually takes place, upon payment of the then
Current Warrant Price. Notwithstanding any other provision to the contrary
herein, if the event for which such record was taken fails to occur or is
rescinded, then such escrowed shares shall be canceled by the Company and
escrowed property returned.
(f) Challenge to Good Faith Determination. Whenever the Board of
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under this Section 4, such determination may be
challenged in good faith by the Majority Holders, and any dispute shall be
resolved by an investment banking firm of recognized national standing selected
by the Majority Holders and acceptable to the Company.
4.8. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR DISPOSITION
OF ASSETS. In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of this Warrant and payment of the Current Warrant Price, the number of
shares of common stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and Other Property receivable upon
or as a result of such reorganization, reclassification, merger, consolidation
or disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately
<PAGE> 18
prior to such event. In case of any such reorganization, reclassification,
merger, consolidation or disposition of assets, the successor or acquiring
corporation (if other than the Company) shall expressly assume the due and
punctual observance and performance of each and every covenant and condition of
this Warrant to be performed and observed by the Company and all the obligations
and liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board of Directors of the
Company) in order to provide for adjustments of shares of the Common Stock for
which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 4. For purposes of
this Section 4.8, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 4.8 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
4.9. OTHER ACTION AFFECTING COMMON STOCK. In case at any time or from time
to time the Company shall take any action in respect of its Common Stock, other
than any action described in this Section 4, then, unless such action will not
have a materially adverse effect upon the rights of the Holders, the number of
shares of Common Stock or other stock for which this Warrant is exercisable
and/or the purchase price thereof shall be adjusted in such manner as may be
equitable in the circumstances.
4.10. CERTAIN LIMITATIONS. Notwithstanding anything herein to the contrary,
the Company agrees not to enter into any transaction which, by reason of any
adjustment hereunder, would cause the Current Warrant Price to be less than the
par value per share of Common Stock.
5. NOTICES TO WARRANT HOLDERS
5.1. NOTICE OF ADJUSTMENTS. Whenever the number of shares of Common Stock
for which this Warrant is exercisable, or whenever the price at which a share of
such Common Stock may be purchased upon exercise of the Warrants, shall be
adjusted pursuant to Section 4, the Company shall forthwith prepare a
certificate to be executed by the chief financial officer of the Company setting
forth, in reasonable detail, the event requiring the adjustment and the method
by which such adjustment was
<PAGE> 19
calculated (including a description of the basis on which the Board of Directors
of the Company determined the fair value of any evidences of indebtedness,
shares of stock, other securities or property or warrants or other subscription
or purchase rights referred to in Section 4.2 or 4.7(a)), specifying the number
of shares of Common Stock for which this Warrant is exercisable and (if such
adjustment was made pursuant to Section 4.8 or 4.9) describing the number and
kind of any other shares of stock or Other Property for which this Warrant is
exercisable, and any change in the purchase price or prices thereof, after
giving effect to such adjustment or change. The Company shall promptly cause a
signed copy of such certificate to be delivered to each Holder in accordance
with Section 13.2. The Company shall keep at its principal office copies of all
such certificates and cause the same to be available for inspection at said
office during normal business hours by any Holder or any prospective purchaser
of a Warrant designated by a Holder thereof.
5.2. NOTICE OF CORPORATE ACTION. If at any time
(a) the Company shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend (other than a cash
dividend payable out of earnings or earned surplus legally available for
the payment of dividends under the laws of the jurisdiction of
incorporation of the Company) or other distribution, or any right to
subscribe for or purchase any evidences of its indebtedness, any shares of
stock of any class or any other securities or property, or to receive any
other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or
other disposition of all or substantially all the property, assets or
business of the Company to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 20 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common
<PAGE> 20
Stock shall be entitled to any such dividend, distribution or right, and the
amount and character thereof, and (ii) the date on which any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up is to take place and the
time, if any such time is to be fixed, as of which the holders of Common Stock
shall be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 13.2.
6. RIGHTS OF HOLDERS
6.1 NO IMPAIRMENT. The Company shall not by any action, including, without
limitation, amending its Certificate of Incorporation, by-laws or comparable
governing instruments or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder against impairment.
Without limiting the generality of the foregoing, the Company will (a) not
increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (b) take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock upon the exercise of
this Warrant, and (c) use its best efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its obligations
under this Warrant.
Upon the request of Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form reasonably
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Closing Date, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such number
of its authorized but unissued shares of Common Stock as will be
<PAGE> 21
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon exercise of
any Warrant and payment therefor in accordance with the terms of such Warrant,
shall be duly and validly issued and fully paid and nonassessable.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of a record of such holders, the Company will in each such
case take such a record and will take such record as of the close of business on
a Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Stock. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 9.
9.1. RESTRICTIVE LEGEND. Except as otherwise provided in this Section 9,
each Warrant and each certificate for Warrant Stock initially issued upon the
exercise of a Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"[THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY] [THE
SECURITIES REPRESENTED BY THIS CERTIFICATE] HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS."
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION. Prior to any
Transfer or attempted Transfer of any Warrants or any shares of Restricted
Common Stock, the holder of such Warrants or Restricted Common Stock shall give
ten days' prior written notice (a "Transfer Notice") to the Company of such
holder's intention to effect such Transfer, describing the manner and
circumstances of the proposed Transfer, and obtain from counsel to such holder
who shall be reasonably satisfactory to the Company, an opinion that the
proposed Transfer of such Warrants or such
<PAGE> 22
Restricted Common Stock may be effected without registration under the
Securities Act. After receipt of the Transfer Notice and opinion, the Company
shall, within five days thereof, notify the holder of such Warrants or such
Restricted Common Stock as to whether such opinion is reasonably satisfactory
and, if so, such holder shall thereupon be entitled to Transfer such Warrants or
such Restricted Common Stock, in accordance with the terms of the Transfer
Notice. Each certificate, if any, evidencing such shares of Restricted Common
Stock issued upon such Transfer and each Warrant issued upon such Transfer shall
bear the restrictive legend set forth in Section 9.1, unless in the opinion of
such counsel such legend is not required in order to ensure compliance with the
Securities Act. The holder of the Warrants or the Restricted Common Stock, as
the case may be, giving the Transfer Notice shall not be entitled to Transfer
such Warrants or such Restricted Common Stock until receipt of notice from the
Company under this Section 9.2 that such opinion is reasonably satisfactory.
10. REDEMPTION. (a) Whenever the Average Market Price shall have equaled or
exceeded $10.00 per share during a period of 90 consecutive trading days ending
on the fifth trading day prior to the date on which the notice contemplated by
the next clause of this sentence is given, the Company may, on 30 days' prior
written notice, redeem up to half of the Warrant at a price of $0.01 per share
of Common Stock (subject to adjustment in the event of any stock splits or other
similar events as provided in Section 4 hereof). Whenever the Average Market
Price shall have equaled or exceeded $10.00 per share during a period of 180
consecutive trading days ending on the fifth trading day prior to the date on
which the notice contemplated by the next clause of this sentence is given, the
Company may, on 30 days' prior written notice, redeem [up to] the entire Warrant
at a price of $0.01 per share of Common Stock (subject to adjustment in the
event of any stock splits or other similar events as provided in Section 4
hereof).
(b) The notice of redemption shall specify (i) the redemption price,
(ii) the redemption date, which shall in no event be less than 45 days after the
date of mailing of such notice, (iii) the place where this Warrant shall be
delivered and the redemption price shall be paid and (iv) that the right to
exercise the Warrant shall terminate at 5:00 p.m. (New York time) on the
Business Day immediately preceding the date fixed for redemption.
(c) Any right to exercise a Warrant shall terminate at 5:00 p.m. (New
York time) on the Business Day immediately preceding the Redemption Date. The
redemption price payable to the Holders shall be mailed to such persons at their
addresses of record.
11. SUPPLYING INFORMATION
The Company shall cooperate with each Holder of a Warrant and each
holder of Restricted Common Stock in supplying such information as
<PAGE> 23
may be reasonably necessary for such holder to complete and file any reports or
forms presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any Warrant
or Restricted Common Stock.
12. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it being
understood that, in the case of the initial holder, the written agreement of
Appaloosa Management, L.P. shall be sufficient indemnity), and in case of
mutilation upon surrender and cancellation hereof, the Company will execute and
deliver in lieu hereof a new Warrant of like tenor to such Holder; provided, in
the case of mutilation, no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of such Holder for
the purchase price of any Common Stock or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
14. MISCELLANEOUS
14.1. NONWAIVER AND EXPENSES. No course of dealing or any delay or failure
to exercise any right hereunder on the part of Holder shall operate as a waiver
of such right or otherwise prejudice Holder's rights, powers or remedies. If the
Company fails to make, when due, any payments provided for hereunder, or fails
to comply with any other provision of this Warrant, the Company shall pay to
Holder such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees, including those of
appellate proceedings, incurred by Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
14.2. NOTICE GENERALLY. Any notice, demand, request, consent, approval,
declaration, delivery or other communication hereunder to be made pursuant to
the provisions of this Warrant shall be sufficiently given or made if in writing
and either delivered in person with receipt acknowledged or sent by registered
or certified mail, return receipt requested, postage prepaid, or by telecopy and
confirmed by telecopy answerback, addressed as
<PAGE> 24
follows:
(a) If to any Holder or holder of Warrant Stock, at its last known
address appearing on the books of the Company maintained for such purpose.
(b) If to the Company at
Bio-Plexus, Inc.
129 Reservoir Road
Vernon, CT 06066
Attention: Carl Sahi
Fax: (860) 870-6118
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback, or three Business Days after the same shall have been deposited in
the United States mail. Failure or delay in delivering copies of any notice,
demand, request, approval, declaration, delivery or other communication to the
person designated above to receive a copy shall in no way adversely affect the
effectiveness of such notice, demand, request, approval, declaration, delivery
or other communication.
14.3. REMEDIES. Each holder of Warrant and Warrant Stock, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under of this
Warrant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Warrant and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
14.4. SUCCESSORS AND ASSIGNS. Subject to the provisions of Sections 3.1 and
9, this Warrant and the rights evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and assigns
of Holder. The provisions of this Warrant are intended to be for the benefit of
all Holders from time to time of this Warrant and, with respect to Section 9
hereof, holders of Warrant Stock, and shall be enforceable by any such Holder or
holder of Warrant Stock.
14.5. AMENDMENT. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the Company
and the Majority Holders, provided that no such Warrant may be modified or
amended to reduce the number of shares of Common Stock for which such Warrant is
exercisable or to increase the price at which such shares may be purchased upon
exercise of such Warrant (before giving effect to any adjustment as provided
therein) without the prior written consent of the Holder thereof, provided
however, that the foregoing shall not limit the operation of Section 4.6.
<PAGE> 25
14.6. SEVERABILITY. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Warrant.
14.7. HEADINGS. The headings used in this Warrant are for the convenience
of reference only and shall not, for any purpose, be deemed a part of this
Warrant.
14.8. ROLLOVER TRANSACTIONS. For the avoidance of doubt, the Company
acknowledges and agrees that this Warrant is fully vested as of the date hereof
and shall continue to be in full force and effect even if the Rollover
Transactions (as defined in the Note) are not consummated for any reason.
14.9. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES OF AMERICA, IN EACH
CASE LOCATED IN THE COUNTY OF NEW YORK, FOR ANY ACTION, PROCEEDING OR
INVESTIGATION IN ANY COURT OR BEFORE ANY GOVERNMENTAL AUTHORITY ("LITIGATION")
ARISING OUT OF OR RELATING TO THIS WARRANT AND THE TRANSACTIONS CONTEMPLATED
HEREBY (AND AGREES NOT TO COMMENCE ANY LITIGATION RELATING THERETO EXCEPT IN
SUCH COURTS), AND FURTHER AGREES THAT SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR
DOCUMENT BY U.S. REGISTERED MAIL TO ITS RESPECTIVE ADDRESS SET FORTH IN THIS
WARRANT SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY LITIGATION BROUGHT AGAINST
IT IN ANY SUCH COURT. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY LITIGATION
ARISING OUT OF THIS WARRANT OR THE TRANSACTIONS CONTEMPLATED HEREBY IN THE
COURTS OF THE STATE OF NEW YORK OR THE UNITED STATES OF AMERICA, IN EACH CASE
LOCATED IN THE COUNTY OF NEW YORK, AND HEREBY FURTHER IRREVOCABLY AND
UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT
ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS TO TRIAL
BY JURY IN CONNECTION WITH ANY LITIGATION ARISING OUT OF OR RELATING TO THIS
WARRANT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by an officer thereunto duly authorized.
Dated: October 21, 1999
BIO-PLEXUS, INC.
By: /s/ Carl Sahi
---------------------------
Name: Carl Sahi
Title: President & CEO
<PAGE> 26
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of shares of Common Stock of Bio-Plexus,
Inc. and herewith makes payment therefor, all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
shares of Common Stock hereby purchased (and any securities or other property
issuable upon such exercise) be issued in the name of and delivered to
whose address is and, if such shares of Common
Stock shall not include all of the shares of Common Stock issuable as provided
in this Warrant, that a new Warrant of like tenor and date for the balance of
the shares of Common Stock issuable hereunder be delivered to the undersigned.
------------------------------------
(Name of Registered Owner)
------------------------------------
(Signature of Registered Owner)
------------------------------------
(Street Address)
------------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 27
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of Common Stock
- ---------------------------- -----------------------------
and does hereby irrevocably constitute and appoint
attorney-in-fact to register such transfer on the books of BIO-PLEXUS, INC.
maintained for the purpose, with full power of substitution in the premises.
Dated: Print Name:
-------------- -------------------------
Signature:
-------------------------
Witness:
-------------------------
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 1
Exhibit 10.32
WARRANT
To Purchase Shares of Common Stock of
BIO-PLEXUS, INC.
At a Purchase Price of
$5.00 per Share
(Subject to Adjustment as Provided herein)
No. of Shares of Common Stock: ________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. DEFINITIONS 1
2. EXERCISE OF WARRANT 4
2.1. MANNER OF EXERCISE. 4
2.2. PAYMENT OF TAXES. 5
2.3. FRACTIONAL SHARES. 5
3. TRANSFER, DIVISION AND COMBINATION 6
3.1. TRANSFER. 6
3.2. DIVISION AND COMBINATION. 6
3.3. EXPENSES. 6
3.4. MAINTENANCE OF BOOKS. 6
4. ADJUSTMENTS 6
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. 7
4.2. CERTAIN OTHER DISTRIBUTIONS. 7
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. 8
4.4. ISSUANCE OF WARRANTS OR OTHER RIGHTS. 9
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. 9
4.6. SUPERSEDING ADJUSTMENT. 10
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER
THIS SECTION. 10
4.8. REORGANIZATION, RECLASSIFICATION, MERGER,
CONSOLIDATION OR DISPOSITION OF ASSETS. 12
4.9. OTHER ACTION AFFECTING COMMON STOCK. 13
4.10. CERTAIN LIMITATIONS. 13
5. NOTICES TO WARRANT HOLDERS 13
5.1. NOTICE OF ADJUSTMENTS. 13
5.2. NOTICE OF CORPORATE ACTION. 14
6. RIGHTS OF HOLDERS 14
6.1 NO IMPAIRMENT. 14
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY 15
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS 15
9. RESTRICTIONS ON TRANSFERABILITY 15
9.1. RESTRICTIVE LEGEND. 16
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION. 16
10. INTENTIONALLY LEFT BLANK 16
11. SUPPLYING INFORMATION 16
12. LOSS OR MUTILATION 16
13. LIMITATION OF LIABILITY 17
14. MISCELLANEOUS 17
14.1. NONWAIVER AND EXPENSES. 17
14.2. NOTICE GENERALLY. 17
14.3. REMEDIES. 18
14.4. SUCCESSORS AND ASSIGNS. 18
14.5. AMENDMENT. 18
14.6. SEVERABILITY. 18
14.7. HEADINGS. 18
14.8. ROLLOVER TRANSACTIONS. 18
14.9. GOVERNING LAW. 19
</TABLE>
<PAGE> 3
314
103
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR
SUCH LAWS
No. of Shares of Common Stock: ________
WARRANT
To Purchase Shares of Common Stock of
BIO-PLEXUS, INC.
THIS IS TO CERTIFY THAT ___________________, or its registered assigns
(the "Holder"), is entitled, at any time prior to the Expiration Date (as
hereinafter defined), to purchase from BIO-PLEXUS, INC., a Connecticut
corporation (the "Company"), ________ (subject to adjustment as provided herein)
shares of Common Stock (as hereinafter defined), in whole or in part, at a
purchase price of $5.00 per share (subject to adjustment as provided herein),
all on the terms and conditions and pursuant to the provisions hereinafter set
forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than
<PAGE> 4
Warrant Stock and shares of Common Stock issuable upon the conversion of the
Convertible Notes issued under the Convertible Note Purchase Agreement.
"Average Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the daily volume weighted average sale price
per share of Common Stock for such date. The closing price for each day shall be
the last quoted sale price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc., Automated Quotation System or such
other system then in use, or, if on any such date the Common Stock or such other
securities are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Common Stock selected by the Board of Directors of the Company. If the
Common Stock is listed or admitted to trading on a national securities exchange,
the closing price shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Common Stock is not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading.
"Business Day" shall mean any day that is not a Saturday or Sunday or
a day on which banks are required or permitted to be closed in the State of New
York.
"Capital Stock" means, in the case of the Company, any and all shares
(however designated) of the capital stock of the Company now or hereafter
outstanding.
"Closing Date" shall mean October 21, 1999.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, no par value, of the Company as constituted on the
Closing Date, and any capital stock into which such Common Stock may thereafter
be changed, and shall also include (i) capital stock of the Company of any other
class (regardless of how denominated) issued to the holders of shares of Common
Stock upon any reclassification thereof and (ii) shares of common stock of any
successor or acquiring corporation (as defined in Section 4.8) received by or
distributed to the holders of Common Stock of the Company in the circumstances
contemplated by Section 4.8.
"Convertible Notes" shall mean the notes to be issued pursuant to the
Convertible Note Purchase Agreement (as defined in the Note).
<PAGE> 5
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable or
exercisable, with or without payment of additional consideration in cash or
property, for Additional Shares of Common Stock, either immediately or upon the
occurrence of a specified date or a specified event.
"Current Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the average of the Average Market Price for
the twenty Business Days ending five days prior to such date.
"Current Warrant Price" shall mean, in respect of a share of Common
Stock at any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date. The Current Warrant
Price as of the date of the issuance of this Warrant is $5; provided, however,
that upon the earlier of (i) the closing of the Rollover Transactions (as
defined in the Note) and (ii) the anniversary of the issuance of this Warrant,
the Current Warrant Price shall automatically be increased to $7 (as
appropriately adjusted to give effect to any anti-dilution adjustments made to
the Current Warrant Price prior to the occurrence of any increase in the Current
Warrant Price as provided herein).
"Expiration Date" shall mean a date which is five years from the
issuance of this Warrant.
"Holder" shall mean the Person in whose name this Warrant is
registered on the books of the Company maintained for such purpose. "Holders"
shall mean, collectively, each Holder of a Warrant, in the event of any division
of this Warrant.
"Majority Holders" shall mean the holders of Warrants exercisable for
in excess of 50% of the aggregate number of shares of Warrant Stock then
purchasable upon exercise of all Warrants.
"Note" shall mean the 7.5% Secured Note issued by the Company to the
Holder on the Closing Date.
"Other Property" shall have the meaning set forth in Section 4.8.
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company or any subsidiary thereof, and shall include all shares
issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock. For the purposes of Sections
4.3, 4.4, 4.5, 4.6 and 4.7, Common Stock Outstanding shall include all shares of
Common Stock issuable in respect of options or warrants to purchase, or
securities convertible into, shares of Common Stock, the exercise or conversion
price of which is less than the Current Market Price as of any date on which the
number of shares of
<PAGE> 6
Common Stock Outstanding is to be determined.
"Permitted Issuances" shall mean issuances of shares of Common Stock
and upon exercise of the warrants and options and other convertible securities,
in each case listed on Schedule 1.
"Person" shall mean any individual, firm, corporation, partnership or
other entity, and shall include any successor by merger or otherwise of such
entity.
"Restricted Common Stock" shall mean shares of Common Stock which are,
or which upon their issuance on the exercise of this Warrant would be, evidenced
by a certificate bearing the restrictive legend set forth in Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Security" or "Securities" shall mean any equity or debt security of
the Company (including, without limitation, subscriptions, options, warrants,
rights, stock-based or stock-related awards or convertible or exchangeable
securities to which the Company is a party or by which the Company may be bound
of any character relating to, or obligating the Company to issue, grant, award,
transfer or sell any issued or unissued shares of the Company's Capital Stock or
other securities of the Company).
"Trading Day" means a Business Day or, if the Common Stock is listed
or admitted to trading in any national securities exchange, a day on which such
exchange is open for the transaction of business.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof, which would constitute a sale thereof
within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section
9.2.
"Warrants" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, any thereof. All
Warrants shall at all times be identical as to terms and conditions and date,
except as to the number of shares of Common Stock for which they may be
exercised.
"Warrant Stock" shall mean the shares of Common Stock purchased by the
holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
<PAGE> 7
2.1. MANNER OF EXERCISE. At any time or from time to time from and after
the Closing Date and until 5:00 P.M., New York time, on the Expiration Date,
Holder may exercise this Warrant, on any Business Day, for all or any part of
the number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at its principal office at 129 Reservoir Road, Vernon, CT
06066 (i) a written notice of Holder's election to exercise this Warrant, which
notice shall specify the number of shares of Common Stock to be purchased, (ii)
payment of the aggregate Current Warrant Price for such shares and (iii) this
Warrant. Such notice shall be substantially in the form appearing at the end of
this Warrant as Exhibit A, duly executed by Holder. Thirty days after receipt of
the items specified in the second preceding sentence, the Company shall execute
or cause to be executed and deliver or cause to be delivered to Holder a
certificate or certificates representing the aggregate number of full shares of
Common Stock issuable upon such exercise, together with cash in lieu of any
fraction of a share, as hereinafter provided. The stock certificate or
certificates so delivered shall be in such denomination or denominations as
Holder shall request in the notice and shall be registered in the name of Holder
or, subject to Section 9, such other name as shall be designated in the notice.
This Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and Holder or any other Person
so designated shall be deemed to have become a holder of record of such shares
for all purposes, as of the date which is thirty days after the date of the
notice, together with the Current Warrant Price and this Warrant, are received
by the Company as described above. If this Warrant shall have been exercised in
part, the Company shall, at the time of delivery of the certificate or
certificates representing Warrant Stock, deliver to Holder a new Warrant
evidencing the right of Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant, or, at the request of Holder, appropriate
notation may be made on this Warrant and the same returned to Holder.
Payment of the Current Warrant Price shall be made at the option of
Holder by (i) certified or official bank check, (ii) wire transfer of
immediately available funds, (iii) tendering (A) a portion of the Note having a
principal face amount such that the amount of the Note so tendered together with
accrued and unpaid interest thereon is equal to the Current Warrant Price or (B)
Convertible Notes having an Accreted Value (as defined in the Convertible Note
Purchase Agreement) equal to the Current Warrant Price (the Company hereby
agreeing to reissue the Note or any
<PAGE> 8
Convertible Notes, as applicable, of a Holder into one or more Notes or
Convertible Notes (as applicable) in denominations requested by such Holder) or
(iv) the surrender of this Warrant to the Company, with a duly executed exercise
notice marked to reflect "Net Issue Exercise," and, in either case, specifying
the number of shares of Common Stock to be purchased, during normal business
hours on any Business Day. Upon a Net Issue Exercise, Holder shall be entitled
to receive shares of Common Stock equal to the value of this Warrant (or the
portion thereof being exercised by Net Issue Exercise) by surrender of this
Warrant to the Company together with notice of such election, in which event the
Company shall issue to Holder a number of shares of the Company's Common Stock
computed as of the date of surrender of this Warrant to the Company using the
following formula:
X = Y x (A-B)
---------
A
Where X = the number of shares of Common Stock to be issued to the
Holder
Y = the number of shares of Warrant Stock being exercised under
this Warrant;
A = the Current Market Price of one share of the Company's Common
Stock (at the date of such calculation);
B = the Current Warrant Price (as adjusted to the date of such
calculation).
2.2. PAYMENT OF TAXES. All shares of Common Stock issuable upon the
exercise of this Warrant shall be validly issued, fully paid and nonassessable.
The Company shall pay all expenses in connection with, and all taxes (other than
income taxes or capital gain tax of the Holder) and other governmental charges
that may be imposed with respect to, the issue or delivery thereof.
2.3. FRACTIONAL SHARES. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of this Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such
fraction in an amount equal to the same fraction of the Current Market Price per
share of Common Stock on the date of exercise.
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject to compliance with Section 9, transfer of this
Warrant and all rights hereunder, in whole or in part, shall be registered on
the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Company referred to in Section 2.1,
together with a written assignment of this Warrant substantially in the form of
Exhibit B hereto duly executed by Holder
<PAGE> 9
and funds sufficient to pay any transfer taxes payable upon the making of such
transfer. Upon such surrender and, if required, such payment, the Company shall,
subject to Section 9, execute and deliver a new Warrant or Warrants in the name
of the assignee or assignees and in the denomination specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be canceled. A Warrant, if properly assigned in compliance with Section
9, may be exercised by a new Holder for the purchase of shares of Common Stock
without having a new Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9, this Warrant may be
divided into multiple Warrants or combined with other Warrants upon presentation
hereof at the aforesaid office or agency of the Company, together with a written
notice specifying the names and denominations in which new Warrants are to be
issued, signed by Holder. Subject to compliance with Section 3.1 and with
Section 9, as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 3.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at its
aforesaid office, books for the registration and the registration of
transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable and/or the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give each Holder notice of any event
described below which requires an adjustment pursuant to this Section 4 at the
time of such event.
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time
the Company shall:
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution
of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
<PAGE> 10
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
per share shall be adjusted to equal (A) the Current Warrant Price multiplied by
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
4.2. CERTAIN OTHER DISTRIBUTIONS. If at any time the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of:
(a) cash,
(b) any evidences of its indebtedness, any shares of stock or any
other securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock), or
(c) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock),
then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
adjustment and a fraction (A) the numerator of which shall be the Current Market
Price per share of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Current Market Price per share of Common
Stock minus the amount allocable to one share of Common Stock of any such cash
so distributable and of the fair value (as determined in good faith by the Board
of Directors of the Company) of any and all such evidences of indebtedness,
shares of stock, other securities or property or warrants or other subscription
or purchase rights so distributable, and (ii) the Current Warrant Price shall be
adjusted to equal (A) the Current Warrant Price multiplied by the number of
shares of Common Stock for which this Warrant is exercisable immediately prior
to the adjustment divided by (B) the number of shares for which this Warrant is
exercisable immediately after such adjustment. A reclassification of the Common
Stock (other than a change in par value, or from par value to no par
<PAGE> 11
value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by the Company to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 4.2 and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4.1.
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. (a) If at any time the
Company shall (except as hereinafter provided) issue or sell any Additional
Shares of Common Stock, other than Permitted Issuances, in exchange for
consideration in an amount per Additional Share of Common Stock less than (a)
the greater of the Current Market Price per share of Common Stock for the period
of 20 Trading Days preceding the earlier of the issuance or public announcement
of the issuance of such Additional Shares of Common Stock and (b) the Current
Warrant Price at the time the Additional Shares of Common Stock are issued, then
(i) the Current Warrant Price as to the number of shares for which this Warrant
is exercisable prior to such adjustment shall be reduced to a price determined
by multiplying the Current Warrant Price by (A) a fraction, the numerator of
which shall be the sum of (x) the number of shares of Common Stock Outstanding
immediately prior to such issue or sale multiplied by the greater of (1) the
then applicable Current Warrant Price and (2) the Current Market Price per share
of Common Stock for the period of 20 Trading Days preceding the earlier of the
issuance or public announcement of the issuance of such Additional Shares of
Common Stock (the greater of (1) and (2) above hereinafter referred to as the
"Adjustment Price") and (y) the aggregate consideration receivable by the
Company for the total number of shares of Common Stock so issued (or into or for
which the rights, warrants or other Convertible Securities may convert or be
exercisable), and the denominator of which shall be the sum of (a) the total
number of shares of Common Stock Outstanding on such date and (b) the number of
Additional Shares issued (or into or for which the rights, warrants or
convertible securities may be converted or exercised), multiplied by the
Adjustment Price; and (ii) the number of shares of Common Stock for which this
<PAGE> 12
Warrant is exercisable shall be adjusted to equal the product obtained by
multiplying the Current Warrant Price in effect immediately prior to such issue
or sale by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such issue or sale and dividing the product
thereof by the Current Warrant Price resulting from the adjustment made pursuant
to clause (i) above. For purposes of this Section 4.3 and for the purposes of
making adjustments of the number of shares of Common Stock for which this
Warrant is exercisable and the Current Warrant Price as provided in this Section
4, the aggregate consideration receivable by the Company in connection with the
issuance of shares of Common Stock or of rights, warrants or other securities
convertible into shares of Common Stock shall be deemed to be equal to the sum
of the aggregate offering price (before deduction of underwriting discounts or
commissions and expenses payable to third parties) of all such Common Stock,
rights, warrants and convertible securities plus the aggregate amount (as
determined on the date of issuance), if any, payable upon exercise or conversion
of any such rights, warrants and convertible securities into shares of Common
Stock. If, subsequent to the date of issuance of such rights, warrants or
Convertible Securities, the exercise or conversion price thereof is reduced,
such aggregate amount shall be recalculated and the Current Warrant Price and
number of shares of Common Stock for which the Warrant is exercisable adjusted
retroactively to give effect to such reduction. If Common Stock is sold as a
unit with other securities, the aggregate consideration received for such Common
Stock shall be deemed to be net of the Fair Market Value of such other
securities.
4.4. ISSUANCE OF WARRANTS OR OTHER RIGHTS. If at any time the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a distribution of, or shall in any manner (whether directly or
by assumption in a merger in which the Company is the surviving corporation)
issue or sell, any warrants or other rights to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Securities (other than
Permitted Issuances), whether or not the rights to exchange or convert
thereunder are immediately exercisable, and
<PAGE> 13
the price per share for which Common Stock is issuable upon the exercise of such
warrants or other rights or upon conversion or exchange of such Convertible
Securities shall be less than the greater of (1) the Current Market Price per
share of Common Stock for the period of 20 Trading Days preceding the earlier of
the issuance or public announcement of the issuance of such Additional Shares of
Common Stock, warrants or other rights and (2) the Current Warrant Price in
effect immediately prior to the time of such issue or sale, then the number of
shares for which this Warrant is exercisable and the Current Warrant Price shall
be adjusted as provided in Section 4.3 on the basis that the maximum number of
Additional Shares of Common Stock issuable pursuant to all such warrants or
other rights or necessary to effect the conversion or exchange of all such
Convertible Securities shall be deemed to have been issued and outstanding and
the Company shall have received all of the consideration payable therefor, if
any, as of the date of the actual issuance of the number such warrants or other
rights. No further adjustments of the Current Warrant Price shall be made upon
the actual issue of such Common Stock or of such Convertible Securities upon
exercise of such warrants or other rights or upon the actual issue of such
Common Stock upon such conversion or exchange of such Convertible Securities.
Notwithstanding the foregoing, no adjustment shall be required under this
Section 4.4 solely by reason of the issuance or distribution of stock purchase
rights pursuant to a shareholder rights plan or any other rights plan of the
Company, provided that the adjustments required by this Section 4.4 shall be
made if any "flip-in" or "flip-over" event shall occur under such stockholder
rights plan.
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a distribution of, or shall in any manner (whether directly or
by assumption in a merger in which the Company is the surviving corporation)
issue or sell, any Convertible Securities (other than Permitted Issuances),
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange shall be less than the greater of (a) the Current
Market Price per share of Common Stock for the period of 20 Trading Days
preceding the earlier of the issuance or Public announcement of the issuance of
such Convertible Securities and (b) the Current Warrant Price in effect
immediately prior to the time of such issue or sale, then the number of shares
for which this Warrant is exercisable and the Current Warrant Price shall be
adjusted as provided in Section 4.3 on the basis that the maximum number of
Additional shares of Common Stock necessary to effect the conversion or exchange
of all such Convertible Securities shall be deemed to have been issued and
outstanding and the Company shall have received all of the consideration payable
<PAGE> 14
therefor, if any, as of the date of actual issuance of such Convertible
Securities. No adjustment of the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be made under this Section 4.5
upon the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any such adjustment shall previously have been made upon the issuance of such
warrants or other rights pursuant to Section 4.4. No further adjustments of the
number of shares for which this Warrant is exercisable and the Current Warrant
Price shall be made upon the actual issue of such Common Stock upon conversion
or exchange of such Convertible Securities and, if any issue or sale of such
Convertible Securities is made upon exercise of any warrant or other right to
subscribe for or to purchase any such Convertible Securities for which
adjustments of the number of shares for which this Warrant is exercisable and
the Current Warrant Price have been or are to be made pursuant to other
provisions of this Section 4, no further adjustments of the number of shares for
which this Warrant is exercisable and the Current Warrant Price shall be made by
reason of such issue or sale.
4.6. SUPERSEDING ADJUSTMENT. If, at any time after any adjustment of the
number of shares for which this Warrant is exercisable and the Current Warrant
Price shall have been made pursuant to Section 4.4 or Section 4.5 as the result
of any issuance of warrants, rights or Convertible Securities, such warrants or
rights, or the right of conversion or exchange in such other Convertible
Securities, shall expire, and all of such warrants or rights, or the right of
conversion or exchange with respect to all or a portion of such other
Convertible Securities, as the case may be, shall not have been exercised and no
outstanding Warrant shall have been exercised (in whole or in part), then for
each outstanding Warrant such previous adjustment shall be rescinded and
annulled and the Additional Shares of Common Stock which were deemed to have
been issued by virtue of the computation made in connection with the adjustment
so rescinded and annulled shall no longer be deemed to have been issued by
virtue of such computation.
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price provided for in this Section 4:
(a) Computation of Consideration. To the extent that any Additional
Shares of Common Stock or any Convertible Securities or any warrants or other
rights to subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Securities shall be issued for cash consideration, the consideration
received by the Company therefor shall
<PAGE> 15
be the amount of the cash received by the Company therefor, or, if such
Additional Shares of Common Stock or Convertible Securities are offered by the
Company for subscription, the subscription price, or, if such Additional Shares
of Common Stock or Convertible Securities are sold to underwriters or dealers
for public offering without a subscription offering, the public offering price
(in any such case subtracting any amounts paid or receivable for accrued
interest or accrued dividends). To the extent that such issuance shall be for a
consideration other than cash, then, except as herein otherwise expressly
provided, the amount of such consideration shall be deemed to be the fair value
of such consideration at the time of such issuance as determined in good faith
by the Board of Directors of the Company. In case any Additional Shares of
Common Stock or any Convertible Securities or any warrants or other rights to
subscribe for or purchase such Additional Shares of Common Stock or Convertible
Securities shall be issued in connection with any merger in which the Company
issues any securities, the amount of consideration therefor shall be deemed to
be the fair value, as determined in good faith by the Board of Directors of the
Company, of such portion of the assets and business of the nonsurviving
corporation as such Board in good faith shall determine to be attributable to
such Additional Shares of Common Stock, Convertible Securities, warrants or
other rights, as the case may be. The consideration for any Additional Shares of
Common Stock issuable pursuant to any warrants or other rights to subscribe for
or purchase the same shall be the consideration received by the Company for
issuing such warrants or other rights plus the additional consideration payable
to the Company upon exercise of such warrants or other rights. The consideration
for any Additional Shares of Common Stock issuable pursuant to the terms of any
Convertible Securities shall be the consideration received by the Company for
issuing warrants or other rights to subscribe for or purchase such Convertible
Securities, plus the consideration paid or payable to the Company in respect of
the subscription for or purchase of such Convertible Securities, plus the
additional consideration, if any, payable to the Company upon the exercise of
the right of conversion or exchange in such Convertible Securities. In case of
the issuance at any time of any Additional Shares of Common Stock or Convertible
Securities in payment or satisfaction of any dividends upon any class of stock
other than Common Stock, the Company shall be deemed to have received for such
Additional Shares of Common Stock or Convertible Securities a consideration
equal to the amount of such dividend so paid or satisfied.
(b) When Adjustments to Be Made. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except that any adjustment of the number of shares of
Common Stock for which this Warrant is exercisable that would otherwise be
required may be postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided
<PAGE> 16
for in Section 4.1) up to, but not beyond the date of exercise if such
adjustment either by itself or with other adjustments not previously made
results in an increase or decrease of less than 1% of the shares of Common Stock
for which this Warrant is exercisable immediately prior to the making of such
adjustment. Any adjustment representing a change of less than such minimum
amount (except as aforesaid) which is postponed shall be carried forward and
made as soon as such adjustment, together with other adjustments required by
this Section 4 and not previously made, would result in a minimum adjustment or
on the date of exercise. For the purpose of any adjustment, any specified event
shall be deemed to have occurred at the close of business on the date of its
occurrence.
(c) Fractional Interests. In computing adjustments under this Section
4, fractional interests in Common Stock shall be taken into account to the
nearest 1/100th of a share.
(d) When Adjustment Not Required. If the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to receive
a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(e) Escrow of Warrant Stock. If Holder exercises this Warrant after
any property becomes distributable pursuant to this Section 4 by reason of the
taking of any record of the holders of Common Stock, but prior to the occurrence
of the event for which such record is taken, any additional shares of Common
Stock issuable upon exercise by reason of such adjustment shall be deemed the
last shares of Common Stock for which this Warrant is exercised (notwithstanding
any other provision to the contrary herein) and such shares or other property
shall be held in escrow for Holder by the Company to be issued to Holder when
and to the extent that the event actually takes place, upon payment of the then
Current Warrant Price. Notwithstanding any other provision to the contrary
herein, if the event for which such record was taken fails to occur or is
rescinded, then such escrowed shares shall be canceled by the Company and
escrowed property returned.
(f) Challenge to Good Faith Determination. Whenever the Board of
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under this Section 4, such determination may be
challenged in good faith by the Majority Holders, and any dispute shall be
resolved by an investment banking firm of recognized
<PAGE> 17
national standing selected by the Majority Holders and acceptable to the
Company.
4.8. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR DISPOSITION
OF ASSETS. In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of this Warrant and payment of the Current Warrant Price, the number of
shares of common stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and Other Property receivable upon
or as a result of such reorganization, reclassification, merger, consolidation
or disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event. In case of
any such reorganization, reclassification, merger, consolidation or disposition
of assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Warrant to be performed and observed by
the Company and all the obligations and liabilities hereunder, subject to such
modifications as may be deemed appropriate (as determined by resolution of the
Board of Directors of the Company) in order to provide for adjustments of shares
of the Common Stock for which this Warrant is exercisable which shall be as
nearly equivalent as practicable to the adjustments provided for in this Section
4. For purposes of this Section 4.8, "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of
<PAGE> 18
this Section 4.8 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
4.9. OTHER ACTION AFFECTING COMMON STOCK. In case at any time or from time
to time the Company shall take any action in respect of its Common Stock, other
than any action described in this Section 4, then, unless such action will not
have a materially adverse effect upon the rights of the Holders, the number of
shares of Common Stock or other stock for which this Warrant is exercisable
and/or the purchase price thereof shall be adjusted in such manner as may be
equitable in the circumstances.
4.10. CERTAIN LIMITATIONS. Notwithstanding anything herein to the contrary,
the Company agrees not to enter into any transaction which, by reason of any
adjustment hereunder, would cause the Current Warrant Price to be less than the
par value per share of Common Stock.
5. NOTICES TO WARRANT HOLDERS
5.1. NOTICE OF ADJUSTMENTS. Whenever the number of shares of Common Stock
for which this Warrant is exercisable, or whenever the price at which a share of
such Common Stock may be purchased upon exercise of the Warrants, shall be
adjusted pursuant to Section 4, the Company shall forthwith prepare a
certificate to be executed by the chief financial officer of the Company setting
forth, in reasonable detail, the event requiring the adjustment and the method
by which such adjustment was calculated (including a description of the basis on
which the Board of Directors of the Company determined the fair value of any
evidences of indebtedness, shares of stock, other securities or property or
warrants or other subscription or purchase rights referred to in Section 4.2 or
4.7(a)), specifying the number of shares of Common Stock for which this Warrant
is exercisable and (if such adjustment was made pursuant to Section 4.8 or 4.9)
describing the number and kind of any other shares of stock or Other Property
for which this Warrant is exercisable, and any change in the purchase price or
prices thereof, after giving effect to such adjustment or change. The Company
shall promptly cause a signed copy of such certificate to be delivered to each
Holder in accordance with Section 13.2. The Company shall keep at its principal
office copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by any Holder or any
prospective purchaser of a Warrant designated by a Holder thereof.
5.2. NOTICE OF CORPORATE ACTION. If at any time
(a) the Company shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend (other than a cash
dividend payable out of earnings or earned surplus legally
<PAGE> 19
available for the payment of dividends under the laws of the jurisdiction
of incorporation of the Company) or other distribution, or any right to
subscribe for or purchase any evidences of its indebtedness, any shares of
stock of any class or any other securities or property, or to receive any
other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or
other disposition of all or substantially all the property, assets or
business of the Company to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 20 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 13.2.
6. RIGHTS OF HOLDERS
6.1 NO IMPAIRMENT. The Company shall not by any action, including, without
limitation, amending its Certificate of Incorporation, by-laws or comparable
governing instruments or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder against impairment.
Without limiting the generality of the
<PAGE> 20
foregoing, the Company will (a) not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise immediately prior to such increase in par
value, (b) take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant, and (c) use its best efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form reasonably
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Closing Date, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such number
of its authorized but unissued shares of Common Stock as will be sufficient to
permit the exercise in full of all outstanding Warrants. All shares of Common
Stock which shall be so issuable, when issued upon exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant, shall be duly and
validly issued and fully paid and nonassessable.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of a record of such holders, the Company will in each such
case take such a record and will take such record as of the close of business on
a Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Stock. Holder, by acceptance of this Warrant, agrees
<PAGE> 21
to be bound by the provisions of this Section 9.
9.1. RESTRICTIVE LEGEND. Except as otherwise provided in this Section 9,
each Warrant and each certificate for Warrant Stock initially issued upon the
exercise of a Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"[THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY] [THE
SECURITIES REPRESENTED BY THIS CERTIFICATE] HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS."
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION. Prior to any
Transfer or attempted Transfer of any Warrants or any shares of Restricted
Common Stock, the holder of such Warrants or Restricted Common Stock shall give
ten days' prior written notice (a "Transfer Notice") to the Company of such
holder's intention to effect such Transfer, describing the manner and
circumstances of the proposed Transfer, and obtain from counsel to such holder
who shall be reasonably satisfactory to the Company, an opinion that the
proposed Transfer of such Warrants or such Restricted Common Stock may be
effected without registration under the Securities Act. After receipt of the
Transfer Notice and opinion, the Company shall, within five days thereof, notify
the holder of such Warrants or such Restricted Common Stock as to whether such
opinion is reasonably satisfactory and, if so, such holder shall thereupon be
entitled to Transfer such Warrants or such Restricted Common Stock, in
accordance with the terms of the Transfer Notice. Each certificate, if any,
evidencing such shares of Restricted Common Stock issued upon such Transfer and
each Warrant issued upon such Transfer shall bear the restrictive legend set
forth in Section 9.1, unless in the opinion of such counsel such legend is not
required in order to ensure compliance with the Securities Act. The holder of
the Warrants or the Restricted Common Stock, as the case may be, giving the
Transfer Notice shall not be entitled to Transfer such Warrants or such
Restricted Common Stock until receipt of notice from the Company under this
Section 9.2 that such opinion is reasonably satisfactory.
10. INTENTIONALLY LEFT BLANK
11. SUPPLYING INFORMATION
The Company shall cooperate with each Holder of a Warrant and each holder
of Restricted Common Stock in supplying such information as may be reasonably
necessary for such holder to complete and file any reports or
<PAGE> 22
forms presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any Warrant
or Restricted Common Stock.
12. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it being
understood that, in the case of the initial holder, the written agreement of
Appaloosa Management, L.P. shall be sufficient indemnity), and in case of
mutilation upon surrender and cancellation hereof, the Company will execute and
deliver in lieu hereof a new Warrant of like tenor to such Holder; provided, in
the case of mutilation, no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of such Holder for
the purchase price of any Common Stock or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
14. MISCELLANEOUS
14.1. NONWAIVER AND EXPENSES. No course of dealing or any delay or failure
to exercise any right hereunder on the part of Holder shall operate as a waiver
of such right or otherwise prejudice Holder's rights, powers or remedies. If the
Company fails to make, when due, any payments provided for hereunder, or fails
to comply with any other provision of this Warrant, the Company shall pay to
Holder such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees, including those of
appellate proceedings, incurred by Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
14.2. NOTICE GENERALLY. Any notice, demand, request, consent, approval,
declaration, delivery or other communication hereunder to be made pursuant to
the provisions of this Warrant shall be sufficiently given or made if in writing
and either delivered in person with receipt acknowledged or sent by registered
or certified mail, return receipt requested, postage prepaid, or by telecopy and
confirmed by telecopy answerback, addressed as
<PAGE> 23
follows:
(a) If to any Holder or holder of Warrant Stock, at its last known
address appearing on the books of the Company maintained for such purpose.
(b) If to the Company at
Bio-Plexus, Inc.
129 Reservoir Road
Vernon, CT 06066
Attention: Carl Sahi
Fax: (860) 870-6118
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback, or three Business Days after the same shall have been deposited in
the United States mail. Failure or delay in delivering copies of any notice,
demand, request, approval, declaration, delivery or other communication to the
person designated above to receive a copy shall in no way adversely affect the
effectiveness of such notice, demand, request, approval, declaration, delivery
or other communication.
14.3. REMEDIES. Each holder of Warrant and Warrant Stock, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under of this
Warrant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Warrant and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
14.4. SUCCESSORS AND ASSIGNS. Subject to the provisions of Sections 3.1 and
9, this Warrant and the rights evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and assigns
of Holder. The provisions of this Warrant are intended to be for the benefit of
all Holders from time to time of this Warrant and, with respect to Section 9
hereof, holders of Warrant Stock, and shall be enforceable by any such Holder or
holder of Warrant Stock.
14.5. AMENDMENT. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the Company
and the Majority Holders, provided that no such Warrant may be modified or
amended to reduce the number of shares of Common Stock for which such Warrant is
exercisable or to increase the price at which such shares may be purchased upon
exercise of such Warrant (before giving effect to any adjustment as provided
therein) without the prior written consent of the Holder thereof, provided
however, that the foregoing shall not limit the operation of Section 4.6.
<PAGE> 24
14.6. SEVERABILITY. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Warrant.
14.7. HEADINGS. The headings used in this Warrant are for the convenience
of reference only and shall not, for any purpose, be deemed a part of this
Warrant.
14.8. ROLLOVER TRANSACTIONS. For the avoidance of doubt, the Company
acknowledges and agrees that this Warrant is fully vested as of the date hereof
and shall continue to be in full force and effect even if the Rollover
Transactions (as defined in the Note) are not consummated for any reason.
14.9. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES OF AMERICA, IN EACH
CASE LOCATED IN THE COUNTY OF NEW YORK, FOR ANY ACTION, PROCEEDING OR
INVESTIGATION IN ANY COURT OR BEFORE ANY GOVERNMENTAL AUTHORITY ("LITIGATION")
ARISING OUT OF OR RELATING TO THIS WARRANT AND THE TRANSACTIONS CONTEMPLATED
HEREBY (AND AGREES NOT TO COMMENCE ANY LITIGATION RELATING THERETO EXCEPT IN
SUCH COURTS), AND FURTHER AGREES THAT SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR
DOCUMENT BY U.S. REGISTERED MAIL TO ITS RESPECTIVE ADDRESS SET FORTH IN THIS
WARRANT SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY LITIGATION BROUGHT AGAINST
IT IN ANY SUCH COURT. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY LITIGATION
ARISING OUT OF THIS WARRANT OR THE TRANSACTIONS CONTEMPLATED HEREBY IN THE
COURTS OF THE STATE OF NEW YORK OR THE UNITED STATES OF AMERICA, IN EACH CASE
LOCATED IN THE COUNTY OF NEW YORK, AND HEREBY FURTHER IRREVOCABLY AND
UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT
ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS TO TRIAL
BY JURY IN CONNECTION WITH ANY LITIGATION ARISING OUT OF OR RELATING TO THIS
WARRANT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by an officer thereunto duly authorized.
Dated: October 21, 1999
----------------
BIO-PLEXUS, INC.
By: /s/ Carl Sahi
----------------------------------
Name: Carl Sahi
Title: President & CEO
<PAGE> 25
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
Net Issue Exercise _____No ______Yes
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of _____ shares of Common Stock of Bio-Plexus,
Inc. and herewith makes payment therefor, all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
shares of Common Stock hereby purchased (and any securities or other property
issuable upon such exercise) be issued in the name of and delivered to
_____________ whose address is ________________ and, if such shares of Common
Stock shall not include all of the shares of Common Stock issuable as provided
in this Warrant, that a new Warrant of like tenor and date for the balance of
the shares of Common Stock issuable hereunder be delivered to the undersigned.
-------------------------------------
(Name of Registered Owner)
-------------------------------------
(Signature of Registered Owner)
-------------------------------------
(Street Address)
-------------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
<PAGE> 26
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of Common Stock
- ---------------------------- -----------------------------
and does hereby irrevocably constitute and appoint ________________
attorney-in-fact to register such transfer on the books of BIO-PLEXUS, INC.
maintained for the purpose, with full power of substitution in the premises.
Dated: Print Name:
------------------
------------------- Signature:
------------------
Witness:
------------------
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 1
EXHIBIT 10.33
Form of Convertible Note Purchase Agreement
CONVERTIBLE NOTE PURCHASE AGREEMENT
AMONG
BIO-PLEXUS, INC.,
THE PURCHASERS
LISTED ON EXHIBIT A HERETO
AND
APPALOOSA MANAGEMENT L.P.,
as Collateral Agent
Dated as of __________1999
<PAGE> 2
TABLE OF CONTENTS
Page
1. Issuance and Sale of Notes and Common Stock...........................1
1.1. Definitions..............................................1
1.2. Issuance, Purchase and Sale..............................1
1.3. Closing..................................................2
1.4. Deliveries by the Company................................2
1.5. Deliveries by the Purchasers.............................3
2. Representations and Warranties of the Company.........................4
2.1. Organization; Subsidiaries...............................4
2.2. Due Authorization........................................4
2.3. Capitalization...........................................5
2.4. SEC Reports Correspondence...............................5
2.5. Financial Statements.....................................6
2.6. Litigation...............................................6
2.7. Title to Properties; Insurance...........................6
2.8. Consents, etc............................................7
2.9. No Material Adverse Change...............................7
2.10. Taxes....................................................7
2.11. Compliance with ERISA....................................8
2.12. Labor Relations..........................................9
2.13. Intellectual Property Rights.............................9
2.14. Possession of Franchises, Licenses, Etc.................10
2.15. Compliance with Laws....................................10
<PAGE> 3
2.16. Conflicting Agreements and Charter Provisions...........10
2.17. Suppliers...............................................11
2.18. Products................................................11
2.19. Offering of the Securities..............................11
2.20. Existing Indebtedness; Future Liens.....................12
2.21. Environmental Matters...................................12
2.22. Solvency................................................12
2.23. Security Documents......................................13
2.24. Brokers or Finders......................................13
2.25. Holding Company Act and Investment Company Act..........13
2.26. Related Party Transactions..............................13
2.27. Year 2000...............................................13
2.28. Disclosure..............................................14
3. Representations and Warranties of the Purchasers.....................14
3.1. Organization and Qualification..........................14
3.2. Due Authorization.......................................14
3.3. Acquisition for Investment..............................15
3.4. Offering of Securities..................................15
3.5. Accredited Investor.....................................15
4. Registration, Exchange and Transfer of Notes.........................15
4.1. The Note Register; Persons Deemed Owners................15
4.2. Issuance of New Notes Upon Exchange or Transfer.........15
5. Payment of Notes.....................................................16
5.1. Home Office Payment.....................................16
5.2. Limitation on Interest..................................16
5.3. Accreted Value..........................................16
5.4. Interest................................................17
5.5. Principal...............................................18
6. Covenants of the Company.............................................18
6.1. Maintenance of Office or Agency.........................18
6.2. Money for Security Payments to be Held in Trust.........18
6.3. Existence...............................................18
6.4. Maintenance of Properties...............................19
<PAGE> 4
6.5. Payment of Taxes and Other Claims.......................19
6.6. Limitation on Indebtedness..............................19
6.7. Limitation on Encumbrances..............................19
6.8. Limitation on Related Party Transactions................20
6.9. Limitation on Dividends; Stock Issuances................20
6.10. Subsidiary Guarantees...................................20
6.11. Additional Offerings of Securities......................21
6.12. Pledges of Intercompany Notes...........................21
6.13. No Speculative Transactions.............................22
6.14. Restricted Investments..................................22
6.15. Financial Covenants.....................................22
6.16. Sale and Leaseback Transactions.........................24
6.17. Line of Business........................................24
6.18. Sale of Assets..........................................24
6.19. Indenture Relating to the Notes.........................25
6.20. Financial Statements and Information....................25
6.21. Inspection..............................................26
6.22. Compliance with Laws....................................27
6.23. Supplemental Disclosure.................................28
6.24. Proceeds................................................28
6.25. Insurance; Damage to or Destruction of Collateral.......28
6.26. Rights of Required Holders to Designate Directors;
Board Composition.....................................29
6.27. Executive Officers......................................30
6.28. Board and Committee Notice Requirement..................30
6.29. Reimbursement of Certain Expenses.......................31
6.30. Limitation of Agreements................................31
6.31. Redemption of Convertible Debentures....................31
6.32. Operations in Accordance with the Business Plan.........31
7. Events of Default and Remedies.......................................31
7.1. Events of Default and Remedies..........................31
7.2. Acceleration of Maturity................................34
7.3. Other Remedies..........................................34
<PAGE> 5
7.4. Conduct No Waiver; Collection Expenses..................35
7.5. Annulment of Acceleration...............................35
7.6. Remedies Cumulative.....................................35
8. Redemption...........................................................35
8.1. Optional Redemption.....................................35
8.2. Partial Redemption......................................36
8.3. Change of Control.......................................36
8.4. Redemption Procedures...................................36
9. Conversion...........................................................37
9.1. Holder's Option to Convert into Common Stock............37
9.2. Exercise of Conversion Privilege........................37
9.3. Fractions of Shares; Interest...........................38
9.4. Reservation of Stock; Listing...........................38
9.5. Rights..................................................38
9.6. Adjustment of Conversion Ratio..........................39
9.7. Merger or Consolidation.................................42
9.8. Notice of Certain Corporate Actions.....................43
9.9. Reports as to Adjustments...............................43
10. The Collateral Agent.................................................43
10.1. Appointment.............................................43
10.2. Delegation of Duties....................................44
10.3. Exculpatory Provisions..................................44
10.4. Reliance by the Collateral Agent........................44
10.5. Notice of Default.......................................45
10.6. Non-Reliance on Collateral Agent and Other Purchasers...45
10.7. Indemnification.........................................46
10.8. Collateral Agent in its Individual Capacity.............46
10.9. Successor Collateral Agent..............................47
11. Interpretation.......................................................47
11.1. Definitions.............................................47
11.2. Accounting Principles...................................62
12. Miscellaneous........................................................62
12.1. Payments; Indemnity.....................................62
<PAGE> 6
12.2. Severability............................................64
12.3. Specific Enforcement....................................64
12.4. Entire Agreement........................................64
12.5. Counterparts............................................64
12.6. Notices and other Communications........................64
12.7. Amendments..............................................65
12.8. Successors and Assigns..................................66
12.9. Expenses................................................66
12.10. Survival................................................66
12.11. Transfer of Notes and Common Stock......................66
12.12. GOVERNING LAW...........................................67
12.13. Submission to Jurisdiction..............................67
12.14. Service of Process......................................67
12.15. WAIVER OF JURY TRIAL....................................67
12.16. Public Announcements....................................67
12.17. Further Assurances......................................68
12.18. Substitution of Purchaser...............................68
12.19. Signatures..............................................68
<PAGE> 7
THIS CONVERTIBLE NOTE PURCHASE AGREEMENT, dated as of _________, 1999
(this "Agreement"), is made among BIO-PLEXUS, INC., a Connecticut corporation
(the "Company"), the purchasers listed on Exhibit A hereto (each such party, a
"Purchaser" and collectively, the "Purchasers"), and APPALOOSA MANAGEMENT L.P.,
as Collateral Agent (the "Collateral Agent").
WHEREAS, the parties hereto have previously entered into a Note
Purchase Agreement (the "Note Purchase Agreement");
WHEREAS, the Note Purchase Agreement provides that, subject to the
terms and conditions specified therein, the parties thereto will enter into this
Agreement;
WHEREAS, upon the terms and subject to the conditions set forth in
this Agreement, the Purchasers wish to purchase from the Company, and the
Company wishes to issue and sell to the Purchasers, (i) Zero Coupon Secured
Convertible Notes due [______, 2004] (the "Notes") issued by the Company in the
aggregate principal amount of $____________ (the "Face Amount") and (ii) an
aggregate of 250,000 shares (the "Shares") of Common Stock, no par value, of the
Company (the "Common Stock");
<PAGE> 8
WHEREAS, the Notes shall be convertible (under the circumstances
described herein) into shares of Common Stock, no par value, of the Company (the
"Common Stock"); and
WHEREAS, the Purchasers and the Company desire to provide for such
purchase and sale and to establish various rights and obligations in connection
therewith.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties and agreements herein set forth, the parties hereto
agree as follows:
1. Issuance and Sale of Notes and Common Stock.
1.1. Definitions. Certain capitalized terms used in the Agreement are
defined in Section 13 hereof; references to a "Schedule" or an "Exhibit" are,
unless otherwise specified, to a Schedule or an Exhibit attached to this
Agreement.
1.2. Issuance, Purchase and Sale. (a) Upon the terms and subject to
the conditions set forth herein, the Company is issuing and selling to the
Purchasers and the Purchasers are purchasing from the Company, the Notes and the
Shares for an aggregate cash purchase price of [$________] (the "Purchase
Price"). The Notes shall be in the form of Exhibit 1.2 hereto.
(b) The parties agree that the fair market value of the Notes is
$_____ and the fair market value of the Common Stock purchased hereby is
$[750,000]. Each party agrees to file all tax returns consistent with such
allocation and to take no position in consistent with such allocation, unless
required by law.
1.3. Closing. (a) The closing of the transactions contemplated hereby
(the "Closing") will take place simultaneously herewith at the offices of Fried,
Frank, Harris, Shriver & Jacobson, New York, New York.
1.4. Deliveries by the Company. At the Closing, the Company is
delivering to each Purchaser (and to such other parties as otherwise set forth
below) the following:
(i) duly executed Notes in the principal amount set forth
opposite such Purchaser's name on Exhibit 1.4i hereto;
(ii) a duly executed warrant to purchase 1,500,000 shares of
Common Sock with an exercise price of $7 per share in the form
attached hereto as Exhibit 1.4 hereto (the "$7 Warrants");
(iii) an opinion of the Company's counsel, dated as of the date
hereof, addressed to such Purchaser in the form of Exhibit 1.4ii
hereto;
(iv) an Officers' Certificate, dated as of the date
<PAGE> 9
hereof, certifying that: the (A) representations and warranties
contained in Section 2 hereof are true and correct; and (B) holders of
more than 50% of the Company's outstanding Common Stock have approved
the Rollover Transactions at a properly called special meeting of the
stockholders of the Company;
(v) a good standing certificate for the Company, dated no earlier
than seven days prior to the date hereof, from the State of
Connecticut;
(vi) a copy of the resolutions of the Board of Directors
authorizing the execution of each of the Transaction Documents and the
performance of the transactions contemplated by the Transaction
Documents which shall be certified as true, correct and effective as
of the date hereof by an officer of the Company;
(vii) duly executed copies of the Security Agreement [and the
Intercreditor Agreement] in the forms attached hereto as Exhibits 1.4A
and B, and copies of any other Collateral Documentation including
Financing Statements required to perfect the Holders' security
interest in the Collateral;
(viii) a duly executed copy of the Registration Rights Agreement
attached hereto as Exhibit 1.4vii;
(ix) a duly executed copy of the Escrow Agreement attached hereto
as Exhibit 1.4viii;
(x) an opinion from an independent valuation consultant or
appraiser reasonably satisfactory to the Purchasers in form and
substance reasonably satisfactory to the Purchasers supporting the
conclusions that, after giving effect to the Rollover Transactions,
the Company will not be insolvent by the incurrence of Indebtedness
incurred in connection therewith, or be left with unreasonably small
capital with which to engage in its business, or have incurred debts
beyond its ability to pay such debts as they mature];
(xi) a copy of the Amended and Restated By-laws of the Company in
form and substance reasonably satisfactory to the Purchasers (the
"By-Laws") and which shall be certified as true, correct and effective
as of the date hereof by an officer of the Company;
(xii) the Purchasers' costs and expenses (including the
reasonable fees and expenses of its counsel, Fried, Frank, Harris,
Shriver & Jacobson) incurred in connection with the transactions
contemplated by the Transaction Documents to be
<PAGE> 10
paid as set forth in Section 1.5(i)(Y); and
(xiii) such other instruments and documents as reasonably
requested by each Purchaser.
1.5. Deliveries by the Purchasers. At the Closing, each Purchaser
is delivering to the Company (or such other parties as otherwise set forth
below) the following:
(i) the amount set forth opposite such Purchaser's name in
Exhibit 1.5i, such amount being equal to the pro-rata portion of the
Purchase Price allocable to such Purchaser for the principal amount of
Notes being purchased by such Purchaser as set forth opposite such
Purchaser's name in Exhibit 1.5i hereto, less (Y) its costs and
expenses (including the fees and expenses of its counsel, Fried,
Frank, Harris, Shriver & Jacobson and accountants, which amounts shall
be wire transferred by Appaloosa in immediately available funds to one
or more accounts designated by such parties on or prior to the date
hereof) [and (Y) $________ to be wire transferred in immediately
available funds to _______ (the "Escrow Agent") pursuant to the Escrow
Agreement, dated as of the date hereof, by and between the Company,
the Escrow Agent and the [Collateral Agent]]; and
[(ii) a duly executed copy of the Escrow Agreement].
2. Representations and Warranties of the Company.
The Company represents and warrants to each Holder as follows:
2.1. Organization; Subsidiaries. (a) The Company is a corporation duly
organized and existing in good standing under the laws of the State of
Connecticut and has the corporate power to own its property and to carry on its
business as now being conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary and where the failure to so qualify could, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(b) The Company does not have any Subsidiaries. Except as set
forth on Schedule 2.1(b), the Company does not own, directly or indirectly, or
have the right or obligation to acquire, any interest in any business
association or other Person.
2.2. Due Authorization. The Company has all right, power and authority
to enter into, deliver and perform the Transaction Documents
<PAGE> 11
to which it is a party and to consummate the transactions contemplated thereby.
The execution and delivery of each Transaction Document by the Company and the
performance by it of the transactions contemplated thereby (including, without
limitation, the issuance and sale of the Notes, the Shares and issuance of
shares of Common Stock upon conversion of the Notes) and compliance by the
Company with all the provisions of each Transaction Document (as applicable) has
been duly authorized by all requisite corporate proceedings on the part of the
Company, (including, without limitation, approval by holders of more than 50% of
the outstanding Common Stock). Each of the Transaction Documents has been duly
executed and delivered on behalf of the Company, and each such Transaction
Document constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its respective terms, except
to the extent that such enforceability (i) may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally or (ii) is subject to general principles of equity.
The Shares and the shares of Common Stock issuable upon conversion of the Notes
have been validly reserved for issuance, and upon issuance, will be validly
issued and outstanding, fully paid and nonassessable.
2.3. Capitalization. The authorized capital stock of the Company
consists of (i) 25,000,000 shares of Common Stock, of which, as of the date
hereof, 13,643,308 shares were issued and outstanding, 809,750 shares were
reserved for issuance upon the exercise of outstanding stock options pursuant to
the Company's option plans, 1,380,386 shares were reserved for issuance upon the
exercise of the outstanding warrants, and 2,500,000 shares were reserved for
issuance upon the conversion of certain 6% Convertible Debentures due 2004 and
(ii) 3,000,000 shares of Preferred Stock, no par value (the "Preferred Stock"),
of which, as of the date hereof, no shares were issued and outstanding. All of
the outstanding shares of Common Stock are validly issued and are fully paid and
nonassessable. No class of Capital Stock of the Company is entitled to
preemptive rights. Except as set forth on Schedule 2.3, there are no outstanding
options, warrants, subscription rights, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, shares of any
class of Capital Stock of the Company, or Contracts, by which the Company is or
may become bound to issue additional shares of its Capital Stock or options,
warrants or other rights to purchase or acquire any shares of its Capital Stock.
Except as set forth on Schedule 2.3, no warrants, bonds, debentures, notes or
other Indebtedness or other security having the right to vote (or convertible
into or exercisable for securities having the right to vote) on any matters on
which stockholders may vote were issued or outstanding. Except as set forth on
Schedule 2.3 or as contemplated by the Transaction Documents, the Company is not
a party to, and, to the Company's best knowledge, there are, and immediately
after the
<PAGE> 12
Closing, there will be, no agreement, restriction or encumbrance (such as a
preemptive or similar right of first refusal, right of first offer, proxy,
voting agreement, voting trust, registration rights agreement, shareholders'
agreement, etc., whether or not the Company is a party thereto) with respect to
the purchase, sale or voting of any shares of Capital Stock of the Company
(whether outstanding or issuable upon conversion, exchange or exercise of
outstanding securities) or other securities of the Company pursuant to any
provision of law, the Certificate of Incorporation or By-Laws, any agreement or
otherwise. Except as set forth on Schedule 2.3 or as contemplated by the
Transaction Documents, no person has the right to nominate or elect one or more
directors of the Company. Immediately following the transactions contemplated
hereby, the Company's capitalization will be as set forth in Schedule 2.3. The
Company has not declared or paid any dividend or made any other distribution of
cash, stock or other property to its stockholders since January 1, 1996.
2.4. SEC Reports Correspondence. The Company has filed all proxy
statements, reports and other documents required to be filed by it under the
Exchange Act from and after January 1, 1995; and the Company has furnished each
Purchaser true and complete copies of all annual reports, quarterly reports,
proxy statements and other reports under the Exchange Act filed by the Company
from and after such date, each as filed with the SEC (collectively, the "SEC
Reports"). Each SEC Report was in compliance in all material respects with the
requirements of its respective report form and did not on the date of filing
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, and
as of the date hereof there is no fact or facts not disclosed in the SEC Reports
which relate specifically to the Company and which could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
has made available for inspection by each Purchaser copies of all correspondence
between the Company and the SEC from and after January 1, 1995.
2.5. Financial Statements. The financial statements (including any
related schedules and/or notes) included in the SEC Reports have been prepared
in accordance with GAAP consistently followed (except as indicated in the notes
thereto) throughout the periods involved and fairly present the consolidated
financial condition, results of operations, cash flows and changes in
stockholders' equity of the Company as of the respective dates thereof and for
the respective periods then ended (in each case subject, as to interim
statements, to changes resulting from year-end adjustments, none of which were
material in amount or effect). Except as set forth on Schedule 2.5, the Company
is not subject to any Liabilities, except (i) Liabilities in the respective
amounts reflected or reserved against in
<PAGE> 13
the Company's balance sheet as of December 31, 1998 included in the SEC Reports
or (ii) Liabilities incurred in the ordinary course of business since December
31, 1998 which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
2.6. Litigation. (a) Except as set forth on Schedule 2.6, there is no
Litigation pending or, to the knowledge of the Company, threatened against the
Company or any of its properties or assets by or before any court, arbitrator or
other Governmental Entity.
(b) The Company is not in default under or in breach of any Order
of any court, arbitrator or other Governmental Entity, and the Company is not
subject to or a party to any Order of any court, arbitrator or other
Governmental Entity arising out of any claim, demand, notice, action, suit or
proceeding under any Law.
2.7. Title to Properties; Insurance. (a) Except as set forth on
Schedule 2.7(a), the Company has good and valid title to, or, in the case of
property leased by it as lessee, a valid and subsisting leasehold interest in,
the Company's properties and assets, free of all Liens.
(b) Schedule 2.7(b) sets forth a complete and correct list of all
insurance coverage carried by the Company, the carrier and the terms and amount
of coverage. All of the material assets of the Company and all aspects of the
Company's business that are of insurable character are covered by insurance with
insurers against risks of liability, casualty and fire and other losses and
liabilities customarily obtained to cover comparable businesses and assets in
amounts, scope and coverage which are consistent with prudent industry practice.
The Company is not in default with respect to its obligations under any such
insurance policy maintained by it. All such policies and other instruments are
in full force and effect and no premiums with respect thereto are past due and
owed. The Company has not failed to give any notice or present any material
claim under any such insurance policy in due and timely fashion or as required
by any of such insurance policies. The Company has not otherwise through any
act, omission or non-disclosure, jeopardized or impaired full recovery of any
claim under such policies, and there are no claims by the Company under any of
such policies to which any insurance company is denying liability or defending
under a reservation of rights or similar clause. The Company has not received
notice of any pending or threatened termination of any of such policies or any
premium increases for the current policy period with respect to any of such
policies and the consummation of the transactions contemplated by the
Transaction Documents will not result in any such termination or premium
increase.
2.8. Consents, etc. The Company is not required to obtain any
<PAGE> 14
consent, approval or authorization of, or to make any registration declaration
or filing with, any Governmental Entity or third party as a condition to or in
connection with the valid execution and delivery of any of the Transaction
Documents (including, without limitation, the issuance and sale of the Notes and
the Shares), or the performance by the Company of its obligations in respect of
any thereof, except for (i) filings required pursuant to state and federal
securities laws to effect any registration of Securities pursuant to this
Agreement and the Registration Rights Agreement, (ii) filing of the Financing
Statements [and Mortgages], (iii) filings to be made with the U.S. Patent and
Trademark Office or the U.S. Copyright Office to perfect the Holders' first
priority security interest in the Intellectual Property constituting Collateral
under the Collateral Documentation, (iv) filing on Form 8-K under the Exchange
Act to report the consummation of the transactions contemplated hereby and (v)
the approval of the stockholders of the Company referred to in Section 6.33.
2.9. No Material Adverse Change. Since December 31, 1998, no event has
occurred or failed to occur which could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
2.10. Taxes. Except as set for on Schedule 2.10:
(a) The Company (i) has timely filed all Tax Returns (including,
but not limited to, those filed on a consolidated, combined or unitary basis)
required to have been filed by the Company, all of which Tax Returns are true,
correct and complete in all material respects; (ii) has within the time and
manner prescribed by Law paid all Taxes, required to be paid in respect of the
periods covered by such Tax Returns or otherwise due to any Governmental Entity;
(iii) has established and maintained on its books and records, accruals and
reserves that are adequate for the payment of all Taxes not yet due and payable
and attributable to any period preceding the date hereof; and (iv) has not
received notice of any deficiencies for any Tax from any Governmental Entity
against the Company, which deficiency has not been satisfied. The Company is not
the subject of any currently ongoing audit or judicial or administrative
proceeding relating to Taxes, nor is any such audit pending or, to the Company's
knowledge, threatened. With respect to any taxable period ended prior to
[December 31, 1994], all Tax Returns including the Company has been audited by
the Internal Revenue Service or are closed by the applicable statute of
limitations. The accruals and reserves for Taxes on the Company's balance sheet
as of December 31, 1998 included in the SEC Reports are complete and adequate in
all respects to cover any and all Liabilities of the Company
<PAGE> 15
for Taxes through such date. There are no Liens with respect to Taxes upon any
of the properties or assets, real or personal, tangible or intangible, of the
Company (other than Liens for Taxes not yet due). No claim has been made or
threatened by any Governmental Entity in a jurisdiction where the Company does
not file Tax Returns that the Company is or may be subject to taxation by that
jurisdiction. The Company has not filed an election under Section 341(f) of the
Code to be treated as a consenting corporation. The Company is not or has not
been a party to any tax sharing agreement.
(b) The Company has duly withheld or collected all Taxes
required by Law to have been withheld or collected (including Taxes required by
Law to be withheld or collected in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third party)
and any such amounts required to be remitted to a Governmental Entity have been
timely remitted.
2.11. Compliance with ERISA. Schedule 2.11 sets forth a complete and
correct list of all (i) Benefit Plans, (ii) Employee Agreements, including (in
the case of each of (i) and (ii)) all amendments thereto, and trust or funding
agreements with respect thereto (excluding any grantor trusts established to
hold assets subject to the claims of the Company's creditors) and (iii) summary
plan descriptions and communications of any material modifications to any
employee or employees relating to any Benefit Plan or Employee Agreement. Each
Benefit Plan has been established and operated in accordance with terms thereof
and all other applicable Laws, including but not limited to the Code and ERISA,
and the Company and each ERISA Affiliate is in compliance with the terms of each
Employee Agreement. Neither the Company nor any ERISA Affiliate presently
sponsors, maintains, contributes to, or is required to contribute to, nor has
the Company nor any ERISA Affiliate ever sponsored, maintained, contributed to,
or been required to contribute to, an "employee pension benefit plan" (within
the meaning of Section 3(2) of ERISA) which is subject to Title IV of ERISA or
Section 412 of the Code or a "multiemployer plan" (within the meaning of Section
4001(a)(3) of ERISA). Neither the Company nor any ERISA Affiliate has ever
maintained or contributed to or been required to maintain or contribute to any
employee welfare benefit plan (within the meaning of Section 3(1) of ERISA)
which provides for post-retirement medical, life insurance or other welfare-type
benefits, and neither the Company nor any ERISA Affiliate has any Liability for
any such post-retirement benefits to any present or former employee.
2.12. Labor Relations. No unfair labor practice complaint or any
complaint alleging sexual harassment or sex, age, race or other employment
<PAGE> 16
discrimination has been brought during the last three years against the Company
before the National Labor Relations Board, the Equal Employment Opportunity
Commission or any other Governmental Entity, nor is there any charge,
investigation (formal or informal) or complaint pending, or to the knowledge of
the Company, threatened, against the Company regarding any labor or employment
matter. There have been no governmental audits of the equal employment
opportunity practices of the Company and, to the knowledge of the Company, no
reasonable basis for any such audit exists. The Company (i) is in compliance
with all applicable Laws respecting employment, employment practices, labor,
terms and conditions of employment, collective bargaining and wages and hours,
and (ii) has withheld all amounts required by Law or by agreement to be withheld
from the wages, salaries and other payments to its employees.
2.13. Intellectual Property Rights. Schedule 2.13(a) sets forth a
complete and correct list of all Intellectual Property of the Company (the
"Company Intellectual Property"). Except as set forth on Schedule 2.13(b), the
Company owns and possesses all right, title and interest in, or possesses
adequate licenses to (without the making of any payment to others or the
obligation to grant rights to others in exchange) all the Company Intellectual
Property, free and clear of any Liens, licenses or other restrictions. The
Company has the right to require the applicant of any Company Intellectual
Property which is an application, including but not limited to patent
applications, trademark applications, service mark applications, copyright
applications, or mask work applications, to transfer ownership to the Company of
the application and of the registration once it issues. All registered patents,
trademarks, service marks and copyrights listed on Schedule 2.13(a) are valid
and subsisting and in full force and effect. The Company Intellectual Property
is all the Intellectual Property that is necessary for the ownership,
maintenance and operation of the Company's properties and assets and the Company
has the right to use all of the Company Intellectual Property in all
jurisdictions in which the Company conducts or proposes to conduct its business,
and the consummation of the transactions contemplated hereby will not alter or
impair any such rights. The Company has never agreed to indemnify any person for
or against any interference, infringement, misappropriation or other conflict
with respect to any Company Intellectual Property. No third party has interfered
with, infringed upon, misappropriated or otherwise come into conflict with any
Company Intellectual Property. The Company has taken all necessary and desirable
action to maintain and protect each item of Company Intellectual Property. The
validity, ownership, enforceability, use or legality of the Company Intellectual
Property is not being questioned or opposed in any Litigation or Order to which
the Company or any Person who has granted a license of Intellectual Property to
the Company, is a party or subject, nor, to the knowledge of the Company, is
<PAGE> 17
any such Litigation or Order threatened. The conduct of the Company as currently
conducted and as currently proposed to be conducted does not and will not
infringe, interfere with, misappropriate or otherwise come into conflict with
any Intellectual Property of any other Person, and the Company has not received
any charge, complaint, claim, demand or notice alleging any such infringement,
interference, misappropriation or conflict (including any claim that the Company
must license or refrain from using any Intellectual Property of any other
Person). Except as set forth in Schedule 2.13(b), the Company has not granted
any licenses of Intellectual Property to any Person.
2.14. Possession of Franchises, Licenses, Etc. The Company possesses
all franchises, certificates, licenses, permits and other authorizations from
Governmental Entities and other rights, free from burdensome restrictions, that
are necessary for the ownership, maintenance and operation of its properties and
assets, except for those the absence of which could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, and the
Company is not in violation of any thereof.
2.15. Compliance with Laws. The Company is in compliance with all
applicable Laws including, without limitation, all rules, regulations and other
Laws of the Food and Drug Administration (the "FDA") relating to the design,
development, manufacturing, sales and distribution of safety medical products
and accessories, except where the failure to comply could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect. No
Order has been issued nor any Law enacted which prevents, nor does any Law
prohibit the consummation of the transactions contemplated by any of the
Transaction Documents.
2.16. Conflicting Agreements and Charter Provisions. The Company has
not entered into any Contract and the Company is not subject to any charter or
by-law provision or any Order which in any case could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Neither the
execution and delivery of any of the Transaction Documents, nor the issuance,
sale and delivery of the Notes or the Shares, nor the fulfillment of or
compliance with the terms and provisions hereof or thereof, will conflict with
or result in a breach of the terms, conditions, or provisions of, or give rise
to a right of termination under, or constitute a default under, or result in the
creation of any Lien, or result in any violation of, the Certificate of
Incorporation or By-Laws or other organizational documents of the Company or any
Contract of the Company. The Company has not defaulted under any outstanding
indenture or other debt instrument or with respect to the payment of the
principal of or interest on any outstanding obligations for borrowed money, and
the Company is not in default under any of its
<PAGE> 18
Contracts except, in the case of Contracts, where such default could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
2.17. Suppliers. Except as set forth on Schedule 2.17, no Major
Supplier has during the last twelve months materially increased or, to the
knowledge of the Company, threatened to materially increase its prices or
materially decreased or limited or, to the knowledge of the Company, threatened
to materially decrease or limit its provision of services or supplies to the
Company. During the last twelve months, there has been no termination,
cancellation or limitation of, or any material change in, the business
relationships of the Company with any Major Supplier. To the knowledge of the
Company, there will not be any such change in relations with any Major Supplier
or triggering of any right of termination, cancellation or penalty or other
payment in connection with or as a result of the transactions contemplated by
the Transaction Documents that could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
2.18. Products. Except as set forth on Schedule 2.18, there are no
statements, citations or decisions by the FDA or any other Governmental Entity
stating that any product manufactured, sold, rented, leased, designed,
distributed or marketed at any time by the Company ("Products") is defective or
unsafe or fails to meet any standards promulgated by the FDA or such
Governmental Entity. Except as set forth on Schedule 2.18, there is no (i) fact
relating to any Product that, to the knowledge of the Company, may impose upon
the Company a duty to recall or retrofit any Product or a duty to warn customers
of a defect in any Product, (ii) latent or overt design, manufacturing or other
defect in any Product that could, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect or (iii) Liability for warranty
claims or returns with respect to any Product that could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
2.19. Offering of the Securities. Neither the Company nor any Person
acting on its behalf has offered the Securities or any similar securities of the
Company for sale to, solicited any offers to buy the Securities or any similar
securities of the Company from or otherwise approached or negotiated with
respect to the Company with any Person other than the Purchasers and other
"accredited investors" (as defined in Rule 501(a) under the Securities Act).
Neither the Company nor any Person acting on its behalf has taken or, except as
contemplated hereby will take any action (including, without limitation, any
offering of any securities of the Company under circumstances which would
require the integration of such offering with the offering of the Securities
under the Securities Act)
<PAGE> 19
which could reasonably be expected to subject the offering, issuance or sale of
the Securities to the registration requirements of Section 5 of the Securities
Act or violate the provisions of any securities, "blue sky", or similar law of
any applicable jurisdiction.
2.20. Existing Indebtedness; Future Liens. (a) Schedule 2.20 sets
forth a complete and correct list of all outstanding Indebtedness of the Company
as of the date hereof. The Company has not defaulted and no waiver of default is
currently in effect, in the payment of any principal or interest on any such
Indebtedness and no event or condition exists with respect to any such
Indebtedness that would permit (or that with notice or the lapse of time, or
both, would permit) one or more Persons to cause such Indebtedness to become due
and payable before its stated maturity or before its regularly scheduled dates
of payment.
(b) The Company has not agreed or consented to cause or permit
in the future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to any Lien
(other than Permitted Liens).
2.21. Environmental Matters. The Company has no knowledge of any claim
or has received any notice of any claim, and no proceeding has been instituted
raising any claim against the Company or any of its real properties now or
formerly owned, leased or operated by it or other assets, alleging any damage to
the environment or violation of any Environmental Laws. Except as set forth on
Schedule 2.21, (i) the Company has no knowledge of any facts which would give
rise to any claim, public or private, of violation of Environmental Laws or
damage to the environment emanating from, occurring on or affecting real
properties now or formerly owned, leased or operated by the Company or to other
assets or their use; (ii) the Company has not stored any Hazardous Materials on
real properties now or formerly owned, leased or operated by it and has not
disposed of any Hazardous Materials in a manner contrary to any Environmental
Laws; and (iii) all buildings on all real properties now owned, leased or
operated by the Company are in compliance with applicable Environmental Laws.
2.22. Solvency. The Company is not, and after giving effect to the
issuance of the Notes and the sale of the Shares and the application of the
proceeds therefrom will not be, insolvent within the meaning of Title 11 of the
United States Code or any comparable state law provision.
2.23. Security Documents. Upon proper filing of the Financing
Statements (or assignments thereof) in the offices of the Secretary of State of
Connecticut with respect to the Company (or assignments thereof) and in the
locations identified in the Security Agreement, the Liens
<PAGE> 20
granted under the Transaction Documents shall constitute a fully perfected
security interest in all right, title and interest of the Company in and to the
personal property therein prior to any other security interests against such
property or interests therein.
2.24. Brokers or Finders. No agent, broker, investment banker or other
Person is or will be entitled to any broker's fee or any other commission or
similar fee from the Company in connection with any of the transactions
contemplated by this Agreement.
2.25. Holding Company Act and Investment Company Act. The Company is
not: (i) a "public utility company" or a "holding company," or an "affiliate" or
a "subsidiary company" of a "holding company," or an "affiliate" of such a
"subsidiary company," as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended, or (ii) a "public utility," as defined in the
Federal Power Act, as amended, or (iii) an "investment company" or an
"affiliated person" thereof or an "affiliated person" of any such "affiliated
person," as such terms are defined in the Investment Company Act of 1940, as
amended.
2.26. Related Party Transactions. (a) Except as set forth on Schedule
2.26, the Company has not entered into or been a party to any transaction with
any Related Party thereof except in the ordinary course of, and pursuant to the
reasonable requirements of, such party's business and upon fair and reasonable
terms that are at least equivalent to an arms length transaction with a Person
not a Related Party of such party.
(b) Except as set forth on Schedule 2.26, the Company has not
entered into any lending or borrowing transaction with any director, officer or
employee of the Company.
2.27. Year 2000. The software, computers and other hardware and
systems used by the Company will (i) accurately process date information before,
during and after January 1, 2000, including, but not limited to, accepting date
input, providing date output and performing calculations on dates or portions of
dates; (ii) function accurately and without interruption before, during and
after January 1, 2000 without any change in operations associated with the
advent of the new century; (iii) respond to two digit year date input in a way
that resolves the ambiguity as to century in a disclosed, defined and
predetermined manner; and (iv) store and provide output of date information in
ways that are unambiguous as to century. The Company has contacted its principal
vendors and Major Suppliers and other Persons with whom the Company has material
business relationships, and each of such vendors, Major Suppliers and other
Persons have notified the Company that its software, computers and other
hardware and systems are Year 2000 compliant in all material respects to the
extent affecting the Company. The ability of such vendors, Major Suppliers and
<PAGE> 21
other Persons to identify and resolve their own Year 2000 issues could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
2.28. Disclosure. Neither any Transaction Document nor any Schedule
thereto, nor any certificate furnished to any Purchaser by or on behalf of the
Company in connection with the transactions contemplated thereby, contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein and therein not misleading.
3. Representations and Warranties of the Purchasers. Each Purchaser,
severally and not jointly, represents and warrants to the Company with respect
to such Purchaser as follows:
3.1. Organization and Qualification. Such Purchaser is duly organized
and existing in good standing under the laws of the state of its formation and
has the power to own its respective property and to carry on its respective
business as now being conducted. Such Purchaser is duly qualified to do business
and in good standing in every jurisdiction in which the nature of the respective
business conducted or property owned by it makes such qualification necessary,
except where the failure to so qualify would not prevent consummation of the
transactions contemplated hereby or reasonably be expected to have a material
adverse effect on such Purchaser's ability to perform its obligations hereunder.
3.2. Due Authorization. Such Purchaser has all right, power and
authority to enter into, deliver and perform the Transaction Documents to which
it is a party and to consummate the transactions contemplated thereby. Such
Purchaser's execution and delivery of each Transaction Document to which it is a
party and the performance by such Purchaser of the transactions contemplated
thereby and compliance by such Purchaser with all the provisions of each
Transaction Document to which it is a party (as applicable) have been duly
authorized by all requisite proceedings on the part of such Purchaser. Each of
the Transaction Documents to which it is a party has been duly executed and
delivered on behalf of such Purchaser, and each such Transaction Document
constitutes the legal, valid and binding obligation of such Purchaser,
enforceable against such Purchaser in accordance with its respective terms,
except to the extent that such enforceability (i) may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally or (ii) is subject to general principles of equity.
3.3. Acquisition for Investment. Such Purchaser is acquiring the Notes
and the Shares being purchased by it for its own account for the purpose of
investment and not with a view to or for sale in connection with
<PAGE> 22
any distribution thereof except in compliance with all applicable securities
Laws.
3.4. Offering of Securities. Such Purchaser has not offered the
Securities for sale by any means of general solicitation or general advertising
including, but not limited to, any advertisements, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
were invited by any general solicitation or general advertising.
3.5. Accredited Investor. Such Purchaser is an "accredited investor"
within the meaning of Rule 501 promulgated under the Securities Act.
4. Registration, Exchange and Transfer of Notes.
4.1. The Note Register; Persons Deemed Owners. The Company shall
maintain, at its office designated for notices in accordance with Section 12.6,
a register for the Notes (the "Note Register"), in which the Company shall
record the name and address of the person in whose name each Note has been
issued and the name and address of each transferee and prior owner of each Note.
The Company shall deem and treat the person in whose name a Note is so
registered as the Holder and owner thereof for all purposes and shall not be
affected by any notice to the contrary, until due presentment of such Note for
registration of transfer as provided in this Section 4.
4.2. Issuance of New Notes Upon Exchange or Transfer. Upon surrender
for exchange or registration of transfer of any Note at the office of the
Company designated for notices in accordance with Section 12.6, the Company
shall execute and deliver, at its expense, one or more new Notes as requested by
the Holder of the surrendered Note, each dated the date so surrendered, but in
the same aggregate Face Amount as such surrendered Note, and registered in the
name of such person or persons as shall be designated in writing by such Holder.
Every Note surrendered for registration of transfer shall be duly endorsed, or
be accompanied by a written instrument of transfer duly executed, by the Holder
of such Note or by his attorney duly authorized in writing. The Company may also
condition the issuance of any new Note or Notes to a Person other than the
Holder thereof on the payment of a sum sufficient to cover any stamp tax or
other governmental charge imposed in respect of such transfer.
5. Payment of Notes.
5.1. Home Office Payment. The Company will pay to each Purchaser or
any transferee thereof all sums becoming due on the Notes (including all
<PAGE> 23
sums which become due on the Notes at the maturity thereof) (a) prior to the
date of execution of an indenture (the "Indenture Date") at the account/address
to be specified by such Purchaser or transferee for such purpose by notice to
the Company, by wire transfer of immediately available funds, or at such other
address or by such other method as such Purchaser or transferee shall have
designated by notice to the Company and (b) at any time after the Indenture
Date, by wire transfer to the Trustee, as specified in the indenture. Before
selling or otherwise transferring any Note, such Purchaser or transferee will
make a notation thereon of the aggregate amount of all payments of the Face
Amount, if any, theretofore made.
5.2. Limitation on Interest. No provision of this Agreement or of the
Notes shall require the payment or permit the collection of interest in excess
of the maximum rate which is permitted by Law. If any such excess interest is
provided for herein or in the Notes, or shall be adjudicated to be so provided
for, then the Company shall not be obligated to pay such interest in excess of
the maximum rate permitted by Law, and the right to demand payment of any such
excess interest is hereby waived, any other provisions in this Agreement or in
the Notes to the contrary notwithstanding.
5.3. Accreted Value. The Notes have been issued at the original issue
discount ("Original Issue Discount") in the amount stated on the face of each
Note and the Notes will accrete in value to the Face Amount at the Stated
Maturity. Prior to the Stated Maturity, the Accreted Value for any specified
date means, the applicable amount provided below for each $1,000 Face Amount of
the Notes:
(i) if the specified date occurs on one of the following dates
(each a "Semi-Annual Accrual Date"), the Accreted Value of such Face Amount
will equal the amount set forth opposite such Semi-Annual Accrual Date:
<TABLE>
<CAPTION>
Semi-Annual Accrual Date Accreted Value
------------------------ --------------
<S> <C>
December 31, 1999...................... $
June 31, 2000 ......................... $
December 31, 2000...................... $
June 30 , 2001......................... $
December 31, 2001...................... $
June 30, 2002 ......................... $
December 31, 2002...................... $
June 31, 2003 ......................... $
December 31, 2003...................... $
June 30, 2004 ......................... $
</TABLE>
(ii) if the specified date occurs before the first
<PAGE> 24
Semi-Annual Accrual Date, the Accreted Value of such Face Amount will equal
the sum of (a) the Original Issue Price and (b) an amount equal to the
product of (1) the Accreted Value of such Face Amount for the first
Semi-Annual Accrual Date less the original issue price multiplied by (2) a
fraction, the numerator of which is the number of days from the Closing
Date to the specified date, using a 360-day year of twelve 30-day months,
and the denominator of which is the number of days elapsed from the
original issue date to the first Semi-Annual Accrual Date, using a 360-day
year of twelve 30-day months;
(iii) if the specified date occurs between two Semi-Annual
Accrual Dates, the Accreted Value of such Face Amount will equal the sum of
(a) the Accreted Value of such Face Amount for the Semi-Annual Accrual Date
immediately preceding such specified date and (b) an amount equal to the
product of (1) the Accreted Value of such Face Amount for the immediately
following Semi-Annual Accrual Date less the Accreted Value of such Face
Amount for the immediately preceding Semi-Annual Accrual Date multiplied by
(2) a fraction, the numerator of which is the number of days from the
immediately preceding Semi-Annual Accrual Date to the specified date, using
a 360-day year of twelve 30-day months, and the denominator of which is
180; or
(iv) if the specified date occurs after the last Semi-Annual
Accrual Date, the Accreted Value will equal $1,000.
5.4. Interest. The Notes shall not bear interest (other than accrued
Original Issue Discount which shall be payable at Stated Maturity), except that
if any amount payable hereunder is not paid when due (including, without
limitation, payment of the Accreted Value or the entire Face Amount of the
Notes, as applicable, under Section 7.2), then in each such case the overdue
amount shall bear interest at a rate of [12%] per annum compounded semi-annually
(to the extent that the payment of such interest shall be legally enforceable),
which interest shall accrue from the date such overdue amount was due to the
date payment of such amount, including interest thereon, has been made or duly
provided for. All such interest shall be payable on demand. The accrual of such
interest on overdue amounts shall, in the case of any late payment of the Face
Amount or Change of Control Redemption Price, be in lieu of, and not in addition
to, the continued accrual of Original Issue Discount. Original Issue Discount in
the period during which the Notes remain outstanding shall accrue at 7.5% per
annum, compounded semi-annually, computed on the basis of a 360-day year
consisting of twelve 30-day months, beginning on __________, 1999.
5.5. Principal. Unless otherwise provided herein, payment of the
<PAGE> 25
Face Amount of the Notes shall be due and payable as provided in the Notes.
6. Covenants of the Company. The Company covenants that at all times
from and after the date hereof:
6.1. Maintenance of Office or Agency. The Company shall maintain in
[Vernon, Connecticut] an office or agency where Notes may be presented or
surrendered for payment, where Notes may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Company in
respect of the Notes may be served. The Company shall give prompt written notice
to the Holders of the location, and any change in the location, of such office
or agency. The Company may also from time to time designate one or more other
offices or agencies (in or outside [Connecticut]) where the Notes may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations, provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in [Vernon, Connecticut] for such purposes. The Company
shall give prompt written notice to the Holders of any such designation or
rescission and of any change in the location of any such other office or agency.
6.2. Money for Security Payments to be Held in Trust. On or before
each date in which payments are due on the Notes, the Company shall segregate
and hold in trust for the benefit of the Persons entitled thereto a sum
sufficient to make such payments when such payments are due, until such sums
shall be paid to such Persons or otherwise disposed of as herein provided.
6.3. Existence. The Company will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, Material
rights (charter and statutory) and franchises and the existence, Material rights
and franchises of all of its Subsidiaries. Neither the Company nor any of its
Subsidiaries shall enter into any transaction of acquisition of, or merger or
consolidation or amalgamation with, any other Person (including any Subsidiary
or Affiliate of the Company or any of its Subsidiaries), or sell, transfer or
otherwise dispose of ("Transfer") all or substantially all of its assets to any
Person, or liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or make any Material change in the present method of conducting
business or engage in any type of business other than of same general type now
conducted by it. The Company shall not, and shall not permit any of its
Subsidiaries to, amend or otherwise modify (i) the Company's Certificate of
Incorporation, (ii) the By-Laws or (iii) the charter, by-laws or other
organizational documents of any of the Company's Subsidiaries.
6.4. Maintenance of Properties. The Company shall cause all properties
used or useful in the conduct of its business or the business
<PAGE> 26
of any Subsidiary to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment and shall cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section 6.4
shall prevent the Company from discontinuing the operation or maintenance of any
of such property if such discontinuance is, in the reasonable, good faith
judgment of the Company, desirable in the conduct of its business or the
business of any Subsidiary and not disadvantageous in any Material respect to
the Holders.
6.5. Payment of Taxes and Other Claims. The Company shall pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all Taxes levied or imposed upon the Company or any of its
Subsidiaries or upon the income, profits or property of the Company or any of
its Subsidiaries, and (ii) all lawful claims for labor, materials and supplies
which, if unpaid, might by Law become a Lien upon the property of the Company or
any of its Subsidiaries; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such Tax
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings.
6.6. Limitation on Indebtedness. The Company shall not, and shall not
permit any of its Subsidiaries to, create, incur, assume or directly or
indirectly guarantee or in any other manner become directly or indirectly liable
for the payment of any Indebtedness (excluding Permitted Indebtedness and
Indebtedness which is a Guaranty of an Indebtedness of the Company or any of its
Subsidiaries that is otherwise Permitted Indebtedness).
6.7. Limitation on Encumbrances. The Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, create, incur, assume
or otherwise suffer to exist or cause or otherwise suffer to become effective
any Lien in or on any right, title or interest to any property (real or
personal) that constitutes all or any portion of the Collateral (a "Restricted
Encumbrance," which term excludes the Lien created in favor of the Holders)
unless such Restricted Encumbrance is a Permitted Lien.
6.8. Limitation on Related Party Transactions. (a) The Company shall
not, and shall not permit any of its Subsidiaries to, enter into or be a party
to any transaction with any Related Parties (other than any of the Holders or
their Affiliates) except in the ordinary course of, and
<PAGE> 27
pursuant to the reasonable requirements of, such party's business and upon fair
and reasonable terms that are at least equivalent to an arms length transaction
with a Person that is not a Related Party. In addition, if any such transaction
or series of related transactions involves payments in excess of $[25,000] in
the aggregate, the terms of those transactions must be disclosed in advance to
each Holder. All such transactions existing as of the date hereof are set forth
on Schedule 6.8.
(b) The Company shall not, and shall not permit any of its
Subsidiaries to, enter into any lending or borrowing transaction with any
director, officer or employee of the Company or any of its Subsidiaries.
(c) The Company shall not, and shall not permit any of its
Subsidiaries to, (i) enter into or adopt or amend any existing agreement or
arrangement relating to severance, (ii) enter into or adopt or amend any
existing severance plan, (iii) enter into or adopt or amend any Benefit Plan or
Employee Agreement or (iv) grant any bonus, salary increase, severance or
termination pay to, any employee, officer, director or consultant other than in
the ordinary course of business consistent with past practice.
6.9. Limitation on Dividends; Stock Issuances. The Company shall not
offer or issue any shares of Preferred Stock or Common Stock for any purpose
whatsoever, except for shares of Common Stock issuable upon (i) exercise of the
Warrants, (ii) the conversion of the Notes and (iii) pursuant to Schedule 6.9.
The Company shall not declare any dividends on any shares of its Capital Stock,
or make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, retirement, exchange or other
acquisition of any shares of its Capital Stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash, securities, property or in obligations of the
Company or any of its Subsidiaries.
6.10. Subsidiary Guarantees. The Company shall cause its future direct
and indirect Subsidiaries organized under the laws of any state of the United
States (or the District of Columbia) to jointly and severally guarantee form of
obligations of the Company under the Notes and this Agreement pursuant to the
form of Guarantee and Security Agreement attached hereto as Exhibit 6.10. The
Company shall cause its Subsidiaries organized under the laws of any
jurisdiction other than any state of the United States or the District of
Columbia to jointly and severally guarantee the obligations of the Company under
the Notes and this Agreement pursuant to a guarantee agreement.
6.11. Additional Offerings of Securities. Prior to seeking
<PAGE> 28
financing from any third party consisting of an issuance of Equity Securities
(the "Proposed Securities") by the Company on or after the date hereof, the
Company shall notify the Holders of a description in reasonable detail of the
Proposed Securities, the amount proposed to be issued and the consideration the
Company desires to receive therefor (the "Notice"), which Notice shall
constitute an offer to the Holders with respect to the Proposed Securities on
the terms set forth therein. The Holders and the Company shall, for not less
than 20 days after receipt of the Notice (unless the Holders earlier indicate
that they have no interest in purchasing the Proposed Securities), discuss the
possibility of any of the Holders acquiring the Proposed Securities, after which
(if any of the Holders has not agreed to purchase the Proposed Securities on the
terms set forth in the Notice or such other terms as are mutually acceptable to
the Company and such Holder) the Company shall be permitted to seek and obtain
third party investors to acquire the Proposed Securities, provided that the
closing of such acquisition by such third party investor occurs within 90 days
from the date of the Notice and provided that the acquisition of the Proposed
Securities by such third party investor is on terms no more favorable to such
third party investor than those terms set forth in the Notice. No Equity
Securities shall be issued by the Company to any Person unless the Company has
first offered such Equity Securities to the Holders in accordance with this
Section 6.11. This Section 6.11 shall not apply to the following issuances of
securities: (i) pursuant to an approved employee stock option plan, stock
purchase plan, or similar employee benefit program or agreement, where the
primary purpose is not to raise equity capital for the Company and (ii) issuance
of Equity Securities as consideration in a business combination approved by each
member of the Board of Directors.
6.12. Pledges of Intercompany Notes. The Company shall, and shall
cause each of its future Subsidiaries to, promptly pledge all Intercompany Notes
(and all security agreements and documents relating thereto) created after the
date hereof to the Collateral Agent as Collateral under the Collateral
Documentation. To the extent that, on or after the date hereof, the Company
makes any cash investment in any of its Subsidiaries (in accordance with Section
6.14) which are organized under the laws of and doing business in the United
States, such investment shall be required to be made in the form of a loan,
which shall be evidenced by an Intercompany Note and all such Intercompany Notes
shall be pledged by the Company to the Collateral Agent as Collateral under the
Collateral Documentation.
6.13. No Speculative Transactions. The Company shall not, and
<PAGE> 29
shall not permit any of its Subsidiaries to, engage in any transaction involving
commodity options, futures contracts or similar transactions.
6.14. Restricted Investments. The Company shall not, directly or
indirectly, make or cause or permit, or permit any of its Subsidiaries to, make
or cause or permit, (i) any direct or indirect advance to, (ii) any loan or
other extension of credit to, (iii) any guarantee of any Indebtedness of, (iv)
any capital contribution to, (v) any purchase or other acquisition of any Equity
Interests in, (vi) any purchase or other acquisition of assets (other than in
the ordinary course of business) from or (vii) any merger with, any Person,
including, without limitation, any of the Company's Subsidiaries in each case
other than Permitted Investments.
6.15. Financial Covenants. (a) The Company's Operating Profit (as
defined below) shall be greater than the amounts listed in the following chart
for the applicable period. "Operating Profit" shall mean, for any given period,
Net Income for such period (exclusive of (A) all amounts in respect of any
extraordinary gains or losses, (B) gains and losses arising from the sale or
other disposition of assets not in the ordinary course of business, (C) earnings
and losses from discontinued operations and (D) fees and expenses incurred by
the Company (including reasonable attorneys' and accountants' fees and expenses)
in connection with the offer and sale of the Notes) plus, to the extent
reflected as a charge in the statement of Consolidated Net Income for such
period, the sum of: (i) all taxes measured by income (whether paid or deferred)
and (ii) interest expense (net of interest income).
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
MINIMUM OPERATING PROFIT MINIMUM OPERATING PROFIT
(LOSS) FOR THREE-MONTH FOR TWELVE-MONTH PERIOD
DATE PERIOD ENDING ON DATE ENDING ON DATE INDICATED
INDICATED
- --------------------------------------------------------------------------------------
<S> <C> <C>
December 31, 1999 N/A N/A
- --------------------------------------------------------------------------------------
March 30, 2000 N/A N/A
- --------------------------------------------------------------------------------------
June 30, 2000 N/A N/A
- --------------------------------------------------------------------------------------
September 30, 2000 ($ 400,000) N/A
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE> 30
<TABLE>
<S> <C> <C>
December 31, 2000 $ 0 N/A
- --------------------------------------------------------------------------------------
March 31, 2001 $ 500,000 N/A
- --------------------------------------------------------------------------------------
June 30, 2001 $1,000,000 $1,000,000
- --------------------------------------------------------------------------------------
September 30, 2001 $2,000,000 $3,000,000
- --------------------------------------------------------------------------------------
December 31, 2001 $2,500,000 $5,500,000
- --------------------------------------------------------------------------------------
March 30, 2002 $5,000,000 $10,500,000
- --------------------------------------------------------------------------------------
June 30, 2002 $5,000,000 $14,500,000
- --------------------------------------------------------------------------------------
September 30, 2002 $5,000,000 $17,500,000
- --------------------------------------------------------------------------------------
December 31, 2002 $5,000,000 $20,000,000
- --------------------------------------------------------------------------------------
March 30, 2003 and the last $5,000,000 $22,500,000
day of each calendar quarter
thereafter
- --------------------------------------------------------------------------------------
</TABLE>
(b) The Company's Product Sales Revenues (excluding revenues
generated by licensing, distribution, supply or similar arrangements) shall be
greater than the amounts listed in the following chart for the applicable
period.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
MINIMUM PRODUCT SALES MINIMUM TOTAL REVENUE FOR
REVENUE FOR THREE-MONTH TWELVE-MONTH PERIOD ENDING
DATE PERIOD ENDING ON DATE ON DATE INDICATED
INDICATED
- --------------------------------------------------------------------------------------
<S> <C> <C>
December 31, 1999 $1,250,000 N/A
- --------------------------------------------------------------------------------------
March 30, 2000 $1,750,000 N/A
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE> 31
<TABLE>
<S> <C> <C>
June 30, 2000 $3,500,000 $7,000,000
- --------------------------------------------------------------------------------------
September 30, 2000 $5,000,000 $12,200,000
- --------------------------------------------------------------------------------------
December 31, 2000 $6,500,000 $15,500,000
- --------------------------------------------------------------------------------------
March 31, 2001 $8,500,000 $22,500,000
- --------------------------------------------------------------------------------------
June 30, 2001 $11,500,000 $31,000,000
- --------------------------------------------------------------------------------------
September 30, 2001 $12,500,000 $39,000,000
- --------------------------------------------------------------------------------------
December 31, 2001 $15,000,000 $47,500,000
- --------------------------------------------------------------------------------------
March 31, 2002 $20,000,000 $59,000,000
- --------------------------------------------------------------------------------------
June 30, 2002 $22,500,000 $70,000,000
- --------------------------------------------------------------------------------------
September 30, 2002 $22,500,000 $80,000,000
- --------------------------------------------------------------------------------------
March 30, 2003 and the last $25,000,000 $100,000,000
day of each calendar quarter
thereafter
- --------------------------------------------------------------------------------------
</TABLE>
(c) The Company's Consolidated Capital Expenditures shall be no
greater than the amounts listed in the following chart for the applicable
period.
<TABLE>
<CAPTION>
- -------------------------------------------------------------
MAXIMUM PERMITTED CAPITAL
EXPENDITURES FOR SIX-MONTH
DATE PERIOD ENDING ON DATE
INDICATED
- -------------------------------------------------------------
<S> <C>
March 30, 2000 $3,500,000
- -------------------------------------------------------------
September 30, 2000 $3,500,000
- -------------------------------------------------------------
</TABLE>
<PAGE> 32
<TABLE>
<S> <C>
March 31, 2001 $2,700,000
- -------------------------------------------------------------
September 30, 2001 $2,700,000
- -------------------------------------------------------------
March 30, 2002 and the last
day of each calendar quarter $2,000,000
thereafter
- -------------------------------------------------------------
</TABLE>
6.16. Sale and Leaseback Transactions. The Company shall not, and
shall not permit any Subsidiary to, enter into any Sale-and-Leaseback
Transaction.
6.17. Line of Business. The Company shall not, and shall not permit
any of its Subsidiaries to, engage in any business if, as a result, the general
nature of the business in which the Company and its Subsidiaries, taken as a
whole, would then be engaged would be substantially changed from the general
nature of the business in which the Company and its Subsidiaries, taken as a
whole, are engaged on the date of this Agreement.
6.18. Sale of Assets. The Company shall not, and shall not permit any
of its Subsidiaries to, Transfer any property or assets, unless the property or
asset that is the subject of such Transfer constitutes (i) inventory held for
sale, (ii) marketable securities available for sale, or (iii) real estate,
equipment, fixtures, supplies or materials no longer required in the operation
of the business of the Company or such Subsidiary or that is obsolete, and, in
the case of any Transfer described in clause (i) or (iii), such Transfer is in
the ordinary course of business.
6.19. Indenture Relating to the Notes. Upon the written request of the
Required Holders, the Company, at its expense, shall cause to be prepared,
executed and delivered within 30 days after such request an indenture (including
a new form of note, any necessary related documentation and, from time to time
thereafter, any necessary supplements thereto) with respect to the Notes, which
indenture (and form of note) shall contain terms and provisions substantially
the same as those set forth in Sections 6, 8, 9 and 13 hereof and such other
terms and provisions as are required under the Trust Indenture Act of 1939 and
such other items and provisions as are customary in indentures relating to
publicly traded senior secured debt securities having a rating comparable to the
rating that the Notes would receive if rated by a nationally recognized rating
agency. In such event, the Company shall also appoint as trustee under such
indenture a national banking association reasonably acceptable to the Required
Holders having its principal offices in New York, New York, and having capital,
surplus, and undivided profits of at least $50,000,000. In
<PAGE> 33
connection with the execution of any such indenture, the Holders shall exchange
all outstanding Notes for new notes in the form contemplated by such indenture,
and upon such exchange such new notes shall be deemed to be "Notes" for purposes
hereof.
6.20. Financial Statements and Information. The Company shall furnish
to each Holder: (a) as soon as practicable and in any event within 45 days after
the end of each of the four quarters of each fiscal year and within 90 days of
the end of each fiscal year, (i) copies of the quarterly and annual reports and
of the other information, documents, and other reports which the Company files
or is required to file with the SEC pursuant to the Exchange Act and of any
other reports or information which the Company delivers or makes available to
any of its security holders, at the time of filing such reports with the SEC or
of delivery to the Company's security holders, as the case may be (but in no
event later than the time such filing or delivery is required pursuant to the
Exchange Act) or (ii) as soon as practicable and in any event within 45 days
after the end of each of the four quarters of each fiscal year and within 90
days of the end of each fiscal year, quarterly reports for the four quarters of
each fiscal year of the Company and annual reports which the Company would have
been required to file under any provision of the Exchange Act if it had a class
of securities listed on a national securities exchange or was otherwise required
to file such reports under the Exchange Act, within fifteen Business Days of
when such report would have been filed under Section 13 of the Exchange Act,
together with copies of a consolidating balance sheet of the Company and its
Subsidiaries as of the end of each such accounting period and of the related
consolidating statements of income and cash flow for the portion of the fiscal
year then ended, all in reasonable detail and all certified by the principal
financial officer of the Company to present fairly the information contained
therein in accordance with GAAP (and in the case of annual reports, including
financial statements, audited and certified by the Company's independent public
accountants as required under the Exchange Act); (b) within ninety days after
the end of each fiscal year, a written statement by the Company's independent
certified public accountants stating as to the Company and its Subsidiaries
whether in connection with their audit examination, any Default or Event of
Default has come to their attention; (c)(i) within forty-five days after the end
of the four quarters of the Company's fiscal year and within ninety days after
the end of the Company's fiscal year, an Officers' Certificate setting forth
computations in reasonable detail showing, as at the end of such quarter or
fiscal year, as the case may be, the Company's compliance with Sections 6.6,
6.7, 6.13, 6.14 and 6.15, and (ii) within thirty days after the end of each
fiscal quarter, an Officers' Certificate stating that as of the date of such
certificate, based upon such examination or investigation and review of this
Agreement, as in the opinion of such signer is necessary to enable the signer to
express an informed opinion with respect thereto, to the best
<PAGE> 34
knowledge of such signer, the Company has kept, observed, performed and
fulfilled each and every covenant contained in this Agreement, and is not in
default in the performance or observance of any of the terms, provisions and
conditions hereof, and to the best of such signer's knowledge, no Default or
Event of Default exists or has existed during such period or, if a Default or
Event of Default shall exist or have existed, specifying all such defaults, and
the nature and period of existence thereof, and what action the Company has
taken, is taking or proposes to take with respect thereto; (d) promptly after
becoming aware of (i) the existence of a Default or Event of Default or any
default in any of the Collateral Documentation, (ii) any default or event of
default under any Indebtedness of the Company or any of its Subsidiaries, (iii)
any Litigation or proceeding affecting the Company or any of its Subsidiaries in
which the amount claimed is in excess of $[50,000] or in which injunctive relief
is sought which if obtained could individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect or (iv) any change that has or
could reasonably be expected to have a Material Adverse Effect, an Officers'
Certificate specifying the nature and period of existence thereof and what
action the Company is taking or proposes to take with respect thereto; and (e)
such other information, including financial statements and computations,
relating to the performance of the provisions of this Agreement and the affairs
of the Company and any of its Subsidiaries as each Holder may from time to time
reasonably request. The Company shall keep at its principal executive office a
true copy of this Agreement (as at the time in effect), and cause the same to be
available for inspection at said office, during normal business hours and after
reasonable notice to the Company by any Holder.
6.21. Inspection. (a) Any Holder shall have the right to visit and
inspect any of the properties of the Company or any of its Subsidiaries, to
examine the books of account and records of the Company or any of its
Subsidiaries, to be provided with copies and extracts therefrom, to discuss the
affairs, finances and accounts of the Company or any of its Subsidiaries with,
and to be advised as to the same by, its and their officers and employees, and
its and their independent public accountants (and the Company authorizes such
independent public accountants to discuss the Company's or any Subsidiaries'
financial matters with such Holder and its representatives, regardless of
whether any representative of the Company is present, but provided that an
officer of the Company will be afforded a reasonable opportunity to be present
at any such discussion), all at such reasonable times and intervals during
normal business hours, and upon reasonable prior notice to the Company as such
Holder and the Company shall agree and at the expense of the Company (including
the costs incurred by such Holder in hiring accountants to conduct an audit).
The Company will likewise afford each Holder the opportunity to obtain any
information necessary to verify the accuracy of any of the representations
<PAGE> 35
and warranties made by the Company hereunder or in any other Transaction
Document or compliance by the Company and its Subsidiaries with a covenant made
hereunder or in any other Transaction Document.
(b) By receipt of information under this Section 6.21, such
Holder agrees that all information (other than such information that is publicly
available or any other information that is in such Holder's possession prior to
any disclosure under this Section 6.21) provided to it pursuant to this Section
6.21 shall be used by such Holder solely in connection with its investment in
the Company and for no other purpose, and such Holder shall treat such
information as confidential in accordance with such reasonable internal
procedures as it applies generally to information of this kind and shall not
disclose such information to any Person, except (i) to any Governmental Entity
having jurisdiction over such Holder in the law or ordinary course of business,
(ii) to any other Person pursuant to subpoena or other process, whether legal,
administrative or other (and such Holder hereby agrees to provide the Company
with prompt notice of any such subpoena or other process), (iii) to such
Holder's officers, directors, trustees, employees, partners, legal counsel,
financial advisors or auditors or accountants who need access to such
information in connection with their duties, (iv) to any transferee or
prospective purchaser of a Note or interest therein who agrees to be bound by
this paragraph, or (v) to the extent necessary in the enforcement of each
Purchaser's rights hereunder and under the Notes during the continuance of a
Default or Event of Default.
6.22. Compliance with Laws. The Company shall, and shall cause each of
its Subsidiaries to, comply with all Laws, ordinances or governmental rules or
regulations to which each of them is subject, and shall obtain and maintain in
effect all licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of their respective properties or to
the conduct of their respective businesses. The Company shall timely file all
proxy statements, reports and other documents required to be filed by it under
the Exchange Act and such statements, reports and other documents shall be in
compliance in all Material respects with the requirements of its respective
report form and shall not on the date of filing contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
6.23. Supplemental Disclosure. From time to time as may be requested
by the Required Holders, the Company shall supplement each Schedule hereto, or
any representation herein or in any other Transaction Document, with respect to
any matter hereafter arising which, if
<PAGE> 36
existing or occurring at the date of this Agreement, would have been required to
be set forth or described in such Schedule or as an exception to such
representation or which is necessary to correct any information in such Schedule
or representation which has been rendered inaccurate thereby (and, in the case
of any supplements to any Schedule, such Schedule shall be appropriately marked
to show changes made therein); provided that no such supplement to any such
Schedule or representation shall be or be deemed a waiver of any Default or
Event of Default resulting from the matters disclosed therein; provided,
further, that if such supplement discloses any Default or Event of Default, the
Company shall have fifteen days to cure such defaults so long as such Default or
Event of Default (i) is not caused by the failure to pay amounts due under this
Agreement and (ii) the Collateral Manager believes that such Default or Event of
Default can be cured within such fifteen days period.
6.24. Proceeds. The proceeds of the sale of the Notes and the Shares
shall be used to redeem the outstanding Old Notes and for the purposes set forth
on Schedule 6.24. Any part of the proceeds from the sale of the Notes and the
Shares not used to redeem the Old Notes and for the purposes set forth in
Schedule 6.24 shall be placed in an escrow account, and the disbursements of
proceeds from such escrow account shall be made in accordance with the
procedures set forth on Schedule 6.24. No part of the proceeds from the sale of
the Notes and the Shares hereunder shall be used, directly or indirectly, for
the purpose of "purchasing" or "carrying" any "margin stock" within the
respective meanings of Regulation U of the Board of Governors of the Federal
Reserve System or for any purpose which violates or would be inconsistent with
the provisions of Regulations T, U or X of said Board.
6.25. Insurance; Damage to or Destruction of Collateral. (a) The
Company shall, and shall cause each of its Subsidiaries to, at its sole cost and
expense, maintain the policies of insurance described on Schedule 2.7(b) in form
and with insurers reasonably acceptable to the Required Holders. If the Company
or any of its Subsidiaries at any time or times hereafter shall fail to obtain
or maintain any of the policies of insurance required above or to pay all
premiums relating thereto, the Collateral Agent may (at the direction of the
Required Holders) may at any time or times after ten days written notice to the
Company obtain and maintain such policies of insurance and pay such premiums and
take any other action with respect thereto which the Required Holders deem
advisable. Neither the Collateral Agent nor the Required Holders shall have any
obligation to obtain insurance for the Company or any of its Subsidiaries or pay
any premiums therefor. By doing so, the Collateral Agent and the Holders shall
not be deemed to have waived any Default or Event of Default arising
<PAGE> 37
from the Company's or any of its Subsidiaries' failure to maintain such
insurance or pay any premiums therefor. All sums so disbursed, including
reasonable attorneys' fees, court costs and other charges related thereto, shall
be payable on demand by the Company to the Collateral Agent and shall be secured
by the Collateral.
(b) The Company shall at all times maintain, with financially
sound and reputable insurers, "key man" term life insurance on the life of Mr.
Carl Sahi in the amount of $______ in form reasonably satisfactory to the
Holders. Such "key man" term life insurance policy shall be owned by the Company
and the Company shall be named as the payee of all benefits thereunder.
6.26. Rights of Required Holders to Designate Directors; Board
Composition. (a) Prior to or simultaneously with the Closing, the Company shall
expand the size of its Board of Directors from five to seven members and shall
at all times cause two persons designated by the Holders (any such person so
designated pursuant to this Section 6.26 from time to time, a "Purchaser
Designee", and together, the "Purchaser Designees") to be appointed to the Board
of Directors to fill the vacancies created by such expansion, and the Company
will take all necessary action to cause a Purchaser Designee to be appointed to
(i) each present and future committee of the Board of Directors (ii) the board
of directors or governing body of any future Subsidiary of the Company (the
"Subsidiary Board") and (iii) each Committee of such Subsidiary Board.
Thereafter, in connection with any annual meeting of stockholders at which the
term of a Purchaser Designee is to expire, the Company will take all necessary
action to cause such Purchaser Designee to be elected to the Board of Directors.
In the event of any vacancy arising by reason of the resignation, death, removal
or inability to serve of any Purchaser Designee, the Holders shall be entitled
to designate a successor to fill such vacancy for the unexpired term (and,
thereafter, such successor shall be deemed a Purchaser Designee for all purposes
of this Section 6.26). The Company further agrees that the Holders shall be
entitled to designate a non-voting observer to attend and participate in (but
not to vote at) all meetings of the Board of Directors, committee of the Board
of Directors, each Subsidiary Board and committee of such Subsidiary Board (the
"Non-Voting Observer"). The Non-Voting Observer, if appointed, shall have the
same access to information concerning the business and operations of the Company
and its Subsidiaries and at the same time as directors of the Company and its
Subsidiaries and shall be entitled to participate in discussions and consult
with the Board of Directors and each Subsidiary Board without voting, and the
Board of Directors and
<PAGE> 38
each Subsidiary Board shall give due consideration to the advice and
recommendations of such Non-Voting Observer.
(b) Without the prior written consent of the Holders, (i) the
Board of Directors shall not consist of more than seven members and (ii) the
Executive Committee of the Board of Directors shall not exceed four members.
(c) Notwithstanding anything to the contrary contained herein,
so long as (i) (Y) the Holders in the aggregate (i) own at least 5% of the
Common Stock (on a fully-diluted basis) or (Z) hold $10 million of the Notes,
(ii) there has not been any change, event or development or series of changes,
events or developments that could or could reasonably be expected to have a
Material Adverse Effect, (iii) at least [three] people who are members of the
Board of Directors as of the date hereof remain members of the Board of
Directors at any time, (iv) there is no material litigation that is pending or
threatened against the Company and/or any Subsidiary and (v) the Board of
Directors or any Subsidiary Board has not failed to address in a timely fashion
any concerns raised by the Purchaser Designee(s) regarding the conduct of, or
breach of duty by, any officer or director of the Company or any Subsidiary, the
Holders agree that they shall appoint and cause one Purchaser Designee to serve
on the Board of Directors.
6.27. Executive Officers. [(a) The Company shall promptly, but in no
event later than ____ days from [the date of the Note Purchase Agreement], hire
a permanent Chief Executive Officer, whose appointment shall be approved by the
Board of Directors (which approval shall include the affirmative vote of each of
the Purchaser Designees).
(b) Without the approval of the Board of Directors, which
approval shall include the affirmative vote of each of the Purchaser Designees,
the Company shall not make any change in, or appointment of, key executive
officers of the Company, including, without limitation, the Chief Executive
Officer, the Chief Financial Officer, Executive Vice President of Marketing,
Vice President of International Business Development, Chief Operating Officer,
General Counsel or similar positions.
6.28. Board and Committee Notice Requirement. In addition to any
requirements specified in the By-Laws of the Company, the Company shall notify
each Purchaser Designee and the Non-Voting Observer, by telecopy, of (a) every
meeting (or action by written consent) of the Board of Directors and (b) every
meeting (or action by written consent) of any Subsidiary Board and of any
committee of the Board of Directors or Subsidiary Board, at least three days in
advance of such meeting (or distribution of written consents), or, if such
notice under the circumstances is not practicable,
<PAGE> 39
as soon before the meeting (or distribution) as is practicable.
6.29. Reimbursement of Certain Expenses. The Company shall, upon
request therefor, promptly reimburse each Purchaser Designee and the Non-Voting
Observer for all reasonable expenses incurred by them in connection with their
attendance at meetings of the Board of Directors, any future Subsidiary Board or
of committees of any of the foregoing and any other activities undertaken by
them in their capacity as directors of the Company or any Subsidiary or
observer, as applicable. The foregoing shall be in addition to, and not in lieu
of (or in duplication of), any indemnification or reimbursement obligations of
the Company under the Certificate of Incorporation of the Company or the By-Laws
or by Law. The Non-Voting Observer shall be entitled to indemnification from the
Company and its Subsidiaries to the maximum extent permitted by Law as though he
or she were a director of the Company or the Subsidiary.
6.30. Limitation of Agreements. The Company shall not, and shall not
permit any Subsidiary to, enter into any Contract, or any amendment,
modification, extension or supplement to any existing Contract or the By-Laws or
Certificate of Incorporation of the Company, which prohibits the Company from
honoring and observing its obligations under the Transaction Documents.
6.31. Redemption of Convertible Debentures. As soon as practicable
after the date hereof, but in no event later than [ ] days from the date hereof,
the Company shall cause all of its outstanding 6% Convertible Debentures (the
"Convertible Debentures") to be redeemed in accordance with the terms and
conditions thereof.
6.32. Operations in Accordance with the Business Plan. The business
and operations of the Company and its Subsidiaries shall be conducted in
accordance with the business plan of the Company, dated August 31, 1999,
previously furnished by the Company to the Purchasers.
7. Events of Default and Remedies.
7.1. Events of Default and Remedies. "Event of Default," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any Order of any court or any Order, rule or
regulation of any Governmental Entity) (or, if the giving of notice or lapse of
time or both is required, then, prior to such notice or lapse of time, a
"Default"):
(a) default in the payment of the Accreted Value of or premium,
if any, and interest in respect of any Note when it becomes
<PAGE> 40
due and payable; or
(b) default in the performance of any agreement or covenant in,
or provision of, this Agreement, the Notes, or the other documents executed
and delivered in connection with this Agreement (including any Transaction
Document) and to which the Company or any of its Subsidiaries is a party
(other than a covenant or a default in whose performance is elsewhere in
this Section specifically dealt with), or any representation or warranty
made in any document executed and delivered in connection with this
Agreement (including any Transaction Document) was false in any material
respect on the date as of which made or deemed made; or
(c) the Company or any of its Subsidiaries shall: (A) default in
any payment of principal of or interest on any Indebtedness (other than the
Notes and any intercompany debt) or in the payment of any Guarantee, beyond
the period of grace, if any, provided in the instrument or agreement under
which such Indebtedness or Guarantee was created; or (B) default in the
observance or performance of any other agreement or condition relating to
any such Indebtedness or Guarantee or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Guarantee (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity, any applicable
grace period having expired, or such Guarantee to become payable, any
applicable grace period having expired, provided that the aggregate
principal amount of all such Indebtedness and Guarantee which would then
become due or payable as described in this Section 7.1(c) would equal or
exceed $500,000; or
(d) a final judgment or judgments for the payment of money are
entered by a court or courts of competent jurisdiction against any Company
or any of its Subsidiaries and such remains undischarged for a period
(during which execution shall not effectively be stayed) of 60 days,
provided that the aggregate of all such judgments that are not covered by
insurance under which the Company or a Subsidiary is a beneficiary exceeds
$500,000, or the Required Holders shall determine that any regulatory body
having jurisdiction over the Company or any
<PAGE> 41
of its Subsidiaries including, without limitation, the SEC, shall have
taken or proposed to take any action that the Required Holders believe
could, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect or that adversely affects the Holders' security
interest in the Collateral; or
(e) the Company or any of its Subsidiaries (i) is generally not
paying, or admits in writing its inability to pay, its debts as they become
due, (ii) files, or consents by answer or otherwise to the filing against
it of, a petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, reorganization, moratorium or other similar law of
any jurisdiction, (iii) makes an assignment for the benefit of its
creditors, (iv) consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property, (v) is adjudicated as
insolvent or to be liquidated, or (vi) takes corporate action for the
purpose of any of the foregoing; or
(f) a court or other Governmental Entity of competent
jurisdiction enters an Order appointing, without consent by the Company or
any of its Subsidiaries, a custodian, receiver, trustee or other officer
with similar powers with respect to it or with respect to any substantial
part of its property, or constituting an order for relief or approving a
petition for relief or reorganization or any other petition in bankruptcy
or for liquidation or to take advantage of any bankruptcy or insolvency law
of any jurisdiction, or ordering the dissolution, winding-up or liquidation
of the Company or any of its Subsidiaries, or any such petition shall be
filed against the Company or any of its Subsidiaries and such petition
shall not be dismissed within 60 days; or
(g) a court or other Governmental Entity of competent
jurisdiction enters a final judgment holding any of the documents delivered
in connection with this Agreement (including any Transaction Document) to
be invalid or unenforceable and such judgment remains unstayed and in
effect for a period of 20 consecutive days; or the Company or any of its
Subsidiaries shall assert, in any pleading filed in such a court, that any
of the documents delivered in connection with this Agreement are invalid or
unenforceable; or
(h) any provision of any Transaction Document shall for any
reason cease to be valid, binding and enforceable in accordance with its
terms (or the Company or any of its Subsidiaries [(or the Trustee in the
case of the Intercreditor Agreement)] shall challenge the enforceability of
any Transaction Document or shall assert in
<PAGE> 42
writing, or engage in any action or inaction based on any such assertion,
that any provision of any of the Transaction Documents has ceased to be or
otherwise is not valid, binding and enforceable in accordance with its
terms), or any security interest created under any Transaction Document
shall cease to be a valid and perfected security interest, or Lien in any
of the Collateral purported to be covered thereby; or
(i) the Company or any of its Subsidiaries shall default in the
payment of any amounts due pursuant to the terms of any document executed
and delivered by the Company or such Subsidiary in connection with this
Agreement (other than payments elsewhere in this Section specifically dealt
with); or
(j) there shall exist with respect to any Benefit Plan any
"prohibited transaction" (as defined in Section 406 of ERISA or Section
4975 of the Code); (ii) there shall exist with respect to any Benefit Plan
which is a "defined benefit plan" (within the meaning of Section 3(35) of
ERISA) any "accumulated funding deficiency" (as defined in Section 302 of
ERISA or Section 412 of the Code, whether or not waived); (iii) a
"reportable event" (within the meaning of Section 4043 of ERISA, but
excluding any reportable event with respect to which the 30-day notice
requirement of Section 4043 has been waived) shall occur, or judicial or
administrative proceedings shall have commenced, with respect to any
Benefit Plan which is a "defined benefit plan" (within the meaning of
Section 3(35) of ERISA), which reportable event or proceedings is, in the
reasonable opinion of the Holders, likely to result in the termination of
such Benefit Plan; (iv) there shall exist with respect to any Benefit Plan
which is a "multiemployer plan" (within the meaning of Section 4001(a)(3)
of ERISA) any "withdrawal liability" (within the meaning of Section 4201 of
ERISA); or (v) any Benefit Plan which is a "defined benefit plan" (within
the meaning of Section 3(35) of ERISA) shall terminate; and in the case of
each of clauses (i) through (v) above, such event or condition could
individually or in the aggregate with all other such events or conditions
have a Material Adverse Effect.
7.2. Acceleration of Maturity. If any Event of Default (other than an
Event of Default specified in clause (e), (f), (g) or (h) of Section 7.1) shall
have occurred and be continuing, the Required Holders may, by notice to the
Company, declare the entire unpaid Accreted Value of, and interest, if any, in
respect of the Notes (to the full extent permitted by applicable law) to be
immediately due and payable (and such Accreted Value shall be based on the
Accreted Value of the Notes to the day prior to
<PAGE> 43
such payment date), and upon such declaration all of such amount shall be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived, anything in the Notes
or in this Agreement to the contrary notwithstanding; provided that if an Event
of Default under clause (e), (f), (g) or (h) of Section 7.1 shall have occurred,
the entire unpaid Face Amount of the Notes (to the full extent permitted by
applicable law), shall immediately become due and payable, without any
declaration and without presentment, demand, protest or further notice, all of
which are hereby waived, anything in the Notes or this Agreement to the contrary
notwithstanding.
7.3. Other Remedies. If any Event of Default shall have occurred and
be continuing, from and including the date of such Event of Default to but not
including the date such Event of Default is cured or waived, each Holder may
enforce its rights by suit in equity, by action at law, or by any other
appropriate proceedings, whether for the specific performance (to the extent
permitted by Law) of any covenant or agreement contained in this Agreement or
the Notes or in aid of the exercise of any power granted in this Agreement or
the Notes, and each Holder may enforce the payment of any Note held by such
Holder and any of its other legal or equitable rights.
7.4. Conduct No Waiver; Collection Expenses. No course of dealing on
the part of any Holder, nor any delay or failure on the part of any Holder to
exercise any of its rights, shall operate as a waiver of such right or otherwise
prejudice any Holder's rights, powers and remedies. If the Company fails to pay,
when due, any payment in respect of any Note, the Company will pay such Holder,
to the extent permitted by Law, on demand, all costs and expenses incurred by
such Holder in the collection of any amount due in respect of any Note
hereunder, including reasonable legal fees incurred by such Holder in enforcing
its rights hereunder.
7.5. Annulment of Acceleration. If a declaration is made in accordance
with Section 7.2, then and in every such case, the Required Holders may, by an
instrument delivered to the Company, annul such declaration and the consequences
thereof.
7.6. Remedies Cumulative. No right or remedy conferred upon or
reserved to each Purchaser or the Collateral Agent or the Holders under this
Agreement is intended to be exclusive of any other right or remedy, and every
right and remedy shall be cumulative and in addition to every other right and
remedy given hereunder or now and hereafter existing under applicable law. Every
right and remedy given by this Agreement or by applicable Law to each Purchaser
or the Collateral Agent or the Holders may be exercised from time to time and as
often as may be deemed expedient by such Purchaser or the Collateral Agent or
the Holders.
<PAGE> 44
8. Redemption
8.1. Optional Redemption. Subject to Holder's right of conversion set
forth in Section 9, the Company shall have the right, at its sole option and
election made in accordance with Section 8.4(d) and subject to Section 8.4(d),
to redeem the Notes after __________, 2001, in whole or in part, at a redemption
price of 145% of the Accreted Value of the Notes to the day prior to the
redemption date (the "Optional Redemption Price"); provided, however, that if
such redemption date occurs after ___________, 2002, the Optional Redemption
Price shall decrease to 110% of the Accreted Value of the Notes prior to the
redemption date.
8.2. Partial Redemption. If less than all of the Notes at the time
outstanding are to be redeemed, the aggregate Accreted Value of the Notes to be
redeemed shall be prorated among the outstanding Notes; provided, however, that
in the event that the aggregate Accreted Value of the Notes then outstanding is
[$1,000,000] or less, the Company shall be required to redeem all of such
outstanding Notes if it elects to redeem any such Notes.
8.3. Change of Control. The Company shall make an offer, in accordance
with the procedures set forth in Section 8.4(b), to acquire the Notes for cash
at a redemption price of 110% of the Accreted Value of the Notes to the day
prior to the redemption date (the "Change of Control Redemption Price"), in the
event of (i) a Change of Control, a merger, consolidation or other combination
involving the Company, or (ii) a Change of Control of a Subsidiary of the
Company or a group of Subsidiaries of the Company occurs and such Subsidiary or
group of Subsidiaries, individually or in the aggregate, together with their
consolidated Subsidiaries and all other Subsidiaries previously subject to a
Change of Control, if any, represent more than 50% of the revenues or net assets
of the Company and its Subsidiaries on a consolidated basis as of the last date
of the immediately preceding fiscal quarter of the Company or for the twelve
month period then ended.
8.4. Redemption Procedures. (a) Notice of any redemption of Notes
pursuant to Section 8.1 shall be mailed at least 30 but not more than 60 days
prior to the date fixed for redemption to each Holder to be redeemed, at such
Holder's address as it appears in the Note Register. In order to facilitate the
redemption of Notes, the Board of Directors may fix a record date for the
determination of Notes to be redeemed which shall be a date at least 20 days
following the date of the notice.
(b) Promptly following a Change of Control (but in no event
<PAGE> 45
more than five Business Days thereafter), the Company shall mail to each Holder,
at such Holder's address as it appears in the Note Register, notice of such
Change of Control, which notice shall set forth such Holder's right to require
the Company to redeem any or all Notes held by it. The Company shall thereafter,
during a period of 90 days from the date of such notice redeem any Notes, in
whole or in part, at the option of such Holder, upon at least five days' written
notice to the Company by such Holder specifying (i) the Accreted Value of Notes
to be redeemed and (ii) the redemption date.
(c) On the date of any redemption being made pursuant to Section
8.1, 8.2 or 8.3 which is specified in a notice given pursuant to this Section
8.4, the Company shall wire transfer to such Holder the Optional Redemption
Price or the Change of Control Redemption Price, as the case may be, for the
Accreted Value of Notes and premium, if any, so redeemed.
9. Conversion
9.1. Holder's Option to Convert into Common Stock. Subject to the
provisions for adjustment hereinafter set forth, any Note or any portion of the
outstanding Accreted Value of such Note shall be convertible at the option of
Holder at any time after the Closing into fully paid and non-assessable shares
of Common Stock at a conversion price, determined as hereinafter provided, in
effect at the time of conversion.
The number of shares of Common Stock issuable upon conversion of a
Note shall be determined by dividing the Accreted Value of the Note to the day
prior to the conversion date or portion thereof surrendered for conversion by
the Conversion Price. The "Conversion Price" shall initially be $3.00 per share,
subject to adjustment as provided in this Section 9 and Section 6.31(c).
9.2. Exercise of Conversion Privilege. (a) Conversion of the Notes may
be effected by any Holder thereof upon the surrender to the Company at the
office of the Company designated for notices in accordance with Section 14.6 or
at the office of any agent or agents of the Company, as may be designated by the
Board of Directors (the "Transfer Agent"), of the Notes to be converted,
accompanied by a written notice stating that such Holder elects to convert all
or a specified portion of the Accreted Value of such Notes in accordance with
the provisions of this Section 9 and specifying the name or names in which such
Holder wishes the certificate or certificates for shares of Common Stock to be
issued. In case any Holder's notice shall specify a name or names other than
that of such Holder, such
<PAGE> 46
notice shall be accompanied by payment of all transfer taxes payable upon the
issuance of shares of Common Stock in such name or names. Other than such taxes,
the Company will pay any and all issue and other taxes (other than taxes based
on income) that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Notes pursuant hereto. As promptly as practicable,
and in any event within five Business Days after the surrender of such Notes and
the receipt of such notice relating thereto and, if applicable, payment of all
transfer taxes (or the demonstration to the satisfaction of the Company that
such taxes have been paid), the Company shall deliver or cause to be delivered
(i) a certificate or certificates representing the number of validly issued,
fully paid and nonassessable full shares of Common Stock to which the holder of
the Notes being converted shall be entitled and (ii) if less than the entire
Accreted Value of any Note surrendered is being converted, a new Note in the
Accreted Value which remains outstanding upon such partial conversion. Such
conversion shall be deemed to have been made at the close of business on the
date of giving such notice so that the rights of any holder thereof as to the
Note or Notes (or portion thereof) being converted shall cease except for the
right to receive shares of Common Stock in accordance herewith, and the Person
entitled to receive the shares of Common Stock shall be treated for all purposes
as having become the record holder of such shares of Common Stock at such time,
so long as such holder's Notes are delivered to the Company within two Business
Days after the date of the giving of notice.
(b) In case any Notes are to be redeemed pursuant to Section 8.1,
such right of conversion shall cease and terminate as to the Notes to be
redeemed at the close of business on the Business Day preceding the date fixed
for redemption unless (i) the Company shall default in the payment of the
Optional Redemption Price or (ii) a holder of a Note to be redeemed has given
notice to the Company of such holder's election to convert all or any portion of
a Note prior to the date fixed for redemption. For the avoidance of doubt, both
the Holders and the Company acknowledge that the Holders' right to convert the
Notes into Common Stock remains in effect until any redemption and will not be
suspended by any notice of redemption.
9.3. Fractions of Shares; Interest. In connection with the conversion
of any Note into Common Stock, no fractional shares shall be issued, but in lieu
thereof the Company shall pay a cash adjustment in respect of such fractional
interest in an amount equal to such fractional interest multiplied by the
Current Market Price per share of Common Stock on the Trading Day on which such
Note is deemed to have been converted. If
<PAGE> 47
more than one Note shall be surrendered for conversion by the same Holder at the
same time, the number of full shares of Common Stock issuable on conversion
thereof shall be computed on the basis of the aggregate Accreted Value of Notes
so surrendered, together with cash in lieu of any fractional share of Common
Stock.
9.4. Reservation of Stock; Listing. (a) The Company shall at all times
reserve and keep available for issuance upon the conversion of the Notes, free
from any preemptive rights, such number of its authorized but unissued shares of
Common Stock as will from time to time be sufficient to permit the conversion of
the Face Amount of the Notes into Common Stock, and shall take all action
required to increase the authorized number of shares of Common Stock, if
necessary, to permit the conversion of the Face Amount of the Notes.
(b) If at the time of conversion, the Common Stock is listed on a
national securities exchange, or is designated as a "national market system
security" on the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ"), the Company shall take all action necessary to
cause the shares of Common Stock issuable upon conversion of the Notes to be
listed on such exchange, subject to official notice of issuance.
9.5. Rights. If the Company shall issue shares of Common Stock upon
conversion of any Notes as contemplated by this Section 9, the Company shall
issue together with each such share of Common Stock any rights issued to holders
of Common Stock, irrespective of whether such rights shall be exercisable at
such time, but only if such rights are issued and outstanding and held by other
holders of Common Stock at such time and have not expired.
9.6. Adjustment of Conversion Ratio. The Conversion Price will be
subject to adjustment from time to time as follows:
(a) In case the Company shall at any time or from time to time
after the date hereof (A) pay a dividend, or make a distribution, on the
outstanding shares of Common Stock in shares of Common Stock, (B) subdivide the
outstanding shares of Common Stock; (C) combine the outstanding shares of Common
Stock into a smaller number of shares; (D) issue by reclassification of the
shares of Common Stock any shares of capital stock of the Company, then, and in
each such case, the Conversion Price in effect immediately prior to such event
or the record date therefor, whichever is earlier, shall be adjusted so that the
holder of any Note thereafter surrendered for conversion into Common Stock shall
be entitled to receive the number of shares of Common Stock of the Company which
such holder would have owned or have been entitled to receive after the
happening of any of the events described above, had such Notes been
<PAGE> 48
surrendered for conversion immediately prior to the happening of such event or
the record date therefor, whichever is earlier. An adjustment made pursuant to
this clause (a) shall become effective (x) in the case of any such dividend or
distribution, immediately after the close of business on the record date for the
determination of holders of shares of Common Stock entitled to receive such
dividend or distribution, or (y) in the case of such subdivision,
reclassification or combination, at the close of business on the day upon which
such corporate action becomes effective. No adjustment shall be made pursuant to
this clause (a) in connection with any transaction to which Section 9.7 applies.
(b) If at any time the Company shall issue shares of Common Stock
(or rights, warrants or other securities convertible into or exchangeable for
shares of Common Stock (collectively "Convertible Securities")) at a price per
share (or having a conversion price per share) less than the greater of (1) the
Conversion Price per share of Common Stock as of the date of issuance of such
shares (or, in the case of Convertible Securities, less than the Conversion
Price as of the date of issuance of the Convertible Securities in respect of
which shares of Common Stock were issued) and (2) the Current Market Price for
the period of 20 Trading Days preceding the earlier of the issuance or public
announcement of the issuance of such additional shares of Common Stock or
Convertible Securities (the "20 day Price"), then the Conversion Price shall be
adjusted by multiplying (A) the Conversion Price in effect on the day
immediately prior to such date by (B) a fraction, the numerator of which shall
be the sum of (1) the number of shares of Common Stock outstanding on such date
and (2) the number of shares of Common Stock purchasable with the aggregate
consideration receivable by the Company for the total number of shares of Common
Stock so issued (or into which the rights, warrants or other convertible
securities may convert), and the denominator of which shall be the sum of (x)
the number of shares of Common Stock outstanding on such date and (y) the number
of additional shares of Common Stock issued (or into which the Convertible
Securities may convert).
An adjustment made pursuant to this Section 9.6(b) shall be made
on the next Business Day following the date on which any such issuance is made
and shall be effective retroactively to the close of business on the date of
such issuance. For purposes of this Section 9.6(b), the aggregate consideration
receivable by the Company in connection with the issuance of shares of Common
Stock or of Convertible Securities shall be deemed to be equal to the sum of the
aggregate offering price (before deduction of underwriting discounts or
commissions and expenses payable to third parties) of all such Common Stock and
Convertible Securities plus the minimum aggregate amount, if any, payable upon
exercise or conversion of any such Convertible Securities. The issuance or
reissuance of any
<PAGE> 49
shares of Common Stock (whether treasury shares or newly issued shares) pursuant
to (i) a dividend or distribution on, or subdivision, combination or
reclassification of, the outstanding shares of Common Stock requiring an
adjustment in the Conversion Price pursuant to Section 9.6(a) or (ii) any stock
option plan or program of the Company currently in effect involving the grant of
options to employees of the Company at Current Market Price shall not be deemed
to constitute an issuance of Common Stock or Convertible Securities by the
Company to which this Section 9.6(b) applies. No adjustment shall be made
pursuant to this Section 9.6(b) in connection with any transaction to which
Section 9.7 applies.
(c) In case the Company shall at any time or from time to time
after the date hereof declare, order, pay or make a dividend or other
distribution (including, without limitation, any distribution of stock or other
securities or property or Convertible Securities of the Company or any of its
Subsidiaries by way of dividend or spinoff), on its Common Stock, then, and in
each such case, the Conversion Price shall be adjusted by multiplying (1) the
applicable Conversion Price on the day immediately prior to the record date
fixed for the determination of stockholders entitled to receive such dividend or
distribution by (2) a fraction, the numerator of which shall be the average
Current Market Price of the Common Stock for the period of 20 Trading Days
preceding such record date, and the denominator of which shall be such average
Current Market Price of the Common Stock less the Fair Market Value per share of
Common Stock (as determined in good faith by the board of directors of the
Company, a certified resolution with respect to which shall be mailed to each
Holder) of such dividend or distribution. No adjustment shall be made pursuant
to this Section 9.6(c) in connection with any transaction to which Section 9.7
applies.
(d) In case a tender or exchange offer made by the Company or any
Affiliate of the Company for all or any portion of the Common Stock shall expire
and such tender or exchange offer shall involve the payment by the Company or
such Affiliate of consideration per share of Common Stock having a Fair Market
Value at the last time (the "Expiration Time") tenders or exchanges may be made
pursuant to such tender or exchange offer (as it shall have been amended) that
exceeds the Current Market Price per share of Common Stock on the Trading Day
next succeeding the Expiration Time, the Conversion Price shall be reduced so
that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the effectiveness of the Conversion Price
reduction contemplated by this subsection (d) by a fraction (which shall not be
greater than one) of
<PAGE> 50
which the numerator shall be the number of shares of Capital Stock outstanding
(including any tendered or exchanged shares) at the Expiration Time multiplied
by the Current Market Price per share of Common Stock on the Trading Day next
succeeding the Expiration Time and of which the denominator shall be the sum of
(i) the Fair Market Value of the aggregate consideration payable to stockholders
based on the acceptance (up to any maximum specified in the terms of the tender
or exchange offer) of all shares validly tendered or exchanged and not withdrawn
as of the Expiration Time (the shares deemed so accepted, up to any such
maximum, being referred to as the "Purchased Shares") and (ii) the product of
the number of shares of Capital Stock outstanding (less any Purchased Shares) at
the Expiration Time and the Current Market Price per share of Common Stock on
the Trading Day next succeeding the Expiration Time, such reduction to become
retroactively effective immediately prior to the opening of business on the day
following the Expiration Time.
(e) For purposes of this Section 9.6, the number of shares of
Common Stock at any time outstanding shall not include any shares of Common
Stock then owned or held by or for the account of the Company.
(f) The term "dividend," as used in this Section 9.5, shall mean
a dividend or other distribution upon stock of the Company.
(g) Anything in this Section 9.6 to the contrary notwithstanding,
the Company shall not be required to give effect to any adjustment in the
Conversion Price unless and until the net effect of one or more adjustments
(each of which shall be carried forward), determined as above provided, shall
have resulted in a change of the Conversion Price by at least one one-hundredth
of one share of Common Stock, and when the cumulative net effect of more than
one adjustment so determined shall be to change the Conversion Price by at least
one one-hundredth of one share of Common Stock, such change in Conversion Price
shall thereupon be given effect.
(h) The certificate of any firm of independent public accountants
of recognized national standing selected by the Board of Directors (which may be
the firm of independent public accountants regularly employed by the Company)
shall be presumptively correct for any computation made under this Section 9.6.
(i) If the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the number of shares of Common
Stock issuable upon exercise of the right of conversion granted by this Section
9.6 or in the Conversion Price then in effect shall
<PAGE> 51
be required by reason of the taking of such record.
9.7. Merger or Consolidation. In the case of any recapitalization,
reorganization, reclassification, consolidation, merger, sale of all or a
substantial portion of the Company's assets to another Person or other
transaction which is effected in such a manner that holders of Common Stock are
entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock (each of
the foregoing being referred to as a "Transaction"), each Note then outstanding
shall thereafter be convertible into, in lieu of the Common Stock issuable upon
such conversion prior to consummation of such Transaction, the kind and amount
of shares of stock and other securities and property receivable (including cash)
upon the consummation of such Transaction by a holder of that number of shares
of Common Stock into which the Accreted Value of such Note was convertible
immediately prior to such Transaction. In each such case, the Company shall also
make appropriate provisions (in form and substance satisfactory to the Required
Holders) to insure that the provisions of this Section 9.6 shall thereafter be
applicable to the Notes (including, in the case of any such consolidation,
merger or sale in which the successor entity or purchasing entity is other than
the Company, an immediate adjustment of the Conversion Price to the value for
the Common Stock reflected by the terms of such consolidation, merger or sale,
and a corresponding immediate adjustment in the number of shares of Common Stock
acquirable and receivable upon conversion of the Notes, in each case if the
value so reflected is less than the Conversion Price in effect immediately prior
to such consolidation, merger or sale). The Company shall not effect any such
consolidation, merger or sale, unless prior to the consummation thereof, the
successor corporation (if other than the Company) resulting from consolidation
or merger or the corporation purchasing such assets assumes by written
instrument (in form reasonably satisfactory to the Required Holders), the
obligation to deliver to each such holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to acquire. In case securities or property other than Common Stock
shall be issuable or deliverable upon conversion as aforesaid, then all
references in this Section 9 shall be deemed to apply, so far as appropriate and
nearly as may be, to such other securities or property.
9.8. Notice of Certain Corporate Actions. In case at any time or from
time to time the Company shall pay any stock dividend or make any other non-cash
distribution to the holders of its Common Stock, or shall offer for subscription
pro rata to the holders of its Common Stock any additional shares of stock of
any class or any other right, or there shall be any capital reorganization or
reclassification of the Common Stock or consolidation or merger of the Company
with or into another corporation, or
<PAGE> 52
any sale or conveyance to another corporation of the property of the Company as
an entirety or substantially as an entirety, or there shall be a voluntary or
involuntary dissolution, liquidation or winding up of the Company, then, in any
one or more of said cases the Company shall give at least 20 days' prior written
notice (the time of mailing of such notice shall be deemed to be the time of
giving thereof) to the registered holders of the Notes at the addresses of each
as shown in the Note Register as of the date on which (i) a record shall be
taken for such stock dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, sale or conveyance,
dissolution, liquidation or winding up shall take place, as the case may be,
provided that in the case of any Transaction to which Section 9.7 applies the
Company shall give at least 30 days' prior written notice as aforesaid. Such
notice shall also specify the date as of which the holders of the Common Stock
of record shall participate in said dividend, distribution or subscription
rights or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale or conveyance or participate in such dissolution,
liquidation or winding up, as the case may be. Failure to give such notice shall
not invalidate any action so taken.
9.9. Reports as to Adjustments. Upon any adjustment of the Conversion
Price then in effect and any increase or decrease in the number of shares of
Common Stock issuable upon the operation of the conversion provisions set forth
in this Section 9, then, and in each such case, the Company shall promptly
deliver to each Holder and the Transfer Agent of the Notes and Common Stock, a
certificate signed by the President or a Vice President and by the Treasurer or
an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company
setting forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated and specifying the Conversion
Price then in effect following such adjustment, and shall set forth in
reasonable detail the method of calculation of each and a brief statement of the
facts requiring such adjustment. Where appropriate, such notice to any Holder
may be given in advance and included as part of the notice required under the
provisions of Section 9.8.
10. The Collateral Agent.
10.1. Appointment. Each Purchaser for itself and for future Holders
hereby irrevocably designates and appoints Appaloosa Management L.P. as the
Collateral Agent under this Agreement, and irrevocably authorizes the Collateral
Agent to take such action on such Purchaser's behalf and any future Holder's
behalf and to exercise such powers and perform such duties as are expressly
delegated to the Collateral Agent by the terms of the Transaction Documents,
together with such other powers as
<PAGE> 53
are reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement, the Collateral Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Purchaser or future Holder, and no implied covenants,
functions, responsibilities, duties, obligations or Liabilities shall be read
into this Agreement or any of the Transaction Documents or otherwise exist
against the Collateral Agent.
10.2. Delegation of Duties. The Collateral Agent may execute any of
its duties under the Transaction Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Collateral Agent shall not be responsible
for the negligence or misconduct of any agents or attorneys-in-fact selected by
it with reasonable care, except as otherwise provided in Section 10.3.
10.3. Exculpatory Provisions. Neither the Collateral Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact, Affiliates or
Subsidiaries shall be (i) liable for any action taken or omitted to be taken by
any of them under or in connection with the Transaction Documents, or (ii)
responsible in any manner to any of the Purchasers or future Holders for any
recitals, statements, representations or warranties made by the Company or any
of its Subsidiaries or any officer thereof contained in the Transaction
Documents or in any certificate, report, statement or other document referred to
or provided for in, or received by the Collateral Agent under or in connection
with, the Transaction Documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of the Transaction Documents or for
any failure of the Company or any of its Subsidiaries to perform its obligation
thereunder. The Collateral Agent shall not be under any obligation to any
Purchaser or future Holder to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, any
Transaction Document, or to inspect the properties, books or records of the
Company or any of its Subsidiaries.
10.4. Reliance by the Collateral Agent. The Collateral Agent shall be
entitled to rely, and shall be fully protected in relying, upon any Note,
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Company), independent accountants and other experts selected by the Collateral
Agent. The Collateral Agent may deem and treat the payee of any Note as the
owner thereof for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Collateral Agent.
The Collateral Agent shall be fully justified in failing or refusing to take any
action under any Transaction Document unless it shall first receive such advice
or concurrence of the Required Holders (or, where unanimous consent of the
Holders is expressly required hereunder or thereunder, such Holders) as it deems
appropriate or it shall first be indemnified to its satisfaction by the Holders
against any and all Liability and expense
<PAGE> 54
which may be incurred by it by reason of taking or continuing to take any such
action. The Collateral Agent shall in all cases be fully protected in acting, or
in refraining from acting, under any Transaction Document in accordance with a
request of the Required Holders, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Purchasers and all
future Holders of the Notes.
10.5. Notice of Default. The Collateral Agent shall not be deemed to
have knowledge or notice of the occurrence of any default or Event of Default
hereunder unless the Collateral Agent has received written notice from a Holder
or the Company referring to this Agreement, describing such default or Event of
Default and stating that such notice is a "notice of default". In the event that
the Collateral Agent receives such a notice, the Collateral Agent shall promptly
give notice thereof to all Holders. The Collateral Agent shall take such action
with respect to such default or Event of Default as shall be directed by the
Required Holders; provided that (i) the Collateral Agent shall not be required
to take any action that exposes the Collateral Agent to any Liability or that is
contrary to this Agreement or applicable law and (ii) unless and until the
Collateral Agent shall have received such directions, the Collateral Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such default or Event or Default as it shall deem
advisable in the best interests of the Holders.
10.6. Non-Reliance on Collateral Agent and Other Purchasers. Each
Purchaser for itself and all future Holders of the Notes acquired by such
Purchaser expressly acknowledges that neither the Collateral Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or
Affiliates has made any representation or warranties to it and that no act by
the Collateral Agent hereafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by the Collateral Agent to any such Purchaser or Holder. Each
Purchaser for itself and all future Holders of the Notes acquired by such
Purchaser represents to the Collateral Agent that it has, independently and
without
<PAGE> 55
reliance upon the Collateral Agent or any other Holder, and based on such
documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, operation, property, financial and other
condition and creditworthiness of the Company and its Subsidiaries, and made its
own decision to make its loan hereunder and to enter into this Agreement. Each
Purchaser also represents for itself and all future Holders of the Notes
acquired by such Purchaser that it will, independently and without reliance upon
the Collateral Agent or any other Holder, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
the Transaction Documents, and to make such investigation as it deems necessary
to inform itself as to the business, operations, property, financial and other
condition and creditworthiness of the Company and its Subsidiaries. Except for
notices, reports and other documents expressly required to be furnished to the
Holders by the Collateral Agent hereunder, the Collateral Agent shall not have
any duty or responsibility to provide any Holder with any credit or other
information concerning the business, financial condition, assets, liabilities,
net assets, properties, results of operations, value, prospects and other
condition or creditworthiness of the Company and its Subsidiaries which may come
into the possession of the Collateral Agent or any of its officers, directors,
employees, agents, attorneys-in-fact, Affiliates or any of its Subsidiaries.
10.7. Indemnification. The Purchasers and the future Holders jointly
and severally agree to indemnify the Collateral Agent in its capacity as such
(to the extent not reimbursed by the Company and its Subsidiaries and without
limiting the obligation of the Company and its Subsidiaries to do so), from and
against any and all Liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time be imposed on, incurred by or asserted against
the Collateral Agent in any way relating to or arising out of the Transaction
Documents or any documents contemplated by or referred to herein or the
transactions contemplated hereby or any action taken or omitted by the
Collateral Agent under or in connection with any of the foregoing; provided that
no Purchaser or future Holder shall be liable for the payment of any portion of
such Liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting solely from the Collateral
Agent's gross negligence or willful misconduct. The agreements contained in this
Section 10.7 shall survive the payment of the Notes and all other amounts
payable hereunder.
10.8. Collateral Agent in its Individual Capacity. The Collateral
Agent and its Affiliates and Subsidiaries may make loans to, accept deposits
from and generally engage in any kind of business with the Company and its
Subsidiaries as though the Collateral Agent were not the Collateral Agent
hereunder. With respect to its loans made or renewed by it or any Note issued to
it, the Collateral Agent shall have the same rights and powers, duties and
Liabilities under the Transaction Documents as any
<PAGE> 56
Holder and may exercise the same as though it were not the Collateral Agent and
the terms "Purchaser", "Purchasers", "Holder" and "Holders" shall include the
Collateral Agent in its individual capacities.
10.9. Successor Collateral Agent. The Collateral Agent may resign as
Collateral Agent upon 30 days' notice to the Company (and the Company shall
promptly notify the Holders). If the Collateral Agent shall resign as Collateral
Agent under the Transaction Documents, then the Required Holders shall appoint a
successor agent for the Holders whereupon such successor agent shall succeed to
the rights, powers and duties of the Collateral Agent and the term "Collateral
Agent" shall mean such successor agent effective upon its appointment, and the
former Collateral Agent's rights, powers and duties as Collateral Agent shall be
terminated, without any other or further act or deed on the part of such former
Collateral Agent or any of the parties to this Agreement or any Holders of the
Notes. After any retiring Collateral Agent's resignation hereunder as Collateral
Agent, the provisions of this Section 10 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Collateral Agent under
the Transaction Documents.
11. Interpretation.
11.1. Definitions.
"$7 Warrants" shall have the meaning ascribed thereto in Section
1.4(ii).
"Accreted Value" shall have the meaning ascribed thereto in Section
5.3.
"Agreement" shall have the meaning ascribed thereto in the Preamble.
"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act. "Affiliate" shall also include partners of a Person.
Notwithstanding the foregoing, "Affiliate" shall not include the limited
partners of any Purchaser or Holder or any limited partners of a limited partner
of any Purchaser or Holder.
"Beneficially Own" with respect to any securities shall mean having
"beneficial ownership" of such securities (as determined pursuant to Rule 13d-3
under the Exchange Act), including pursuant to any agreement, arrangement or
understanding, whether or not in writing.
"Benefit Plan" shall mean each plan, program, policy, payroll
practice, commitment or other arrangement providing for compensation, severance,
termination pay, bonuses, performance awards, stock or stock-related awards,
fringe benefits or other employee benefits of any kind, whether formal or
informal, funded or unfunded, written or oral and
<PAGE> 57
whether or not legally binding, including, without limitation, each "employee
benefit plan" (within the meaning of Section 3(3) of ERISA), in the case of each
of the foregoing, maintained, sponsored or contributed to by the Company or any
ERISA Affiliate or pursuant to which the Company or any ERISA Affiliate has or
may have any Liability, but excluding individual Employee Agreements.
"Board of Directors" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day other than a Saturday, Sunday, or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"By-Laws" shall have the meaning ascribed thereto in Section 1.4(xi).
"Capital Expenditures" shall mean [expenditures made or liabilities
incurred for the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than one
year, including the total principal portion of Capitalized Lease Obligations.].
"Capital Stock" means, in the case of the Company, any and all shares
(however designated) of the capital stock of the Company now or hereafter
outstanding.
"Capitalized Lease" shall mean, with respect to any Person, any lease
or any other agreement for the use of property which, in accordance with
generally accepted accounting principles, should be capitalized on the lessee's
or user's balance sheet.
"Capitalized Lease Obligation" of any Person shall mean and include,
as of any date as of which the amount thereof is to be determined, the amount of
the liability capitalized or disclosed (or which should be disclosed) in a
balance sheet of such Person in respect of a Capitalized Lease of such Person.
"Change of Control" shall mean:
(a) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 35% or more of the combined
voting power of the then outstanding Voting Securities of the Company,
but excluding, for this purpose, any such acquisition by (i) the
Company or any Subsidiary, (ii) any Benefit Plan (or related trust) of
the Company or any Subsidiary, or (iii) any corporation with respect
to which, following such
<PAGE> 58
acquisition, 50% or more of the combined voting power of the then
outstanding Voting Securities of such corporation is then beneficially
owned, directly or indirectly, by individuals and entities who were
the beneficial owners of Voting Securities of the Company immediately
prior to such acquisition in substantially the same proportion as
their ownership, immediately prior to such acquisition, of the
combined voting power of the then outstanding Voting Securities of the
Company; or
(b) a reorganization, merger or consolidation, in each case,
with respect to which all or substantially all the Persons who were
the respective Beneficial Owners of the Voting Securities of the
Company immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or
consolidation Beneficially Own, directly or indirectly, more than 35%
of the combined voting power of the then outstanding Voting Securities
of the corporation resulting from such reorganization, merger or
consolidation; or
(c) the Incumbent Board shall cease for any reason to
constitute at least 50% of the members of the Board; or
(d) the sale, lease or other disposition of all or a
substantial part of the Company's assets in one transaction or a
series of related transactions.
"Change of Control Redemption Price" shall have the meaning ascribed
thereto in Section 8.3.
"Closing" shall have the meaning ascribed thereto in Section 1.3.
"Closing Date" shall have the meaning ascribed thereto in Section
1.3(a).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral" means all real and personal property and interests in
real and personal property including, without limitation, Intellectual Property,
rights under leases and royalty rights and agreements, now owned or hereafter
acquired by the Company or its Subsidiaries in or upon which a Lien is granted
or made under the Collateral Documentation.
"Collateral Agent" shall have the meaning ascribed thereto in the
Preamble.
"Collateral Documentation" means the Guarantee and Security
Agreements, the Security Agreement, the Financing Statements, the Intercompany
Notes and the endorsements thereof to the Collateral Agent (for the benefit of
the Holders) or to the Holders, and all other deeds
<PAGE> 59
of trust, assignments, endorsements, pledged stock, collateral assignments and
other instruments, documents, agreements or conveyances at any time creating or
evidencing Liens or assigning Liens to the Collateral Agent (for the benefit of
the Holders) or to the Holders, to secure the obligations of the Company or any
of its Subsidiaries under the Notes, [the Intercreditor Agreement] and the
Registration Rights Agreement.
"Common Stock" shall have the meaning ascribed thereto in the
Recitals.
"Company" shall have the meaning ascribed thereto in the Preamble.
"Consolidated" or "consolidated", when used with reference to any
financial term in this Agreement (but not when used with respect to any tax
return or tax Liability), shall mean the aggregate for two or more Persons of
the amounts signified by such term for all such Persons, with inter-company
items eliminated and, with respect to earnings, after eliminating the portion of
earnings properly attributable to minority interests, if any, in the capital
stock of any such Person or attributable to shares of preferred stock of any
such Person not owned by any other such Person.
"Contracts" shall mean all agreements, contracts, leases, purchase
orders, arrangements, commitments and licenses to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound.
"Conversion Price" shall have the meaning ascribed thereto in Section
9.1.
"Convertible Debentures" shall have the meaning ascribed thereto in
Section 6.32.
"Convertible Securities" shall have the meaning ascribed thereto in
Section 9.6(b).
"Current Market Price", when used with reference to shares of Common
Stock or other securities on any date, shall mean the closing price per share of
Common Stock or such other securities on such date and, when used with reference
to shares of Common Stock or other securities for any period shall mean the
average of the daily closing prices per share of Common Stock or such other
securities for such period. If the Common Stock or such other securities are
listed or admitted to trading on a national securities exchange, the closing
price shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock
<PAGE> 60
Exchange or, if the Common Stock or such other securities are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Common Stock or such
other securities are listed or admitted to trading or, if the Common Stock or
such other securities are not so listed on any national securities exchange, as
reported in the transaction reporting system applicable to securities designated
as a "national market system security" or NASDAQ. If the Common Stock or such
other securities are not publicly held or so listed or designated, "Current
Market Price" shall mean the Fair Market Value per share of Common Stock or of
such other securities as determined in good faith by the Board of Directors
based on an opinion of an independent investment banking firm with an
established national reputation with respect to the valuation of securities.
"Default" shall have the meaning ascribed thereto in Section 7.1.
"Employee Agreement" shall mean each management, employment,
severance, consulting, non-compete, confidentiality, or similar agreement or
Contract between the Company or any ERISA Affiliate and any employee pursuant to
which the Company or any ERISA Affiliate has or may have any Liability.
"Environmental Laws" means any and all Laws, permits, concessions,
grants, franchises, licenses, agreements or governmental restrictions relating
to pollution and the protection of the environment or the release of any
materials into the environment, including but not limited to those related to
hazardous substances or wastes, air emissions and discharges to waste or public
systems.
"Equity Interests" means any capital stock, partnership interest,
joint venture interest or other equity interest or warrants, options or other
rights to acquire any capital stock, partnership interest, joint venture
interest or other equity interest.
"Equity Securities" shall mean with respect to any Person, shares of
capital stock or other equity interest of such Person, and any rights, options
or warrants to purchase stock or other securities exchangeable for or
convertible into capital stock of or other equity interest in the Company.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means each business or entity which is a member of a
"controlled group of corporations," under "common control" or an "affiliated
service group" with the Company within the meaning of Sections
<PAGE> 61
414(b), (c) or (m) of the Code, or required to be aggregated with the Company
under Section 414(o) of the Code, or is under "common control" with the Company,
within the meaning of Section 4001(a)(14) of ERISA.
"Event of Default" shall have the meaning ascribed thereto in Section
7.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
SEC thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include reference to the comparable section, if any, of any such successor
federal statute.
"Expiration Time" shall have the meaning ascribed thereto in Section
9.6(d).
"Face Amount" shall have the meaning ascribed thereto in the Recitals
"Fair Market Value" shall mean, as to shares of Common Stock or any
other securities of the Company or any other issuer which are publicly traded,
the average of the Current Market Prices of such shares or securities during the
period of five consecutive trading days preceding the date as of which the Fair
Market Value of a security is to be determined. The "Fair Market Value" of any
security which is not publicly traded or of any other property shall mean the
fair value thereof as determined by an independent investment banking or
appraisal firm experienced in the valuation of such securities or property
selected in good faith by the Board of Directors or a committee thereof.
"FDA" shall have the meaning ascribed there to in Section 2.15.
"Financing Statements" means Form UCC-1 financing statements to be
filed in all jurisdictions necessary or desirable in order to perfect the
Holders' security interest in the Collateral and shall include any Form UCC-1
financing statements assigned to the Holders and filings to be made in the U.S.
Patent and Trademark Office and the U.S. Copyright Office.
"GAAP" shall mean U.S. generally accepted accounting principles.
"Governmental Entity" shall mean any supernational, national, foreign,
federal, state or local judicial, legislative, executive, administrative or
regulatory body or authority.
"Guaranty" or "Guarantee" by any Person shall mean all obligations
(other than endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) of any Person guaranteeing, or in effect
guaranteeing, any Indebtedness, dividend or
<PAGE> 62
other obligation of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, including, without limitation, all obligations
incurred through an agreement, contingent or otherwise, by such Person: (i) to
purchase such Indebtedness or obligation or any property or assets constituting
security therefor, (ii) to advance or supply funds (x) for the purchase or
payment of such Indebtedness or obligation, (y) to maintain working capital or
other balance sheet condition or otherwise to advance or make available funds
for the purchase or payment of such Indebtedness or obligation, (iii) to lease
property or to purchase securities or other property or services primarily for
the purpose of assuring the owner of such Indebtedness or obligation of the
ability of the primary obligor to make payment of such Indebtedness or
obligation, or (iv) otherwise to assure the owner of the Indebtedness or
obligation of the primary obligor against loss in respect thereof. For the
purposes of any computations made under this Agreement, a Guarantee in respect
of any Indebtedness for borrowed money shall be deemed to be Indebtedness equal
to the outstanding amount of the Indebtedness for borrowed money which has been
guaranteed, and a Guarantee in respect of any other Liability or any dividend
shall be deemed to be Indebtedness equal to the maximum aggregate amount of such
Liability or dividend.
"Guarantee and Security Agreement" shall mean the agreement, in the
form of Exhibit 6.10 hereto, to be entered into between the Collateral Agent and
the Company's future domestic Subsidiaries, providing for a security interest in
the domestic Subsidiaries' Collateral and Guarantees from such Subsidiaries.
"Hazardous Material" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
"Holder" shall mean, at any time of reference, a Person in whose name
a Note is registered in the Note Register at such time.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations thereunder.
"HSR Notification" shall mean the notification of the particular
transaction pursuant to the requirements of the HSR Act.
"Incumbent Board" shall mean the individuals who, immediately
<PAGE> 63
after the Closing, constitute the Board of Directors; provided, however, that
any individual becoming a director subsequent to the Closing whose election, or
nomination for election by the Company's stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be deemed to be a member of the Incumbent Board.
"Indebtedness" shall mean, with respect to any Person, (i) all
obligations of such Person for borrowed money, or with respect to deposits or
advances of any kind, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (iii) all obligations of such Person
under conditional sale or other title retention agreements relating to property
purchased by such Person, (iv) all obligations of such Person issued or assumed
as the deferred purchase price of property or services (other than accounts
payable to suppliers and similar accrued liabilities incurred in the ordinary
course of business and paid in a manner consistent with industry practice), (v)
all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any lien or security interest on property owned or acquired by such Person
whether or not the obligations secured thereby have been assumed, (vi) all
Capitalized Lease Obligations of such Person, (vii) all Guarantees of such
Person, (viii) all obligations (including but not limited to reimbursement
obligations) relating to the issuance of letters of credit for the account of
such Person, (ix) all obligations arising out of foreign exchange contracts, and
(x) all obligations arising out of interest rate and currency swap agreements,
cap, floor and collar agreements, interest rate insurance, currency spot and
forward contracts and other agreements or arrangements designed to provide
protection against fluctuations in interest or currency exchange rates.
"Indemnified Person" shall have the meaning ascribed thereto in
Section 12.1.
"Indenture Date" shall have the meaning ascribed thereto in Section
5.1.
"Intellectual Property" means (a) Patents, (b) all trademarks, service
marks, trade dress, logos, trade names, domain names and corporate names,
together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith, (c) all copyrightable works,
all copyrights and all applications, registrations and renewals in connection
therewith, (d) all mask works and all applications, registrations and renewals
in connection therewith, (e) all trade secrets and confidential business
information (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs,
<PAGE> 64
drawings, specifications, customer and supplier lists, pricing and cost
information and business and marketing plans and proposals), (f) all computer
software (including data and related documentation), (g) all other proprietary
rights, (h) all copies and tangible embodiments of the foregoing (in whatever
form or medium) and (i) all licenses, sublicenses, permissions or agreements in
connection with the foregoing.
"Intercompany Notes" means any notes from the Subsidiaries or
Affiliates of the Company in favor of the Company, as the same may be amended,
modified or supplemented from time to time in accordance with their terms, and
all other promissory notes or other instruments evidencing Indebtedness of
Affiliates or Subsidiaries of the Company to the Company between the Company and
its Affiliates.
["Intercreditor Agreement" shall mean the agreement, dated as of the
date hereof, between the Collateral Agent and [ ]].
"Law" shall include any foreign, federal, state, or local law,
statute, rule, regulation, Order or other restriction of any court or other
Governmental Entity.
"Liability" shall mean any debt, liability or obligation, whether
known or unknown, asserted or unasserted, accrued, absolute, contingent or
otherwise, whether due or to become due.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"Litigation" shall mean any claim, demand, notice, action, suit,
proceeding, arbitration, investigation, civil, criminal or administrative
action, audit, inquiry or hearing by or before any Governmental Entity or
private arbitration tribunal.
"Major Supplier" shall mean a supplier of $20,000 or more in materials
or services to the Company during the last twelve months.
"Material" shall mean material in relation to the properties,
business, prospects, operations, earnings, assets, Liabilities, condition
(financial or otherwise) or prospects of the Company and its Subsidiaries taken
as a whole, whether or not in the ordinary course of business.
"Material Adverse Effect" shall mean a material adverse effect on (a)
properties, business, prospects, operations, earnings, assets,
<PAGE> 65
Liabilities or the condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole, whether or not in the ordinary course of
business, (b) the ability of the Company or any of its Subsidiaries to perform
its obligations under any of the Transaction Documents to which it is a party,
(c) the validity or enforceability of any of the Transaction Documents, (d) the
rights, remedies, powers and privileges of the Holders under any of the
Transaction Documents or (e) the timely payment or performance of the Secured
Obligations.
"NASDAQ" shall have the meaning ascribed thereto in Section 9.4(b).
"Net Income" shall mean, with respect to any period, the net income or
net loss of the Company and its Subsidiaries in accordance with GAAP on a
consolidated basis as reflected in the financial statements furnished to the
Holders in accordance with Section 6.20.
"Non-Voting Observer" shall have the meaning ascribed thereto in
Section 6.26.
"Note Purchase Agreement" shall have the meaning ascribed thereto in
the preamble.
"Note Register" shall have the meaning ascribed thereto in Section
4.1.
"Notes" shall have the meaning ascribed thereto in the Recitals.
"Notice" shall have the meaning ascribed thereto in Section 6.11.
"Officers' Certificate" means a certificate signed by any two officers
of the Company, one of whom must be the Chairman of the Board of Directors, the
President, the Chief Executive Officer, the Treasurer or a Vice President of the
Company.
"Old Notes" shall mean the notes issued under the Note Purchase
Agreement.
"Operating Profit" shall have the meaning ascribed thereto in Section
6.15.
"Optional Redemption Price" shall have the meaning ascribed thereto in
Section 8.1.
"Order" shall mean any judgment, order, injunction, ruling, decree,
stipulation or award of any Governmental Entity or private arbitration tribunal.
"Original Issue Discount" shall have the meaning ascribed thereto in
Section 5.3.
"Original Issue Price" shall mean ___________________.
<PAGE> 66
"Outstanding" or "outstanding" shall mean when used with reference to
the Notes at a particular time, all Notes theretofore issued as provided in this
Agreement, except (i) Notes theretofore reported as lost, stolen, damaged or
destroyed, or surrendered for transfer, exchange or replacement, in respect to
which replacement Notes have been issued, (ii) Notes theretofore paid in full,
and (iii) Notes therefore canceled by the Company, except that, for the purpose
of determining whether Holders of the requisite aggregate Accreted Value of
Notes have made or concurred in any waiver, consent, approval, notice or other
communication under this Agreement, Notes registered in the name of, or owned
beneficially by, the Company or any Subsidiary of any thereof, shall not be
deemed to be outstanding.
"Patents" shall mean, collectively, (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice) and all
improvements thereon, (b) all patents, patent applications and patent
disclosures, (c) all reissues, divisions, continuations, revisions
reexaminations, renewals, extensions and continuations-in-part thereof) and (d)
all rights, now existing or hereafter coming into existence, (i) to all income,
royalties, damages, and other payments (including in respect of all past,
present and future infringements) now or hereafter due or payable under or with
respect to any of the foregoing, (ii) to sue for all past, present and future
infringements with respect to any of the foregoing and (iii) otherwise accruing
under or pertaining to any of the foregoing throughout the world, including all
inventions and improvements described or discussed in all such patents and
patent applications.
"Permitted Indebtedness" means, without duplication, any of the
following Indebtedness of the Company or any of its Subsidiaries, as the case
may be: (i) Indebtedness and obligations under the Notes; (ii) any Indebtedness
and obligations outstanding on the date hereof, as set forth on Schedule 6.6; or
(iii) Indebtedness of a domestic Subsidiary of the Company to the Company as
long as such Subsidiary has executed the Guarantee and Security Agreement and
such Indebtedness is evidenced by Intercompany Notes and the Intercompany Notes
are pledged to the Collateral Agent as Collateral.
"Permitted Investments" shall mean (a) direct obligations of the
United States of America, or of any of its agencies, or obligations guaranteed
as to principal and interest by the United States of America, or of any of its
agencies, in either case maturing not more than 90 days from the date of
acquisition of such obligation; (b) deposit accounts in, and certificates of
deposit, repurchase agreements or bankers acceptances of any bank or trust
company organized under the laws of the United States of America or any state or
licensed to conduct a banking or trust business
<PAGE> 67
in the United States of America or any state and having capital, surplus and
undivided profits of at least $35,000,000, maturing not more than 90 days from
the date of acquisition; (c) commercial paper rated A-1 or better or P-1 by
Standard & Poor's Corporation or Moody's Investors Services, Inc., respectively,
maturing not more than 90 days from the date of acquisition; (d) money market
funds sponsored by commercial or investment banks unaffiliated with the Company
or any of its Subsidiaries; and (e) loans or advances of money by the Company to
its wholly-owned domestic Subsidiaries that have executed the Guarantee and
Security Agreement as long as such loans or advances are evidenced by
Intercompany Notes and the Intercompany Notes are pledged to the Collateral
Agent as Collateral.
"Permitted Liens" means (i) Liens existing on the date hereof and set
forth on Schedule ___, all of which are subordinate to the Lien of the
Collateral Documentation; (ii) Liens (other than any Lien imposed under ERISA or
any Environmental Laws) for taxes, assessments or charges of any governmental
authority for claims not yet due or which are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted, and with
respect to which adequate reserves or other appropriate provisions are being
maintained in accordance with the provisions of GAAP and enforcement thereof is
stayed; (iii) Liens of landlords, carriers, warehousemen, mechanics, materialmen
and other Liens (other than any Lien imposed under ERISA) not voluntarily
granted for amounts not yet due or which are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted, and with
respect to which adequate reserves or other appropriate provisions are being
maintained in accordance with the provisions of GAAP, and enforcement thereof is
stayed; (iv) Liens (other than any Lien imposed under ERISA), incurred or
deposited made in the ordinary course of business, including without limitation,
surety bonds and appeal bonds, in connection with workers' compensation,
unemployment insurance and other types of social security benefits or to secure
the performance of tenders, bids, leases, contracts (other than for the
repayment of indebtedness), statutory obligations and other similar obligations
or arising as a result of progress payments under government contracts; (v)
easements (including without limitation reciprocal easement agreements and
utility agreements), rights-of-way, covenants, consents, reservations,
encroachments, variations and other similar restrictions, charges or
encumbrances (whether or not recorded) and other Liens incurred in the ordinary
course of business, which do not secure indebtedness or the deferred purchase
price of any asset and which do not interfere materially
<PAGE> 68
with the ordinary conduct of the business of the Company or any Subsidiary of
the Company and which do not materially detract from the value of the property
to which they attach or materially impair the use thereof to the Company or any
Subsidiary of the Company; and (vi) building restrictions, zoning laws and other
statutes, laws, rules, regulations, ordinances and restrictions, and any
amendments thereto, now or at any time hereafter adopted by any governmental
authority having jurisdiction.
"Person" shall mean any individual, firm, corporation, limited
liability company, partnership, company or other entity, and shall include any
successor (by merger or otherwise) of such entity.
"Preferred Stock" shall have the meaning ascribed thereto in
Section 2.3.
"Product Sales Revenues" shall mean sale of medical products
manufactured by the Company calculated in accordance with GAAP.
"Products" shall have the meaning ascribed thereto in Section
2.18.
"Proposed Securities" shall have the meaning ascribed thereto in
Section 6.11.
"Prospectus" shall mean the prospectus included in a registration
statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including any such
prospectus supplement with respect to the terms of the offering of any portion
of the Common Stock covered by the Registration Statement, and by all other
amendments and supplements to a prospectus, including post-effective amendments,
and in each case including all material incorporated by reference therein.
"Proxy Statement" shall mean the proxy statement in a definitive form
relating to the Company Meeting.
"Purchase Price" shall have the meaning ascribed thereto in
Section 1.2.
"Purchased Shares" shall have the meaning ascribed thereto in
Section 9.6(d).
"Purchaser" shall have the meaning ascribed thereto in the
Preamble.
"Purchaser Designee" shall have the meaning ascribed thereto in
Section 6.26.
"Registration Default" shall have the meaning ascribed thereto in
Section 6.31.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated the date hereof between the Purchasers and the Company with
respect to the Notes.
<PAGE> 69
"Related Parties" shall mean Affiliates of the Company or any of its
Subsidiaries and directors or officers of the Company or any of its Subsidiaries
(including any family members of directors and officers).
"Required Holders" means, at any time, the holders of at least 51% of
the aggregate Accreted Value of the Notes at the time outstanding (exclusive of
Notes then owned by the Company or any of its Affiliates).
"Restricted Encumbrance" shall have the meaning ascribed thereto
in Section 6.7.
"Sale-and-Leaseback Transaction" shall mean a transaction or series of
transactions pursuant to which the Company or any Subsidiary shall Transfer to
any Person (other than the Company or a Subsidiary) any property, whether now
owned or hereafter acquired, and, as part of the same transaction or series of
transactions, the Company or any Subsidiary shall rent or lease as lessee (other
than pursuant to a Capitalized Lease), or similarly acquire the right to
possession or use of, such property or one or more properties which it intends
to use for the same purpose or purposes as such property.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SEC Reports" shall have the meaning ascribed thereto in Section
2.4.
"Secured Obligations" shall mean any and all obligations of the
Company or any of its Subsidiaries at any time and from time to time for the
performance of its agreements, covenants and undertakings under or in respect of
the Transaction Documents to which it is a party.
"Securities" shall mean the Notes, the Shares, the Warrants and the
shares of Common Stock issuable upon the conversion of the Notes and exercise of
the Warrants.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Act shall include reference to the
comparable section, if any, of such successor federal statute.
"Security Agreement" shall mean the agreement, dated as of the date
hereof, between the Collateral Agent and the Company, providing for a security
interest in the Collateral.
"Semi-Annual Accrual Date" shall have the meaning ascribed thereto in
Section 5.3.
"Shares" shall have the meaning ascribed thereto in the
<PAGE> 70
Recitals.
"Stated Maturity" when used with respect to any security or any
installment of interest thereon, means the date specified in such security as
the fixed date on which the principal of such security or such installment of
interest is due and payable.
"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of whose capital stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such Person,
by one or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries thereof, (ii) any other Person (other than a corporation),
including without limitation a joint venture, in which such Person, one or more
Subsidiaries thereof or such Person and one or more Subsidiaries thereof,
directly or indirectly, at the date of determination thereof, has at least
majority ownership interest entitled to vote in the election of directors,
managers or trustees thereof (or other Persons performing similar functions),
(iii) the management of which is otherwise controlled, directly or indirectly,
by such Person or (iv) any other Person required to be consolidated with such
Person in accordance with generally accepted accounting principles. For purposes
of this definition (and for the determination of whether or not a Subsidiary is
a wholly-owned Subsidiary of a Person), any directors' qualifying shares or
investment by foreign nationals mandated by applicable law shall be disregarded
in determining the ownership of a Subsidiary.
"Tax" and "Taxes" shall mean any federal, state, local or foreign
income, gross receipts, property, sales, use, value added, license, excise,
franchise, capital, net worth, estimated, withholding, employment, payroll,
premium, withholding, alternative or added minimum, ad valorem, inventory,
asset, gains, transfer or excise tax, or any other tax, levy, custom, duty,
impost, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest, penalty or additions to tax,
imposed by any Governmental Entity and, including, without limitation, any
Taxes of another person owing under a contract, as transferee or successor,
under Treas. Reg. ss. 1.1502-6 or analogous state, local or foreign law, or
otherwise.
"Tax Return" shall mean any return, report or similar statement
required to be filed with respect to any Tax (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return or declaration of estimated Tax.
"Total Revenue" shall mean, with respect to any period, the total
<PAGE> 71
revenues of the Company and its Subsidiaries in accordance with GAAP on a
consolidated basis as reflected in the financial statements furnished to the
Holders in accordance with Section 6.20.
"Trading Day" shall mean a Business Day or, if the Common Stock is
listed or admitted to trading on any national securities exchange, a day on
which such exchange is open for the transaction of business.
"Transaction" shall have the meaning ascribed thereto in Section
9.7.
"Transaction Documents" shall mean this Agreement, the Notes, the
Warrants, the Registration Rights Agreement, the Security Agreement, the
Guarantee and Security Agreement, [the Intercreditor Agreement and the
Escrow Agreement].
"Transfer" shall have the meaning ascribed thereto in Section
6.3.
"Transfer Agent" shall have the meaning ascribed thereto in
Section 9.2.
"Voting Securities" shall mean at any time shares of any class of
Capital Stock of the Company (or other corporation) which are then entitled to
vote generally in the election of directors of the Company (or such other
corporation).
"Warrants" shall mean the $7 Warrants and $5 Warrants (as defined in
the Note Purchase Agreement).
11.2. Accounting Principles. The character or amount of any asset,
liability, capital account or reserve and of any item of income or expense
required to be determined pursuant to this Agreement, and any consolidation or
other accounting computation required to be made pursuant to this Agreement, and
the construction of any definition in this Agreement containing a financial
term, shall be determined or made, as the case may be, in accordance with GAAP,
to the extent applicable, unless such principles are inconsistent with the
express requirements of this Agreement.
12. Miscellaneous.
12.1. Payments; Indemnity. (a) The Company agrees that, so long as
each Holder shall hold any Notes, it will make all payments hereunder and under
the Notes in immediately available funds by wire transfer on the date due in
such manner as each Holder may reasonably request in writing. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of any Note
that is due on a date other than a Business Day shall be made on the next
succeeding Business Day. If the date for
<PAGE> 72
payment is extended to the next succeeding Business Day by reason of the
preceding sentence, the period of such extension will be included in the
computation of the interest payable on such next succeeding Business Day.
(b)(i) The Company and its Subsidiaries shall jointly and
severally indemnify and hold harmless each Purchaser, each Holder and each of
their respective Affiliates, and each such Person's respective officers,
directors, partners, members, employees, attorneys, agents and representatives
(each, an "Indemnified Person") from and against any and all suits, actions,
proceedings, claims, damages, losses, Liabilities and out-of-pocket expenses
(including reasonable attorneys' fees and disbursements and other costs of
investigation or defense, including those incurred upon any appeal) which may be
instituted or asserted against or incurred by any such Indemnified Person as the
result of credit having been extended, suspended or terminated under this
Agreement and the other Transaction Documents and the administration of such
credit, and in connection with or arising out of the transactions contemplated
hereunder and thereunder and any actions or failures to act in connection
therewith.
(ii) Upon receipt by any Indemnified Person of any Action against
such Indemnified Person with respect to which indemnity may be sought under this
Note or any other Transaction Document, such Indemnified Person shall promptly
notify the Company in writing, provided that failure so to notify the Company
shall not relieve the Company from any liability which the Company may have on
account of this indemnity or otherwise, except to the extent the Company shall
have been materially prejudiced by such failure. The Company shall, at its
option, assume the defense of any Action including the employment of counsel
reasonably satisfactory to the Indemnified Person. Any Indemnified Person shall
have the right to employ separate counsel in any such action and participate in
the defense thereof but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person, unless: (i) the Company has failed promptly
to assume the defense and employ counsel or (ii) the named parties to such
Action (including any impleaded parties) include such Indemnified Person and the
Company, and such Indemnified Person and the Company shall have been advised by
counsel that there may be one or more legal defenses available to it which are
different from or in addition to those available to the Company or there is or
may be a conflict between the Company and any Indemnified Person (in which case
the Company may not assume the defense). In the event that any Indemnified
Person shall become entitled to separate counsel under this Note or any other
Transaction Document, the Company
<PAGE> 73
shall not in such event be responsible hereunder for the fees and expenses of
more than one firm of separate counsel in connection with any Action in the same
jurisdiction, in addition to any local counsel. In addition, the Company will
not, without prior written consent of the Indemnified Person, settle, compromise
or consent to the entry of any judgment in or otherwise seek to terminate any
pending or threatened Action in which indemnification may be sought hereunder
(whether or not any Indemnified Person is a party thereto) unless such
settlement, compromise, consent or termination includes an unconditional release
of such Indemnified Person from all liabilities and expenses arising out of such
Action.
(c) The Company shall bear all sales, documentary, transfer,
stamp or other similar Taxes and all filing fees and expenses incurred in
connection with the transactions contemplated by this Agreement and shall
indemnify and hold harmless each Indemnified Purchaser from and against any such
Taxes.
12.2. Severability. If any term, provision, covenant or restriction of
this Agreement or any exhibit hereto is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement and such exhibits shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such which may be hereafter declared
invalid, void or unenforceable.
12.3. Specific Enforcement. The Holders, on the one hand, and the
Company, on the other, acknowledge and agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the Holders shall be entitled to an injunction to
prevent breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
thereof having jurisdiction, this being in addition to any other remedy to which
they may be entitled at Law or equity.
12.4. Entire Agreement. The Transaction Documents (including the
Schedules and Exhibits hereto and thereto) contain the entire understanding of
the parties with respect to the transactions contemplated hereby and
<PAGE> 74
thereby.
12.5. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each party and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
12.6. Notices and other Communications. All notices, consents,
requests, instructions, approvals, financial statements, proxy statements,
reports and other communications provided for herein shall be deemed given, if
in writing and delivered personally, by telecopy or sent by registered mail,
postage prepaid, if to:
The Company, to:
129 Reservoir Road
Vernon, CT 06066
Attention: Carl Sahi
With a copy to:
Pepe & Hazard LLP
Goodwinn Square
Hartford, CT 06103
Attention: Walter W. Simmers, Esq.
The Purchasers, to each Purchaser's address
as set forth in the Note Register
The Collateral Agent, to:
Appaloosa Management, L.P.
26 Main Street, 1st Floor
Chatham, New Jersey 07928
Attention: Mr. James Bolin
With a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Attention: Robert C. Schwenkel, Esq.
or to such other address as any party may, from time to time, designate in a
written notice given in a like manner.
12.7. Amendments. This Agreement may be amended as to the Purchasers,
any Holder and their respective successors and assigns, and the Company may take
any action herein prohibited, or omit to perform any act required to be
performed by it, if the Company shall obtain the written consent of the Required
Holders. This Agreement may not be waived, changed, modified, or discharged
orally, but only by an agreement in writing signed by the party or parties
against whom enforcement of any waiver, change, modification or discharge is
sought or by parties with the right to consent to such waiver, change,
<PAGE> 75
modification or discharge on behalf of such party.
12.8. Successors and Assigns. All covenants and agreements contained
herein shall bind and inure to the benefit of the parties hereto and their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note).
12.9. Expenses. The Company agrees to pay to each Holder all
reasonable costs and expenses incurred by such Holder relating to any future
amendment or supplement to any of the Transaction Documents or any of the Notes
(or any proposal by the Company for such amendment or supplement) whether or not
consummated or any waiver or consent with respect thereto (or any proposal for
such waiver or consent) whether or not consummated, and all costs and expenses
of such Holder relating to the enforcement of any of the Transaction Documents.
12.10. Survival. All covenants, agreements, representations and
warranties contained herein and in any certificates delivered pursuant hereto in
connection with the transactions contemplated hereby shall survive the Closing
and the delivery of the Transaction Documents, regardless of any investigation
made by or on behalf of any party; provided, that, all covenants, agreements,
representations and warranties contained herein shall terminate when all the
Notes and amounts due hereunder have been paid in full; provided, however, that
notwithstanding anything to the contrary contained herein, Sections 12.1(b),
12.6, 12.12, 12.13, 12.14 and 12.15 shall survive forever.
12.11. Transfer of Notes and Common Stock. Each Purchaser understands
and agrees that the Notes and the Shares have not been registered under the
Securities Act or the securities laws of any state and that they may be sold or
otherwise disposed of only in one or more transactions registered under the
Securities Act and, where applicable, such laws or transactions as to which an
exemption from the registration requirements of the Securities Act and, where
applicable, such laws are available. Each Purchaser acknowledges that, except as
provided in the Registration Rights Agreement, such Purchaser has no right to
require the Company to register the Notes. Each Purchaser understands and agrees
that each Note or certificate representing the Notes shall bear the following
legends:
THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT. FOR
INFORMATION REGARDING THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE
PURCHASE PRICE, DATE OF ISSUANCE OF YIELD TO MATURITY OF THE NOTE,
CONTACT [name or title of contact] AT [address].
"THE TRANSFER OF [THE SECURITIES REPRESENTED BY THIS CERTIFICATE]
[THIS NOTE] IS RESTRICTED BY AND PURSUANT TO A NOTE PURCHASE AGREEMENT
DATED AS OF AUGUST _, 1999, A COPY OF WHICH IS ON FILE
<PAGE> 76
AT THE OFFICES OF THE COMPANY."
"[THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE] [THIS NOTE HAS]
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS."
12.12. Governing Law. THIS AGREEMENT AND THE NOTES shall be construed
and enforced in accordance with, and the rights of the parties shall be governed
by, the law of the State of NEW YORK excluding choice-of-law principles of the
law of such State that would require the application of the laws of a
jurisdiction other than such State.
12.13. Submission to Jurisdiction. If any Litigation shall be brought
by any Holder in order to enforce any right or remedy under this Agreement or
any of the Notes, the Company hereby consents and will submit, and will cause
each of its Subsidiaries to submit, to the jurisdiction of any state or federal
court of competent jurisdiction sitting within the area comprising the Southern
District of New York on the date of this Agreement. The Company hereby
irrevocably waives any objection, including, but not limited to, any objection
to the laying of venue or based on the grounds of forum non conveniens, which it
may now or hereafter have to the bringing of any such Litigation in such
jurisdiction.
12.14. Service of Process. Nothing herein shall affect the right of
any Holder to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against the Company in any other
jurisdiction.
12.15. Waiver of Jury Trial. The Company hereby waives any right it
may have to a trial by jury in respect of any action, proceeding or litigation
directly or indirectly arising out of, under or in connection with, THIS
AGREEMENT AND THE NOTES.
12.16. Public Announcements. Neither the Company nor any Purchaser
shall make any public statements, including, without limitation, any press
releases, with respect to this Agreement and the transactions contemplated
hereby without the prior written consent of the other party (which consent shall
not be unreasonably withheld) except as may be required by law. If a public
statement is required to be made by law, the parties shall consult with each
other in advance as to the contents and timing thereof.
12.17. Further Assurances. The Company and each of its Subsidiaries
agrees that it shall and shall cause each other to, at the Company's expense and
upon the reasonable request of the Collateral Agent, duly execute and deliver,
or cause to be duly executed and delivered, to
<PAGE> 77
the Collateral Agent such further instruments, agreements and documents
(including, without limitation, financing statements under the Code, security
agreements in respect of Intellectual Property, stock powers executed in blank
and other items necessary or desirable in connection with the perfection of
Liens in the Collateral) and do and cause to be done such further acts as may be
necessary or proper in the reasonable opinion of the Collateral Agent to carry
out more effectually the provisions and purposes of the Transaction Documents.
12.18. Substitution of Purchaser. Each Purchaser shall have the right
to substitute any one of its Affiliates as the purchaser of the Notes, by
written notice to the Company, which notice shall be signed by both such
Purchaser and such Affiliate, shall contain such Affiliate's agreement to be
bound by this Agreement and shall contain a confirmation by such Affiliate of
the accuracy with respect to it of the representations set forth in Section 3.
Upon receipt of such notice, wherever the word "Purchaser" is used in this
Agreement (other than in this Section 14.17), such word shall be deemed to refer
to such Affiliate in lieu of the Purchaser. In the event that such Affiliate is
so substituted as a purchaser hereunder and such Affiliate thereafter transfers
to any Purchaser all of the Notes then held by such Affiliate, upon receipt by
the Company of notice of such transfer, wherever the word "Purchaser" is used in
this Agreement (other than in this Section 14.17), such word shall no longer be
deemed to refer to such Affiliate, but shall refer to such Purchaser, and such
Purchaser shall have all the rights of an original Holder of the Notes under
this Agreement.
12.19. Signatures. This Agreement shall be effective upon
delivery of original signature pages or facsimile copies thereof executed
by each of the parties hereto.
<PAGE> 78
IN WITNESS WHEREOF, the Company, the Purchasers and the Collateral
Agent have caused this Agreement to be executed and delivered by their
respective officers or partners thereunto duly authorized.
BIO-PLEXUS, INC.
By:
------------------------------------
Name:
Title:
APPALOOSA MANAGEMENT L.P.,
as Collateral Agent
By: Appaloosa Partners, Inc., its
Investment Adviser
By:
------------------------------------
Name:
Title:
<PAGE> 79
APPALOOSA INVESTMENT LIMITED
PARTNERSHIP I
By: Appaloosa Management, L.P., its
General Partner
By: Appaloosa Partners Inc., its General
Partner
By:
------------------------------------
Name:
Title:
PALOMINO FUND LTD.
By: Appaloosa Management, L.P., its
Investment Adviser
By: Appaloosa Partners Inc., its General
Partner
By:
------------------------------------
Name:
Title:
<PAGE> 1
Exhibit 10.34
Form of Rollover Warrant
WARRANT
To Purchase Shares of Common Stock of
BIO-PLEXUS, INC.
At a Purchase Price of
$7.00 per Share
(Subject to Adjustment as Provided herein)
No. of Shares of Common Stock: _________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. DEFINITIONS 1
- --------------------------------------------------------------------------
2. EXERCISE OF WARRANT 4
- --------------------------------------------------------------------------
2.1. MANNER OF EXERCISE. 4
2.2. PAYMENT OF TAXES. 5
2.3. FRACTIONAL SHARES. 5
3. TRANSFER, DIVISION AND COMBINATION 5
- --------------------------------------------------------------------------
3.1. TRANSFER. 6
3.2. DIVISION AND COMBINATION. 6
3.3. EXPENSES. 6
3.4. MAINTENANCE OF BOOKS. 6
4. ADJUSTMENTS 6
- --------------------------------------------------------------------------
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. 6
4.2. CERTAIN OTHER DISTRIBUTIONS. 7
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. 8
4.4. ISSUANCE OF WARRANTS OR OTHER RIGHTS. 9
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. 9
4.6. SUPERSEDING ADJUSTMENT. 10
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION. 10
4.8. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. 12
4.9. OTHER ACTION AFFECTING COMMON STOCK. 13
4.10.CERTAIN LIMITATIONS. 13
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
5. NOTICES TO WARRANT HOLDERS 13
- --------------------------------------------------------------------------
5.1. NOTICE OF ADJUSTMENTS. 13
5.2. NOTICE OF CORPORATE ACTION. 14
6. RIGHTS OF HOLDERS 14
- --------------------------------------------------------------------------
6.1 NO IMPAIRMENT. 14
- --------------------------------------------------------------------------
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY 15
- --------------------------------------------------------------------------
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS 15
- --------------------------------------------------------------------------
9. RESTRICTIONS ON TRANSFERABILITY 15
- --------------------------------------------------------------------------
9.1. RESTRICTIVE LEGEND. 15
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION. 16
10. INTENTIONALLY LEFT BLANK 16
- --------------------------------------------------------------------------
11. SUPPLYING INFORMATION 16
- --------------------------------------------------------------------------
12. LOSS OR MUTILATION 16
- --------------------------------------------------------------------------
13. LIMITATION OF LIABILITY 17
- --------------------------------------------------------------------------
14. MISCELLANEOUS 17
- --------------------------------------------------------------------------
14.1. NONWAIVER AND EXPENSES. 17
14.2. NOTICE GENERALLY. 17
14.3. REMEDIES. 18
14.4. SUCCESSORS AND ASSIGNS. 18
14.5. AMENDMENT. 18
14.6. SEVERABILITY. 18
14.7. HEADINGS. 18
14.8. ROLLOVER TRANSACTIONS. 18
14.9. GOVERNING LAW. 18
</TABLE>
<PAGE> 4
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR
SUCH LAWS
No. of Shares of Common Stock: _________
WARRANT
To Purchase Shares of Common Stock of
BIO-PLEXUS, INC.
THIS IS TO CERTIFY THAT _______________., or its registered assigns
(the "Holder"), is entitled, at any time prior to the Expiration Date (as
hereinafter defined), to purchase from BIO-PLEXUS, INC., a Connecticut
corporation (the "Company"), _________ (subject to adjustment as provided
herein) shares of Common Stock (as hereinafter defined), in whole or in part, at
a purchase price of $7.00 per share (subject to adjustment as provided herein),
all on the terms and conditions and pursuant to the provisions hereinafter set
forth.
1. DEFINITIONS
<PAGE> 5
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than Warrant Stock and
shares of Common Stock issuable upon the conversion of the Convertible Notes
issued under the Convertible Note Purchase Agreement.
"Average Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the daily volume weighted average sale price
per share of Common Stock for such date. The closing price for each day shall be
the last quoted sale price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc., Automated Quotation System or such
other system then in use, or, if on any such date the Common Stock or such other
securities are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Common Stock selected by the Board of Directors of the Company. If the
Common Stock is listed or admitted to trading on a national securities exchange,
the closing price shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Common Stock is not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading.
"Business Day" shall mean any day that is not a Saturday or Sunday or
a day on which banks are required or permitted to be closed in the State of New
York.
"Capital Stock" means, in the case of the Company, any and all shares
(however designated) of the capital stock of the Company now or hereafter
outstanding.
"Closing Date" shall mean October __, 1999.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, no par value, of the Company as constituted on the
Closing Date, and any capital stock into which such Common Stock may thereafter
be changed, and shall also include (i) capital stock of the Company of any other
class (regardless of how denominated) issued to the holders of shares of Common
Stock upon any reclassification thereof and (ii) shares of common stock of any
successor or acquiring corporation (as
<PAGE> 6
defined in Section 4.8) received by or distributed to the holders of Common
Stock of the Company in the circumstances contemplated by Section 4.8.
"Convertible Notes" shall mean the notes to be issued pursuant to the
Convertible Note Purchase Agreement (as defined in the Note).
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable or
exercisable, with or without payment of additional consideration in cash or
property, for Additional Shares of Common Stock, either immediately or upon the
occurrence of a specified date or a specified event.
"Current Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the average of the Average Market Price for
the twenty Business Days ending five days prior to such date.
"Current Warrant Price" shall mean, in respect of a share of Common
Stock at any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date. The Current Warrant
Price as of the date of the issuance of this Warrant is $7.
"Expiration Date" shall mean a date which is five years from the
issuance of this Warrant.
"Holder" shall mean the Person in whose name this Warrant is
registered on the books of the Company maintained for such purpose. "Holders"
shall mean, collectively, each Holder of a Warrant, in the event of any division
of this Warrant.
"Majority Holders" shall mean the holders of Warrants exercisable for
in excess of 50% of the aggregate number of shares of Warrant Stock then
purchasable upon exercise of all Warrants.
"Note" shall mean the 7.5% Secured Note issued by the Company to the
Holder on the Closing Date.
"Other Property" shall have the meaning set forth in Section 4.8.
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company or any subsidiary thereof, and shall include all shares
issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock. For the purposes of Sections
4.3, 4.4, 4.5, 4.6 and 4.7, Common Stock Outstanding shall include all shares of
Common Stock issuable in respect of options or warrants to purchase, or
securities convertible into, shares of Common Stock, the exercise or conversion
price of which is less than the Current Market Price as of any date on which the
number of shares of Common
<PAGE> 7
Stock Outstanding is to be determined.
"Permitted Issuances" shall mean issuances of shares of Common Stock
and upon exercise of the warrants and options and other convertible securities,
in each case listed on Schedule 1.
"Person" shall mean any individual, firm, corporation, partnership or
other entity, and shall include any successor by merger or otherwise of such
entity.
"Restricted Common Stock" shall mean shares of Common Stock which are,
or which upon their issuance on the exercise of this Warrant would be, evidenced
by a certificate bearing the restrictive legend set forth in Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Security" or "Securities" shall mean any equity or debt security of
the Company (including, without limitation, subscriptions, options, warrants,
rights, stock-based or stock-related awards or convertible or exchangeable
securities to which the Company is a party or by which the Company may be bound
of any character relating to, or obligating the Company to issue, grant, award,
transfer or sell any issued or unissued shares of the Company's Capital Stock or
other securities of the Company).
"Trading Day" means a Business Day or, if the Common Stock is listed
or admitted to trading in any national securities exchange, a day on which such
exchange is open for the transaction of business.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof, which would constitute a sale thereof
within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section
9.2.
"Warrants" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, any thereof. All
Warrants shall at all times be identical as to terms and conditions and date,
except as to the number of shares of Common Stock for which they may be
exercised.
"Warrant Stock" shall mean the shares of Common Stock purchased by the
holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
<PAGE> 8
2.1. MANNER OF EXERCISE. At any time or from time to time from and after
the Closing Date and until 5:00 P.M., New York time, on the Expiration Date,
Holder may exercise this Warrant, on any Business Day, for all or any part of
the number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at its principal office at 129 Reservoir Road, Vernon, CT
06066 (i) a written notice of Holder's election to exercise this Warrant, which
notice shall specify the number of shares of Common Stock to be purchased, (ii)
payment of the aggregate Current Warrant Price for such shares and (iii) this
Warrant. Such notice shall be substantially in the form appearing at the end of
this Warrant as Exhibit A, duly executed by Holder. Thirty days after receipt of
the items specified in the second preceding sentence, the Company shall execute
or cause to be executed and deliver or cause to be delivered to Holder a
certificate or certificates representing the aggregate number of full shares of
Common Stock issuable upon such exercise, together with cash in lieu of any
fraction of a share, as hereinafter provided. The stock certificate or
certificates so delivered shall be in such denomination or denominations as
Holder shall request in the notice and shall be registered in the name of Holder
or, subject to Section 9, such other name as shall be designated in the notice.
This Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and Holder or any other Person
so designated shall be deemed to have become a holder of record of such shares
for all purposes, as of the date which is thirty days after the date of the
notice, together with the Current Warrant Price and this Warrant, are received
by the Company as described above. If this Warrant shall have been exercised in
part, the Company shall, at the time of delivery of the certificate or
certificates representing Warrant Stock, deliver to Holder a new Warrant
evidencing the right of Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant, or, at the request of Holder, appropriate
notation may be made on this Warrant and the same returned to Holder.
Payment of the Current Warrant Price shall be made at the option of
Holder by (i) certified or official bank check, (ii) wire transfer of
immediately available funds, (iii) tendering (A) a portion of the Note having a
principal face amount such that the amount of the Note so tendered together with
accrued and unpaid interest thereon is equal to the Current Warrant Price or (B)
Convertible Notes having an Accreted Value (as defined in the Convertible Note
Purchase Agreement) equal to the Current Warrant Price (the Company hereby
agreeing to reissue the Note or any Convertible
<PAGE> 9
Notes, as applicable, of a Holder into one or more Notes or Convertible Notes
(as applicable) in denominations requested by such Holder) or (iv) the surrender
of this Warrant to the Company, with a duly executed exercise notice marked to
reflect "Net Issue Exercise," and, in either case, specifying the number of
shares of Common Stock to be purchased, during normal business hours on any
Business Day. Upon a Net Issue Exercise, Holder shall be entitled to receive
shares of Common Stock equal to the value of this Warrant (or the portion
thereof being exercised by Net Issue Exercise) by surrender of this Warrant to
the Company together with notice of such election, in which event the Company
shall issue to Holder a number of shares of the Company's Common Stock computed
as of the date of surrender of this Warrant to the Company using the following
formula:
X = Y x (A-B)
---------
A
Where X = the number of shares of Common Stock to be issued to the Holder
Y = the number of shares of Warrant Stock being exercised under this
Warrant;
A = the Current Market Price of one share of the Company's Common Stock (at
the date of such calculation);
B = the Current Warrant Price (as adjusted to the date of such
calculation).
2.2. PAYMENT OF TAXES. All shares of Common Stock issuable upon the
exercise of this Warrant shall be validly issued, fully paid and nonassessable.
The Company shall pay all expenses in connection with, and all taxes (other than
income taxes or capital gain tax of the Holder) and other governmental charges
that may be imposed with respect to, the issue or delivery thereof.
2.3. FRACTIONAL SHARES. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of this Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such
fraction in an amount equal to the same fraction of the Current Market Price per
share of Common Stock on the date of exercise.
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject to compliance with Section 9, transfer of this
Warrant and all rights hereunder, in whole or in part, shall be registered on
the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Company referred to in Section 2.1,
together with a written assignment of this Warrant substantially in the form of
Exhibit B hereto duly executed by Holder and funds sufficient to pay any
transfer taxes payable upon the making of
<PAGE> 10
such transfer. Upon such surrender and, if required, such payment, the Company
shall, subject to Section 9, execute and deliver a new Warrant or Warrants in
the name of the assignee or assignees and in the denomination specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be canceled. A Warrant, if properly assigned in compliance with Section
9, may be exercised by a new Holder for the purchase of shares of Common Stock
without having a new Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9, this Warrant may be
divided into multiple Warrants or combined with other Warrants upon presentation
hereof at the aforesaid office or agency of the Company, together with a written
notice specifying the names and denominations in which new Warrants are to be
issued, signed by Holder. Subject to compliance with Section 3.1 and with
Section 9, as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 3.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at its
aforesaid office, books for the registration and the registration of
transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable and/or the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give each Holder notice of any event
described below which requires an adjustment pursuant to this Section 4 at the
time of such event.
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time the
Company shall:
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution
of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record
<PAGE> 11
holder of the same number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the occurrence of such event would own or be
entitled to receive after the happening of such event, and (ii) the Current
Warrant Price per share shall be adjusted to equal (A) the Current Warrant Price
multiplied by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment divided by (B) the number of
shares for which this Warrant is exercisable immediately after such adjustment.
4.2. CERTAIN OTHER DISTRIBUTIONS. If at any time the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of:
(a) cash,
(b) any evidences of its indebtedness, any shares of stock or any
other securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock), or
(c) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock),
then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
adjustment and a fraction (A) the numerator of which shall be the Current Market
Price per share of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Current Market Price per share of Common
Stock minus the amount allocable to one share of Common Stock of any such cash
so distributable and of the fair value (as determined in good faith by the Board
of Directors of the Company) of any and all such evidences of indebtedness,
shares of stock, other securities or property or warrants or other subscription
or purchase rights so distributable, and (ii) the Current Warrant Price shall be
adjusted to equal (A) the Current Warrant Price multiplied by the number of
shares of Common Stock for which this Warrant is exercisable immediately prior
to the adjustment divided by (B) the number of shares for which this Warrant is
exercisable immediately after such adjustment. A reclassification of the Common
Stock (other than a change in par value, or from par value to no par value or
from no par value to par value) into shares of Common Stock and shares of any
other class of stock shall be deemed a distribution by the Company to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 4.2 and, if the
<PAGE> 12
outstanding shares of Common Stock shall be changed into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such change
shall be deemed a subdivision or combination, as the case may be, of the
outstanding shares of Common Stock within the meaning of Section 4.1.
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. (a) If at any time the
Company shall (except as hereinafter provided) issue or sell any Additional
Shares of Common Stock, other than Permitted Issuances, in exchange for
consideration in an amount per Additional Share of Common Stock less than (a)
the greater of the Current Market Price per share of Common Stock for the period
of 20 Trading Days preceding the earlier of the issuance or public announcement
of the issuance of such Additional Shares of Common Stock and (b) the Current
Warrant Price at the time the Additional Shares of Common Stock are issued, then
(i) the Current Warrant Price as to the number of shares for which this Warrant
is exercisable prior to such adjustment shall be reduced to a price determined
by multiplying the Current Warrant Price by (A) a fraction, the numerator of
which shall be the sum of (x) the number of shares of Common Stock Outstanding
immediately prior to such issue or sale multiplied by the greater of (1) the
then applicable Current Warrant Price and (2) the Current Market Price per share
of Common Stock for the period of 20 Trading Days preceding the earlier of the
issuance or public announcement of the issuance of such Additional Shares of
Common Stock (the greater of (1) and (2) above hereinafter referred to as the
"Adjustment Price") and (y) the aggregate consideration receivable by the
Company for the total number of shares of Common Stock so issued (or into or for
which the rights, warrants or other Convertible Securities may convert or be
exercisable), and the denominator of which shall be the sum of (a) the total
number of shares of Common Stock Outstanding on such date and (b) the number of
Additional Shares issued (or into or for which the rights, warrants or
convertible securities may be converted or exercised), multiplied by the
Adjustment Price; and (ii) the number of shares of Common Stock for which this
Warrant is exercisable shall be adjusted to equal the product obtained by
multiplying the Current Warrant Price in effect immediately prior to such issue
or sale by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such issue or sale and dividing the product
thereof by the Current Warrant Price resulting from the adjustment made pursuant
to clause (i) above. For purposes of this Section 4.3 and for the purposes of
making adjustments of the number of shares of Common Stock for which this
Warrant is exercisable and the Current Warrant Price as provided in this Section
4, the aggregate consideration receivable by the Company in connection with the
issuance of shares of Common Stock or of rights, warrants or other securities
convertible into shares of Common Stock shall be deemed to be equal to the sum
of the aggregate offering
<PAGE> 13
price (before deduction of underwriting discounts or commissions and expenses
payable to third parties) of all such Common Stock, rights, warrants and
convertible securities plus the aggregate amount (as determined on the date of
issuance), if any, payable upon exercise or conversion of any such rights,
warrants and convertible securities into shares of Common Stock. If, subsequent
to the date of issuance of such rights, warrants or Convertible Securities, the
exercise or conversion price thereof is reduced, such aggregate amount shall be
recalculated and the Current Warrant Price and number of shares of Common Stock
for which the Warrant is exercisable adjusted retroactively to give effect to
such reduction. If Common Stock is sold as a unit with other securities, the
aggregate consideration received for such Common Stock shall be deemed to be net
of the Fair Market Value of such other securities.
4.4. ISSUANCE OF WARRANTS OR OTHER RIGHTS. If at any time the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a distribution of, or shall in any manner (whether directly or
by assumption in a merger in which the Company is the surviving corporation)
issue or sell, any warrants or other rights to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Securities (other than
Permitted Issuances), whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such warrants or other rights or upon
conversion or exchange of such Convertible Securities shall be less than the
greater of (1) the Current Market Price per share of Common Stock for the period
of 20 Trading Days preceding the earlier of the issuance or public announcement
of the issuance of such Additional Shares of Common Stock, warrants or other
rights and (2) the Current Warrant Price in effect immediately prior to the time
of such issue or sale, then the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be adjusted as provided in
Section 4.3 on the basis that the maximum number of Additional Shares of Common
Stock issuable pursuant to all such warrants or other rights or necessary to
effect the conversion or exchange of all such Convertible Securities shall be
deemed to have been issued and outstanding and the Company shall have received
all of the consideration payable therefor, if any, as of the date of the actual
issuance of the number such warrants or other rights. No further adjustments of
the Current Warrant Price shall be made upon the actual issue of such Common
Stock or of such Convertible Securities upon exercise of such warrants or other
rights or upon the actual issue of such Common Stock upon such conversion or
exchange of such Convertible Securities. Notwithstanding the foregoing, no
adjustment shall be required under this Section 4.4 solely by reason of the
issuance or distribution of stock purchase rights pursuant to a shareholder
rights plan or any other rights plan of the Company, provided that the
adjustments required by this Section 4.4 shall be made if any "flip-in" or
"flip-over" event shall occur under such stockholder rights plan.
<PAGE> 14
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a distribution of, or shall in any manner (whether directly or
by assumption in a merger in which the Company is the surviving corporation)
issue or sell, any Convertible Securities (other than Permitted Issuances),
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange shall be less than the greater of (a) the Current
Market Price per share of Common Stock for the period of 20 Trading Days
preceding the earlier of the issuance or Public announcement of the issuance of
such Convertible Securities and (b) the Current Warrant Price in effect
immediately prior to the time of such issue or sale, then the number of shares
for which this Warrant is exercisable and the Current Warrant Price shall be
adjusted as provided in Section 4.3 on the basis that the maximum number of
Additional shares of Common Stock necessary to effect the conversion or exchange
of all such Convertible Securities shall be deemed to have been issued and
outstanding and the Company shall have received all of the consideration payable
therefor, if any, as of the date of actual issuance of such Convertible
Securities. No adjustment of the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be made under this Section 4.5
upon the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any such adjustment shall previously have been made upon the issuance of such
warrants or other rights pursuant to Section 4.4. No further adjustments of the
number of shares for which this Warrant is exercisable and the Current Warrant
Price shall be made upon the actual issue of such Common Stock upon conversion
or exchange of such Convertible Securities and, if any issue or sale of such
Convertible Securities is made upon exercise of any warrant or other right to
subscribe for or to purchase any such Convertible Securities for which
adjustments of the number of shares for which this Warrant is exercisable and
the Current Warrant Price have been or are to be made pursuant to other
provisions of this Section 4, no further adjustments of the number of shares for
which this Warrant is exercisable and the Current Warrant Price shall be made by
reason of such issue or sale.
4.6. SUPERSEDING ADJUSTMENT. If, at any time after any adjustment of the
number of shares for which this Warrant is exercisable and the Current Warrant
Price shall have been made pursuant to Section 4.4 or Section 4.5 as the result
of any issuance of warrants, rights or Convertible
<PAGE> 15
Securities, such warrants or rights, or the right of conversion or exchange in
such other Convertible Securities, shall expire, and all of such warrants or
rights, or the right of conversion or exchange with respect to all or a portion
of such other Convertible Securities, as the case may be, shall not have been
exercised and no outstanding Warrant shall have been exercised (in whole or in
part), then for each outstanding Warrant such previous adjustment shall be
rescinded and annulled and the Additional Shares of Common Stock which were
deemed to have been issued by virtue of the computation made in connection with
the adjustment so rescinded and annulled shall no longer be deemed to have been
issued by virtue of such computation.
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price provided for in this Section 4:
(a) Computation of Consideration. To the extent that any Additional
Shares of Common Stock or any Convertible Securities or any warrants or other
rights to subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Securities shall be issued for cash consideration, the consideration
received by the Company therefor shall be the amount of the cash received by the
Company therefor, or, if such Additional Shares of Common Stock or Convertible
Securities are offered by the Company for subscription, the subscription price,
or, if such Additional Shares of Common Stock or Convertible Securities are sold
to underwriters or dealers for public offering without a subscription offering,
the public offering price (in any such case subtracting any amounts paid or
receivable for accrued interest or accrued dividends). To the extent that such
issuance shall be for a consideration other than cash, then, except as herein
otherwise expressly provided, the amount of such consideration shall be deemed
to be the fair value of such consideration at the time of such issuance as
determined in good faith by the Board of Directors of the Company. In case any
Additional Shares of Common Stock or any Convertible Securities or any warrants
or other rights to subscribe for or purchase such Additional Shares of Common
Stock or Convertible Securities shall be issued in connection with any merger in
which the Company issues any securities, the amount of consideration therefor
shall be deemed to be the fair value, as determined in good faith by the Board
of Directors of the Company, of such portion of the assets and business of the
nonsurviving corporation as such Board in good faith shall determine to be
attributable to such Additional Shares of Common Stock, Convertible Securities,
warrants or other rights, as the case may be. The consideration for any
Additional Shares of Common Stock issuable pursuant to any warrants or other
rights to subscribe for or purchase the same shall be the
<PAGE> 16
consideration received by the Company for issuing such warrants or other rights
plus the additional consideration payable to the Company upon exercise of such
warrants or other rights. The consideration for any Additional Shares of Common
Stock issuable pursuant to the terms of any Convertible Securities shall be the
consideration received by the Company for issuing warrants or other rights to
subscribe for or purchase such Convertible Securities, plus the consideration
paid or payable to the Company in respect of the subscription for or purchase of
such Convertible Securities, plus the additional consideration, if any, payable
to the Company upon the exercise of the right of conversion or exchange in such
Convertible Securities. In case of the issuance at any time of any Additional
Shares of Common Stock or Convertible Securities in payment or satisfaction of
any dividends upon any class of stock other than Common Stock, the Company shall
be deemed to have received for such Additional Shares of Common Stock or
Convertible Securities a consideration equal to the amount of such dividend so
paid or satisfied.
(b) When Adjustments to Be Made. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except that any adjustment of the number of shares of
Common Stock for which this Warrant is exercisable that would otherwise be
required may be postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 4.1) up to, but not
beyond the date of exercise if such adjustment either by itself or with other
adjustments not previously made results in an increase or decrease of less than
1% of the shares of Common Stock for which this Warrant is exercisable
immediately prior to the making of such adjustment. Any adjustment representing
a change of less than such minimum amount (except as aforesaid) which is
postponed shall be carried forward and made as soon as such adjustment, together
with other adjustments required by this Section 4 and not previously made, would
result in a minimum adjustment or on the date of exercise. For the purpose of
any adjustment, any specified event shall be deemed to have occurred at the
close of business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments under this Section
4, fractional interests in Common Stock shall be taken into account to the
nearest 1/100th of a share.
(d) When Adjustment Not Required. If the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to receive
a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(e) Escrow of Warrant Stock. If Holder exercises this Warrant
<PAGE> 17
after any property becomes distributable pursuant to this Section 4 by reason of
the taking of any record of the holders of Common Stock, but prior to the
occurrence of the event for which such record is taken, any additional shares of
Common Stock issuable upon exercise by reason of such adjustment shall be deemed
the last shares of Common Stock for which this Warrant is exercised
(notwithstanding any other provision to the contrary herein) and such shares or
other property shall be held in escrow for Holder by the Company to be issued to
Holder when and to the extent that the event actually takes place, upon payment
of the then Current Warrant Price. Notwithstanding any other provision to the
contrary herein, if the event for which such record was taken fails to occur or
is rescinded, then such escrowed shares shall be canceled by the Company and
escrowed property returned.
(f) Challenge to Good Faith Determination. Whenever the Board of
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under this Section 4, such determination may be
challenged in good faith by the Majority Holders, and any dispute shall be
resolved by an investment banking firm of recognized national standing selected
by the Majority Holders and acceptable to the Company.
4.8. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of this Warrant and payment of the Current Warrant Price, the number of
shares of common stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and Other Property receivable upon
or as a result of such reorganization, reclassification, merger, consolidation
or disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event. In case of
any such reorganization, reclassification, merger, consolidation or disposition
of assets, the successor or acquiring
<PAGE> 18
corporation (if other than the Company) shall expressly assume the due and
punctual observance and performance of each and every covenant and condition of
this Warrant to be performed and observed by the Company and all the obligations
and liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board of Directors of the
Company) in order to provide for adjustments of shares of the Common Stock for
which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 4. For purposes of
this Section 4.8, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 4.8 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
4.9. OTHER ACTION AFFECTING COMMON STOCK. In case at any time or from time
to time the Company shall take any action in respect of its Common Stock, other
than any action described in this Section 4, then, unless such action will not
have a materially adverse effect upon the rights of the Holders, the number of
shares of Common Stock or other stock for which this Warrant is exercisable
and/or the purchase price thereof shall be adjusted in such manner as may be
equitable in the circumstances.
4.10. CERTAIN LIMITATIONS. Notwithstanding anything herein to the contrary,
the Company agrees not to enter into any transaction which, by reason of any
adjustment hereunder, would cause the Current Warrant Price to be less than the
par value per share of Common Stock.
5. NOTICES TO WARRANT HOLDERS
5.1. NOTICE OF ADJUSTMENTS. Whenever the number of shares of Common Stock
for which this Warrant is exercisable, or whenever the price at which a share of
such Common Stock may be purchased upon exercise of the Warrants, shall be
adjusted pursuant to Section 4, the Company shall forthwith prepare a
certificate to be executed by the chief financial officer of the Company setting
forth, in reasonable detail, the event requiring the adjustment and the method
by which such adjustment was calculated (including a description of the basis on
which the Board of Directors of the Company determined the fair value of any
evidences of indebtedness, shares of stock, other securities or property or
warrants
<PAGE> 19
or other subscription or purchase rights referred to in Section 4.2 or 4.7(a)),
specifying the number of shares of Common Stock for which this Warrant is
exercisable and (if such adjustment was made pursuant to Section 4.8 or 4.9)
describing the number and kind of any other shares of stock or Other Property
for which this Warrant is exercisable, and any change in the purchase price or
prices thereof, after giving effect to such adjustment or change. The Company
shall promptly cause a signed copy of such certificate to be delivered to each
Holder in accordance with Section 13.2. The Company shall keep at its principal
office copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by any Holder or any
prospective purchaser of a Warrant designated by a Holder thereof.
5.2. NOTICE OF CORPORATE ACTION. If at any time
(a) the Company shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend (other than a cash
dividend payable out of earnings or earned surplus legally available for
the payment of dividends under the laws of the jurisdiction of
incorporation of the Company) or other distribution, or any right to
subscribe for or purchase any evidences of its indebtedness, any shares of
stock of any class or any other securities or property, or to receive any
other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or
other disposition of all or substantially all the property, assets or
business of the Company to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 20 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer,
<PAGE> 20
disposition, dissolution, liquidation or winding up is to take place and the
time, if any such time is to be fixed, as of which the holders of Common Stock
shall be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 13.2.
6. RIGHTS OF HOLDERS
6.1 NO IMPAIRMENT. The Company shall not by any action, including, without
limitation, amending its Certificate of Incorporation, by-laws or comparable
governing instruments or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder against impairment.
Without limiting the generality of the foregoing, the Company will (a) not
increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (b) take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock upon the exercise of
this Warrant, and (c) use its best efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its obligations
under this Warrant.
Upon the request of Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form reasonably
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Closing Date, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such number
of its authorized but unissued shares of Common Stock as will be sufficient to
permit the exercise in full of all outstanding Warrants. All
<PAGE> 21
shares of Common Stock which shall be so issuable, when issued upon exercise of
any Warrant and payment therefor in accordance with the terms of such Warrant,
shall be duly and validly issued and fully paid and nonassessable.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of a record of such holders, the Company will in each such
case take such a record and will take such record as of the close of business on
a Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Stock. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 9.
9.1. RESTRICTIVE LEGEND. Except as otherwise provided in this Section 9,
each Warrant and each certificate for Warrant Stock initially issued upon the
exercise of a Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"[THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY] [THE
SECURITIES REPRESENTED BY THIS CERTIFICATE] HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS."
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION. Prior to
any Transfer or attempted Transfer of any Warrants or any shares of Restricted
Common Stock, the holder of such Warrants or Restricted Common Stock shall give
ten days' prior written notice (a "Transfer Notice") to the Company of such
holder's intention to effect such Transfer, describing the manner and
circumstances of the proposed Transfer, and obtain from counsel to such holder
who shall be reasonably satisfactory to the Company, an opinion that the
proposed Transfer of such Warrants or such Restricted Common Stock may be
effected without registration under the Securities
<PAGE> 22
Act. After receipt of the Transfer Notice and opinion, the Company shall, within
five days thereof, notify the holder of such Warrants or such Restricted Common
Stock as to whether such opinion is reasonably satisfactory and, if so, such
holder shall thereupon be entitled to Transfer such Warrants or such Restricted
Common Stock, in accordance with the terms of the Transfer Notice. Each
certificate, if any, evidencing such shares of Restricted Common Stock issued
upon such Transfer and each Warrant issued upon such Transfer shall bear the
restrictive legend set forth in Section 9.1, unless in the opinion of such
counsel such legend is not required in order to ensure compliance with the
Securities Act. The holder of the Warrants or the Restricted Common Stock, as
the case may be, giving the Transfer Notice shall not be entitled to Transfer
such Warrants or such Restricted Common Stock until receipt of notice from the
Company under this Section 9.2 that such opinion is reasonably satisfactory.
10. INTENTIONALLY LEFT BLANK
11. SUPPLYING INFORMATION
The Company shall cooperate with each Holder of a Warrant and each
holder of Restricted Common Stock in supplying such information as may be
reasonably necessary for such holder to complete and file any reports or forms
presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any Warrant
or Restricted Common Stock.
12. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it being
understood that, in the case of the initial holder, the written agreement of
Appaloosa Management, L.P. shall be sufficient indemnity), and in case of
mutilation upon surrender and cancellation hereof, the Company will execute and
deliver in lieu hereof a new Warrant of like tenor to such Holder; provided, in
the case of mutilation, no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of such Holder for
the purchase price of any Common Stock or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
14. MISCELLANEOUS
<PAGE> 23
14.1. NONWAIVER AND EXPENSES. No course of dealing or any delay or failure
to exercise any right hereunder on the part of Holder shall operate as a waiver
of such right or otherwise prejudice Holder's rights, powers or remedies. If the
Company fails to make, when due, any payments provided for hereunder, or fails
to comply with any other provision of this Warrant, the Company shall pay to
Holder such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees, including those of
appellate proceedings, incurred by Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
14.2. NOTICE GENERALLY. Any notice, demand, request, consent, approval,
declaration, delivery or other communication hereunder to be made pursuant to
the provisions of this Warrant shall be sufficiently given or made if in writing
and either delivered in person with receipt acknowledged or sent by registered
or certified mail, return receipt requested, postage prepaid, or by telecopy and
confirmed by telecopy answerback, addressed as follows:
(a) If to any Holder or holder of Warrant Stock, at its last known
address appearing on the books of the Company maintained for such purpose.
(b) If to the Company at
Bio-Plexus, Inc.
129 Reservoir Road
Vernon, CT 06066
Attention: Carl Sahi
Fax: (860) 870-6118
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback, or three Business Days after the same shall have been deposited in
the United States mail. Failure or delay in delivering copies of any notice,
demand, request, approval, declaration, delivery or other communication to the
person designated above to receive a copy shall in no way adversely affect the
effectiveness of such notice, demand, request, approval, declaration, delivery
or other communication.
14.3. REMEDIES. Each holder of Warrant and Warrant Stock, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under of
<PAGE> 24
this Warrant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Warrant and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
14.4. SUCCESSORS AND ASSIGNS. Subject to the provisions of Sections 3.1 and
9, this Warrant and the rights evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and assigns
of Holder. The provisions of this Warrant are intended to be for the benefit of
all Holders from time to time of this Warrant and, with respect to Section 9
hereof, holders of Warrant Stock, and shall be enforceable by any such Holder or
holder of Warrant Stock.
14.5. AMENDMENT. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the Company
and the Majority Holders, provided that no such Warrant may be modified or
amended to reduce the number of shares of Common Stock for which such Warrant is
exercisable or to increase the price at which such shares may be purchased upon
exercise of such Warrant (before giving effect to any adjustment as provided
therein) without the prior written consent of the Holder thereof, provided
however, that the foregoing shall not limit the operation of Section 4.6.
14.6. SEVERABILITY. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Warrant.
14.7. HEADINGS. The headings used in this Warrant are for the convenience
of reference only and shall not, for any purpose, be deemed a part of this
Warrant.
14.8. ROLLOVER TRANSACTIONS. For the avoidance of doubt, the Company
acknowledges and agrees that this Warrant is fully vested as of the date hereof
and shall continue to be in full force and effect even if the Rollover
Transactions (as defined in the Note) are not consummated for any reason.
14.9. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES OF AMERICA, IN EACH
CASE LOCATED IN THE COUNTY OF NEW YORK, FOR ANY ACTION, PROCEEDING OR
INVESTIGATION IN ANY COURT OR BEFORE ANY GOVERNMENTAL AUTHORITY ("LITIGATION")
ARISING OUT OF OR RELATING TO THIS WARRANT AND
<PAGE> 25
THE TRANSACTIONS CONTEMPLATED HEREBY (AND AGREES NOT TO COMMENCE ANY LITIGATION
RELATING THERETO EXCEPT IN SUCH COURTS), AND FURTHER AGREES THAT SERVICE OF ANY
PROCESS, SUMMONS, NOTICE OR DOCUMENT BY U.S. REGISTERED MAIL TO ITS RESPECTIVE
ADDRESS SET FORTH IN THIS WARRANT SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY
LITIGATION BROUGHT AGAINST IT IN ANY SUCH COURT. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF
VENUE OF ANY LITIGATION ARISING OUT OF THIS WARRANT OR THE TRANSACTIONS
CONTEMPLATED HEREBY IN THE COURTS OF THE STATE OF NEW YORK OR THE UNITED STATES
OF AMERICA, IN EACH CASE LOCATED IN THE COUNTY OF NEW YORK, AND HEREBY FURTHER
IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY
SUCH COURT THAT ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS TO
TRIAL BY JURY IN CONNECTION WITH ANY LITIGATION ARISING OUT OF OR RELATING TO
THIS WARRANT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
<PAGE> 26
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by an officer thereunto duly authorized.
Dated: October __, 1999
BIO-PLEXUS, INC.
By:
------------------------------
Name:
Title:
<PAGE> 27
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
Net Issue Exercise _____No ______Yes
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of shares of Common Stock of Bio-Plexus,
Inc. and herewith makes payment therefor, all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
shares of Common Stock hereby purchased (and any securities or other property
issuable upon such exercise) be issued in the name of and delivered to
whose address is and, if such shares of Common
Stock shall not include all of the shares of Common Stock issuable as provided
in this Warrant, that a new Warrant of like tenor and date for the balance of
the shares of Common Stock issuable hereunder be delivered to the undersigned.
------------------------------------
(Name of Registered Owner)
------------------------------------
(Signature of Registered Owner)
------------------------------------
(Street Address)
------------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 28
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of Common Stock
- ---------------------------- -----------------------------
and does hereby irrevocably constitute and appoint
attorney-in-fact to register such transfer on the books of BIO-PLEXUS, INC.
maintained for the purpose, with full power of substitution in the premises.
Dated: Print Name:
------------- --------------------
Signature:
---------------------
Witness:
-----------------------
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 1
Exhibit 10.35
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of _________, 1999 (this
"Registration Rights Agreement"), by and between BIO-PLEXUS, INC., a
Connecticut corporation (the "Company"), APPALOOSA INVESTMENT LIMITED
PARTNERSHIP I, L.P., TERSK LLC and PALOMINO FUND LTD. (collectively, the
"Holders").
1. Background. The Company has issued Appaloosa Investment Limited
Partnership I, L.P. a 7.5% Secured Note, dated as of October 21, 1999 (as
amended, supplemented, amended and restated, restructured or otherwise
modified from time to time, the "Note"), whereby, among other things,
Appaloosa Investment Limited Partnership I, L.P. has agreed to loan the
Company $3.0 million. The execution and delivery of this Registration
Rights Agreement is required by Section 6.3 of the Note.
2. Definitions. Capitalized terms used but not defined herein shall
have the respective meanings given to them in the Note. As used herein,
unless the context otherwise requires, the following terms have the
following respective meanings:
"Commission" means the Securities and Exchange Commission.
"Incidental Registration" is defined in Section 3.2.
"NASDAQ" is defined in Section 3.3(j).
"Participating Holders" means the holders of Registrable
Securities participating in the particular registration.
"Registration Expenses" means all expenses incident to the
Company's performance of or compliance with Section 3, including, without
limitation, all registration, filing and applicable fees of the Commission,
stock exchange or NASD registration and filing fees and all listing fees
and fees with respect to the inclusion of securities in NASDAQ (as defined
in Section 3.3(j)), all fees and expenses of complying with state
securities or blue sky laws (including fees and disbursements of counsel to
the underwriters or the Participating Holders in connection with "blue sky"
qualification of the Registrable Securities and determination of their
eligibility for investment under the laws of the various jurisdictions),
all word processing, duplicating and printing expenses, all messenger and
delivery expenses, the fees and disbursements of counsel for the Company
and of its independent public accountants including the expenses of "cold
comfort" letters required by or incident to such registration, all fees and
<PAGE> 2
disbursements of underwriters customarily paid by issuers or sellers of
securities, all transfer taxes, and the reasonable fees and expenses of one
counsel to the Participating Holders (selected by the Requisite Percentage
of Participating Holders); provided, however, that Registration Expenses
shall exclude and the Participating Holders shall pay underwriters' fees
and underwriting discounts and commissions in respect of the Registrable
Securities being registered.
"Registrable Securities" mean the shares of Common Stock issuable
upon exercise of the Warrants. As to any particular Registrable Securities,
such securities shall cease to be Registrable Securities (a) when a
registration statement with respect to the sale of such securities shall
have become effective under the Securities Act and such securities shall
have been disposed of in accordance with such registration statement, (b)
when such securities shall have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer
under the Securities Act shall have been delivered by the Company and
subsequent public distribution of them shall not require registration of
them under the Securities Act, (c) when such securities are sold pursuant
to Rule 144 (or similar rule adopted by the Commission) under the
Securities Act, or (d) when such securities cease to be outstanding.
"Requested Registration" is defined in Section 3.1(a).
"Requisite Percentage of Participating Holders" means
Participating Holders of Registrable Securities who hold a majority of the
Registrable Securities that are then being held by all Participating
Holders.
3. Registration Under Securities Act, etc.
3.1 Requested Registrations.
(a) Request for Registration. Subject to the limitations
imposed by Sections 3.1(c), at any time and from time to time, one or more
holders of Registrable Securities shall have the right to require the
Company to file a registration statement under the Securities Act covering
all or any part of their respective Registrable Securities, by delivering a
written request therefor to the Company specifying the number and amount of
Registrable Securities and the intended method of distribution thereof. Any
such request pursuant to this Section 3.1(a) is referred to herein as a
"Requested Registration." The Company shall give prompt written notice of
each Requested Registration to all other holders of record of Registrable
Securities, and thereupon the Company shall use its best efforts to effect
the registration under the Securities Act so as to permit promptly the
sale, in accordance with the intended method of distribution, of the
Registrable Securities which the Company has been so requested to register
<PAGE> 3
in the Requested Registration and all other Registrable Securities which
the Company has been requested to register by the holders thereof by
written request given to the Company within 30 days after the giving of
such written notice by the Company.
(b) Registration of Other Securities. Whenever the Company
shall effect a registration pursuant to this Section 3.1 in connection with
an underwritten offering by one or more Participating Holders of
Registrable Securities, no securities other than Registrable Securities
shall be included among the securities covered by such registration unless
(i) such inclusion is pursuant to and subject to the terms of the
applicable underwriting agreement or arrangements and (ii) in the opinion
of the underwriter, the inclusion of such securities will not have a
material adverse effect on the offering (including, without limitation, on
the pricing of the offering). If the offering is not an underwritten
offering, there is no limitation on the inclusion of other securities
therein.
(c) Limitations on Requested Registrations; Expenses. The
rights of holders of Registrable Securities to request Requested
Registrations pursuant to Section 3.1(a) are subject to the following
limitations: (i) the Company shall not be obligated to effect a Requested
Registration having an aggregate anticipated offering price of less than
U.S. $1,000,000 unless such offering shall cover all remaining Registrable
Securities; (ii) the Company shall not be obligated to effect a Requested
Registration within six months after the effective date of any other
registration of securities (other than pursuant to a registration on Form
S-8 or any successor or similar form which is then in effect); and (iii)
the Company will pay all Registration Expenses only in connection with the
first two Requested Registrations of Registrable Securities pursuant to
this Section 3.1 that have become effective under the Securities Act.
(d) Registration Statement Form. Registrations under this
Section 3.1 shall be on Form S-1, Form S-3 or any successor forms, if
permitted, or such appropriate registration form of the Commission as shall
be selected by the Company and as shall be reasonably acceptable to the
Requisite Percentage of Participating Holders. The Company agrees to
include in any such registration statement all information which, in the
opinion of counsel to the Participating Holders and counsel to the Company,
is required to be included.
(e) Effective Registration Statement. A registration
requested pursuant to this Section 3.1 shall not be deemed to have been
effected (including for purposes of paragraph (c) of this Section 3.1) (i)
unless a registration statement with respect thereto has become effective
and has been kept continuously effective for a period of at least 180 days
(or such shorter period which shall terminate when all the Registrable
Securities covered by such registration statement have been sold pursuant
thereto), (ii) if, after it has become effective, such registration is
<PAGE> 4
interfered with by any stop order, injunction or other order or requirement
of the Commission or other Governmental Entity or court for any reason not
attributable to the Participating Holders and has not thereafter become
effective, or (iii) if the conditions to closing specified in the
underwriting agreement, if any, entered into in connection with such
registration are not satisfied or waived, other than by reason of a failure
on the part of the Participating Holders.
(f) Selection of Underwriters. The managing underwriter or
underwriters of each underwritten offering of the Registrable Securities
registered under this Section 3.1 shall be selected by the Requisite
Percentage of Participating Holders (and shall be reasonably acceptable to
the Company).
(g) Cutbacks in Requested Registration. If the managing
underwriter of any underwritten offering shall advise the Company in
writing (with a copy to each Participating Holder) that, in its opinion,
the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering within a price range
acceptable to the Requisite Percentage of Participating Holders, the
Company will include in such registration, to the extent of the number
which the Company is so advised can be sold in such offering, Registrable
Securities requested to be included in such registration, pro rata among
the Participating Holders requesting such registration in accordance with
the Registrable Securities held by each such Participating Holder so
requested to be registered, and any securities of the Company and other
investors included in such registration pursuant to Section 3.1(b) shall be
reduced proportionately.
(h) Postponement. The Company shall be entitled once in any
six-month period to postpone for a reasonable period of time (but not
exceeding 90 days) the filing of any registration statement required to be
prepared and filed by it pursuant to this Section 3.1 if the Board of
Directors of the Company determines, in its reasonable judgment, that such
registration and offering would interfere with any financing, corporate
reorganization or other material transaction or development involving the
Company or any subsidiary or would require premature disclosure thereof,
and promptly gives the holders of Registrable Securities requesting
registration thereof pursuant to this Section 3.1 written notice of such
determination, containing a statement of the reasons for such postponement
and an approximation of the anticipated delay. If the Company shall so
postpone the filing of a registration statement, the Participating Holders
representing the Requisite Percentage of Participating Holders shall have
the right to withdraw the request for registration by giving written notice
to the Company within 20 days after receipt of the notice of postponement
and, in the event of such withdrawal, such request shall not be counted
toward the number of Requested Registrations (including for purposes of
<PAGE> 5
paragraph (c) of this Section 3.1).
(i) Holder's Right to Withdraw. The Requisite Percentage of
Participating Holders shall have the right to withdraw the request for
registration pursuant to Section 3.1 at any time by giving written notice
to the Company of its request to withdraw and such request shall not be
counted toward the number of Requested Registrations (including for
purposes of paragraph (c) of this Section 3.1).
3.2 Incidental Registration.
(a) Incidental Registration. If, at any time, the Company
proposes or is required to register any of its securities under the
Securities Act (other than pursuant to registrations on such form or
similar form(s) solely for registration of securities in connection with an
employee benefit plan or dividend reinvestment plan) (an "Incidental
Registration"), the Company will give prompt written notice to all holders
of record of Registrable Securities of its intention to so register its
securities and of such holders' rights under this Section 3.2. Upon the
written request of any holder of Registrable Securities made within 20 days
following the receipt of any such written notice (which request shall
specify the maximum number of Registrable Securities intended to be
disposed of by such holder and the intended method of distribution
thereof), the Company will use its best efforts to effect the registration
under the Securities Act of all Registrable Securities which the Company
has been so requested to register by the holders thereof together with any
other securities the Company is obligated to register pursuant to
incidental registration rights of other security holders of the Company. No
registration effected under this Section 3.2 shall relieve the Company of
its obligation to effect any Requested Registration under Section 3.1.
(b) Abandonment or Delay. If, at any time after the Company
has giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in
connection with such registration, the Company shall determine not to
register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination and its reasons
therefor to all holders of record of Registrable Securities and (i) in the
case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from any obligation of the Company to pay the
Registration Expenses in connection therewith), without prejudice, however,
to the rights of any holder or holders of Registrable Securities entitled
to do so to request that such registration be effected as a registration
under Section 3.1, and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable
Securities for the same period as the delay in registering such other
securities.
<PAGE> 6
(c) Holder's Right to Withdraw. Each holder of Registrable
Securities shall have the right to withdraw its request for inclusion of
its Registrable Securities in any registration statement pursuant to this
Section 3.2 at any time by giving written notice to the Company of its
request to withdraw.
(d) Unlimited Number of Registrations; Expenses. There is no
limitation on the number of Incidental Registrations which the Company is
obligated to effect pursuant to this Section 3.2. The Company will pay all
Registration Expenses in connection with any registration of Registrable
Securities requested pursuant to this Section 3.2.
(e) Underwriters' Cutback in Incidental Registrations. If
the managing underwriter of any underwritten offering shall inform the
Company by letter of its belief that the number of Registrable Securities
requested to be included in such registration would materially adversely
affect such offering, then the Company will include in such registration,
first, the securities proposed by the Company to be sold for its own
account, and, second, the Registrable Securities and all other securities
of the Company to be included in such registration to the extent of the
number and type which the Company is so advised can be sold in (or during
the time of) such offering, pro rata among the Participating Holders and
such other holders requesting such registration in accordance with the
Registrable Securities held by each Participating Holder and each such
other holder so requested to be registered.
3.3 Registration Procedures. If and whenever the Company is
required to use its best efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in Sections 3.1
or 3.2 hereof, the Company will as expeditiously as possible:
(a) prepare and file with the Commission as soon as
practicable the requisite registration statement to effect such
registration (and shall include all financial statements required
by the Commission to be filed therewith) and thereafter use its
best efforts to cause such registration statement to become
effective; provided, however, that before filing such
registration statement (including all exhibits) or any amendment
or supplement thereto or comparable statements under securities
or blue sky laws of any jurisdiction, the Company shall furnish
such documents to the Participating Holders, their counsel, and
each underwriter, if any, participating in the offering of the
Registrable Securities and its counsel; and provided, further,
however, that the Company may discontinue any registration of its
securities which are not Registrable Securities at any time prior
<PAGE> 7
to the effective date of the registration statement relating
thereto;
(b) notify each Participating Holder of the Commission's
requests for amending or supplementing the registration statement
and the prospectus, and prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to
keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition
of all Registrable Securities covered by such registration
statement for such period as shall be required for the
disposition of all of such Registrable Securities, provided, that
such period need not exceed 180 days;
(c) furnish, without charge, to each Participating Holder
such number of conformed copies of such registration statement
and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such
other documents, as such Participating Holder may reasonably
request;
(d) use its best efforts (i) to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such securities or blue sky laws of
such States of the United States of America where an exemption is
not available and as the Participating Holders shall reasonably
request, (ii) to keep such registration or qualification in
effect for so long as such registration statement remains in
effect, and (iii) to take any other action which may be
reasonably necessary or advisable to enable such Participating
Holders to consummate the disposition in such jurisdictions of
the securities to be sold by such Participating Holders, except
that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of
this subsection (d) be obligated to be so qualified or to consent
to general service of process in any such jurisdiction;
(e) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or
approved by such other federal or state or foreign governmental
<PAGE> 8
agencies or authorities as may be necessary in the opinion of
counsel to the Company and counsel to the Participating Holders
to consummate the disposition of such Registrable Securities;
(f) furnish to each Participating Holder and each
underwriter, if any, participating in the offering of the
securities covered by such registration statement, a signed
counterpart of
(i) an opinion of outside counsel (or inside counsel if
satisfactory to each underwriter) for the Company, and
(ii) a "comfort" letter signed by the independent
public accountants who have certified the Company's
financial statements included or incorporated by reference
in such registration statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and,
in the case of the accountants' comfort letter, with respect to
events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in
accountants' comfort letters delivered to the underwriters in
underwritten public offerings of securities (and dated the dates
such opinions and comfort letters are customarily dated) and, in
the case of the legal opinion, such other legal matters, and, in
the case of the accountants' comfort letter, such other financial
matters, as the Requisite Percentage of Participating Holders, or
the underwriters, may reasonably request;
(g) promptly notify each Participating Holder and each
managing underwriter, if any, participating in the offering of
the securities covered by such registration statement (i) when
such registration statement, any pre-effective amendment, the
prospectus or any prospectus supplement related thereto or
post-effective amendment to such registration statement has been
filed, and, with respect to such registration statement or any
post-effective amendment, when the same has become effective;
(ii) of any request by the Commission for amendments or
supplements to such registration statement or the prospectus
related thereto or for additional information; (iii) of the
issuance by the Commission of any stop order suspending the
effectiveness of such registration statement or the initiation of
any proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of any of the Registrable Securities for sale under
the securities or blue sky laws of any jurisdiction or the
initiation of any proceeding for such purpose; (v) at any time
when a prospectus relating thereto is required to be delivered
under the Securities Act, upon discovery that, or upon the
happening of any event as a result of which, the prospectus
<PAGE> 9
included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to
make the statements therein not misleading, in the light of the
circumstances under which they were made, and in the case of this
clause (v), at the request of any Participating Holder, promptly
prepare and furnish to it and each managing underwriter, if any,
participating in the offering of the Registrable Securities a
reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus
shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the
light of the circumstances under which they were made; and (vi)
at any time when the representations and warranties of the
Company contemplated by Section 3.4(a) hereof cease to be true
and correct;
(h) otherwise comply with all applicable rules and
regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months beginning with the
first full calendar month after the effective date of such
registration statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the Securities Act and Rule
158 promulgated thereunder, and promptly furnish to each such
Participating Holder a copy of any amendment or supplement to
such registration statement or prospectus;
(i) provide and cause to be maintained a transfer agent and
registrar (which, in each case, may be the Company) for all
Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such
registration;
(j) use its best efforts to cause all Registrable Securities
covered by such registration statement to be listed on a national
securities exchange or to secure designation of all such
Registrable Securities on the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ") "Small Cap
Market";
(k) deliver promptly to counsel to the Participating Holders
and each underwriter, if any, participating in the offering of
the Registrable Securities, copies of all correspondence
<PAGE> 10
between the Commission and the Company, its counsel or auditors and
all memoranda relating to discussions with the Commission or its staff
with respect to such registration statement;
(1) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the registration
statement;
(m) if required, provide a CUSIP number for all Registrable
Securities, no later than the effective date of the registration
statement; and
(n) make available its employees and personnel and otherwise
provide reasonable assistance to the underwriters (taking into
account the needs of the Company's businesses) in their marketing
of Registrable Securities.
The Company may require each Participating Holder as to the Registrable
Securities of whom any registration is being effected to furnish the
Company such information regarding such holder and the distribution of such
securities as the Company may from time to time reasonably request in
writing.
Each holder of Registrable Securities agrees that upon receipt of
any notice from the Company of the happening of any event of the kind
described in subsection (g) (iii) or (v) of this Section 3.3, the
Participating Holder will forthwith discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement relating
to such Registrable Securities until, in the case of subsection (g)(iii) of
this Section 3.3, such stop order is removed or proceedings therefor
terminated, and, in the case of subsection (g)(v) of this Section 3.3, such
holder's receipt of the copies of the supplemented or amended prospectus
contemplated by subsection (g)(v) of this Section 3.3 and, if so directed
by the Company, will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such holder's possession,
of the prospectus relating to such Registrable Securities current at the
time of receipt of such notice.
3.4 Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the
underwriters for any underwritten offering by Participating Holders
pursuant to a registration requested under Section 3.1, the Company will
use its best efforts to enter into an underwriting agreement with such
underwriters for such offering, such agreement to be reasonably
satisfactory in substance and form to the Company, each such holder and the
underwriters and to contain such representations and warranties by the
<PAGE> 11
Company and such other terms as are generally prevailing in agreements of
that type, including, without limitation, indemnities to the effect and to
the extent provided in Section 3.6 hereof. The Participating Holders will
cooperate with the Company in the negotiation of the underwriting agreement
and will give consideration to the reasonable suggestions of the Company
regarding the form thereof. The Participating Holders shall be parties to
such underwriting agreement and may, at their option, require that any or
all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall
also be made to and for the benefit of the Participating Holders and that
any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to
the obligations of the Participating Holders. No Participating Holder shall
be required to make any representations or warranties to or agreements with
the Company or the underwriters other than representations, warranties or
agreements regarding such holder, such holder's ownership of and title to
the Registrable Securities, such holder's intended method of distribution
and any other representations required by law, and any liability of the
Participating Holder to any underwriter or other person under such
underwriting agreement shall be limited to liability arising from
misstatements in or omissions from its representations and warranties and
shall be limited to an amount equal to the net proceeds that the
Participating Holder derives from such registration.
(b) Incidental Underwritten Offerings. If the Company
proposes to register any of its securities under the Securities Act as
contemplated by Section 3.2 hereof and such securities are to be
distributed by or through one or more underwriters, the Company will, if
requested by any Participating Holder, use its best efforts to arrange for
such underwriters to include all the Registrable Securities to be offered
and sold by such Participating Holder among the securities of the Company
to be distributed by such underwriters. The Participating Holders shall be
parties to the underwriting agreement between the Company and such
underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of,
the Company to and for the benefit of such underwriters shall also be made
to and for the benefit of such Participating Holders and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
Participating Holders. No Participating Holder shall be required to make
<PAGE> 12
any representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding
such holder, such holder's ownership of and title to the Registrable
Securities, such holder's intended method of distribution and any other
representations required by law, and any liability of the Participating
Holder to any underwriter or other person under such underwriting agreement
shall be limited to liability arising from misstatements in or omissions
from its representations and warranties and shall be limited to an amount
equal to the net proceeds that the Participating Holder derives from such
registration.
3.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, the Company will give the Participating
Holders, their underwriters, if any, and their respective counsel and
accountants the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, and, to the extent practicable, each amendment thereof or
supplement thereto, and give each of them such access to its books and
records and such opportunities to discuss the business of the Company with
its officers and employees and the independent public accountants who have
certified its financial statements as shall be necessary, in the opinion of
such holders' and such underwriters' respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act.
3.6 Indemnification.
(a) Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities Act, the
Company will, and hereby does, indemnify and hold harmless, to the fullest
extent permitting by law, each Participating Holder, its directors,
officers, partners, attorneys, agents and affiliates or general and limited
partners (and the directors, officers, employees, stockholders and
affiliates thereof), and each other Person who participates as an
underwriter in the offering or sale of such securities and each other
Person, if any, who controls such Participating Holder or any such
underwriter within the meaning of the Securities Act, against any losses,
claims, damages, or liabilities, joint or several (or actions or
proceedings, whether commenced or threatened) to which such Participating
Holder or any such director, officer, partner, agent or affiliate or
underwriter or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities,
joint or several (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in
<PAGE> 13
any registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, together
with the documents incorporated by reference therein, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances in which
they were made not misleading, and the Company will reimburse such Participating
Holder and each such director, officer, partner, agent or affiliate, or general
or limited partner, underwriter and controlling Person for any legal or any
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided, that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by or on behalf of
such Participating Holder or underwriter, as the case may be, specifically
stating that it is for use in the preparation thereof; and provided, further,
that the Company shall not be liable to any Person who participates as an
underwriter in the offering or sale of Registrable Securities or any other
Person, if any, who controls such underwriter within the meaning of the
Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such Person's failure to send or give a copy of the final prospectus, as
the same may be then supplemented or amended, to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force regardless of any investigation made
by or on behalf of such Participating Holder or any such director, officer,
partner, attorney, agent or affiliate or controlling Person and shall survive
the transfer of such securities by such Participating Holder.
(b) Indemnification by the Participating Holders. As a
condition to including any Registrable Securities in any registration
statement, the Company shall have received an undertaking reasonably
satisfactory to it from the Participating Holders to indemnify and hold
harmless (in the same manner and to the same extent as set forth in
subsection (a) of this Section 3.6) the Company, each director and officer
of the Company, and each other Person, if any, who controls the Company
within the meaning of the Securities Act, with respect to any statement
<PAGE> 14
or alleged statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, but only if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such Participating Holder
specifically stating that it is for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement; provided, however, that the liability of such
indemnifying party under this Section 3.6(b) shall be limited to the amount of
net proceeds received by such indemnifying party in the offering giving rise to
such liability. Such indemnity shall remain in full force and effect, regardless
of any investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such securities
by the Participating Holder.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subsections of this Section
3.6, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the latter of
the commencement of such action or proceeding; provided, however, that the
failure of any indemnified party to give notice as provided herein shall
not relieve the indemnifying party of its obligations under the preceding
subsections of this Section 3.6, except to the extent that the indemnifying
party is materially prejudiced by such failure to give notice, and shall
not relieve the indemnifying party from any liability which it may have to
the indemnified party otherwise than under this Section 3.6. In case any
such action or proceeding is brought against an indemnified party, the
indemnifying party shall be entitled to participate therein and, unless in
the opinion of outside counsel to the indemnified party a conflict of
interest between such indemnified and indemnifying parties may exist in
respect of such claim, to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that it may wish,
with counsel reasonably satisfactory to such indemnified party; provided,
however, that if the defendants in any such action or proceeding include
both the indemnified party and the indemnifying party and if in the opinion
of outside counsel to the indemnified party there may be legal defenses
available to such indemnified party and/or other indemnified parties which
are different from or in addition to those available to the indemnifying
party, the indemnified party or parties shall have the right to select
separate counsel to defend such action or proceeding on behalf of such
indemnified party or parties, provided, further, that the indemnifying
party shall be obligated to pay for only one counsel for all indemnified
parties. After notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof and approval by the
<PAGE> 15
indemnified party of such counsel, the indemnifying party shall not be
liable to such indemnified party for any legal expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation (unless the first proviso in the
preceding sentence shall be applicable). No indemnifying party shall be
liable for any settlement of any action or proceeding effected without its
written consent. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release
from all liability in respect to such claim or litigation.
(d) Contribution. If the indemnification provided for in
this Section 3.6 shall for any reason be held by a court to be unavailable
to an indemnified party under subsection (a) or (b) hereof in respect of
any loss, claim, damage or liability, or any action in respect thereof,
then, in lieu of the amount paid or payable under subsection (a) or (b)
hereof, the indemnified party and the indemnifying party under subsection
(a) or (b) hereof shall contribute to the aggregate losses, claims, damages
and liabilities (including legal or other expenses reasonably incurred in
connection with investigating the same), (i) in such proportion as is
appropriate to reflect the relative fault of the Company and the
Participating Holders which resulted in such loss, claim, damage or
liability, or action in respect thereof, with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or
action in respect thereof, as well as any other relevant equitable
considerations or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as shall be appropriate
to reflect not only the relative fault but also the relative benefits
received by the Company and the Participating Holders from the offering of
the securities covered by such registration statement as well as any other
relevant equitable considerations. The parties hereto agree that it would
not be just and equitable if contributions pursuant to this Section 3.6(d)
were to be determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations
referred to above. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. The Participating Holders' obligations to contribute as
provided in this subsection (d) are several and not joint in proportion to
the relative value of their respective Registrable Securities covered by
such registration statement. In addition, no Person shall be obligated to
contribute hereunder any amounts in payment for any settlement of any
action or claim effected without such Person's consent, which consent shall
not be unreasonably withheld. Notwithstanding anything in this subsection
(d) to the contrary, no indemnifying party (other than the Company) shall
<PAGE> 16
be required to contribute any amount in excess of the net proceeds received
by such party from the sale of the Registrable Securities in the offering
to which the losses, claims, damages or liabilities of the indemnified
parties relate.
(e) Other Indemnification. Indemnification and contribution
similar to that specified in the preceding subsections of this Section 3.6
(with appropriate modifications) shall be given by the Company and each
Participating Holder with respect to any required registration or other
qualification of securities under any federal or state law or regulation of
any governmental authority other than the Securities Act. The
indemnification agreements contained in this Section 3.6 shall be in
addition to any other rights to indemnification or contribution which any
indemnified party may have pursuant to law or contract and shall remain
operative and in full force and effect regardless of any investigation made
by or on behalf of any indemnified party and shall survive the transfer of
any of the Registrable Securities by any of the Participating Holders.
(f) Indemnification Payments. The indemnification and
contribution required by this Section 3.6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or expense, loss, damage or
liability is incurred.
3.7 Certain Rights of the Holder If Named in a Registration
Statement. If any statement contained in a registration statement under the
Securities Act or in any filing under the state securities laws of any
jurisdiction refers to any Participating Holder by name or otherwise as the
holder of any securities of the Company, then such Participating Holder
shall have the right to require (i) the insertion therein of language, in
form and substance satisfactory to such Participating Holder, to the effect
that the holding by such Participating Holder of such securities does not
necessarily make such Participating Holder a "controlling person" of the
Company within the meaning of the Securities Act and is not to be construed
as a recommendation by such Participating Holder of the investment quality
of the Company's debt or equity securities covered thereby and that such
holding does not imply that such Participating Holder will assist in
meeting any future financial requirements of the Company or (ii) in the
event that such reference to such Participating Holder by name or otherwise
is not, in the reasonable judgment of such Participating Holder as advised
by its counsel, required by the Securities Act or any of the rules and
regulations promulgated thereunder, or any state securities laws of any
jurisdiction, the deletion of the reference to such Participating Holder.
3.8 Unlegended Warrant Shares. In connection with the offering of
any Registrable Securities registered pursuant to this Article 3, the
<PAGE> 17
Company shall (i) facilitate the timely preparation and delivery to
Participating Holders and the underwriters, if any, participating in such
offering, of unlegended Warrant Shares representing ownership of such
Registrable Securities being sold in such denominations and registered in
such names as requested by such Participating Holders or such underwriters
and (ii) instruct any transfer agent and registrar of such Registrable
Securities to release any stop transfer orders with respect to any such
Registrable Securities.
3.9 Limitation on Sale or Distribution of Other Securities. The
Company hereby agrees that, if it shall previously have received a request
for registration pursuant to Section 3.1 or 3.2 hereof, and if such
previous registration shall not have been withdrawn or abandoned, (i) the
Company shall not effect any public or private offer, sale or other
distribution of its securities or effect any registration of any of its
equity securities under the Securities Act (subject to the provisions of
Section 3.2 hereof) (other than a registration on Form S-8 or any successor
or similar form which is then in effect), whether or not for sale for its
own account, until a period of 180 days (or such shorter period as the
Requisite Majority of Participating Holders shall agree) shall have elapsed
after the effective date of such previous registration (and the Company
shall so provide in any registration rights agreements hereafter entered
into with respect to any of its securities); and (ii) the Company shall use
its best efforts to cause each holder of its equity securities purchased
from the Company at any time after the date of this Agreement other than in
a public offering to agree not to effect any public sale or distribution of
any such securities during such period, including a sale pursuant to Rule
144 under the Securities Act.
3.10 No Required Sale. Nothing in this Agreement shall be deemed
to create an independent obligation on the part of any Participating Holder
to sell any Registrable Securities pursuant to any effective registration
statement.
4. Rule 144. The Company shall take all actions reasonably necessary
to enable holders of Registrable Securities to sell such securities without
registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144, or (b) any similar rule or regulation
hereafter adopted by the Commission including, without limiting the
generality of the foregoing, filing on a timely basis all reports required
to be filed by the Exchange Act. Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.
<PAGE> 18
5. Amendments and Waivers. This Agreement may be amended with the
consent of (i) the Company and (ii) the holders of at least 51% in
aggregate principal amount of the Registrable Securities. The Company may
take any action herein prohibited, or omit to perform any act herein
required to be performed by it, in each case only if the Company shall have
obtained the written consent to such action or omission to act, of holders
of at least 51% in aggregate principal amount of the outstanding
Registrable Securities. Each holder of any Registrable Securities at the
time or thereafter outstanding shall be bound by any consent authorized by
this Section 5, whether or not such Registrable Securities shall have been
marked to indicate such consent.
6. Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election in writing delivered to the
Company (accompanied by a written acknowledgment of, and consent to, such
election by such nominee), be treated as the holder of such Registrable
Securities for purposes of any request or other action by any holder or
holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable
Securities held by any holder or holders of Registrable Securities
contemplated by this Agreement. If the beneficial owner of any Registrable
Securities so elects to be treated as the holder of such Registrable
Securities, the Company may require assurances reasonably satisfactory to
it of such owner's beneficial ownership of such Registrable Securities.
7. Notices. All communications provided for hereunder shall be
personally delivered or sent by telecopier (and confirmed by telephone) or
by a reputable overnight courier, and shall be addressed as follows:
(a) if to any of the Holders, addressed to it at such address as
it shall have furnished to the Company in writing;
(b) if to any other holder of Registrable Securities, at the
address that such holder shall have furnished to the Company in writing,
or, until any such other holder so furnishes to the Company an address,
then to and at the address of the last holder of such Registrable
Securities who has furnished an address to the Company; or
(c) if to the Company, addressed to it in the manner set forth in
the Note, or at such other address as the Company shall have furnished to
each holder of Registrable Securities at the time outstanding.
8. Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns. This Agreement may not be assigned by the
Company. This Agreement and/or the registration and other rights contained
herein (including these assignment rights) may be assigned by the
<PAGE> 19
Holders to any one or more transferees or distributees of all or part of such
Holders' Registrable Securities. A holder of Registrable Securities shall be
permitted, in connection with a transfer or disposition of Registrable
Securities, to impose conditions or constraints on the ability of the
transferee, as a holder of Registrable Securities, to request a registration
pursuant to Section 3.1 and shall provide the Company with copies of such
conditions or constraints and the identity of such transferees.
9. Remedies. Each holder of Registrable Securities, in addition to
being entitled to exercise all rights provided herein or granted by law,
including recovery of damages, will be entitled to specific performance of
its rights under this Agreement. The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Agreement and hereby agrees to waive
the defense in any action for specific performance that a remedy at law
would be adequate. In any action or proceeding brought to enforce any
provision of this Agreement (including the indemnification provisions
thereof), the successful party shall be entitled to recover reasonable
attorneys' fees in addition to its costs and expenses and any other
available remedy.
10. No Inconsistent Agreements. The Company will not, on or after the
date of this Agreement, enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. Except as set forth on Schedule 10(a) hereto, the
Company has not previously entered into any agreement with respect to its
securities granting any registration rights to any Person other than the
registration rights granted pursuant to this Agreement. Except as set forth
on Schedule 10(b) hereto, the rights granted to the holders of Registrable
Securities hereunder do not in any way conflict with and are not
inconsistent with any other agreements to which the Company is a party or
by which it is bound. The Company further agrees that if any other
registration rights agreement entered into after the date of this Agreement
with respect to any of its securities contains terms which are more
favorable to, or less restrictive on, the other party thereto than the
terms and conditions contained in this Agreement are (insofar as they are
applicable) to the Holders, then the terms and conditions of this Agreement
shall immediately be deemed to have been amended without further action by
the Company or any of the holders of Registrable Securities so that such
holders shall be entitled to the benefit of any such more favorable or less
restrictive terms or conditions.
11. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only
and shall not limit or otherwise affect the meaning hereof.
<PAGE> 20
12. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
This Agreement shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the laws of the State of New
York, without regard to the conflicts of laws principles thereof. Each of
the parties hereto hereby irrevocably and unconditionally consents to
submit to the exclusive jurisdiction of the courts of the State of New York
and the United States of America located in New York, New York for any
action or proceeding arising out of or relating to this Agreement and the
transactions contemplated hereby (and agrees not to commence any action or
proceeding relating thereto except in such courts). Each of the parties
hereto hereby irrevocably and unconditionally waives any objection to the
laying of venue of any action or proceeding arising out of this Agreement
or the transactions contemplated hereby in the courts of the State of New
York or the United States of America located in New York, New York, and
hereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such action or proceeding brought
in any such court has been brought in an inconvenient forum. The Company
hereby waives any right it may have to a trial by jury in respect of any
action, proceeding or litigation directly or indirectly arising out of,
under or in connection with, this Agreement.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
BIO-PLEXUS, INC.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
APPALOOSA INVESTMENT LIMITED
PARTNERSHIP I, L.P.
By: Appaloosa Management, L.P., its
General Partner
By: Appaloosa Partners Inc., its General
Partner
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
TERSK LLC
<PAGE> 21
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
PALOMINO FUND LTD.
By: Appaloosa Management, L.P.,
its Investment Advisor
By: Appaloosa Partners Inc.,
its General Partner
By:
--------------------------------
Name:
Title:
<PAGE> 1
Exhibit 10.36
Form of Rollover Registration Rights Agreement
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of _________________,
(this "Registration Rights Agreement"), by and among BIO-PLEXUS, INC., a
Connecticut corporation (the "Company"), [APPALOOSA INVESTMENT LIMITED
PARTNERSHIP I, L.P., PALOMINO FUND LTD. and TERSK, LLC] (collectively, the
"Purchasers").
1. Background. The Company and the Purchasers have entered into a
Convertible Note Purchase Agreement, dated as of __________________, (as
amended, supplemented, amended and restated, restructured or otherwise
modified from time to time, the "Convertible Note Purchase Agreement")
whereby the Purchasers purchased from the Company (i) Zero Coupon Secured
Convertible Notes due _____________ issued by the Company in the aggregate
principal amount of $16,750,000 (the "Notes") and (ii) an aggregate of
250,000 shares (the "Shares") of Common Stock, no par value, of the Company
(the "Common Stock"). The execution and delivery of this Registration
Rights Agreement is required by Section [1.4vii] of the Convertible Note
Purchase Agreement.
2. Definitions. Capitalized terms used but not defined herein shall
have the respective meanings given to them in the Convertible Note Purchase
Agreement. As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:
"Commission" means the Securities and Exchange Commission.
"Incidental Registration" is defined in Section 3.2.
<PAGE> 2
"NASDAQ" is defined in Section 3.3(j).
"Participating Holders" means the holders of Registrable
Securities participating in the particular registration.
"Registration Expenses" means all expenses incident to the
Company's performance of or compliance with Section 3, including, without
limitation, all registration, filing and applicable fees of the Commission,
stock exchange or NASD registration and filing fees and all listing fees
and fees with respect to the inclusion of securities in NASDAQ (as defined
in Section 3.3(j)), all fees and expenses of complying with state
securities or blue sky laws (including fees and disbursements of counsel to
the underwriters or the Participating Holders in connection with "blue sky"
qualification of the Registrable Securities and determination of their
eligibility for investment under the laws of the various jurisdictions),
all word processing, duplicating and printing expenses, all messenger and
delivery expenses, the fees and disbursements of counsel for the Company
and of its independent public accountants including the expenses of "cold
comfort" letters required by or incident to such registration, all fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities, all transfer taxes, and the reasonable fees and expenses of one
counsel to the Participating Holders (selected by the Requisite Percentage
of Participating Holders); provided, however, that Registration Expenses
shall exclude and the Participating Holders shall pay underwriters' fees
and underwriting discounts and commissions in respect of the Registrable
Securities being registered.
"Registrable Securities" mean (i) the Notes, (ii) the Shares,
(iii) the shares of Common Stock issuable upon exercise of the Warrants and
(iv) any other additional shares of Common Stock the Purchasers may
otherwise acquire. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities (a) when a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (b) when such
securities shall have been otherwise transferred, new certificates for them
not bearing a legend restricting further transfer under the Securities Act
shall have been delivered by the Company and subsequent public distribution
of them shall not require registration of them under the Securities Act,
(c) when such securities are sold pursuant to Rule 144 (or similar rule
adopted by the Commission) under the Securities Act, or (d) when such
securities cease to be outstanding.
"Requested Registration" is defined in Section 3.1(a).
"Requisite Percentage of Participating Holders" means
Participating Holders of Registrable Securities who hold a majority of the
<PAGE> 3
Registrable Securities that are then being held by all Participating Holders.
"Warrants" means the $3 Warrants, the $5 Warrants and the $7
Warrants.
3. Registration Under Securities Act, etc.
3.1 Requested Registrations.
(a) Request for Registration. Subject to the limitations
imposed by Sections 3.1(c), at any time and from time to time, one or more
holders of Registrable Securities shall have the right to require the
Company to file a registration statement under the Securities Act covering
all or any part of their respective Registrable Securities, by delivering a
written request therefor to the Company specifying the number and amount of
Registrable Securities and the intended method of distribution thereof. Any
such request pursuant to this Section 3.1(a) is referred to herein as a
"Requested Registration." The Company shall give prompt written notice of
each Requested Registration to all other holders of record of Registrable
Securities, and thereupon the Company shall use its best efforts to effect
the registration under the Securities Act so as to permit promptly the
sale, in accordance with the intended method of distribution, of the
Registrable Securities which the Company has been so requested to register
in the Requested Registration and all other Registrable Securities which
the Company has been requested to register by the holders thereof by
written request given to the Company within 30 days after the giving of
such written notice by the Company.
(b) Registration of Other Securities. Whenever the Company
shall effect a registration pursuant to this Section 3.1 in connection with
an underwritten offering by one or more Participating Holders of
Registrable Securities, no securities other than Registrable Securities
shall be included among the securities covered by such registration unless
(i) such inclusion is pursuant to and subject to the terms of the
applicable underwriting agreement or arrangements and (ii) in the opinion
of the underwriter, the inclusion of such securities will not have a
material adverse effect on the offering (including, without limitation, on
the pricing of the offering). If the offering is not an underwritten
offering, there is no limitation on the inclusion of other securities
therein.
(c) Limitations on Requested Registrations; Expenses. The
rights of holders of Registrable Securities to request Requested
Registrations pursuant to Section 3.1(a) are subject to the following
limitations: (i) the Company shall not be obligated to effect a Requested
Registration having an aggregate anticipated offering price of less than
U.S. $1,000,000 unless such offering shall cover all remaining
<PAGE> 4
Registrable Securities; (ii) the Company shall not be obligated to effect a
Requested Registration within six months after the effective date of any other
registration of securities (other than pursuant to a registration on Form S-8 or
any successor or similar form which is then in effect); and (iii) the Company
will pay all Registration Expenses only in connection with the first three
Requested Registrations of Registrable Securities pursuant to this Section 3.1
that have become effective under the Securities Act.
(d) Registration Statement Form. Registrations under this
Section 3.1 shall be on Form S-1, Form S-3 or any successor forms, if
permitted, or such appropriate registration form of the Commission as shall
be selected by the Company and as shall be reasonably acceptable to the
Requisite Percentage of Participating Holders. The Company agrees to
include in any such registration statement all information which, in the
opinion of counsel to the Participating Holders and counsel to the Company,
is required to be included.
(e) Effective Registration Statement. A registration
requested pursuant to this Section 3.1 shall not be deemed to have been
effected (including for purposes of paragraph (c) of this Section 3.1) (i)
unless a registration statement with respect thereto has become effective
and has been kept continuously effective for a period of at least 180 days
(or such shorter period which shall terminate when all the Registrable
Securities covered by such registration statement have been sold pursuant
thereto), (ii) if, after it has become effective, such registration is
interfered with by any stop order, injunction or other order or requirement
of the Commission or other Governmental Entity or court for any reason not
attributable to the Participating Holders and has not thereafter become
effective, or (iii) if the conditions to closing specified in the
underwriting agreement, if any, entered into in connection with such
registration are not satisfied or waived, other than by reason of a failure
on the part of the Participating Holders.
(f) Selection of Underwriters. The managing underwriter or
underwriters of each underwritten offering of the Registrable Securities
registered under this Section 3.1 shall be selected by the Requisite
Percentage of Participating Holders (and shall be reasonably acceptable to
the Company).
(g) Cutbacks in Requested Registration. If the managing
underwriter of any underwritten offering shall advise the Company in
writing (with a copy to each Participating Holder) that, in its opinion,
the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering within a price range
acceptable to the Requisite Percentage of Participating Holders, the
Company will include in such registration, to the extent of the number
which the Company is so advised can be sold in such offering, Registrable
<PAGE> 5
Securities requested to be included in such registration, pro rata among
the Participating Holders requesting such registration in accordance with
the Registrable Securities held by each such Participating Holder so
requested to be registered, and any securities of the Company and other
investors included in such registration pursuant to Section 3.1(b) shall be
reduced proportionately.
(h) Postponement. The Company shall be entitled once in any
six-month period to postpone for a reasonable period of time (but not
exceeding 90 days) the filing of any registration statement required to be
prepared and filed by it pursuant to this Section 3.1 if the Board of
Directors of the Company determines, in its reasonable judgment, that such
registration and offering would interfere with any financing, corporate
reorganization or other material transaction or development involving the
Company or any subsidiary or would require premature disclosure thereof,
and promptly gives the holders of Registrable Securities requesting
registration thereof pursuant to this Section 3.1 written notice of such
determination, containing a statement of the reasons for such postponement
and an approximation of the anticipated delay. If the Company shall so
postpone the filing of a registration statement, the Participating Holders
representing the Requisite Percentage of Participating Holders shall have
the right to withdraw the request for registration by giving written notice
to the Company within 20 days after receipt of the notice of postponement
and, in the event of such withdrawal, such request shall not be counted
toward the number of Requested Registrations (including for purposes of
paragraph (c) of this Section 3.1).
(i) Holder's Right to Withdraw. The Requisite Percentage of
Participating Holders shall have the right to withdraw the request for
registration pursuant to Section 3.1 at any time by giving written notice
to the Company of its request to withdraw and such request shall not be
counted toward the number of Requested Registrations (including for
purposes of paragraph (c) of this Section 3.1).
3.2 Incidental Registration.
(a) Incidental Registration. If, at any time, the Company
proposes or is required to register any of its securities under the
Securities Act (other than pursuant to registrations on such form or
similar form(s) solely for registration of securities in connection with an
employee benefit plan or dividend reinvestment plan) (an "Incidental
Registration"), the Company will give prompt written notice to all holders
of record of Registrable Securities of its intention to so register its
securities and of such holders' rights under this Section 3.2. Upon the
written request of any holder of Registrable Securities made within 20 days
following the receipt of any such written notice (which request shall
specify the maximum number of Registrable Securities intended to be
disposed of by such holder and the intended method of distribution
<PAGE> 6
thereof), the Company will use its best efforts to effect the registration
under the Securities Act of all Registrable Securities which the Company
has been so requested to register by the holders thereof together with any
other securities the Company is obligated to register pursuant to
incidental registration rights of other security holders of the Company. No
registration effected under this Section 3.2 shall relieve the Company of
its obligation to effect any Requested Registration under Section 3.1.
(b) Abandonment or Delay. If, at any time after the Company
has giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in
connection with such registration, the Company shall determine not to
register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination and its reasons
therefor to all holders of record of Registrable Securities and (i) in the
case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from any obligation of the Company to pay the
Registration Expenses in connection therewith), without prejudice, however,
to the rights of any holder or holders of Registrable Securities entitled
to do so to request that such registration be effected as a registration
under Section 3.1, and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable
Securities for the same period as the delay in registering such other
securities.
(c) Holder's Right to Withdraw. Each holder of Registrable
Securities shall have the right to withdraw its request for inclusion of
its Registrable Securities in any registration statement pursuant to this
Section 3.2 at any time by giving written notice to the Company of its
request to withdraw.
(d) Unlimited Number of Registrations; Expenses. There is no
limitation on the number of Incidental Registrations which the Company is
obligated to effect pursuant to this Section 3.2. The Company will pay all
Registration Expenses in connection with any registration of Registrable
Securities requested pursuant to this Section 3.2.
(e) Underwriters' Cutback in Incidental Registrations. If
the managing underwriter of any underwritten offering shall inform the
Company by letter of its belief that the number of Registrable Securities
requested to be included in such registration would materially adversely
affect such offering, then the Company will include in such registration,
first, the securities proposed by the Company to be sold for its own
account, and, second, the Registrable Securities and all other securities
of the Company to be included in such registration to the extent of the
<PAGE> 7
number and type which the Company is so advised can be sold in (or during
the time of) such offering, pro rata among the Participating Holders and
such other holders requesting such registration in accordance with the
Registrable Securities held by each Participating Holder and each such
other holder so requested to be registered.
3.3 Registration Procedures. If and whenever the Company is
required to use its best efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in Sections 3.1
or 3.2 hereof, the Company will as expeditiously as possible:
(a) prepare and file with the Commission as soon as
practicable the requisite registration statement to effect such
registration (and shall include all financial statements required
by the Commission to be filed therewith) and thereafter use its
best efforts to cause such registration statement to become
effective; provided, however, that before filing such
registration statement (including all exhibits) or any amendment
or supplement thereto or comparable statements under securities
or blue sky laws of any jurisdiction, the Company shall furnish
such documents to the Participating Holders, their counsel, and
each underwriter, if any, participating in the offering of the
Registrable Securities and its counsel; and provided, further,
however, that the Company may discontinue any registration of its
securities which are not Registrable Securities at any time prior
to the effective date of the registration statement relating
thereto;
(b) notify each Participating Holder of the Commission's
requests for amending or supplementing the registration statement
and the prospectus, and prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to
keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition
of all Registrable Securities covered by such registration
statement for such period as shall be required for the
disposition of all of such Registrable Securities, provided, that
such period need not exceed 180 days;
(c) furnish, without charge, to each Participating Holder
such number of conformed copies of such registration statement
and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any
<PAGE> 8
other prospectus filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such other
documents, as such Participating Holder may reasonably request;
(d) use its best efforts (i) to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such securities or blue sky laws of
such States of the United States of America where an exemption is
not available and as the Participating Holders shall reasonably
request, (ii) to keep such registration or qualification in
effect for so long as such registration statement remains in
effect, and (iii) to take any other action which may be
reasonably necessary or advisable to enable such Participating
Holders to consummate the disposition in such jurisdictions of
the securities to be sold by such Participating Holders, except
that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of
this subsection (d) be obligated to be so qualified or to consent
to general service of process in any such jurisdiction;
(e) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or
approved by such other federal or state or foreign governmental
agencies or authorities as may be necessary in the opinion of
counsel to the Company and counsel to the Participating Holders
to consummate the disposition of such Registrable Securities;
(f) furnish to each Participating Holder and each
underwriter, if any, participating in the offering of the
securities covered by such registration statement, a signed
counterpart of
(i) an opinion of outside counsel (or inside counsel if
satisfactory to each underwriter) for the Company, and
(ii) a "comfort" letter signed by the independent
public accountants who have certified the Company's
financial statements included or incorporated by reference
in such registration statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and,
in the case of the accountants' comfort letter, with respect to
events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in
accountants' comfort letters delivered to the underwriters in
underwritten public offerings of securities (and dated the
<PAGE> 9
dates such opinions and comfort letters are customarily dated) and, in
the case of the legal opinion, such other legal matters, and, in the
case of the accountants' comfort letter, such other financial matters,
as the Requisite Percentage of Participating Holders, or the
underwriters, may reasonably request;
(g) promptly notify each Participating Holder and each
managing underwriter, if any, participating in the offering of
the securities covered by such registration statement (i) when
such registration statement, any pre-effective amendment, the
prospectus or any prospectus supplement related thereto or
post-effective amendment to such registration statement has been
filed, and, with respect to such registration statement or any
post-effective amendment, when the same has become effective;
(ii) of any request by the Commission for amendments or
supplements to such registration statement or the prospectus
related thereto or for additional information; (iii) of the
issuance by the Commission of any stop order suspending the
effectiveness of such registration statement or the initiation of
any proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of any of the Registrable Securities for sale under
the securities or blue sky laws of any jurisdiction or the
initiation of any proceeding for such purpose; (v) at any time
when a prospectus relating thereto is required to be delivered
under the Securities Act, upon discovery that, or upon the
happening of any event as a result of which, the prospectus
included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to
make the statements therein not misleading, in the light of the
circumstances under which they were made, and in the case of this
clause (v), at the request of any Participating Holder, promptly
prepare and furnish to it and each managing underwriter, if any,
participating in the offering of the Registrable Securities a
reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus
shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the
light of the circumstances under which they were made; and (vi)
at any time when the representations and warranties of the
Company contemplated by Section 3.4(a) hereof cease to be true
and correct;
<PAGE> 10
(h) otherwise comply with all applicable rules and
regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months beginning with the
first full calendar month after the effective date of such
registration statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the Securities Act and Rule
158 promulgated thereunder, and promptly furnish to each such
Participating Holder a copy of any amendment or supplement to
such registration statement or prospectus;
(i) provide and cause to be maintained a transfer agent and
registrar (which, in each case, may be the Company) for all
Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such
registration;
(j) use its best efforts to cause all Registrable Securities
covered by such registration statement to be listed on a national
securities exchange or to secure designation of all such
Registrable Securities on the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ") "Small Cap
Market";
(k) deliver promptly to counsel to the Participating Holders
and each underwriter, if any, participating in the offering of
the Registrable Securities, copies of all correspondence between
the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its
staff with respect to such registration statement;
(1) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the registration
statement;
(m) if required, provide a CUSIP number for all Registrable
Securities, no later than the effective date of the registration
statement; and
(n) make available its employees and personnel and otherwise
provide reasonable assistance to the underwriters (taking into
account the needs of the Company's businesses) in their marketing
of Registrable Securities.
The Company may require each Participating Holder as to the Registrable
Securities of whom any registration is being effected to furnish the
Company such information regarding such holder and the distribution of such
securities as the Company may from time to time reasonably request in
<PAGE> 11
writing.
Each holder of Registrable Securities agrees that upon receipt of
any notice from the Company of the happening of any event of the kind
described in subsection (g) (iii) or (v) of this Section 3.3, the
Participating Holder will forthwith discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement relating
to such Registrable Securities until, in the case of subsection (g)(iii) of
this Section 3.3, such stop order is removed or proceedings therefor
terminated, and, in the case of subsection (g)(v) of this Section 3.3, such
holder's receipt of the copies of the supplemented or amended prospectus
contemplated by subsection (g)(v) of this Section 3.3 and, if so directed
by the Company, will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such holder's possession,
of the prospectus relating to such Registrable Securities current at the
time of receipt of such notice.
3.4 Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the
underwriters for any underwritten offering by Participating Holders
pursuant to a registration requested under Section 3.1, the Company will
use its best efforts to enter into an underwriting agreement with such
underwriters for such offering, such agreement to be reasonably
satisfactory in substance and form to the Company, each such holder and the
underwriters and to contain such representations and warranties by the
Company and such other terms as are generally prevailing in agreements of
that type, including, without limitation, indemnities to the effect and to
the extent provided in Section 3.6 hereof. The Participating Holders will
cooperate with the Company in the negotiation of the underwriting agreement
and will give consideration to the reasonable suggestions of the Company
regarding the form thereof. The Participating Holders shall be parties to
such underwriting agreement and may, at their option, require that any or
all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall
also be made to and for the benefit of the Participating Holders and that
any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to
the obligations of the Participating Holders. No Participating Holder shall
be required to make any representations or warranties to or agreements with
the Company or the underwriters other than representations, warranties or
agreements regarding such holder, such holder's ownership of and title
<PAGE> 12
to the Registrable Securities, such holder's intended method of distribution and
any other representations required by law, and any liability of the
Participating Holder to any underwriter or other person under such underwriting
agreement shall be limited to liability arising from misstatements in or
omissions from its representations and warranties and shall be limited to an
amount equal to the net proceeds that the Participating Holder derives from such
registration.
(b) Incidental Underwritten Offerings. If the Company
proposes to register any of its securities under the Securities Act as
contemplated by Section 3.2 hereof and such securities are to be
distributed by or through one or more underwriters, the Company will, if
requested by any Participating Holder, use its best efforts to arrange for
such underwriters to include all the Registrable Securities to be offered
and sold by such Participating Holder among the securities of the Company
to be distributed by such underwriters. The Participating Holders shall be
parties to the underwriting agreement between the Company and such
underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of,
the Company to and for the benefit of such underwriters shall also be made
to and for the benefit of such Participating Holders and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
Participating Holders. No Participating Holder shall be required to make
any representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding
such holder, such holder's ownership of and title to the Registrable
Securities, such holder's intended method of distribution and any other
representations required by law, and any liability of the Participating
Holder to any underwriter or other person under such underwriting agreement
shall be limited to liability arising from misstatements in or omissions
from its representations and warranties and shall be limited to an amount
equal to the net proceeds that the Participating Holder derives from such
registration.
3.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the Participating Holders,
their underwriters, if any, and their respective counsel and accountants the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and, to the
extent practicable, each amendment thereof or supplement thereto, and give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with
<PAGE> 13
its officers and employees and the independent public accountants who have
certified its financial statements as shall be necessary, in the opinion of such
holders' and such underwriters' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
3.6 Indemnification.
(a) Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities Act, the
Company will, and hereby does, indemnify and hold harmless, to the fullest
extent permitting by law, each Participating Holder, its directors,
officers, partners, attorneys, agents and affiliates or general and limited
partners (and the directors, officers, employees, stockholders and
affiliates thereof), and each other Person who participates as an
underwriter in the offering or sale of such securities and each other
Person, if any, who controls such Participating Holder or any such
underwriter within the meaning of the Securities Act, against any losses,
claims, damages, or liabilities, joint or several (or actions or
proceedings, whether commenced or threatened) to which such Participating
Holder or any such director, officer, partner, agent or affiliate or
underwriter or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities,
joint or several (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under
the Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto,
together with the documents incorporated by reference therein, or any
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein in light of
the circumstances in which they were made not misleading, and the Company
will reimburse such Participating Holder and each such director, officer,
partner, agent or affiliate, or general or limited partner, underwriter and
controlling Person for any legal or any other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
<PAGE> 14
supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by or on
behalf of such Participating Holder or underwriter, as the case may be,
specifically stating that it is for use in the preparation thereof; and
provided, further, that the Company shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter
within the meaning of the Securities Act, in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to send or
give a copy of the final prospectus, as the same may be then supplemented
or amended, to the Person asserting an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such
indemnity shall remain in full force regardless of any investigation made
by or on behalf of such Participating Holder or any such director, officer,
partner, attorney, agent or affiliate or controlling Person and shall
survive the transfer of such securities by such Participating Holder.
(b) Indemnification by the Participating Holders. As a
condition to including any Registrable Securities in any registration
statement, the Company shall have received an undertaking reasonably
satisfactory to it from the Participating Holders to indemnify and hold
harmless (in the same manner and to the same extent as set forth in
subsection (a) of this Section 3.6) the Company, each director and officer
of the Company, and each other Person, if any, who controls the Company
within the meaning of the Securities Act, with respect to any statement or
alleged statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, but
only if such statement or alleged statement or omission or alleged omission
was made in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by such
Participating Holder specifically stating that it is for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement; provided, however,
that the liability of such indemnifying party under this Section 3.6(b)
shall be limited to the amount of net proceeds received by such
indemnifying party in the offering giving rise to such liability. Such
indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such
securities by the Participating Holder.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subsections of this Section
3.6, such indemnified party will, if a claim in respect thereof is to be
<PAGE> 15
made against an indemnifying party, give written notice to the latter of
the commencement of such action or proceeding; provided, however, that the
failure of any indemnified party to give notice as provided herein shall
not relieve the indemnifying party of its obligations under the preceding
subsections of this Section 3.6, except to the extent that the indemnifying
party is materially prejudiced by such failure to give notice, and shall
not relieve the indemnifying party from any liability which it may have to
the indemnified party otherwise than under this Section 3.6. In case any
such action or proceeding is brought against an indemnified party, the
indemnifying party shall be entitled to participate therein and, unless in
the opinion of outside counsel to the indemnified party a conflict of
interest between such indemnified and indemnifying parties may exist in
respect of such claim, to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that it may wish,
with counsel reasonably satisfactory to such indemnified party; provided,
however, that if the defendants in any such action or proceeding include
both the indemnified party and the indemnifying party and if in the opinion
of outside counsel to the indemnified party there may be legal defenses
available to such indemnified party and/or other indemnified parties which
are different from or in addition to those available to the indemnifying
party, the indemnified party or parties shall have the right to select
separate counsel to defend such action or proceeding on behalf of such
indemnified party or parties, provided, further, that the indemnifying
party shall be obligated to pay for only one counsel for all indemnified
parties. After notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof and approval by the
indemnified party of such counsel, the indemnifying party shall not be
liable to such indemnified party for any legal expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation (unless the first proviso in the
preceding sentence shall be applicable). No indemnifying party shall be
liable for any settlement of any action or proceeding effected without its
written consent. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release
from all liability in respect to such claim or litigation.
(d) Contribution. If the indemnification provided for in
this Section 3.6 shall for any reason be held by a court to be unavailable
to an indemnified party under subsection (a) or (b) hereof in respect of
any loss, claim, damage or liability, or any action in respect thereof,
then, in lieu of the amount paid or payable under subsection (a) or (b)
hereof, the indemnified party and the indemnifying party under subsection
(a) or (b) hereof shall contribute to the aggregate losses, claims, damages
and liabilities (including legal or other expenses reasonably incurred in
connection with investigating the same), (i) in such proportion as is
appropriate to reflect the relative fault of the Company and the
Participating Holders which resulted in such loss, claim, damage or
<PAGE> 16
liability, or action in respect thereof, with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or
action in respect thereof, as well as any other relevant equitable
considerations or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as shall be appropriate
to reflect not only the relative fault but also the relative benefits
received by the Company and the Participating Holders from the offering of
the securities covered by such registration statement as well as any other
relevant equitable considerations. The parties hereto agree that it would
not be just and equitable if contributions pursuant to this Section 3.6(d)
were to be determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations
referred to above. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. The Participating Holders' obligations to contribute as
provided in this subsection (d) are several and not joint in proportion to
the relative value of their respective Registrable Securities covered by
such registration statement. In addition, no Person shall be obligated to
contribute hereunder any amounts in payment for any settlement of any
action or claim effected without such Person's consent, which consent shall
not be unreasonably withheld. Notwithstanding anything in this subsection
(d) to the contrary, no indemnifying party (other than the Company) shall
be required to contribute any amount in excess of the net proceeds received
by such party from the sale of the Registrable Securities in the offering
to which the losses, claims, damages or liabilities of the indemnified
parties relate.
(e) Other Indemnification. Indemnification and contribution
similar to that specified in the preceding subsections of this Section 3.6
(with appropriate modifications) shall be given by the Company and each
Participating Holder with respect to any required registration or other
qualification of securities under any federal or state law or regulation of
any governmental authority other than the Securities Act. The
indemnification agreements contained in this Section 3.6 shall be in
addition to any other rights to indemnification or contribution which any
indemnified party may have pursuant to law or contract and shall remain
operative and in full force and effect regardless of any investigation made
by or on behalf of any indemnified party and shall survive the transfer of
any of the Registrable Securities by any of the Participating Holders.
(f) Indemnification Payments. The indemnification and
contribution required by this Section 3.6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
<PAGE> 17
defense, as and when bills are received or expense, loss, damage or
liability is incurred.
3.7 Certain Rights of the Holder If Named in a Registration
Statement. If any statement contained in a registration statement under the
Securities Act or in any filing under the state securities laws of any
jurisdiction refers to any Participating Holder by name or otherwise as the
holder of any securities of the Company, then such Participating Holder
shall have the right to require (i) the insertion therein of language, in
form and substance satisfactory to such Participating Holder, to the effect
that the holding by such Participating Holder of such securities does not
necessarily make such Participating Holder a "controlling person" of the
Company within the meaning of the Securities Act and is not to be construed
as a recommendation by such Participating Holder of the investment quality
of the Company's debt or equity securities covered thereby and that such
holding does not imply that such Participating Holder will assist in
meeting any future financial requirements of the Company or (ii) in the
event that such reference to such Participating Holder by name or otherwise
is not, in the reasonable judgment of such Participating Holder as advised
by its counsel, required by the Securities Act or any of the rules and
regulations promulgated thereunder, or any state securities laws of any
jurisdiction, the deletion of the reference to such Participating Holder.
3.8 Unlegended Warrant Shares. In connection with the offering of
any Registrable Securities registered pursuant to this Article 3, the
Company shall (i) facilitate the timely preparation and delivery to
Participating Holders and the underwriters, if any, participating in such
offering, of unlegended Warrant Shares representing ownership of such
Registrable Securities being sold in such denominations and registered in
such names as requested by such Participating Holders or such underwriters
and (ii) instruct any transfer agent and registrar of such Registrable
Securities to release any stop transfer orders with respect to any such
Registrable Securities.
3.9 Limitation on Sale or Distribution of Other Securities. The
Company hereby agrees that, if it shall previously have received a request
for registration pursuant to Section 3.1 or 3.2 hereof, and if such
previous registration shall not have been withdrawn or abandoned, (i) the
Company shall not effect any public or private offer, sale or other
distribution of its securities or effect any registration of any of its
equity securities under the Securities Act (subject to the provisions of
Section 3.2 hereof) (other than a registration on Form S-8 or any successor
or similar form which is then in effect), whether or not for sale for its
own account, until a period of 180 days (or such shorter period as the
Requisite Majority of Participating Holders shall agree) shall have elapsed
<PAGE> 18
after the effective date of such previous registration (and the Company
shall so provide in any registration rights agreements hereafter entered
into with respect to any of its securities); and (ii) the Company shall use
its best efforts to cause each holder of its equity securities purchased
from the Company at any time after the date of this Agreement other than in
a public offering to agree not to effect any public sale or distribution of
any such securities during such period, including a sale pursuant to Rule
144 under the Securities Act.
3.10 No Required Sale. Nothing in this Agreement shall be deemed
to create an independent obligation on the part of any Participating Holder
to sell any Registrable Securities pursuant to any effective registration
statement.
4. Rule 144. The Company shall take all actions reasonably necessary
to enable holders of Registrable Securities to sell such securities without
registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144, or (b) any similar rule or regulation
hereafter adopted by the Commission including, without limiting the
generality of the foregoing, filing on a timely basis all reports required
to be filed by the Exchange Act. Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.
5. Amendments and Waivers. This Agreement may be amended with the
consent of (i) the Company and (ii) the holders of at least 51% in
aggregate principal amount of the Registrable Securities. The Company may
take any action herein prohibited, or omit to perform any act herein
required to be performed by it, in each case only if the Company shall have
obtained the written consent to such action or omission to act, of holders
of at least 51% in aggregate principal amount of the outstanding
Registrable Securities. Each holder of any Registrable Securities at the
time or thereafter outstanding shall be bound by any consent authorized by
this Section 5, whether or not such Registrable Securities shall have been
marked to indicate such consent.
6. Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election in writing delivered to the
Company (accompanied by a written acknowledgment of, and consent to, such
election by such nominee), be treated as the holder of such Registrable
Securities for purposes of any request or other action by any holder or
holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable
Securities held by any holder or holders of Registrable Securities
<PAGE> 19
contemplated by this Agreement. If the beneficial owner of any Registrable
Securities so elects to be treated as the holder of such Registrable
Securities, the Company may require assurances reasonably satisfactory to
it of such owner's beneficial ownership of such Registrable Securities.
7. Notices. All communications provided for hereunder shall be
personally delivered or sent by telecopier (and confirmed by telephone) or
by a reputable overnight courier, and shall be addressed as follows:
(a) if to any of the Purchasers, addressed to it at such address
as it shall have furnished to the Company in writing;
(b) if to any other holder of Registrable Securities, at the
address that such holder shall have furnished to the Company in writing,
or, until any such other holder so furnishes to the Company an address,
then to and at the address of the last holder of such Registrable
Securities who has furnished an address to the Company; or
(c) if to the Company, addressed to it in the manner set forth in
the Convertible Note Purchase Agreement, or at such other address as the
Company shall have furnished to each holder of Registrable Securities at
the time outstanding.
8. Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns. This Agreement may not be assigned by the
Company. This Agreement and/or the registration and other rights contained
herein (including these assignment rights) may be assigned by the
Purchasers to any one or more transferees or distributees of all or part of
such Purchaser's Registrable Securities. A holder of Registrable Securities
shall be permitted, in connection with a transfer or disposition of
Registrable Securities, to impose conditions or constraints on the ability
of the transferee, as a holder of Registrable Securities, to request a
registration pursuant to Section 3.1 and shall provide the Company with
copies of such conditions or constraints and the identity of such
transferees.
9. Remedies. Each holder of Registrable Securities, in addition to
being entitled to exercise all rights provided herein or granted by law,
including recovery of damages, will be entitled to specific performance of
its rights under this Agreement. The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Agreement and hereby agrees to waive
the defense in any action for specific performance that a remedy at law
would be adequate. In any action or proceeding brought to enforce any
provision of this Agreement (including the indemnification provisions
thereof), the successful party shall be entitled to recover reasonable
attorneys' fees in addition to its costs and expenses and any other
available remedy.
<PAGE> 20
10. No Inconsistent Agreements. The Company will not, on or after the
date of this Agreement, enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. Except as set forth on Schedule 10(a) hereto, the
Company has not previously entered into any agreement with respect to its
securities granting any registration rights to any Person other than the
registration rights granted pursuant to this Agreement. Except as set forth
on Schedule 10(b) hereto, the rights granted to the holders of Registrable
Securities hereunder do not in any way conflict with and are not
inconsistent with any other agreements to which the Company is a party or
by which it is bound. The Company further agrees that if any other
registration rights agreement entered into after the date of this Agreement
with respect to any of its securities contains terms which are more
favorable to, or less restrictive on, the other party thereto than the
terms and conditions contained in this Agreement are (insofar as they are
applicable) to the Purchasers, then the terms and conditions of this
Agreement shall immediately be deemed to have been amended without further
action by the Company or any of the holders of Registrable Securities so
that such holders shall be entitled to the benefit of any such more
favorable or less restrictive terms or conditions.
11. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only
and shall not limit or otherwise affect the meaning hereof.
12. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
This Agreement shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the laws of the State of New
York, without regard to the conflicts of laws principles thereof. Each of
the parties hereto hereby irrevocably and unconditionally consents to
submit to the exclusive jurisdiction of the courts of the State of New York
and the United States of America located in New York, New York for any
action or proceeding arising out of or relating to this Agreement and the
transactions contemplated hereby (and agrees not to commence any action or
proceeding relating thereto except in such courts). Each of the parties
hereto hereby irrevocably and unconditionally waives any objection to the
laying of venue of any action or proceeding arising out of this Agreement
or the transactions contemplated hereby in the courts of the State of New
York or the United States of America located in New York, New York, and
hereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such action or proceeding brought
in any such court has been brought in an inconvenient forum. The Company
hereby waives any right it may have to a trial by jury in respect of any
action, proceeding or litigation directly or indirectly arising out of,
<PAGE> 21
under or in connection with, this Agreement.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
<PAGE> 22
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
BIO-PLEXUS, INC.
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
APPALOOSA INVESTMENT LIMITED
PARTNERSHIP I, L.P.
By: Appaloosa Management, L.P., its
General Partner
By: Appaloosa Partners Inc., its General
Partner
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
TERSK LLC
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
PALOMINO FUND LTD.
By: Appaloosa Management, L.P.,
its Investment Advisor
By: Appaloosa Partners Inc.,
its General Partner
By:
--------------------------------
Name:
--------------------------
Title:
--------------------------
<PAGE> 1
Exhibit 10.37
SECURITY AGREEMENT
AMONG
BIO-PLEXUS, INC.,
as Obligor
and
APPALOOSA INVESTMENT LIMITED PARTNERSHIP I, L.P.,
as Holder
Dated as of October 21, 1999
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
Article I. Definitions and Interpretation............................. 1
1.01 Certain Defined Terms......................................... 1
1.02 Interpretation................................................ 3
Article II. Collateral................................................ 3
2.01 Grant of First Priority Security Interest..................... 3
2.02 Reserved...................................................... 5
2.03 Intellectual Property......................................... 5
2.04 Perfection.................................................... 6
2.05 Preservation and Protection of Security Interests............. 6
2.06 Reserved...................................................... 7
2.07 Special Provisions Relating to Securities Collateral.......... 7
2.08 Use of Intellectual Property.................................. 8
2.09 Instruments................................................... 8
2.10 Use of Collateral............................................. 8
2.11 Rights and Obligations........................................ 8
2.12 Release of Motor Vehicles..................................... 9
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
2.13 Termination.................................................. 9
Article III. Cash Proceeds of Collateral............................. 9
3.01 Collateral Account........................................... 9
3.02 Certain Proceeds............................................. 10
3.03 Investment of Balance in Collateral Account.................. 10
Article IV. Representations and Warranties........................... 10
4.01 Title........................................................ 10
4.02 Intellectual Property........................................ 11
4.03 Goods........................................................ 11
Article V. Covenants................................................. 11
5.01 Books and Records............................................ 11
5.02 Removals, Etc................................................ 11
5.03 Stock Collateral............................................. 11
5.04 Intellectual Property........................................ 12
Article VI. Remedies................................................. 13
6.01 Events of Default, Etc....................................... 13
6.02 Deficiency................................................... 14
6.03 Private Sale................................................. 14
6.04 Application of Proceeds...................................... 15
Article VII. Miscellaneous........................................... 15
7.01 Waiver....................................................... 15
7.02 Notices...................................................... 16
7.03 Expenses, Etc................................................ 16
7.04 Amendments................................................... 16
7.05 Successors and Assigns....................................... 17
7.06 Survival..................................................... 17
7.07 Agreements Superseded........................................ 17
7.08 Severability................................................. 17
7.09 Captions..................................................... 17
7.10 Counterparts................................................. 17
7.11 GOVERNING LAW................................................ 17
7.12 Submission to Jurisdiction................................... 17
7.13. Service of Process........................................... 18
7.14. WAIVER OF JURY TRIAL......................................... 18
</TABLE>
<PAGE> 4
Annex I - Schedule of Pledged Debt
Annex II - Jurisdictions for Filing of Financing Statements
Annex III - Business Locations
<PAGE> 5
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement") dated as of October 21, 1999, is
made by and among BIO-PLEXUS, INC., a Connecticut corporation (the "Obligor"),
and APPALOOSA INVESTMENT LIMITED PARTNERSHIP I, L.P. (the "Holder").
WHEREAS, pursuant to the 7.5% Secured Note, dated as of the date hereof (as
amended, supplemented, restated or otherwise modified from time to time, the
"Note"), the Company is borrowing $3.0 million from the Obligor;
WHEREAS, as a condition, and material inducement, to the Holder's agreement
to loan the Obligor the money under the Note, the Holder required that the
Obligor deliver this Agreement to the Holder;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Obligor agrees with the Holder
as follows:
Article I. Definitions and Interpretation.
1.01 Certain Defined Terms. Unless otherwise defined, all capitalized terms
used in this Agreement that are defined in the Note (including those terms
incorporated therein by reference) shall have the respective meanings assigned
to them in the Note. In addition, the following terms shall have the following
meanings under this Agreement:
"Accounts" shall have the meaning assigned to that term in Section
2.01(b).
"Additional Debt" shall have the meaning assigned to that term in Section
2.01(a).
"Additional Shares" shall have the meaning assigned to that term in Section
5.03.
"Casualty Event" shall mean, with respect to any property of any Person,
any loss of or damage to, or any condemnation or other taking of, such property
for which such Person or any of its Subsidiaries receives insurance proceeds, or
proceeds of a condemnation award or other compensation.
"Collateral" shall have the meaning assigned to that term in Section
<PAGE> 6
2.01.
"Collateral Account" shall have the meaning assigned to that term in
Section 3.01.
"Copyright Collateral" shall mean all Copyrights, whether now owned or
hereafter acquired by the Obligor.
"Copyrights" shall mean, collectively, (a) all copyrightable works, all
copyrights, and all registrations, applications and renewals and extensions in
connection therewith and (b) all rights, now existing or hereafter coming into
existence, (i) to all income, royalties, damages and other payments (including
in respect of all past, present or future infringements) now or hereafter due or
payable under or with respect to any of the foregoing, (ii) to sue for all past,
present and future infringements with respect to any of the foregoing and (iii)
otherwise accruing under or pertaining to any of the foregoing throughout the
world.
"Documents" shall have the meaning assigned to that term in Section
2.01(f).
"Equipment" shall have the meaning assigned to that term in Section
2.01(e).
"Equity Rights" shall mean, with respect to any Person, any outstanding
subscriptions, options, warrants, commitments, preemptive rights or agreements
of any kind (including any stockholders' or voting trust agreements) for the
issuance, sale, registration or voting of, or outstanding securities convertible
into, any additional shares of capital stock of any class, or partnership or
other ownership interests of any type in, such Person.
"Holder" shall have the meaning assigned to that term in the preamble.
"Instruments" shall have the meaning assigned to that term in Section
2.01(c).
"Inventory" shall have the meaning assigned to that term in Section
2.01(d).
"Issuers" shall mean, collectively, each Subsidiary, directly or
indirectly, of the Obligor that is the issuer (as defined in the Uniform
Commercial Code) of any shares of capital stock now owned or hereafter acquired
by the Obligor.
"Loan Documents" shall mean the Note and this Agreement.
"Motor Vehicles" shall mean motor vehicles, tractors, trailers and other
like property, whether or not the title to any such property is governed by a
certificate of title or ownership.
"Patent Collateral" shall mean all Patents, whether now owned or hereafter
acquired by the Obligor.
"Person" shall mean any individual, firm, corporation, limited liability
company, partnership, company or other entity, and shall
<PAGE> 7
include any successor (by merger or otherwise) of such entity.
"Pledged Debt" shall have the meaning assigned to that term in Section
2.01(a).
"Pledged Stock" shall have the meaning assigned to that term in Section
2.01(a).
"Securities Collateral" means the Stock Collateral and the Pledged
Debt.
"Signing Date" shall mean the date on which the Obligor shall sign and
deliver this Agreement.
"Stock Collateral" shall have the meaning assigned to that term in Section
2.01(a).
"Trademark Collateral" shall mean all Trademarks, whether now owned or
hereafter acquired by the Obligor. Notwithstanding the foregoing, the Trademark
Collateral shall not include any Trademark which would be rendered invalid,
abandoned, void or unenforceable by reason of its being included as part of the
Trademark Collateral.
"Trademarks" shall mean, collectively, (a) all trade names, trademarks,
service marks, logos, trade dress, domain names, and corporate names, together
with all translations, adaptations, decorations, and combinations thereof and
including all goodwill associated therewith and all registrations and
applications in connection with any of the foregoing, (b) all renewals and
extensions of any of the foregoing and (c) all rights, now existing or hereafter
coming into existence, (i) to all income, royalties, damages and other payments
(including in respect of all past, present and future infringements) now or
hereafter due or payable under or with respect to any of the foregoing, (ii) to
sue for all past, present and future infringements with respect to any of the
foregoing and (iii) otherwise accruing under or pertaining to any of the
foregoing throughout the world, together, in each case, with the product lines
and goodwill of the business connected with the use of, or otherwise symbolized
by, each of the foregoing.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
effect in the State of New York from time to time or, by reason of mandatory
application, any other applicable jurisdiction.
1.02 Interpretation. In this Agreement, unless otherwise indicated, the
singular includes the plural and plural the singular; words importing either
gender include the other gender; references to statutes or regulations are to be
construed as including all statutory or regulatory provisions consolidating,
amending or replacing the statute or regulation referred to; references to
"writing" include printing, typing,
<PAGE> 8
lithography and other means of reproducing words in a tangible visible form; the
words "including," "includes" and "include" shall be deemed to be followed by
the words "without limitation"; references to articles, sections (or
subdivisions of sections), exhibits, annexes or schedules are to this Agreement;
references to agreements and other contractual instruments shall be deemed to
include all subsequent amendments, extensions and other modifications to such
instruments (without, however, limiting any prohibition on any such amendments,
extensions and other modifications by the terms of any Loan Document); and
references to Persons include their respective permitted successors and assigns
and, in the case of governmental Persons, Persons succeeding to their respective
functions and capacities.
Article II. Collateral.
2.01 Grant of First Priority Security Interest. As collateral security for
the prompt payment in full when due (whether at stated maturity, by acceleration
or otherwise) and performance of the Secured Obligations and obligations of
every kind and nature of the Obligor now or hereafter incurred, existing or
created, to the Holder (including, without limitation, under the Convertible
Note Purchase Agreement), the Obligor hereby pledges and grants to the Holder a
first priority security interest in all of the Obligor's right, title and
interest in and to the following property, whether now owned or hereafter
acquired by the Obligor and whether now existing or hereafter coming into
existence including, without limitation, all real and personal property and
interests in real and personal property (collectively, the "Collateral"):
(a)(i) all of the shares of capital stock of the Issuers now owned or
hereafter acquired by the Obligor together with in each case the certificates
representing the same (collectively, the "Pledged Stock"); (ii) all shares,
securities, moneys or property representing a dividend on, or a distribution or
return of capital in respect of, any of the Pledged Stock, resulting from a
split-up, revision, reclassification or other like change of any of the Pledged
Stock or otherwise received in exchange for any of the Pledged Stock and all
Equity Rights issued to the holders of, or otherwise in respect of, any of the
Pledged Stock; and (iii) without affecting the obligations of the Obligor under
any provision prohibiting such action under any Loan Document, in the event of
any consolidation or merger in which any Issuer is not the surviving
corporation, all shares of each class of the capital stock of the successor
corporation (unless such successor corporation is the Obligor itself) formed by
or resulting from such consolidation or merger (collectively, and together with
the property described in clauses (i) and (ii) above, the "Stock Collateral");
(iv) the Indebtedness described in Annex I and issued by the obligors named
<PAGE> 9
therein (the "Pledged Debt"); (v) all additional Indebtedness for money borrowed
or for the deferred purchase price of property from time to time owed to the
Obligor by any Person, "Additional Debt"); (vi) all notes or other instruments
evidencing the Indebtedness referred to in clauses (iv) and (v) above;
(b) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of the Obligor constituting a right to the payment of
money, whether or not earned by performance, including, without limitation, (i)
in payments due and to become due to the Obligor under the Development and
License Agreement, dated as of January 28, 1997, between Johnson & Johnson
Medical, Inc. and the Company, as such agreement may be amended from time to
time (the "Development and License Agreement"), (ii) in payments due and to
become due to the Obligor under any existing or future licensing, supply,
development, or similar agreements, (iii) in repayment of any loans or advances
(including loans and advances to Subsidiaries of the Obligor), (iv) in payment
for goods (including Inventory and Equipment) sold or leased or for services
rendered and (v) in payment of tax refunds and in payment of any guarantee of
any of the foregoing (collectively, the "Accounts");
(c) all instruments, chattel paper or letters of credit (each as
defined in the Uniform Commercial Code) of the Obligor evidencing, representing,
arising from or existing in respect of, relating to, securing or otherwise
supporting the payment of, any of the Accounts (collectively, the
"Instruments");
(d) all inventory (as defined in the Uniform Commercial Code) and all
other goods (including Motor Vehicles) of the Obligor that are held by the
Obligor for sale, lease or furnishing under a contract of service (including to
its Subsidiaries or Affiliates), that are so leased or furnished or that
constitute raw materials, work in process or material used or consumed in its
business, including all spare parts and related supplies, all goods obtained by
the Obligor in exchange for any such goods, all products made or processed from
any such goods and all substances, if any, commingled with or added to any such
goods (collectively, the "Inventory");
(e) all equipment (as defined in the Uniform Commercial Code) and all
other goods (including Motor Vehicles) of the Obligor that are used or bought
for use primarily in its business, including all spare parts and related
supplies, all goods obtained by the Obligor in exchange for any such goods, all
substances, if any, commingled with or added to such goods and all upgrades and
other improvements to such goods, in each case to the
<PAGE> 10
extent not constituting Inventory (collectively, the "Equipment");
(f) all documents of title (as defined in the Uniform Commercial Code)
or other receipts of the Obligor covering, evidencing or representing Inventory
or Equipment (collectively, the "Documents");
(g) all contracts and other agreements of the Obligor relating to the
sale or other disposition of all or any part of the Inventory, Equipment or
Documents and all rights, warranties, claims and benefits of the Obligor against
any Person arising out of, relating to or in connection with all or any part of
the Inventory, Equipment or Documents of the Obligor, including any such rights,
warranties, claims or benefits against any Person storing or transporting any
such Inventory or Equipment or issuing any such Documents;
(h) all other accounts or general intangibles of the Obligor not
constituting Accounts, including, to the extent related to all or any part of
the other Collateral, all books, correspondence, credit files, records,
invoices, tapes, cards, computer runs and other papers and documents in the
possession or under the control of the Obligor or any computer bureau or service
company from time to time acting for the Obligor;
(i) the balance from time to time in the Collateral Account;
(j) all other tangible and intangible property of the Obligor,
including all Intellectual Property (provided, however, that with respect to
Patents jointly developed by the Obligor and Johnson & Johnson Medical, Inc.
under the Development and License Agreement, only to the extent consented to by
Johnson & Johnson Medical, Inc.); and
(k) all proceeds and products in whatever form of all or any part of
the other Collateral, including all proceeds of insurance and all condemnation
awards and all other compensation for any Casualty Event with respect to all or
any part of the other Collateral (together with all rights to recover and
proceed with respect to the same), and all accessories to, substitutions for and
replacements of all or any part of the other Collateral.
2.02 Reserved
2.03 Intellectual Property. For the purpose of enabling the Holder to
exercise its rights, remedies, powers and privileges under Article VI at such
time or times as the Holder shall be lawfully entitled to exercise such rights,
remedies, powers and privileges, and for no other purpose, the Obligor hereby
grants to the Holder, the right to immediately, without demand of performance
and without additional notice, or demand whatsoever to the Obligor, sell at
public or private sale or otherwise realize
<PAGE> 11
upon, all right, title, and interest in all or any of the Intellectual Property
and any associated good will, as the case may be, or any interest that the
Obligor may have therein, and after deducting all expenses (including all
reasonable expenses for brokers' fees and legal services) from the proceeds of
such sale or other disposition of the Intellectual Property and any associated
good will, as the case may be, the Holder shall apply the residue of such
proceeds toward the payment of all liabilities.
2.04 Perfection. Concurrently with the execution and delivery of this
Agreement, the Obligor shall (i) file such financing statements and other
documents in such offices as shall be necessary or as the Holder may request to
perfect and establish a first priority of the Liens granted by this Agreement
(including promptly filing the Trademark Collateral Security Agreement and
Patent Collateral Security Agreement, in the form executed on the date hereof by
the Obligor, in the United States Patent and Trademark Office) (subject only to
such Permitted Liens), (ii) deliver and pledge to the Holder any and all
Instruments, endorsed or accompanied by such instruments of assignment and
transfer in such form and substance as the Holder may request, (iii) cause the
Holder to be listed as the lienholder on all certificates of title or ownership
relating to Motor Vehicles owned by the Obligor and deliver to the Holder
originals of all such certificates of title or ownership for the Motor Vehicles
together with the odometer statements for each respective Motor Vehicle, (iv)
deliver and pledge to the Holder all certificates for the Pledged Stock and
notes, instruments or other documents evidencing the Pledged Debt, accompanied
by undated stock or bond powers, as the case may be, duly executed in blank and
(v) take all such other actions as shall be necessary or as the Holder may
request to perfect and establish a first priority of the Liens granted by this
Agreement (subject only to such Permitted Liens). The Holder shall have the
right, at any time in its discretion and with notice to the Obligor, to transfer
to or to register in its name or in the name of any of its nominees any or all
of the Pledged Stock or Pledged Debt.
2.05 Preservation and Protection of Security Interests. The Obligor
shall:
(a) upon the acquisition after the Signing Date by the Obligor of any
Securities Collateral, promptly either (x) transfer and deliver to the Holder
all such Securities Collateral (together with the certificates or instruments
representing such Securities Collateral securities duly endorsed in blank or
accompanied by undated powers duly executed in blank) or (y) take such other
action as the Holder shall deem necessary or appropriate to perfect, and
establish the priority of, the Liens granted
<PAGE> 12
by this Agreement in such Securities Collateral;
(b) upon the acquisition after the Signing Date by the Obligor of any
Instrument, promptly deliver and pledge to the Holder all such Instruments,
endorsed or accompanied by such instruments of assignment and transfer in such
form and substance as the Holder may request;
(c) upon the acquisition after the Signing Date by the Obligor of any
Equipment or Motor Vehicle covered by a certificate of title or ownership,
promptly cause the Holder to be listed as the lienholder on such certificate of
title and within 45 days of the acquisition of such property deliver evidence of
the same to the Holder;
(d) upon the Obligor's acquiring, or otherwise becoming entitled to
the benefits of, any Copyright (or copyrightable material), Patent (or
patentable invention), Trademark (or associated goodwill) or other Intellectual
Property or upon or prior to the Obligor's filing, either directly or through
any agent, licensee or other designee, of any application with any governmental
Person for any Copyright, Patent, Trademark, or other Intellectual Property, in
each case after the Signing Date, execute and deliver such contracts, agreements
and other instruments as the Holder may request to evidence, validate, perfect
and establish the first priority (subject only to Liens permitted under Section
6.7 of the Note Purchase Agreement) of the Liens granted by this Agreement in
such and any related Intellectual Property; and
(e) give, execute, deliver, file or record any and all financing
statements, notices, contracts, agreements or other instruments, obtain any and
all governmental approvals and take any and all steps that may be necessary or
as the Holder may request to create, perfect a first priority of the Liens
granted by this Agreement or to preserve the validity, perfection with regard to
such first priority or to enable the Holder to exercise and enforce its rights,
remedies, powers and privileges under this Agreement with respect to such Liens,
including causing any or all of the Securities Collateral to be transferred of
record into the name of the Holder or its nominee (and the Holder agrees that if
any Securities Collateral is transferred into its name or the name of its
nominee, the Holder will thereafter promptly give to the Obligor copies of any
notices and communications received by it with respect to the Stock Collateral
pledged by the Obligor), provided that notices to account debtors in respect of
any Accounts or Instruments shall be subject to the provisions of Section
3.02(b).
2.06 Reserved
<PAGE> 13
2.07 Special Provisions Relating to Securities Collateral. (a) So long as
no Event of Default shall have occurred and be continuing, the Obligor shall
have the right to exercise all voting, consensual and other powers of ownership
pertaining to the Securities Collateral for all purposes not inconsistent with
the terms of any Loan Document, provided that the Obligor agrees that it will
not vote the Securities Collateral in any manner that is inconsistent with the
terms of any Loan Document; and the Holder shall, at the Obligor' expense,
execute and deliver to the Obligor or cause to be executed and delivered to the
Obligor all such proxies, powers of attorney, dividends and other orders and
other instruments, without recourse, as the Obligor may reasonably request for
the purpose of enabling the Obligor to exercise the rights and powers which it
is entitled to exercise pursuant to this Section 2.07(a).
(b) So long as no Event of Default shall have occurred and be
continuing, the Obligor shall be entitled to receive and retain any dividends or
distributions on the Securities Collateral paid in cash.
(c) If any Event of Default shall have occurred and be continuing, and
whether or not the Holders or the Holder exercise any available right to declare
any Secured Obligation due and payable or seek or pursue any other right,
remedy, power or privilege available to them under applicable law, this
Agreement or any other Loan Document, all dividends and other distributions on
the Securities Collateral shall be paid directly to the Holder and retained by
it in the Collateral Account as part of the Securities Collateral, subject to
the terms of this Agreement, and, if the Holder shall so request, the Obligor
agrees to execute and deliver to the Holder appropriate additional dividend,
distribution and other orders and instruments to that end, provided that if such
Event of Default is cured, any such dividend or distribution paid to the Holder
prior to such cure shall, upon request of the Obligor (except to the extent
applied to the Secured Obligations), be returned by the Holder to the Obligor.
2.08 Use of Intellectual Property. Subject to such action not otherwise
constituting a Default and so long as no Event of Default shall have occurred
and be continuing, the Obligor will be permitted to exploit, use, enjoy,
protect, license, sublicense, assign, sell, dispose of or take other actions
with respect to the Intellectual Property in the ordinary course of the business
of the Obligor subject to the rights of the Holder, whose rights shall not be
subordinated, impaired or diminished. In furtherance of the foregoing, so long
as no Event of Default shall have occurred and be continuing, the Holder shall
from time to time, upon the request of the Obligor, execute and deliver any
instruments, certificates or other documents, in the form so requested, which
the Obligor shall
<PAGE> 14
have certified are appropriate (in its reasonable judgment) to allow it to take
any action permitted above. The exercise of rights, remedies, powers and
privileges under Article VI by the Holder shall not terminate the rights of the
holders of any licenses or sublicenses theretofore granted by the Obligor in
accordance with the first sentence of this Section 2.08.
2.09 Instruments. So long as no Default or Event of Default shall have
occurred and be continuing, the Obligor may retain for collection in the
ordinary course of business any Instruments obtained by it in the ordinary
course of business, and the Holder shall, promptly upon the request, and at the
expense of the Obligor, make appropriate arrangements for making any Instruments
pledged by the Obligor available to the Obligor for purposes of presentation,
collection or renewal. Any such arrangement shall be effected, to the extent
deemed appropriate by the Holder, against trust receipt or like document.
2.10 Use of Collateral. So long as no Event of Default shall have occurred
and be continuing, the Obligor shall, in addition to its rights under Sections
2.07, 2.08 and 2.09 hereof and Section 6.18 of the Note Purchase Agreement, in
respect of the Collateral contemplated in those sections, be entitled to use and
possess the other Collateral and to exercise its rights, title and interest in
all contracts, agreements, licenses and governmental approvals, subject to the
rights, remedies, powers and privileges of the Holder under Articles III and VI
and to such use, possession or exercise not otherwise constituting a Default.
2.11 Rights and Obligations. (a) The Obligor shall remain liable to perform
its duties and obligations under the contracts and agreements included in the
Collateral in accordance with their respective terms to the same extent as if
this Agreement had not been executed and delivered. The exercise by the Holder
of any right, remedy, power or privilege in respect of this Agreement shall not
release the Obligor from any of its duties and obligations under such contracts
and agreements and the Obligor shall save, indemnify and keep the Holder
harmless from and against all expense, loss or damage suffered by reason of such
exercise. The Holder shall have no duty, obligation or liability under such
contracts and agreements or with respect to any governmental approval included
in the Collateral by reason of this Agreement or any other Loan Document, nor
shall the Holder be obligated to perform any of the duties or obligations of the
Obligor under any such contract or agreement or any such governmental approval
or to take any action to collect or enforce any claim (for payment) under any
such contract or agreement or governmental approval.
(b) No Lien granted by this Agreement in the Obligor's right, title
and interest in any contract, agreement or governmental approval shall be deemed
to be a consent by the Holder to any such contract, agreement or governmental
approval.
<PAGE> 15
(c) No reference in this Agreement to proceeds or to the sale or other
disposition of Collateral shall authorize the Obligor to sell or otherwise
dispose of any Collateral except to the extent otherwise expressly permitted by
the terms of any Loan Document.
(d) The Holder shall not be required to take steps necessary to
preserve any rights against prior parties to any part of the Collateral.
2.12 Release of Motor Vehicles. So long as no Default shall have occurred
and be continuing, upon the request of, and at the expense of, the Obligor, the
Holder shall execute and deliver to the Obligor such instruments as the Obligor
shall reasonably request to remove the notation of the Holder as lienholder on
any certificate of title for any Motor Vehicle; provided that any such
instruments shall be delivered, and the release shall be effective, only upon
receipt by the Holder of a certificate from the Obligor stating that the Motor
Vehicle the Lien on which is to be released is to be sold or has suffered a
casualty loss (with title passing to the appropriate casualty insurance company
in settlement of the claim for such loss).
2.13 Termination. When all Secured Obligations shall have been indefeasibly
paid in full, this Agreement shall terminate, and the Holder shall, at the
expense of the Obligor, forthwith cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or representation
whatsoever, any remaining Collateral and money received in respect of the
Collateral, to or on the order of the Obligor and to be released, canceled and
granted back all licenses and rights referred to in Section 2.03. The Holder
shall also, at the expense of the Obligor, execute and deliver to the Obligor
upon such termination such Uniform Commercial Code termination statements,
certificates for terminating the Liens on the Motor Vehicles and such other
documentation as shall be reasonably requested by the Obligor to effect the
termination and release of the Liens granted by this Agreement on the
Collateral.
Article III. Cash Proceeds of Collateral.
3.01 Collateral Account. There is hereby established with the Holder a cash
collateral account (the "Collateral Account") in the name and under the
exclusive domain and control of the Holder into which there shall be deposited
from time to time the cash proceeds of any of the Collateral (including proceeds
resulting from insurance or condemnation) required to be delivered to the Holder
pursuant to this Agreement and into which the Obligor may from time to time
deposit any additional amounts which it wishes to pledge to the Holder as
additional collateral security under this Agreement. The balance from time to
time in the Collateral Account shall constitute part of the Collateral and shall
not constitute payment of the Secured Obligations until applied as provided in
this Agreement. If any Event of Default shall have occurred and be continuing,
the Holder may in
<PAGE> 16
its discretion apply (subject to collection) the balance from time to time
outstanding to the credit of the Collateral Account to the payment of the
Secured Obligations in the manner specified in Article VI. The balance from time
to time in the Collateral Account shall be subject to withdrawal only as
provided in this Agreement.
3.02 Certain Proceeds. (a) If any Default or Event of Default shall have
occurred and be continuing, the Obligor shall, upon request of the Holder,
promptly notify (and the Obligor hereby authorizes the Holder so to notify) each
account debtor in respect of any Accounts or Instruments that such Collateral
has been assigned to the Holder under this Agreement and that any payments due
or to become due in respect of such Collateral are to be made directly to the
Holder. All such payments made to the Holder shall be immediately deposited in
the Collateral Account.
(b) The Obligor agrees that if the proceeds of any Collateral
(including payments made in respect of Accounts and Instruments) shall be
received by it following the occurrence and during the continuation of a
Default, the Obligor shall as promptly as possible deposit such proceeds into
the Collateral Account. Until so deposited, all such proceeds shall be held in
trust by the Obligor for and as the property of the Holder and shall not be
commingled with any other funds or property of the Obligor.
3.03 Investment of Balance in Collateral Account. Amounts on deposit in the
Collateral Account shall be invested from time to time in such Permitted
Investments as the Obligor (or, if any Default or Event of Default shall have
occurred and be continuing, the Holder) shall determine. All such investments
shall be held in the name and be under the control of the Holder. At any time
after the occurrence and during the continuance of an Event of Default, the
Holder may in its discretion at any time and from time to time elect to
liquidate any such investments and to apply or cause to be applied the proceeds
of such action to the payment of the Secured Obligations in the manner specified
in Article VI.
Article IV. Representations and Warranties.
The Obligor hereby represents and warrants to the Holder for the benefit of
the Holders as follows:
4.01 Title. The Obligor is the sole beneficial owner of the Collateral in
which it purports to grant a Lien pursuant to this Agreement, and, except as set
forth in Schedule 4.01, such Collateral is free and clear of all Liens. The
first priority Liens granted by this Agreement in favor of the Holder for the
benefit of the Holder and the Holders have attached and, upon filing of the
respective financing statements in the jurisdictions
<PAGE> 17
listed on Annex II, and subject to the liens set forth on Schedule 4.01, this
Agreement is effective to create a perfected first priority security interest in
all of such Collateral, prior to all other Liens. With respect to the Pledged
Stock, the Pledged Debt and the cash in the Collateral Account, the pledge of
such Collateral pursuant to this Agreement creates a valid and perfected first
priority security interest in such Collateral in favor of the Holder for the
benefit of the Holders.
4.02 Intellectual Property. (a) Except pursuant to licenses and other user
agreements entered into by the Obligor in the ordinary course of business, the
Obligor owns and possesses the right to use, and has done nothing to authorize
or enable any other Person to use, any Patent or Trademark constituting
Intellectual Property or any other Intellectual Property.
(b) The Obligor owns any Trademarks registered in the United States of
America to which the last sentence of the definition of Trademark Collateral
applies.
4.03 Goods. Any goods now or hereafter manufactured or otherwise produced
by the Obligor or any of its Subsidiaries included in the Collateral have been
and will be produced in compliance with the requirements of the Fair Labor
Standards Act.
Article V. Covenants.
5.01 Books and Records. The Obligor shall: (a) keep full and accurate books
and records relating to the Collateral and stamp or otherwise mark such books
and records in such manner as the Holder may reasonably require in order to
reflect the Liens granted by this Agreement; (b) furnish to the Holder from time
to time (but, unless a Default shall have occurred and be continuing, no more
frequently than quarterly) statements and schedules further identifying and
describing the Copyright Collateral, the Patent Collateral and the Trademark
Collateral and such other reports in connection with the Copyright Collateral,
the Patent Collateral and the Trademark Collateral, as the Holder may reasonably
request, all in reasonable detail; (c) prior to filing, either directly or
through an agent, licensee or other designee, any application for any Copyright,
Patent or Trademark, furnish to the Holder prompt notice of such proposed
filing; and (d) permit representatives of the Holder, upon reasonable notice, at
any time during normal business hours to inspect and make abstracts from its
books and records pertaining to the Collateral, permit representatives of the
Holder to be present at the Obligor's place of business to receive copies of all
communications and remittances relating to the Collateral and forward copies of
any notices or communications received by the Obligor with respect to the
Collateral, all in such manner as the Holder may reasonably request.
5.02 Removals, Etc. Without at least 30 days' prior written notice to the
Holder, the Obligor shall (i) not maintain any of its books and
<PAGE> 18
records with respect to the Collateral at any office or maintain its principal
place of business at any place, or permit any Inventory or Equipment to be
located anywhere, other than (a) at the address initially indicated for notices
to it under Article VII, (b) at one of the other business locations presently
owned or operated by the Obligor or any of its Affiliates and identified in
Annex II or III or (c) in transit from one of such locations to another, or (ii)
change its corporate name, or the name under which it does business, from the
name shown on the signature pages to this Agreement.
5.03 Stock Collateral. The Obligor will cause the Stock Collateral to
constitute at all times 100% of the total number of shares of each class of
capital stock of each Issuer then outstanding. The Obligor shall cause all such
shares to be duly authorized, validly issued, fully paid and nonassessable and
to be free of any contractual restriction or any restriction under the charter
or bylaws of the respective Issuer of such Stock Collateral, upon the transfer
of such Stock Collateral (except for any such restriction contained in any Loan
Document). The Obligor agrees that it will (i) cause each issuer of the Pledged
Stock not to issue any shares of stock or other securities in addition to or in
substitution for the Pledged Stock, (ii) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all additional shares of
capital stock issued to the Obligor (the "Additional Shares") and any and all
Additional Debt, and (iii) promptly (and in any event within three business
days) deliver to the Holder an amendment to this Agreement, duly executed by the
Obligor, in respect of the Additional Shares or Additional Debt, together with
all certificates, notes or other instruments representing or evidencing the
same. The Obligor agrees that all Additional Shares and Additional Debt listed
on any such amendment delivered to the Holder shall for all purposes hereunder
constitute Pledged Stock and Pledged Debt, respectively, and (iii) is deemed to
have made, upon such delivery, the representations and warranties contained in
Article IV hereof with respect to such Collateral.
5.04 Intellectual Property. (a) The Obligor (either itself or through
licensees) will, for each Trademark, (i) to the extent consistent with past
practice and good business judgment, continue to use such Trademark on each and
every trademark class of goods applicable to its current line as reflected in
its current catalogs, brochures and price lists in order to maintain such
Trademark in full force and effect free from any claim of abandonment for
nonuse, (ii) maintain as in the past the quality of products and services
offered under such Trademark, (iii) employ such Trademark with the appropriate
notice of registration and (iv) not (and not permit any licensee or sublicensee
to) do any act or knowingly omit to do
<PAGE> 19
any act whereby any Trademark material to the conduct of its business may become
invalidated.
(b) The Obligor (either itself or through licensees) will not do any
act or knowingly omit to do any act whereby any Patent or Copyright material to
the conduct of its business may become abandoned or dedicated.
(c) The Obligor shall notify the Holder immediately if it knows or has
reason to know that any Intellectual Property material to the conduct of its
business may become abandoned or dedicated, or of any adverse determination or
development (including the institution of, or any such determination or
development in, any proceeding before any governmental Person) regarding the
Obligor's ownership of any Intellectual Property material to its business, its
right to apply for registration or register the same (as the case may be), or
its right to keep, use and maintain the same.
(d) The Obligor will take all necessary steps that are consistent with
good business practices in any proceeding before any appropriate governmental
Person to maintain and pursue each application relating to any Intellectual
Property (and to obtain the relevant registrations) and to maintain each
registration material to the conduct of its business, including but not limited
to payment of maintenance fees, filing of applications for renewal, affidavits
of use, affidavits of incontestability and opposition, interference and
cancellation proceedings.
(e) In the event that any Intellectual Property material to the
conduct of its business is infringed, misappropriated or diluted by, or comes in
conflict with, a third party, the Obligor shall notify the Holder within ten
days after it learns of such event and shall, if consistent with good business
practice, promptly sue for infringement, misappropriation or dilution, seek
temporary restraints and preliminary injunctive relief to the extent
practicable, seek to recover any and all damages for such infringement,
misappropriation or dilution and take such other actions as are appropriate
under the circumstances to protect such Collateral.
(f) The Obligor shall prosecute diligently any application for any
Intellectual Property pending as of the date of this Agreement or thereafter
made until the termination of this Agreement, make application on uncopyrighted
but copyrightable material, unpatented but patentable inventions and
unregistered but registerable Trademarks and preserve and maintain all rights in
applications for any Intellectual Property; provided, however, that the Obligor
shall have no obligation to make any such application if making such application
would be unnecessary or imprudent in the good faith business judgment of the
Obligor. Any expenses incurred in connection with such an application shall be
borne by the Obligor.
<PAGE> 20
(g) The Holder shall have the right but shall in no way be obligated
to bring suit in its own name to enforce the Copyrights, Patents and Trademarks
or any other Intellectual Property and any license under such Intellectual
Property, in which event the Obligor shall, at the request of the Holder, do any
and all lawful acts and execute and deliver any and all proper documents
required by the Holder in aid of such enforcement action.
Article VI. Remedies.
6.01 Events of Default, Etc. If any Event of Default shall have occurred
and be continuing:
(a) the Holder in its discretion may require the Obligor to, and the
Obligor shall, assemble the Collateral owned by it at such place or places,
reasonably convenient to both the Holder and the Obligor, designated in the
Holder's request;
(b) the Holder in its discretion may make any reasonable compromise or
settlement it deems desirable with respect to any of the Collateral and may
extend the time of payment, arrange for payment in installments, or otherwise
modify the terms of, all or any part of the Collateral;
(c) the Holder in its discretion may, in its name or in the name of
the Obligor or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for all
or any part of the Collateral, but shall be under no obligation to do so;
(d) the Holder in its discretion may, upon five business days' prior
written notice to the Obligor of the time and place, with respect to all or any
part of the Collateral which shall then be or shall thereafter come into the
possession, custody or control of the Holder, or its agents, sell, lease or
otherwise dispose of all or any part of such Collateral, at such place or places
as the Holder deems best, for cash, for credit or for future delivery (without
thereby assuming any credit risk) and at public or private sale, without demand
of performance or notice of intention to effect any such disposition or of time
or place of any such sale (except such notice as is required above or by
applicable statute and cannot be waived), and the Holder or any other Person may
be the Holder, lessee or recipient of any or all of the Collateral so disposed
of at any public sale (or, to the extent permitted by law, at any private sale)
and thereafter hold the same absolutely, free from any claim or right of
whatsoever kind, including any right or equity of redemption (statutory or
otherwise), of the Obligor, any such demand, notice and right or equity being
hereby expressly waived and released. In the event of any sale, assignment,
license or other disposition of any of the Trademark Collateral, the goodwill
and business or portion thereof connected with and symbolized by
<PAGE> 21
the Trademark Collateral subject to such disposition shall be included, and the
Obligor shall supply to the Holder or its designee, for inclusion in such sale,
assignment, license or other disposition, all Intellectual Property relating to
such Trademark Collateral. The Holder may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the sale may be so adjourned; and
(e) the Holder shall have, and in its discretion may exercise, all of
the rights, remedies, powers and privileges with respect to the Collateral of a
secured party under the Uniform Commercial Code (whether or not the Uniform
Commercial Code is in effect in the jurisdiction where such rights, remedies,
powers and privileges are asserted) and such additional rights, remedies, powers
and privileges to which a secured party is entitled under the laws in effect in
any jurisdiction where any rights, remedies, powers and privileges in respect of
this Agreement or the Collateral may be asserted, including the right, to the
maximum extent permitted by law, to exercise all voting, consensual and other
powers of ownership pertaining to the Collateral as if the Holder were the sole
and absolute owner of the Collateral (and the Obligor agrees to take all such
action as may be appropriate to give effect to such right).
The proceeds of, and other realization upon, the Collateral by virtue
of the exercise of remedies under this Section 6.01 and of the exercise of the
license granted to the Holder in Section 2.03 shall be applied in accordance
with Section 6.04.
6.02 Deficiency. If the proceeds of, or other realization upon, the
Collateral by virtue of the exercise of remedies under Section 6.01 and of the
exercise of the license granted to the Holder in Section 2.03 are insufficient
to cover the costs and expenses (including attorneys fees) of such exercise and
the payment in full of the other Secured Obligations, the Obligor shall remain
liable for any deficiency.
6.03 Private Sale. (a) The Holder shall incur no liability as a result of
the sale, lease or other disposition of all or any part of the Collateral at any
private sale pursuant to Section 6.01 conducted in a commercially reasonable
manner. The Obligor hereby waives any claims against the Holder arising by
reason of the fact that the price at which the Collateral may have been sold at
such a private sale was less than the price which might have been obtained at a
public sale or was less than the aggregate amount of the Secured Obligations,
even if the Holder accepts the first offer received and does not offer the
Collateral to more than one offeree.
(b) The Obligor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws, the Holder
may be compelled, with respect to any sale of
<PAGE> 22
all or any part of the Collateral, to limit the Holder to those who will agree,
among other things, to acquire the Collateral for their own account, for
investment and not with a view to distribution or resale. The Obligor
acknowledges that any such private sales may be at prices and on terms less
favorable to the Holder than those obtainable through a public sale without such
restrictions, and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner and that the Holder shall have no obligation to engage in public sales
and no obligation to delay the sale of any Collateral for the period of time
necessary to permit the respective Issuer of such Collateral to register it for
public sale.
6.04 Application of Proceeds. Except as otherwise expressly provided in
this Agreement and except as provided below in this Section 6.04, the proceeds
of, or other realization upon, all or any part of the Collateral by virtue of
the exercise of remedies under Section 6.01 or of the exercise of the license
granted in Section 2.03, and any other cash at the time held by the Holder under
Article III or this Article VI, shall be applied by the Holder:
First, to the payment of the costs and expenses of such exercise of
remedies, including reasonable out-of-pocket costs and expenses of the Holder,
the fees and expenses of its agents and counsel and all other expenses incurred
and advances made by the Holder in that connection;
Second, to the Holder for amounts due and unpaid on the Notes for principal
and interest and all other amounts due and unpaid under the Loan Documents.
Third, to the Obligor or any other obligor on the Notes, as their interests
may appear, or as a court of competent jurisdiction may direct.
As used in this Article VI, "proceeds" of Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any property received under any bankruptcy,
reorganization or other similar proceeding as to the Obligor or any issuer of,
or account debtor or other obligor on, any of the Collateral.
Article VII. Miscellaneous.
7.01 Waiver. No failure on the part of the Holder or any Holder to exercise
and no delay in exercising, and no course of dealing with respect to, any right,
remedy, power or privilege under this Agreement shall operate as a waiver of
such right, remedy, power or privilege, nor shall any single or partial exercise
of any right, remedy, power or privilege under this Agreement preclude any other
or further exercise of any such
<PAGE> 23
right, remedy, power or privilege or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges provided in this
Agreement are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
7.02 Notices. All notices and, consents, requests, instructions, approvals,
financial statements, reports and other communications to be given under this
Agreement shall be deemed given, if in writing and delivered personally, by
telecopy or sent by registered mail, postage prepaid to:
if to the Obligor: Bio-Plexus, Inc.
129 Reservoir Road
Vernon, CT 06066
Attention: Carl Sahi
Fax: (860) 870-6118
with a copy to: Pepe & Hazard LLP
Goodwin Square
Hartford, CT 06103
Attention: Walter W. Simmers, Esq.
Fax: (860) 522-2796
if to the Holder: c/o Appaloosa Management, L.P.
26 Main St., 1st Floor
Chatham, NJ 07928
Attention: Mr. James Bolin
Fax: (973) 701-7055
with a copy to: Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Attention: Robert C. Schwenkel, Esq.
Fax: (212) 859-4000
7.03 Expenses, Etc. The Obligor agrees to pay or to reimburse the Holder
for all costs and expenses (including reasonable attorney's fees and expenses)
that may be incurred by the Holder in any effort to enforce any of the
provisions of Article VI, or any of the obligations of the Obligor in respect of
the Collateral or in connection with (a) the preservation of the Lien of, or the
rights of the Holder under this Agreement or (b) any actual or attempted sale,
lease, disposition, exchange, collection, compromise, settlement or other
realization in respect of, or care of, the Collateral, including all such costs
and expenses (and reasonable attorney's fees and expenses) incurred in any
bankruptcy, reorganization, workout or other similar proceeding.
7.04 Amendments. This Agreement may be amended as to the Holder and its
respective successors and assigns, and the Obligor may take any action herein
prohibited, or omit to perform any act required to be performed by it, if the
Obligor shall obtain the written consent of the Holder. This Agreement may not
be waived, changed, modified, or discharged orally, but
<PAGE> 24
only by an agreement in writing signed by the party or parties against whom
enforcement of any waiver, change, modification or discharge is sought or by
parties with the right to consent to such waiver, change, modification or
discharge on behalf of such party.
7.05 Successors and Assigns. All covenants and agreements contained herein
shall bind and inure to the benefit of the parties hereto and their respective
successors and assigns.
7.06 Survival. All covenants, agreements, representations and warranties
contained herein and in any certificates delivered pursuant hereto in connection
with the transactions contemplated hereby shall survive the Closing and the
delivery of the Loan Documents, regardless of any investigation made by or on
behalf of any party.
7.07 Agreements Superseded. Except with respect to express references to
other Loan Documents, this Agreement supersedes all prior agreements and
understandings, written or oral, among the parties with respect to the subject
matter of this Agreement.
7.08 Severability. If any term, provision, covenant or restriction of this
Agreement or any exhibit hereto is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement and such exhibits shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such which may be hereafter declared
invalid, void or unenforceable.
7.09 Captions. The table of contents and captions and section headings
appearing in this Agreement are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
7.10 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each party and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
7.11 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH
STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER
THAN SUCH STATE.
7.12 Submission to Jurisdiction. If any action, proceeding or litigation
shall be brought by the Holder in order to enforce any right
<PAGE> 25
or remedy under this Agreement, the Obligor hereby consents and will submit, and
will cause each of its Subsidiaries to submit, to the jurisdiction of any state
or federal court of competent jurisdiction sitting within the area comprising
the Southern District of New York on the date of this Agreement. The Obligor
hereby irrevocably waives any objection, including, but not limited to, any
objection to the laying of venue or based on the grounds of forum non
conveniens, which it may now or hereafter have to the bringing of any such
action, proceeding or litigation in such jurisdiction.
7.13. Service of Process. Nothing herein shall affect the right of the
Holder to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against the Obligor in any other
jurisdiction.
7.14. WAIVER OF JURY TRIAL. THE OBLIGOR HEREBY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
BIO-PLEXUS, INC.
By: /s/ Carl Sahi
--------------------------------------
Name: Carl Sahi
Title: President & CEO
APPALOOSA INVESTMENT LIMITED
PARTNERSHIP I, L.P.
By: Appaloosa Management, L.P., its
General Partner
By: Appaloosa Partners Inc., its General
Partner
By: /s/ James E. Bolin
--------------------------------------
Name: James E. Bolin
Title: Vice President
<PAGE> 1
EXHIBIT 10.38
Bio-Plexus, Inc.
129 Reservoir Road
Vernon, CT 06066
December 30, 1999
Appaloosa Investment Limited
Partnership I
26 Main Street, 1st Floor
Chatham, New Jersey 07928
Attention: Mr. James Bolin
Dear Mr. Bolin:
Reference is made to the 7.5% Secured Note, dated October 21,
1999, issued by Bio-Plexus, Inc. (the "Company") to Appaloosa Investment
<PAGE> 2
Limited Partnership I ("Appaloosa") (as such 7.5% Secured Note may be amended
from time to time, the "7.5% Note"). The purpose of this letter is to set forth
the understanding of the Company and Appaloosa with respect to the matters set
forth herein:
(a) on the date hereof, the Company and Appaloosa will enter into
an amendment to the 7.5% Note in the form attached hereto as Exhibit A;
(b) no later than January 6, 2000, if no Default (as defined in
the 7.5% Note) shall have occurred and be continuing under the 7.5% Note,
Appaloosa will make additional loans to the Company and, in exchange
therefor, the Company shall execute and deliver a 15% Secured Note (the
"15% Note") in the form attached hereto as Exhibit B (subject to the
satisfaction or waiver of the conditions to such loans specified therein);
(c) in connection with the 15% Note, on the Maturity Date (as
defined in the 7.5% Note), regardless of whether the Rollover Transactions
(as defined in the 7.5% Note) are consummated, the Company will sell to one
or more affiliates of Appaloosa, and one or more affiliates of Appaloosa
will purchase from the Company, as part of an investment unit with the 15%
Note, warrants to purchase in the aggregate 200,000 shares of common stock,
no par value, of the Company (the "Common Stock"), with an exercise price
of $3.00 per share in the form attached hereto as Exhibit C (the
"Additional Warrants");
(d) on the Maturity Date:
(i) if either (X) all the conditions to the Purchasers' (as
defined in the 7.5% Note) obligations to consummate the
Rollover Transactions, as specified in the 7.5% Note, have
not been satisfied or waived and the Rollover Transactions
are not consummated, or (Y) if all the conditions to the
Company's and the Purchasers' obligations to consummate the
Rollover Transactions, as specified in the 7.5% Note, have
been satisfied or waived but the Company fails to consummate
the Rollover Transactions, the $3 Warrants (as defined in
the 7.5% Note) will remain in full force and effect and the
terms and conditions thereof will remain unchanged;
(ii) if the Rollover Transactions are consummated, the $3
Warrants will be cancelled and be of no further force and
effect and, simultaneously therewith, the Company will issue
to one or more affiliates of Appaloosa replacement warrants
to purchase 1,000,000 shares of Common Stock with an
exercise price of $4 per share; and
<PAGE> 3
(iii) if all the conditions to the Company's and the
Purchasers' obligations to consummate the Rollover
Transactions, as specified in the 7.5% Note, have been
satisfied or waived but the Purchasers fail to consummate
the Rollover Transactions, the $3 Warrants will be cancelled
and be of no further force and effect and, simultaneously
therewith, the Company will issue to one or more affiliates
of Appaloosa replacement warrants to purchase 1,000,000
shares of Common Stock with an exercise price of $5 per
share.
The warrants to be issued by the Company pursuant to (ii) or (iii) above
(as the case may be, the "Replacement Warrants"; the "Replacement
Warrants", together with the Additional Warrants, the "Warrants") will be
in the form attached hereto as Exhibit D.
The Company represents that (i) the execution and delivery of
this letter by the Company and the performance by it of the transactions
contemplated hereby (including, without limitation, the issuance of the
Warrants and issuance of shares of Common Stock upon exercise of the
Warrants) and compliance by the Company with all the provisions of the
Warrants (as applicable) have been duly authorized by all requisite
corporate proceedings on the part of the Company and (ii) the shares of
Common Stock issuable upon exercise of the Warrants have been validly
reserved for issuance, and upon issuance, will be validly issued and
outstanding, fully paid and nonassessable.
The Company cannot assign its rights and obligations under this
letter without the written consent of Appaloosa.
If any term, provision, covenant or restriction of this letter or
any exhibit hereto is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this letter and such exhibits shall remain in
full force and effect and shall in no way be affected, impaired or
invalidated. It is hereby stipulated and declared to be the intention of
the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such which may be
hereafter declared invalid, void or unenforceable.
Appaloosa, on the one hand, and the Company, on the other,
acknowledge and agree that irreparable damage would occur in the event that
any of the provisions of this letter were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed
that Appaloosa shall be entitled to an injunction to prevent breaches of
the provisions of this letter and to enforce specifically the terms and
provisions hereof in any court of the United States or any state thereof
having jurisdiction, this being in addition to any other remedy to which
they may be entitled at Law (as defined in the 7.5% Note) or equity.
Neither the Company nor Appaloosa shall make any public
statements, including, without limitation, any press releases, with respect
to this letter and the transactions contemplated hereby without the
<PAGE> 4
prior written consent of the other party (which consent shall not be
unreasonably withheld) except as may be required by Law. If a public statement
is required to be made by Law, the parties shall consult with each other in
advance as to the contents and timing thereof.
THIS LETTER SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF
NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT
WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH
STATE.
If any Litigation (as defined in the 7.5% Note) shall be brought
by Appaloosa in order to enforce any right or remedy under this letter, the
Company hereby consents and will submit to the jurisdiction of any state or
federal court of competent jurisdiction sitting within the area comprising
the Southern District of New York on the date of this letter. The Company
hereby irrevocably waives any objection, including, but not limited to, any
objection to the laying of venue or based on the grounds of forum non
conveniens, which it may now or hereafter have to the bringing of any such
Litigation in such jurisdiction.
THE COMPANY HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS LETTER.
Please confirm that the foregoing is in accordance with your
understanding by signing and returning to me this letter, whereupon this
letter shall be deemed accepted and binding.
Very truly yours,
BIO-PLEXUS, INC.
By: /s/ Carl Sahi
---------------------------
Name: Carl Sahi
Title:
ACCEPTED AND AGREED
THIS 30TH DAY OF DECEMBER, 1999
APPALOOSA INVESTMENT LIMITED
PARTNERSHIP I
By: Appaloosa Management L.P., its
General Partner
By: Appaloosa Partners Inc., its
General Partner
<PAGE> 5
By: /s/ James E. Bolin
-------------------------------
Name: James E. Bolin
Title: Vice President
<PAGE> 1
EXHIBIT 10.39
WARRANT
To Purchase Shares of Common Stock of
BIO-PLEXUS, INC.
At a Purchase Price of
$3.00 per Share
(Subject to Adjustment as Provided herein)
No. of Shares of Common Stock: _________
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. DEFINITIONS 1
- ---------------------------------------------------------------------------
2. EXERCISE OF WARRANT 4
- ---------------------------------------------------------------------------
2.1. MANNER OF EXERCISE. 4
2.2. PAYMENT OF TAXES. 5
2.3. FRACTIONAL SHARES. 5
3. TRANSFER, DIVISION AND COMBINATION 6
- ---------------------------------------------------------------------------
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
3.1. TRANSFER. 6
3.2. DIVISION AND COMBINATION. 6
3.3. EXPENSES. 6
3.4. MAINTENANCE OF BOOKS. 6
4. ADJUSTMENTS 6
- ---------------------------------------------------------------------------
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. 6
4.2. CERTAIN OTHER DISTRIBUTIONS. 7
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. 8
4.4. ISSUANCE OF WARRANTS OR OTHER RIGHTS. 8
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. 9
4.6. SUPERSEDING ADJUSTMENT. 10
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION. 10
4.8. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION
OR DISPOSITION OF ASSETS. 12
4.9. OTHER ACTION AFFECTING COMMON STOCK. 13
4.10.CERTAIN LIMITATIONS. 13
5. NOTICES TO WARRANT HOLDERS 13
- ---------------------------------------------------------------------------
5.1. NOTICE OF ADJUSTMENTS. 13
5.2. NOTICE OF CORPORATE ACTION. 13
6. RIGHTS OF HOLDERS 14
- ---------------------------------------------------------------------------
6.1 NO IMPAIRMENT. 14
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY 15
- ---------------------------------------------------------------------------
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS 15
- ---------------------------------------------------------------------------
9. RESTRICTIONS ON TRANSFERABILITY 15
- ---------------------------------------------------------------------------
9.1. RESTRICTIVE LEGEND. 15
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION. 16
9.3. TERMINATION OF RESTRICTIONS. 16
10. PREEMPTIVE RIGHTS 16
- ---------------------------------------------------------------------------
11. SUPPLYING INFORMATION 17
- ---------------------------------------------------------------------------
12. LOSS OR MUTILATION 17
- ---------------------------------------------------------------------------
13. LIMITATION OF LIABILITY 18
- ---------------------------------------------------------------------------
14. MISCELLANEOUS 18
- ---------------------------------------------------------------------------
14.1. NONWAIVER AND EXPENSES. 18
14.2. NOTICE GENERALLY. 18
14.3. REMEDIES. 19
14.4. SUCCESSORS AND ASSIGNS. 19
14.5. AMENDMENT. 19
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
14.6. SEVERABILITY. 19
14.7. HEADINGS. 19
14.8. GOVERNING LAW. 19
</TABLE>
<PAGE> 6
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS
OF SUCH ACT OR SUCH LAWS
No. of Shares of Common Stock:
----------
WARRANT
To Purchase Shares of Common Stock of
BIO-PLEXUS, INC.
THIS IS TO CERTIFY THAT _______________, or its registered
assigns (the "Holder"), is entitled, at any time prior to the Expiration
Date (as hereinafter defined), to purchase from BIO-PLEXUS, INC., a
Connecticut corporation (the "Company"), _________ (subject to adjustment
as provided herein) shares of Common Stock (as hereinafter defined), in
whole or in part, at a purchase price of $3.00 per share (subject to
adjustment as provided herein), all on the terms and conditions and
pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Company after the Issue Date, other than (i)
Warrant Stock, (ii) shares of Common Stock issuable upon the conversion of
the Convertible Notes to be issued under the Convertible Note Purchase
Agreement and (iii) shares of Common Stock issuable upon exercise of the $7
Warrants to be issued pursuant to the Convertible Note Purchase Agreement.
"Average Market Price" shall mean, in respect of any share of
Common Stock on any date herein specified, the daily volume weighted
average sale price per share of Common Stock for such date. The closing
price for each day shall be the last quoted sale price or, if not so
quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of
Securities Dealers, Inc., Automated Quotation System or such other system
then in use, or, if on any such date the Common Stock or such other
<PAGE> 7
securities are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Common Stock selected by the Board of Directors of the Company. If the
Common Stock is listed or admitted to trading on a national securities exchange,
the closing price shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Common Stock is not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed in
the State of New York.
"Capital Stock" means, in the case of the Company, any and all
shares (however designated) of the capital stock of the Company now or
hereafter outstanding.
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency then administering the Securities Act and other
federal securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, no par value, of the Company as constituted on
the Issue Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the
Company of any other class (regardless of how denominated) issued to the
holders of shares of Common Stock upon any reclassification thereof and
(ii) shares of common stock of any successor or acquiring corporation (as
defined in Section 4.8) received by or distributed to the holders of Common
Stock of the Company in the circumstances contemplated by Section 4.8.
"Convertible Note Purchase Agreement" shall mean the convertible
note purchase agreement to be entered into by and among the Company, the
purchasers listed on Exhibit A thereto and Appaloosa Management L.P., as
collateral agent.
"Convertible Notes" shall mean the notes to be issued pursuant to
the Convertible Note Purchase Agreement.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible into or
exchangeable or exercisable, with or without payment of additional
consideration in cash or property, for Additional Shares of Common Stock,
either immediately or upon the occurrence of a specified date or a
specified event.
"Current Market Price" shall mean, in respect of any share of
<PAGE> 8
Common Stock on any date herein specified, the average of the Average Market
Price for the twenty Business Days ending five days prior to such date.
"Current Warrant Price" shall mean, in respect of a share of
Common Stock at any date herein specified, the price at which a share of
Common Stock may be purchased pursuant to this Warrant on such date. The
Current Warrant Price as of the date of the issuance of this Warrant is
$3.00.
"Expiration Date" shall mean a date which is nine years from the
issuance of this Warrant.
"Holder" shall mean the Person in whose name this Warrant is
registered on the books of the Company maintained for such purpose.
"Holders" shall mean, collectively, each Holder of a Warrant, in the event
of any division of this Warrant.
"Issue Date" shall mean __________, 2000.
"Majority Holders" shall mean the holders of Warrants exercisable
for in excess of 50% of the aggregate number of shares of Warrant Stock
then purchasable upon exercise of all Warrants.
"Other Property" shall have the meaning set forth in Section 4.8.
"Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be
determined, all issued shares of Common Stock, except shares then owned or
held by or for the account of the Company or any subsidiary thereof, and
shall include all shares issuable in respect of outstanding scrip or any
certificates representing fractional interests in shares of Common Stock.
For the purposes of Sections 4.3, 4.4, 4.5, 4.6 and 4.7, Common Stock
Outstanding shall include all shares of Common Stock issuable in respect of
options or warrants to purchase, or securities convertible into, shares of
Common Stock, the exercise or conversion price of which is less than the
Current Market Price as of any date on which the number of shares of Common
Stock Outstanding is to be determined.
"Permitted Issuances" shall mean issuances of shares of Common
Stock and upon exercise of the warrants and options and other convertible
securities, in each case listed on Schedule 1.
"Person" shall mean any individual, firm, corporation,
partnership or other entity, and shall include any successor by merger or
otherwise of such entity.
"Restricted Common Stock" shall mean shares of Common Stock which
are, or which upon their issuance on the exercise of this Warrant would be,
evidenced by a certificate bearing the restrictive legend set forth in
Section 9.1(a).
<PAGE> 9
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"Security" or "Securities" shall mean any equity or debt security
of the Company (including, without limitation, subscriptions, options,
warrants, rights, stock-based or stock-related awards or convertible or
exchangeable securities to which the Company is a party or by which the
Company may be bound of any character relating to, or obligating the
Company to issue, grant, award, transfer or sell any issued or unissued
shares of the Company's Capital Stock or other securities of the Company).
"Trading Day" means a Business Day or, if the Common Stock is
listed or admitted to trading in any national securities exchange, a day on
which such exchange is open for the transaction of business.
"Transfer" shall mean any disposition of any Warrant or Warrant
Stock or of any interest in either thereof, which would constitute a sale
thereof within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section
9.2.
"Warrants" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, any thereof.
All Warrants shall at all times be identical as to terms and conditions and
date, except as to the number of shares of Common Stock for which they may
be exercised.
"Warrant Stock" shall mean the shares of Common Stock purchased
by the holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1. MANNER OF EXERCISE. At any time or from time to time from and
after the Issue Date and until 5:00 P.M., New York time, on the Expiration
Date, Holder may exercise this Warrant, on any Business Day, for all or any
part of the number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder
shall deliver to the Company at its principal office at 129 Reservoir Road,
Vernon, CT 06066 (i) a written notice of Holder's election to exercise this
Warrant, which notice shall specify the number of shares of Common Stock to
be purchased, (ii) payment of the aggregate Current Warrant Price for such
shares and (iii) this Warrant. Such notice shall be substantially in the
form appearing at the end of this Warrant as Exhibit A, duly executed by
Holder. Thirty days after receipt of the items specified in the second
<PAGE> 10
preceding sentence, the Company shall execute or cause to be executed and
deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate or certificates so delivered shall
be in such denomination or denominations as Holder shall request in the notice
and shall be registered in the name of Holder or, subject to Section 9, such
other name as shall be designated in the notice. This Warrant shall be deemed to
have been exercised and such certificate or certificates shall be deemed to have
been issued, and Holder or any other Person so designated shall be deemed to
have become a holder of record of such shares for all purposes, as of the date
which is thirty days after the date of the notice, together with the Current
Warrant Price and this Warrant, are received by the Company as described above.
If this Warrant shall have been exercised in part, the Company shall, at the
time of delivery of the certificate or certificates representing Warrant Stock,
deliver to Holder a new Warrant evidencing the right of Holder to purchase the
unpurchased shares of Common Stock called for by this Warrant, which new Warrant
shall in all other respects be identical with this Warrant, or, at the request
of Holder, appropriate notation may be made on this Warrant and the same
returned to Holder.
Payment of the Current Warrant Price shall be made at the option
of Holder by (i) certified or official bank check, (ii) wire transfer of
immediately available funds, (iii) tendering Convertible Notes having an
Accreted Value (as defined in the Convertible Note Purchase Agreement)
equal to the Current Warrant Price (the Company hereby agreeing to reissue
any Convertible Notes of a Holder into one or more Convertible Notes in
denominations requested by such Holder) or (iv) the surrender of this
Warrant to the Company, with a duly executed exercise notice marked to
reflect "Net Issue Exercise," and, in either case, specifying the number of
shares of Common Stock to be purchased, during normal business hours on any
Business Day. Upon a Net Issue Exercise, Holder shall be entitled to
receive shares of Common Stock equal to the value of this Warrant (or the
portion thereof being exercised by Net Issue Exercise) by surrender of this
Warrant to the Company together with notice of such election, in which
event the Company shall issue to Holder a number of shares of the Company's
Common Stock computed as of the date of surrender of this Warrant to the
Company using the following formula:
X = Yx(A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the
Holder
Y = the number of shares of Warrant Stock being exercised under this
<PAGE> 11
Warrant;
A = the Current Market Price of one share of the Company's Common
Stock (at the date of such calculation);
B = the Current Warrant Price (as adjusted to the date of such
calculation).
2.2. PAYMENT OF TAXES. All shares of Common Stock issuable upon the
exercise of this Warrant shall be validly issued, fully paid and
nonassessable. The Company shall pay all expenses in connection with, and
all taxes (other than income taxes or capital gain tax of the Holder) and
other governmental charges that may be imposed with respect to, the issue
or delivery thereof.
2.3. FRACTIONAL SHARES. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of this Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase
upon such exercise, the Company shall pay a cash adjustment in respect of
such fraction in an amount equal to the same fraction of the Current Market
Price per share of Common Stock on the date of exercise.
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject to compliance with Section 9, transfer of this
Warrant and all rights hereunder, in whole or in part, shall be registered
on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of the Company referred
to in Section 2.1, together with a written assignment of this Warrant
substantially in the form of Exhibit B hereto duly executed by Holder and
funds sufficient to pay any transfer taxes payable upon the making of such
transfer. Upon such surrender and, if required, such payment, the Company
shall, subject to Section 9, execute and deliver a new Warrant or Warrants
in the name of the assignee or assignees and in the denomination specified
in such instrument of assignment, and shall issue to the assignor a new
Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be canceled. A Warrant, if properly assigned in
compliance with Section 9, may be exercised by a new Holder for the
purchase of shares of Common Stock without having a new Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9, this Warrant may
be divided into multiple Warrants or combined with other Warrants upon
presentation hereof at the aforesaid office or agency of the Company,
together with a written notice specifying the names and denominations in
which new Warrants are to be issued, signed by Holder. Subject to
compliance with Section 3.1 and with Section 9, as to any transfer which
may be involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant or
Warrants to be divided or combined in accordance with such notice.
<PAGE> 12
3.3. EXPENSES. The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 3.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at its
aforesaid office, books for the registration and the registration of
transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable and/or the price at which such shares may be purchased upon
exercise of this Warrant, shall be subject to adjustment from time to time
as set forth in this Section 4. The Company shall give each Holder notice
of any event described below which requires an adjustment pursuant to this
Section 4 at the time of such event.
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time
the Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be
adjusted to equal the number of shares of Common Stock which a record
holder of the same number of shares of Common Stock for which this Warrant
is exercisable immediately prior to the occurrence of such event would own
or be entitled to receive after the happening of such event, and (ii) the
Current Warrant Price per share shall be adjusted to equal (A) the Current
Warrant Price multiplied by the number of shares of Common Stock for which
this Warrant is exercisable immediately prior to the adjustment divided by
(B) the number of shares for which this Warrant is exercisable immediately
after such adjustment.
4.2. CERTAIN OTHER DISTRIBUTIONS. If at any time the Company shall
take a record of the holders of its Common Stock for the purpose of
entitling them to receive any dividend or other distribution of:
(a) cash,
(b) any evidences of its indebtedness, any shares of stock or any
<PAGE> 13
other securities or property of any nature whatsoever (other than
cash, Convertible Securities or Additional Shares of Common Stock), or
(c) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock),
then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of the number of shares
of Common Stock for which this Warrant is exercisable immediately prior to
such adjustment and a fraction (A) the numerator of which shall be the
Current Market Price per share of Common Stock at the date of taking such
record and (B) the denominator of which shall be such Current Market Price
per share of Common Stock minus the amount allocable to one share of Common
Stock of any such cash so distributable and of the fair value (as
determined in good faith by the Board of Directors of the Company) of any
and all such evidences of indebtedness, shares of stock, other securities
or property or warrants or other subscription or purchase rights so
distributable, and (ii) the Current Warrant Price shall be adjusted to
equal (A) the Current Warrant Price multiplied by the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to the
adjustment divided by (B) the number of shares for which this Warrant is
exercisable immediately after such adjustment. A reclassification of the
Common Stock (other than a change in par value, or from par value to no par
value or from no par value to par value) into shares of Common Stock and
shares of any other class of stock shall be deemed a distribution by the
Company to the holders of its Common Stock of such shares of such other
class of stock within the meaning of this Section 4.2 and, if the
outstanding shares of Common Stock shall be changed into a larger or
smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or combination,
as the case may be, of the outstanding shares of Common Stock within the
meaning of Section 4.1.
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. (a) If at any time
the Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock, other than Permitted Issuances, in
exchange for consideration in an amount per Additional Share of Common
Stock less than the Current Warrant Price at the time the Additional Shares
of Common Stock are issued, then (i) the Current Warrant Price as to the
number of shares for which this Warrant is exercisable prior to such
adjustment shall be reduced to a price determined by multiplying (A) the
Current Warrant Price by (B) a fraction, the numerator of which shall be
the sum of (x) the number of shares of Common Stock Outstanding immediately
prior to such issue or sale multiplied by the then applicable Current
Warrant Price (the "Adjustment Price") and (y) the aggregate consideration
receivable by the Company for the total number of shares of Common Stock
<PAGE> 14
so issued, and the denominator of which shall be the sum of (a) the total number
of shares of Common Stock Outstanding on such date and (b) the number of
Additional Shares issued, multiplied by the Adjustment Price; and (ii) the
number of shares of Common Stock for which this Warrant is exercisable shall be
adjusted to equal the product obtained by multiplying the Current Warrant Price
in effect immediately prior to such issue or sale by the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
issue or sale and dividing the product thereof by the Current Warrant Price
resulting from the adjustment made pursuant to clause (i) above. For purposes of
this Section 4.3 and for the purposes of making adjustments of the number of
shares of Common Stock for which this Warrant is exercisable and the Current
Warrant Price as provided in this Section 4, the aggregate consideration
receivable by the Company in connection with the issuance of shares of Common
Stock or of rights, warrants or other securities convertible into shares of
Common Stock shall be deemed to be equal to the sum of the aggregate offering
price (before deduction of underwriting discounts or commissions and expenses
payable to third parties) of all such Common Stock, rights, warrants and
convertible securities plus the aggregate amount (as determined on the date of
issuance), if any, payable upon exercise or conversion of any such rights,
warrants and convertible securities into shares of Common Stock. If, subsequent
to the date of issuance of such rights, warrants or Convertible Securities, the
exercise or conversion price thereof is reduced, such aggregate amount shall be
recalculated and the Current Warrant Price and number of shares of Common Stock
for which the Warrant is exercisable adjusted retroactively to give effect to
such reduction. If Common Stock is sold as a unit with other securities, the
aggregate consideration received for such Common Stock shall be deemed to be net
of the Fair Market Value of such other securities.
4.4. ISSUANCE OF WARRANTS OR OTHER RIGHTS. If at any time the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Company is the
surviving corporation) issue or sell, any warrants or other rights to
subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Securities (other than Permitted Issuances), whether or not the
rights to exchange or convert thereunder are immediately exercisable, and
the price per share for which Common Stock is issuable upon the exercise of
such warrants or other rights or upon conversion or exchange of such
Convertible Securities shall be less than the Current Warrant Price in
effect immediately prior to the time of such issue or sale, then the number
of shares for which this Warrant is exercisable and the Current Warrant
Price shall be adjusted as provided in Section 4.3 on the basis that the
maximum number of Additional Shares of Common Stock issuable pursuant to
all such warrants or other rights or necessary to effect the conversion or
exchange of all such Convertible Securities shall be deemed to have been
<PAGE> 15
issued and outstanding and the Company shall have received all of the
consideration payable therefor, if any, as of the date of the actual issuance of
the number such warrants or other rights. No further adjustments of the Current
Warrant Price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such warrants or other rights or
upon the actual issue of such Common Stock upon such conversion or exchange of
such Convertible Securities. Notwithstanding the foregoing, no adjustment shall
be required under this Section 4.4 solely by reason of the issuance or
distribution of stock purchase rights pursuant to a shareholder rights plan or
any other rights plan of the Company, provided that the adjustments required by
this Section 4.4 shall be made if any "flip-in" or "flip-over" event shall occur
under such stockholder rights plan.
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Company is the
surviving corporation) issue or sell, any Convertible Securities (other
than Permitted Issuances), whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which
Common Stock is issuable upon such conversion or exchange shall be less
than the Current Warrant Price in effect immediately prior to the time of
such issue or sale, then the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be adjusted as provided in
Section 4.3 on the basis that the maximum number of Additional shares of
Common Stock necessary to effect the conversion or exchange of all such
Convertible Securities shall be deemed to have been issued and outstanding
and the Company shall have received all of the consideration payable
therefor, if any, as of the date of actual issuance of such Convertible
Securities. No adjustment of the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be made under this Section
4.5 upon the issuance of any Convertible Securities which are issued
pursuant to the exercise of any warrants or other subscription or purchase
rights therefor, if any such adjustment shall previously have been made
upon the issuance of such warrants or other rights pursuant to Section 4.4.
No further adjustments of the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be made upon the actual
issue of such Common Stock upon conversion or exchange of such Convertible
Securities and, if any issue or sale of such Convertible Securities is made
upon exercise of any warrant or other right to subscribe for or to purchase
any such Convertible Securities for which adjustments of the number of
shares for which this Warrant is exercisable and the Current Warrant Price
have been or are to be made pursuant to other provisions of this Section 4,
<PAGE> 16
no further adjustments of the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be made by reason of such issue
or sale.
4.6. SUPERSEDING ADJUSTMENT. If, at any time after any adjustment of
the number of shares for which this Warrant is exercisable and the Current
Warrant Price shall have been made pursuant to Section 4.4 or Section 4.5
as the result of any issuance of warrants, rights or Convertible
Securities, such warrants or rights, or the right of conversion or exchange
in such other Convertible Securities, shall expire, and all of such
warrants or rights, or the right of conversion or exchange with respect to
all or a portion of such other Convertible Securities, as the case may be,
shall not have been exercised and no outstanding Warrant shall have been
exercised (in whole or in part), then for each outstanding Warrant such
previous adjustment shall be rescinded and annulled and the Additional
Shares of Common Stock which were deemed to have been issued by virtue of
the computation made in connection with the adjustment so rescinded and
annulled shall no longer be deemed to have been issued by virtue of such
computation.
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION.
The following provisions shall be applicable to the making of adjustments
of the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price provided for in this Section 4:
(a) Computation of Consideration. To the extent that any
Additional Shares of Common Stock or any Convertible Securities or any
warrants or other rights to subscribe for or purchase any Additional Shares
of Common Stock or any Convertible Securities shall be issued for cash
consideration, the consideration received by the Company therefor shall be
the amount of the cash received by the Company therefor, or, if such
Additional Shares of Common Stock or Convertible Securities are offered by
the Company for subscription, the subscription price, or, if such
Additional Shares of Common Stock or Convertible Securities are sold to
underwriters or dealers for public offering without a subscription
offering, the public offering price (in any such case subtracting any
amounts paid or receivable for accrued interest or accrued dividends). To
the extent that such issuance shall be for a consideration other than cash,
then, except as herein otherwise expressly provided, the amount of such
consideration shall be deemed to be the fair value of such consideration at
the time of such issuance as determined in good faith by the Board of
Directors of the Company. In case any Additional Shares of Common Stock or
any Convertible Securities or any warrants or other rights to subscribe for
or purchase such Additional Shares of Common Stock or Convertible
Securities shall be issued in connection with any merger in which the
Company issues any securities, the amount of consideration therefor shall
<PAGE> 17
be deemed to be the fair value, as determined in good faith by the Board of
Directors of the Company, of such portion of the assets and business of the
nonsurviving corporation as such Board in good faith shall determine to be
attributable to such Additional Shares of Common Stock, Convertible Securities,
warrants or other rights, as the case may be. The consideration for any
Additional Shares of Common Stock issuable pursuant to any warrants or other
rights to subscribe for or purchase the same shall be the consideration received
by the Company for issuing such warrants or other rights plus the additional
consideration payable to the Company upon exercise of such warrants or other
rights. The consideration for any Additional Shares of Common Stock issuable
pursuant to the terms of any Convertible Securities shall be the consideration
received by the Company for issuing warrants or other rights to subscribe for or
purchase such Convertible Securities, plus the consideration paid or payable to
the Company in respect of the subscription for or purchase of such Convertible
Securities, plus the additional consideration, if any, payable to the Company
upon the exercise of the right of conversion or exchange in such Convertible
Securities. In case of the issuance at any time of any Additional Shares of
Common Stock or Convertible Securities in payment or satisfaction of any
dividends upon any class of stock other than Common Stock, the Company shall be
deemed to have received for such Additional Shares of Common Stock or
Convertible Securities a consideration equal to the amount of such dividend so
paid or satisfied.
(b) When Adjustments to Be Made. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur, except that any adjustment of the
number of shares of Common Stock for which this Warrant is exercisable that
would otherwise be required may be postponed (except in the case of a
subdivision or combination of shares of the Common Stock, as provided for
in Section 4.1) up to, but not beyond the date of exercise if such
adjustment either by itself or with other adjustments not previously made
results in an increase or decrease of less than 1% of the shares of Common
Stock for which this Warrant is exercisable immediately prior to the making
of such adjustment. Any adjustment representing a change of less than such
minimum amount (except as aforesaid) which is postponed shall be carried
forward and made as soon as such adjustment, together with other
adjustments required by this Section 4 and not previously made, would
result in a minimum adjustment or on the date of exercise. For the purpose
of any adjustment, any specified event shall be deemed to have occurred at
the close of business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account
to the nearest 1/100th of a share.
<PAGE> 18
(d) When Adjustment Not Required. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them
to receive a dividend or distribution or subscription or purchase rights
and shall, thereafter and before the distribution to stockholders thereof,
legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be
required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.
(e) Escrow of Warrant Stock. If Holder exercises this Warrant
after any property becomes distributable pursuant to this Section 4 by
reason of the taking of any record of the holders of Common Stock, but
prior to the occurrence of the event for which such record is taken, any
additional shares of Common Stock issuable upon exercise by reason of such
adjustment shall be deemed the last shares of Common Stock for which this
Warrant is exercised (notwithstanding any other provision to the contrary
herein) and such shares or other property shall be held in escrow for
Holder by the Company to be issued to Holder when and to the extent that
the event actually takes place, upon payment of the then Current Warrant
Price. Notwithstanding any other provision to the contrary herein, if the
event for which such record was taken fails to occur or is rescinded, then
such escrowed shares shall be canceled by the Company and escrowed property
returned.
(f) Challenge to Good Faith Determination. Whenever the Board of
Directors of the Company shall be required to make a determination in good
faith of the fair value of any item under this Section 4, such
determination may be challenged in good faith by the Majority Holders, and
any dispute shall be resolved by an investment banking firm of recognized
national standing selected by the Majority Holders and acceptable to the
Company.
4.8. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where
there is a change in or distribution with respect to the Common Stock of
the Company), or sell, transfer or otherwise dispose of all or
substantially all its property, assets or business to another corporation
and, pursuant to the terms of such reorganization, reclassification,
merger, consolidation or disposition of assets, shares of common stock of
the successor or acquiring corporation, or any cash, shares of stock or
other securities or property of any nature whatsoever (including warrants
or other subscription or purchase rights) in addition to or in lieu of
common stock of the successor or acquiring corporation ("Other Property"),
are to be received by or distributed to the holders of Common Stock of the
Company, then Holder shall have the right thereafter to receive, upon
exercise of this Warrant and payment of the Current Warrant Price, the
<PAGE> 19
number of shares of common stock of the successor or acquiring corporation or of
the Company, if it is the surviving corporation, and Other Property receivable
upon or as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets by a holder of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
event. In case of any such reorganization, reclassification, merger,
consolidation or disposition of assets, the successor or acquiring corporation
(if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant to be performed and observed by the Company and all the obligations and
liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board of Directors of the
Company) in order to provide for adjustments of shares of the Common Stock for
which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 4. For purposes of
this Section 4.8, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 4.8 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
4.9. OTHER ACTION AFFECTING COMMON STOCK. In case at any time or from
time to time the Company shall take any action in respect of its Common
Stock, other than any action described in this Section 4, then, unless such
action will not have a materially adverse effect upon the rights of the
Holders, the number of shares of Common Stock or other stock for which this
Warrant is exercisable and/or the purchase price thereof shall be adjusted
in such manner as may be equitable in the circumstances.
4.10. CERTAIN LIMITATIONS. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction which, by
reason of any adjustment hereunder, would cause the Current Warrant Price
to be less than the par value per share of Common Stock.
5. NOTICES TO WARRANT HOLDERS
<PAGE> 20
5.1. NOTICE OF ADJUSTMENTS. Whenever the number of shares of Common
Stock for which this Warrant is exercisable, or whenever the price at which
a share of such Common Stock may be purchased upon exercise of the
Warrants, shall be adjusted pursuant to Section 4, the Company shall
forthwith prepare a certificate to be executed by the chief financial
officer of the Company setting forth, in reasonable detail, the event
requiring the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which the Board of
Directors of the Company determined the fair value of any evidences of
indebtedness, shares of stock, other securities or property or warrants or
other subscription or purchase rights referred to in Section 4.2 or
4.7(a)), specifying the number of shares of Common Stock for which this
Warrant is exercisable and (if such adjustment was made pursuant to Section
4.8 or 4.9) describing the number and kind of any other shares of stock or
Other Property for which this Warrant is exercisable, and any change in the
purchase price or prices thereof, after giving effect to such adjustment or
change. The Company shall promptly cause a signed copy of such certificate
to be delivered to each Holder in accordance with Section 14.2. The Company
shall keep at its principal office copies of all such certificates and
cause the same to be available for inspection at said office during normal
business hours by any Holder or any prospective purchaser of a Warrant
designated by a Holder thereof.
5.2. NOTICE OF CORPORATE ACTION. If at any time
(a) the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend (other
than a cash dividend payable out of earnings or earned surplus legally
available for the payment of dividends under the laws of the
jurisdiction of incorporation of the Company) or other distribution,
or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities
or property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger of the Company with, or any
sale, transfer or other disposition of all or substantially all the
property, assets or business of the Company to, another corporation,
or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder
(i) at least 20 days' prior written notice of the date on which a record
date shall be selected for such dividend, distribution or right or for
determining rights to vote in respect of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up, and (ii) in the case of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition,
<PAGE> 21
dissolution, liquidation or winding up, at least 20 days' prior written notice
of the date when the same shall take place. Such notice in accordance with the
foregoing clause also shall specify (i) the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, the date on
which the holders of Common Stock shall be entitled to any such dividend,
distribution or right, and the amount and character thereof, and (ii) the date
on which any such reorganization, reclassification, merger, consolidation, sale,
transfer, disposition, dissolution, liquidation or winding up is to take place
and the time, if any such time is to be fixed, as of which the holders of Common
Stock shall be entitled to exchange their shares of Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, dissolution, liquidation or
winding up. Each such written notice shall be sufficiently given if addressed to
Holder at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 13.2.
6. RIGHTS OF HOLDERS
6.1 NO IMPAIRMENT. The Company shall not by any action, including,
without limitation, amending its Certificate of Incorporation, by-laws or
comparable governing instruments or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking
of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and
(c) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may
be necessary to enable the Company to perform its obligations under this
Warrant.
Upon the request of Holder, the Company will at any time during
the period this Warrant is outstanding acknowledge in writing, in form
reasonably satisfactory to Holder, the continuing validity of this Warrant
and the obligations of the Company hereunder.
<PAGE> 22
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Issue Date, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon
exercise of any Warrant and payment therefor in accordance with the terms
of such Warrant, shall be duly and validly issued and fully paid and
nonassessable.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any
provision of Section 4 refers to the taking of a record of such holders,
the Company will in each such case take such a record and will take such
record as of the close of business on a Business Day. The Company will not
at any time, except upon dissolution, liquidation or winding up of the
Company, close its stock transfer books or Warrant transfer books so as to
result in preventing or delaying the exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in
this Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any
Warrant or any Warrant Stock. Holder, by acceptance of this Warrant, agrees
to be bound by the provisions of this Section 9.
9.1. RESTRICTIVE LEGEND. Except as otherwise provided in this Section
9, each Warrant and each certificate for Warrant Stock initially issued
upon the exercise of a Warrant, and each certificate for Warrant Stock
issued to any subsequent transferee of any such certificate, shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"[THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY] [THE
SECURITIES REPRESENTED BY THIS CERTIFICATE] HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH
ACT OR SUCH LAWS."
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION. Prior to
any Transfer or attempted Transfer of any Warrants or any shares of
<PAGE> 23
Restricted Common Stock, the holder of such Warrants or Restricted Common Stock
shall give ten days' prior written notice (a "Transfer Notice") to the Company
of such holder's intention to effect such Transfer, describing the manner and
circumstances of the proposed Transfer, and obtain from counsel to such holder
who shall be reasonably satisfactory to the Company, an opinion that the
proposed Transfer of such Warrants or such Restricted Common Stock may be
effected without registration under the Securities Act. After receipt of the
Transfer Notice and opinion, the Company shall, within five days thereof, notify
the holder of such Warrants or such Restricted Common Stock as to whether such
opinion is reasonably satisfactory and, if so, such holder shall thereupon be
entitled to Transfer such Warrants or such Restricted Common Stock, in
accordance with the terms of the Transfer Notice. Each certificate, if any,
evidencing such shares of Restricted Common Stock issued upon such Transfer and
each Warrant issued upon such Transfer shall bear the restrictive legend set
forth in Section 9.1, unless in the opinion of such counsel such legend is not
required in order to ensure compliance with the Securities Act. The holder of
the Warrants or the Restricted Common Stock, as the case may be, giving the
Transfer Notice shall not be entitled to Transfer such Warrants or such
Restricted Common Stock until receipt of notice from the Company under this
Section 9.2 that such opinion is reasonably satisfactory.
9.3. TERMINATION OF RESTRICTIONS. Notwithstanding the foregoing
provisions of this Section 9, the restrictions imposed by this Section upon
the transferability of the Warrants, the Warrant Stock and the Restricted
Common Stock and the legend requirements of Section 9.1 shall terminate as
to any particular Warrant or share of Warrant Stock or Restricted Common
Stock (i) when and so long as such security shall have been effectively
registered under the Securities Act and disposed of pursuant thereto or
(ii) when the Company shall have received an opinion of counsel reasonably
satisfactory to it that such shares may be transferred without registration
thereof under the Securities Act.
10. PREEMPTIVE RIGHTS
(a) The Company shall not issue, sell or exchange, or agree to
issue, sell or exchange (collectively, "Issue," and any issuance, sale or
exchange resulting therefrom, an "Issuance") any Securities unless the
Company shall have first given written notice (the "Section 10 Notice") to
each holder of Warrants or Warrant Stock (for purposes of this Section,
each a "Section 10 Offeree") that shall (i) state the Company's intention
to Issue Securities, the amount to be issued, sold or exchanged, the terms
of such Securities, the purchase price therefor and a summary of the other
<PAGE> 24
material terms of the proposed issuance, sale or exchange and (ii) offer (a
"Section 10 Offer") to Issue to each Section 10 Offeree and their affiliates
such Section 10 Offeree's Proportionate Percentage (as defined below) of such
Securities (with respect to each Section 10 Offeree, the "Offered Securities")
upon the terms and subject to the conditions set forth in the Section 10 Notice,
which Section 10 Offer by its terms shall remain open and irrevocable for a
period of 15-days from the date it is delivered by the Company to such holder,
as the case may be (and, to the extent the Section 10 Offer is accepted during
such 15-day period, until the closing of the Issuance contemplated by the
Section 10 Offer). "Proportionate Percentage" for the purposes of this Section
shall mean the quotient obtained by dividing: (A) the Warrant Stock held by such
Section 10 Offeree (assuming for purposes of this Section 10 that all issued and
outstanding Warrants have been exercised) on the date of the Section 10 Offer,
by (B) the Warrant Stock issued and outstanding on the date of the Section 10
Offer.
(b) Notice of a Section 10 Offeree's intention to accept a
Section 10 Offer, in whole or in part, shall be evidenced by a writing
signed by such party and delivered to the Company prior to the end of the
15-day period of such Section 10 Offer (each, a "Notice of Acceptance"),
setting forth the portion of the Offered Securities that the Section 10
Offeree elects to purchase, which election shall be binding.
(c) In the event that a Notice of Acceptance is not given by a
Section 10 Offeree in respect of all the Offered Securities, the Company
shall have 60 days following the 15-day period referred to in clause (b)
above to Issue all or any part of such remaining Offered Securities not
covered by the Notice of Acceptance to any other Person(s), but only at a
price not less than the price, and on terms no more favorable to the person
than the terms, stated in the Section 10 Offer Notice. If the Company does
not consummate the Issuance of all or part of the remaining Offered
Securities to such other Person(s) within such period, the right provided
hereunder shall be deemed to be revived and such securities shall not be
offered unless first re-offered to each Section 10 Offeree in accordance
with this Section 10. Upon the closing of the Issuance to such other
Person(s) (the "Other Buyers") of all or part of the remaining Offered
Securities, each Section 10 Offeree shall purchase from the Company, and
the Company shall Issue to each such Section 10 Offeree, the Offered
Securities covered by the Notice of Acceptance delivered to the Company by
the Section 10 Offeree, on the terms specified in the Section 10 Offer. The
purchase by a Section 10 Offeree of any Offered Securities is subject in
all cases to the execution and delivery by the Company and the Section 10
Offeree of a purchase agreement relating to such Offered Securities in form
and substance similar in all material respects to the extent applicable to
that executed and delivered between the Company and the Other Buyers.
11. SUPPLYING INFORMATION
<PAGE> 25
The Company shall cooperate with each Holder of a Warrant and
each holder of Restricted Common Stock in supplying such information as may
be reasonably necessary for such holder to complete and file any reports or
forms presently or hereafter required by the Commission as a condition to
the availability of an exemption from the Securities Act for the sale of
any Warrant or Restricted Common Stock.
12. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably
satisfactory to it (it being understood that, in the case of the initial
holder, the written agreement of Appaloosa Management L.P. shall be
sufficient indemnity), and in case of mutilation upon surrender and
cancellation hereof, the Company will execute and deliver in lieu hereof a
new Warrant of like tenor to such Holder; provided, in the case of
mutilation, no indemnity shall be required if this Warrant in identifiable
form is surrendered to the Company for cancellation.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by
Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of Holder hereof, shall give rise to any liability of
such Holder for the purchase price of any Common Stock or as a stockholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
14. MISCELLANEOUS
14.1. NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall operate
as a waiver of such right or otherwise prejudice Holder's rights, powers or
remedies. If the Company fails to make, when due, any payments provided for
hereunder, or fails to comply with any other provision of this Warrant, the
Company shall pay to Holder such amounts as shall be sufficient to cover
any costs and expenses including, but not limited to, reasonable attorneys'
fees, including those of appellate proceedings, incurred by Holder in
collecting any amounts due pursuant hereto or in otherwise enforcing any of
its rights, powers or remedies hereunder.
14.2. NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or
made if in writing and either delivered in person with receipt acknowledged
or sent by registered or certified mail, return receipt requested, postage
<PAGE> 26
prepaid, or by telecopy and confirmed by telecopy answerback, addressed as
follows:
(a) If to any Holder or holder of Warrant Stock, at its last
known address appearing on the books of the Company maintained for
such purpose.
(b) If to the Company at
Bio-Plexus, Inc.
129 Reservoir Road
Vernon, CT 06066
Attention: Mr. Carl Sahi
Fax: (860) 870-6118
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every notice, demand,
request, consent, approval, declaration, delivery or other communication
hereunder shall be deemed to have been duly given or served on the date on
which personally delivered, with receipt acknowledged, telecopied and
confirmed by telecopy answerback, or three Business Days after the same
shall have been deposited in the United States mail. Failure or delay in
delivering copies of any notice, demand, request, approval, declaration,
delivery or other communication to the person designated above to receive a
copy shall in no way adversely affect the effectiveness of such notice,
demand, request, approval, declaration, delivery or other communication.
14.3. REMEDIES. Each holder of Warrant and Warrant Stock, in addition
to being entitled to exercise all rights granted by law, including recovery
of damages, will be entitled to specific performance of its rights under of
this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of
the provisions of this Warrant and hereby agrees to waive the defense in
any action for specific performance that a remedy at law would be adequate.
14.4. SUCCESSORS AND ASSIGNS. Subject to the provisions of Sections
3.1 and 9, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the
successors and assigns of Holder. The provisions of this Warrant are
intended to be for the benefit of all Holders from time to time of this
Warrant and, with respect to Section 9 hereof, holders of Warrant Stock,
and shall be enforceable by any such Holder or holder of Warrant Stock.
14.5. AMENDMENT. This Warrant and all other Warrants may be modified
or amended or the provisions hereof waived with the written consent of the
Company and the Majority Holders, provided that no such Warrant may be
modified or amended to reduce the number of shares of Common Stock for
which such Warrant is exercisable or to increase the price at which such
shares may be purchased upon exercise of such Warrant (before giving effect
to any adjustment as provided therein) without the prior written consent of
<PAGE> 27
the Holder thereof, provided however, that the foregoing shall not limit the
operation of Section 4.6.
14.6. SEVERABILITY. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Warrant.
14.7. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
14.8. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT
TO THE PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED
STATES OF AMERICA, IN EACH CASE LOCATED IN THE COUNTY OF NEW YORK, FOR ANY
ACTION, PROCEEDING OR INVESTIGATION IN ANY COURT OR BEFORE ANY GOVERNMENTAL
AUTHORITY ("LITIGATION") ARISING OUT OF OR RELATING TO THIS WARRANT AND THE
TRANSACTIONS CONTEMPLATED HEREBY (AND AGREES NOT TO COMMENCE ANY LITIGATION
RELATING THERETO EXCEPT IN SUCH COURTS), AND FURTHER AGREES THAT SERVICE OF
ANY PROCESS, SUMMONS, NOTICE OR DOCUMENT BY U.S. REGISTERED MAIL TO ITS
RESPECTIVE ADDRESS SET FORTH IN THIS WARRANT SHALL BE EFFECTIVE SERVICE OF
PROCESS FOR ANY LITIGATION BROUGHT AGAINST IT IN ANY SUCH COURT. EACH OF
THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
OBJECTION TO THE LAYING OF VENUE OF ANY LITIGATION ARISING OUT OF THIS
WARRANT OR THE TRANSACTIONS CONTEMPLATED HEREBY IN THE COURTS OF THE STATE
OF NEW YORK OR THE UNITED STATES OF AMERICA, IN EACH CASE LOCATED IN THE
COUNTY OF NEW YORK, AND HEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY
WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH
LITIGATION BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS TO TRIAL BY
JURY IN CONNECTION WITH ANY LITIGATION ARISING OUT OF OR RELATING TO THIS
WARRANT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by an officer thereunto duly authorized.
Dated:
-----------------
BIO-PLEXUS, INC.
By:
---------------------------
Name:
Title:
<PAGE> 28
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
Net Issue Exercise _____No ______Yes
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of _____ shares of Common Stock of
Bio-Plexus, Inc. and herewith makes payment therefor, all at the price and
on the terms and conditions specified in this Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and any
securities or other property issuable upon such exercise) be issued in the
name of and delivered to _____________ whose address is ________________
and, if such shares of Common Stock shall not include all of the shares of
Common Stock issuable as provided in this Warrant, that a new Warrant of
like tenor and date for the balance of the shares of Common Stock issuable
hereunder be delivered to the undersigned.
-----------------------------------
(Name of Registered Owner)
-----------------------------------
(Signature of Registered Owner)
-----------------------------------
(Street Address)
-----------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
<PAGE> 29
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below
all of the rights of the undersigned under this Warrant, with respect to
the number of shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of Common Stock
- ---------------------------- -----------------------------
and does hereby irrevocably constitute and appoint ________________
attorney-in-fact to register such transfer on the books of BIO-PLEXUS, INC.
maintained for the purpose, with full power of substitution in the
premises.
Dated: Print Name:
------------------ ----------------------------
Signature:
-----------------------------
Witness:
-------------------------------
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 1
EXHIBIT 10.40
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF
SUCH ACT OR SUCH LAWS.
BIO-PLEXUS, INC.
15% SECURED NOTE
No. R-1 Dated as of January 5, 2000
$1,650,000
FOR VALUE RECEIVED, the undersigned, BIO-PLEXUS, INC. (herein called the
"Company"), a corporation organized and existing under the laws of the State of
Connecticut, hereby unconditionally promises to pay to the order of Appaloosa
Investment Limited Partnership I, or its registered assigns (the "Holder"), the
principal sum of ONE MILLION SIX HUNDRED FIFTY THOUSAND
<PAGE> 2
DOLLARS ($1,650,000) in immediately available lawful money of the United States
of America, together with interest on the unpaid balance hereof, in accordance
with the terms and conditions set forth below.
1. Payment.
1.1. Principal. The entire unpaid principal balance of this Note
shall be paid in full by the Company on the Due Date.
1.2. Home Office Payment. The Company will pay to each Holder or any
transferee thereof all sums becoming due on this Note at the account/address to
be specified by such Holder or transferee for such purpose by notice to the
Company, by wire transfer of immediately available funds, or at such other
address or by such other method as such Holder or transferee shall have
designated by notice to the Company.
1.3. Prepayment. After all amounts owed under the 7.5% Secured Note
issued by the Company to the Holder on October 21, 1999 (as amended from time to
time, the "7.5% Note") have been repaid in full, subject to Section 8.8, (i)
upon at least ten days prior notice to the Holder, this Note may be prepaid,
without premium or penalty, in whole or in part by the Company at any time and
from time to time and (ii) concurrently with the receipt of any proceeds
received by the Company in respect of any sale of Debentures pursuant to section
1.4 of the Subscription Agreement, the Company shall make a mandatory prepayment
of the Note in an amount equal to 100% of such proceeds; provided, that, upon
any prepayment under (i) or (ii) above, all accrued and unpaid interest shall be
paid on the principal of the Note being repaid.
1.4. Interest. The unpaid principal balance of this Note outstanding
at any time shall accrue interest, at a rate per annum equal to 15% (including
during the pendency of any bankruptcy or similar proceeding, whether or not a
claim for post-petition interest is allowed as a claim in any such bankruptcy or
proceeding). Interest shall begin to accrue from the date hereof and shall be
computed on the basis of a year of 360 days and actual days elapsed and shall be
payable in one lump sum on the Due Date.
1.5. Default Interest. If the Company shall fail to pay any principal
amount of, or interest on, or other amount payable under, this Note when due and
payable (whether at the Due Date, the Acceleration Date or otherwise), such
principal amount, interest or other amount shall thereafter bear interest, until
paid in full (after as well as before judgment) to the extent lawful, at a rate
per annum equal to 15% (including during the pendency of any bankruptcy or
similar proceeding, whether or not a claim for post-petition interest is allowed
as a claim in any such bankruptcy or proceeding). The Company shall pay such
default interest in
<PAGE> 3
cash on demand from time to time.
1.6. Limitation on Interest. No provision of this Note shall require
the payment or permit the collection of interest in excess of the maximum rate
which is permitted by Law. If any such excess interest is provided for herein,
or shall be adjudicated to be so provided for, then the Company shall not be
obligated to pay such interest in excess of the maximum rate permitted by Law,
and the right to demand payment of any such excess interest is hereby waived,
any other provisions in this Note to the contrary notwithstanding.
1.7. Allocation. The parties hereto agree that the fair market value
of this Note is $1,600,000 and the fair market value of the warrants to be
issued to one or more Affiliates of the Holder on the Maturity Date pursuant to
the section (c) of the side letter, dated December 30, 1999, between the Company
and the Holder is $50,000. Each party agrees to file all tax returns consistent
with such allocation and to take no position inconsistent with such allocation,
unless required by Law.
2. Deliveries by the Company. Simultaneously with the execution of this
Note, the Company is delivering to the Holder the following:
(a) an opinion of the Company's counsel, dated as of the date hereof,
addressed to such Holder in the form of Exhibit 2(a) hereto;
(b) a good standing certificate for the Company, dated no earlier than
seven days prior to the date hereof, from the State of Connecticut;
(c) a copy of the resolutions of the Board of Directors authorizing
the execution of each of the Transaction Documents and the performance of the
transactions contemplated by the Transaction Documents which shall be certified
as true, correct and effective as of the date hereof by an officer of the
Company; and
(d) the Holder's costs and expenses (including the reasonable fees and
expenses of its counsel, Fried, Frank, Harris, Shriver & Jacobson, in an
aggregate amount not to exceed $100,000 which amounts shall be deducted from the
proceeds of this Note and shall be wired transferred by the Holder, on behalf of
the Company, to one or more accounts designated by such party on or prior to the
date hereof) incurred in connection with the transactions contemplated hereby.
3. Representations and Warranties of the Company. The Company represents
and warrants to the Holder as follows:
3.1. Organization; Subsidiaries. (a) The Company is a corporation duly
organized and existing in good standing under the laws of the State of
Connecticut and has the corporate power to own its property and to carry on its
business as now being conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property
<PAGE> 4
owned by it makes such qualification necessary and where the failure to so
qualify could, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
(b) The Company does not have any Subsidiaries. Except as set forth on
Schedule 3.1(b), the Company does not own, directly or indirectly, or have the
right or obligation to acquire, any interest in any business association or
other Person.
3.2. Due Authorization. (a) The Company has all right, power and
authority to enter into, deliver and perform the Transaction Documents to which
it is a party and to consummate the transactions contemplated thereby. The
execution and delivery of each Transaction Document by the Company and the
performance by it of the transactions contemplated thereby (including, without
limitation, the issuance and sale of this Note) and compliance by the Company
with all the provisions of each Transaction Document (as applicable) has been
duly authorized by all requisite corporate proceedings on the part of the
Company. Each of the Transaction Documents has been duly executed and delivered
on behalf of the Company, and each such Transaction Document constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its respective terms, except to the extent that such
enforceability (i) may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally or (ii)
is subject to general principles of equity.
(b) The Board of Directors has taken all necessary action so that no
"fair price," "moratorium," "control share acquisition," "interested holder" or
other similar anti-takeover statute or regulation (including, without
limitation, Sections 33-840 through 33-845 of the Connecticut Business
Corporation Act) or any applicable anti-takeover provision in the Company's
Certificate of Incorporation or By-Laws is applicable to the transactions
contemplated by the Transaction Documents. To the knowledge of the Company, no
other state takeover statute is applicable to the transactions contemplated by
the Transaction Documents.
3.3. Capitalization. The authorized capital stock of the Company
consists of (i) 25,000,000 shares of Common Stock, of which, as of the date
hereof, 14,004,239 shares were issued and outstanding, 579,650 shares were
reserved for issuance upon the exercise of outstanding stock options pursuant to
the Company's option plans, 3,957,588 shares were reserved for issuance upon the
exercise of the outstanding warrants, and 2,111,880 shares were reserved for
issuance upon the conversion of certain 6% Convertible Debentures due 2004 and
(ii) 3,000,000 shares of Preferred Stock, no par value (the "Preferred Stock"),
of which, as of the date hereof, no shares were issued and outstanding. All of
the outstanding shares of Common Stock are validly issued and are fully paid and
nonassessable. No class of Capital Stock of the Company is entitled to
preemptive rights. Except as set forth on Schedule 3.3, there are no
<PAGE> 5
outstanding options, warrants, preemptive rights, subscription rights, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, shares of any class of Capital Stock of the Company, or
Contracts, by which the Company is or may become bound to issue additional
shares of its Capital Stock or options, warrants or other rights to purchase or
acquire any shares of its Capital Stock. Except as set forth on Schedule 3.3, no
warrants, bonds, debentures, notes or other Indebtedness or other security
having the right to vote (or convertible into or exercisable for securities
having the right to vote) on any matters on which stockholders may vote were
issued or outstanding. Except as set forth on Schedule 3.3 or as contemplated by
the Transaction Documents, the Company is not a party to, and, to the Company's
best knowledge, there are, and immediately after the Closing, there will be, no
agreement, restriction or encumbrance (such as a preemptive or similar right of
first refusal, right of first offer, proxy, voting agreement, voting trust,
registration rights agreement, shareholders' agreement, etc., whether or not the
Company is a party thereto) with respect to the purchase, sale or voting of any
shares of Capital Stock of the Company (whether outstanding or issuable upon
conversion, exchange or exercise of outstanding securities) or other securities
of the Company pursuant to any provision of Law, the Certificate of
Incorporation or By-Laws, any agreement or otherwise. Except as set forth on
Schedule 3.3, no person has the right to nominate or elect one or more directors
of the Company. Immediately following the transactions contemplated hereby, the
Company's capitalization will be as set forth on Schedule 3.3. The Company has
not declared or paid any dividend or made any other distribution of cash, stock
or other property to its stockholders since January 1, 1996.
3.4. SEC Reports Correspondence. The Company has filed all proxy
statements, reports and other documents required to be filed by it under the
Exchange Act from and after January 1, 1995 (collectively, the "SEC Reports").
Each SEC Report was in compliance in all material respects with the requirements
of its respective report form and did not on the date of filing contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and as of the date
hereof there is no fact or facts not disclosed in the SEC Reports which relate
specifically to the Company and which could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
3.5. Financial Statements. The financial statements (including
<PAGE> 6
any related schedules and/or notes) included in the SEC Reports have been
prepared in accordance with GAAP consistently followed (except as indicated in
the notes thereto) throughout the periods involved and fairly present the
consolidated financial condition, results of operations, cash flows and changes
in stockholders' equity of the Company as of the respective dates thereof and
for the respective periods then ended (in each case subject, as to interim
statements, to changes resulting from year-end adjustments, none of which were
material in amount or effect). Except as set forth on Schedule 3.5, the Company
is not subject to any Liabilities, except (i) Liabilities in the respective
amounts reflected or reserved against in the Company's balance sheet as of
December 31, 1998 included in the SEC Reports or (ii) Liabilities incurred in
the ordinary course of business since December 31, 1998 which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
3.6. No Material Adverse Change. Since December 31, 1998, no event has
occurred or failed to occur which could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
3.7. Intellectual Property Rights. Schedule 3.7 sets forth a complete
and correct list of all Intellectual Property of the Company (the "Company
Intellectual Property"). Except as set forth on Schedule 3.7, the Company owns
and possesses all right, title and interest in, or possesses adequate licenses
to (without the making of any payment to others or the obligation to grant
rights to others in exchange) all the Company Intellectual Property, free and
clear of any Liens, licenses or other restrictions. The Company has the right to
require the applicant of any Company Intellectual Property which is an
application, including but not limited to patent applications, trademark
applications, service mark applications, copyright applications, or mask work
applications, to transfer ownership to the Company of the application and of the
registration once it issues. All registered patents, trademarks, service marks
and copyrights listed on Schedule 3.7 are valid and subsisting and in full force
and effect. The Company Intellectual Property is all the Intellectual Property
that is necessary for the ownership, maintenance and operation of the Company's
properties and assets and the Company has the right to use all of the Company
Intellectual Property in all jurisdictions in which the Company conducts or
proposes to conduct its business, and the consummation of the transactions
contemplated hereby will not alter or impair any such rights. The Company has
never agreed to indemnify any person for or against any interference,
infringement, misappropriation or other conflict with respect to any Company
Intellectual Property. Except as set forth in Schedule 3.7, no third party has
interfered with, infringed upon, misappropriated or otherwise come into conflict
with any Company Intellectual Property. The Company has taken all reasonably
necessary and desirable action to maintain and protect each item of Company
<PAGE> 7
Intellectual Property. The validity, ownership, enforceability, use or legality
of the Company Intellectual Property is not being questioned or opposed in any
Litigation or Order to which the Company or any Person who has granted a license
of Intellectual Property to the Company, is a party or subject, nor, to the
knowledge of the Company, is any such Litigation or Order threatened. The
conduct of the Company as currently conducted and as currently proposed to be
conducted does not and will not infringe, interfere with, misappropriate or
otherwise come into conflict with any Intellectual Property of any other Person,
and the Company has not received any charge, complaint, claim, demand or notice
alleging any such infringement, interference, misappropriation or conflict
(including any claim that the Company must license or refrain from using any
Intellectual Property of any other Person). Except as set forth on Schedule 3.7,
the Company has not granted any licenses of Intellectual Property to any Person.
3.8. Existing Indebtedness; Future Liens. (a) Schedule 3.8 sets forth
a complete and correct list of all outstanding Indebtedness of the Company as of
the date hereof. Except as set forth on Schedule 3.8, the Company has not
defaulted and no waiver of default is currently in effect, in the payment of any
principal or interest on any such Indebtedness and no event or condition exists
with respect to any such Indebtedness that would permit (or that with notice or
the lapse of time, or both, would permit) one or more Persons to cause such
Indebtedness to become due and payable before its stated maturity or before its
regularly scheduled dates of payment. The Company has not received any notice
from any Person declaring or threatening to declare any Indebtedness owed by the
Company to such Person due and payable prior to the stated maturity of such
Indebtedness or before its regularly scheduled dates of payment.
(b) The Company has not agreed or consented to cause or permit in
the future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to any Lien
(other than Permitted Liens).
3.9. Litigation. (a) Except as set forth on Schedule 3.9, there is no
Litigation pending or, to the knowledge of the Company, threatened against the
Company or any of its properties or assets by or before any court, arbitrator or
other Governmental Entity.
(b) The Company is not in default under or in breach of any Order of
any court, arbitrator or other Governmental Entity, and the Company is not
subject to or a party to any Order of any court, arbitrator or other
Governmental Entity arising out of any claim, demand, notice, action, suit or
proceeding under any Law.
3.10. Compliance with Laws. The Company is in compliance with all
applicable Laws including, without limitation, all rules, regulations
<PAGE> 8
and other Laws of the Food and Drug Administration relating to the design,
development, manufacturing, sales and distribution of safety medical products
and accessories, except where the failure to comply could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect. No
Order has been issued nor any Law enacted which prevents, nor does any Law
prohibit the consummation of the transactions contemplated by any of the
Transaction Documents.
3.11. Offering of the Securities. In connection with the offering of
this Note, neither the Company nor any Person acting on its behalf has offered
the Note, or any similar securities of the Company for sale to, solicited any
offers to buy the Note, or any similar securities of the Company from or
otherwise approached or negotiated with respect to the Company with any Person
other than the Purchasers and other "accredited investors" (as defined in Rule
501(a) under the Securities Act). Neither the Company nor any Person acting on
its behalf has taken or, except as contemplated hereby will take any action
(including, without limitation, any offering of any securities of the Company
under circumstances which would require the integration of such offering with
the offering of the Note under the Securities Act) which could reasonably be
expected to subject the offering, issuance or sale of the Note and the Warrants
to the registration requirements of Section 5 of the Securities Act or violate
the provisions of any securities, "blue sky", or similar law of any applicable
jurisdiction.
3.12. Solvency. The Company is not, and after giving effect to the
issuance of this Note and the application of the proceeds therefrom will not be,
insolvent within the meaning of Title 11 of the United States Code or any
comparable state law provision.
3.13. Security Documents. Except as set forth in Schedule 3.13, upon
proper filing of the Financing Statements (or assignments thereof) in the
offices of the Secretary of State of Connecticut with respect to the Company (or
assignments thereof) and in the locations identified in the Security Agreement,
the Liens granted under the Transaction Documents shall constitute a fully
perfected first priority security interest in all right, title and interest of
the Company in and to the personal property therein prior to any other security
interests against such property or interests therein.
3.14. Disclosure. Neither any Transaction Document nor any Schedule
hereto and thereto, nor any certificate furnished to any Holder by or on behalf
of the Company in connection with the transactions contemplated hereby and
thereby, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein not misleading. The financial forecasts furnished by the Company to the
Holder has been prepared in good faith based upon reasonable assumptions. There
is no fact or information
<PAGE> 9
relating to the Company that could reasonably be expected to be material to the
Company that has not been disclosed to the Holder.
4. Covenants of the Company. The Company covenants that for so long as this
Note is outstanding or any amounts are due and unpaid hereunder:
4.1. Limitation on Indebtedness. The Company shall not, and shall not
permit any of its Subsidiaries to, create, incur, assume or directly or
indirectly guarantee or in any other manner become directly or indirectly liable
for the payment of any Indebtedness (excluding Permitted Indebtedness and
Indebtedness which is a Guaranty of an Indebtedness of the Company or any of its
Subsidiaries that is otherwise Permitted Indebtedness).
4.2. Limitation on Encumbrances. The Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, create, incur, assume
or otherwise suffer to exist or cause or otherwise suffer to become effective
any Lien in or on any right, title or interest to any property (real or
personal) that constitutes all or any portion of the Collateral (a "Restricted
Encumbrance," which term excludes the Lien created in favor of the Holder)
unless such Restricted Encumbrance is a Permitted Lien.
4.3. Limitation on Dividends; Stock Issuances. The Company shall not
offer or issue any shares of Preferred Stock or Common Stock for any purpose
whatsoever, except pursuant to Schedule 4.3. The Company shall not declare any
dividends on any shares of its Capital Stock, or make any payment on account of,
or set apart assets for a sinking or other analogous fund for, the purchase,
redemption, retirement, exchange or other acquisition of any shares of its
Capital Stock, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash,
securities, property or in obligations of the Company or any of its
Subsidiaries.
4.4. Stockholders' Meetings. As promptly as practicable hereafter but
in no event no later than February 28, 2000, the Company shall take all action
necessary, in accordance with applicable Law and its Certificate of
Incorporation and By-laws, to convene a special meeting of its stockholders (the
"Company Meeting") for the purpose of considering and voting upon the approval
of the Rollover Transactions, including, without limitation, the issuance and
sale of the Convertible Notes, the Shares and the Rollover Warrants, and any
other transactions contemplated in furtherance thereof under applicable Law;
provided, however, that the Company shall adjourn the Company Meeting from time
to time until all of the conditions set forth in Section 6.2 are satisfied or
waived (other than those conditions that by their nature are to be satisfied on
the Rollover Date), such that the
<PAGE> 10
Company Meeting shall take place on the same day as the Rollover Date in
accordance with Section 6.1. The Company will use its best efforts to obtain
such stockholders' approval, including, without limitation, taking all lawful
actions to solicit such approval. The Board of Directors will recommend that its
stockholders vote in favor of and approve the Rollover Transactions, including,
without limitation, the issuance and sale of the Convertible Notes, the Shares
and the Rollover Warrants, and any other transactions contemplated in
furtherance thereof under applicable Law.
4.5. Proxy Statement. The Proxy Statement shall comply as to form in
all material respects with the applicable provisions of the Exchange Act and the
rules and regulations thereunder. The Company shall use its best efforts, and
the Holder will cooperate with the Company, to have the Proxy Statement cleared
by the SEC as promptly as practicable. The Company shall, as promptly as
practicable, provide copies of any written comments received from the SEC with
respect to the Proxy Statement to the Holder and advise the Holder of any oral
comments with respect to the Proxy Statement received from the SEC. The Holder
agrees that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in the Proxy Statement and each
amendment or supplement thereto, at the time of mailing thereof and at the time
of the Company Meeting, will contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Company agrees that none of the information supplied
or to be supplied by the Company for inclusion or incorporation by reference in
the Proxy Statement and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the Company Meeting, will contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company will
provide the Holder with a reasonable opportunity to review and comment on the
Proxy Statement and any amendment or supplement thereto prior to filing such
with the SEC, and will provide the Holder with a copy of all such filings made
with the SEC. No amendment or supplement to the information supplied by the
Holder for inclusion in the Proxy Statement shall be made without the approval
of such Holder, which approval shall not be unreasonably withheld or delayed.
4.6. Operations in Accordance with the Business Plan. The business and
operations of the Company and its Subsidiaries shall be conducted in accordance
with a business plan of the Company approved by the
<PAGE> 11
Holder.
4.7. Proceeds. The proceeds of the sale of this Note shall be used for
the purposes set forth on Schedule 4.7. No part of the proceeds from the sale of
this Note hereunder shall be used, directly or indirectly, for the purpose of
"purchasing" or "carrying" any "margin stock" within the respective meanings of
Regulation U of the Board of Governors of the Federal Reserve System or for any
purpose which violates or would be inconsistent with the provisions of
Regulations T, U or X of said Board.
4.8. Additional Offerings of Securities. The Company shall not seek
financing from any third party consisting of an issuance of Equity Securities
without the written consent of the Holder (which may be withheld at the Holder's
absolute discretion).
4.9. Existence. Neither the Company nor any of its Subsidiaries shall
enter into any transaction for the acquisition of, or merger or consolidation or
amalgamation with, any other Person (including any Subsidiary or Affiliate of
the Company or any of its Subsidiaries), or enter into any transaction or series
of transactions that could result in a Change of Control, or sell, transfer or
otherwise dispose of ("Transfer") all or substantially all of its assets in one
transaction or series of transactions to any Person, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or make any material
change in the present method of conducting business or engage in any type of
business other than of same general type now conducted by it. The Company shall
not, and shall not permit any of its Subsidiaries to, Transfer any property or
assets, unless the property or asset that is the subject of such Transfer
constitutes (i) inventory held for sale, (ii) marketable securities available
for sale, or (iii) real estate, equipment, fixtures, supplies or materials no
longer required in the operation of the business of the Company or such
Subsidiary or that is obsolete, and, in the case of any Transfer described in
clause (i) or (iii), such Transfer is in the ordinary course of business
consistent with past practice.
4.10. Access. Subject to a written confidentiality agreement, the
Company shall, and shall cause the Company's officers, directors, employees and
agents to, afford to the Holder and each of its Affiliates, officers, directors,
employees, counsel, investment bankers, accountants, advisors, agents and other
representatives (collectively, "Representatives"), reasonable access during
normal business hours to its officers, employees, accountants, agents,
properties, offices and other facilities, and to the books and records of the
Company (including, without limitation, all interim financial statements, tax
returns and work papers of its accountants), legal documents of the Company, and
shall furnish the Holder and its Representatives all financial, operating,
technical and other
<PAGE> 12
data and information which any of them may from time to time reasonably request.
4.11. 6% Convertible Debentures due 2004. The Company shall not
exercise its Put Option without the written consent of the Holder.
4.12. Security. The Secured Obligations will be secured by the
Collateral, subject to the terms and conditions of the Collateral
Documentation.
5. Events of Default and Remedies.
5.1. Events of Default and Remedies. "Event of Default," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any Order of any court or any Order, rule or
regulation of any Governmental Entity) (or if the giving of notice or lapse of
time or both is required, then, prior to such notice or lapse of time, a
"Default"):
(a) default in the payment of any interest upon this Note
when it becomes due and payable; or
(b) default in the payment of any principal of this Note when it
becomes due and payable; or
(c) default in the performance of any agreement or covenant in,
or provision of, this Note or the other documents executed and delivered in
connection with this Note (including any other Transaction Document) and to
which the Company or any of its Subsidiaries is a party (other than a
covenant or a default in whose performance is elsewhere in this Section
specifically dealt with) which is not cured within thirty (30) days, or any
representation or warranty made in any document executed and delivered in
connection with this Note (including any other Transaction Document) was
false in any material respect on the date as of which made or deemed made;
or
(d) the Company Meeting shall not have been held on or prior to
February 28, 2000 or the approval of the Company's stockholders described
in Section 4.4 shall not have been obtained at the Company Meeting on or
prior to February 28, 2000; or
(e) the Company or any of its Subsidiaries shall: (A) default in
any payment of principal of or interest on any Indebtedness (other than
this Note and any intercompany debt) or in the payment of any Guarantee,
beyond the period of grace, if any, provided in the instrument or agreement
under which such Indebtedness or Guarantee was
<PAGE> 13
created; or (B) default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or Guarantee or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of
which default or other event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of
such Guarantee (or a trustee or agent on behalf of such holder or holders
or beneficiary or beneficiaries) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity, any
applicable grace period having expired, or such Guarantee to become
payable, any applicable grace period having expired, provided that the
aggregate principal amount of all such Indebtedness and Guarantee which
would then become due or payable as described in this Section 5.1(e) would
equal or exceed $100,000; or
(f) a final judgment or judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company
or any of its Subsidiaries and such remains undischarged for a period
(during which execution shall not effectively be stayed) of 60 days,
provided that the aggregate of all such judgments that are not covered by
insurance under which the Company or a Subsidiary is a beneficiary exceeds
$100,000, or the Holder shall determine that any regulatory body having
jurisdiction over the Company or any of its Subsidiaries including, without
limitation, the SEC, shall have taken or proposed to take any action that
the Holder believes could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect or that adversely affects the
Holder's security interest in the Collateral; or
(g) the Company or any of its Subsidiaries (i) is generally not
paying, or admits in writing its inability to pay, its debts as they become
due, (ii) files, or consents by answer or otherwise to the filing against
it of, a petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, reorganization, moratorium or other similar law of
any jurisdiction, (iii) makes an assignment for the benefit of its
creditors, (iv) consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property, (v) is adjudicated as
insolvent or to be liquidated, or (vi) takes corporate action for the
purpose of any of the foregoing; or
(h) a court or other Governmental Entity of competent
<PAGE> 14
jurisdiction enters an Order appointing, without consent by the Company or
any of its Subsidiaries, a custodian, receiver, trustee or other officer
with similar powers with respect to it or with respect to any substantial
part of its property, or constituting an order for relief or approving a
petition for relief or reorganization or any other petition in bankruptcy
or for liquidation or to take advantage of any bankruptcy or insolvency law
of any jurisdiction, or ordering the dissolution, winding-up or liquidation
of the Company or any of its Subsidiaries, or any such petition shall be
filed against the Company or any of its Subsidiaries and such petition
shall not be dismissed within 60 days; or
(i) a court or other Governmental Entity of competent
jurisdiction enters a final judgment holding this Note or any of the
documents delivered in connection with this Note (including any other
Transaction Document) to be invalid or unenforceable and such judgment
remains unstayed and in effect for a period of 20 consecutive days; or the
Company or any of its Subsidiaries shall assert, in any pleading filed in
such a court, that this Note or any of the documents delivered in
connection with this Note (including any other Transaction Document) are
invalid or unenforceable; or
(j) any material provision of any Transaction Document shall for
any reason cease to be valid, binding and enforceable in accordance with
its terms (or the Company or any of its Subsidiaries shall challenge the
enforceability of any Transaction Document or shall assert in writing, or
engage in any action or inaction based on any such assertion, that any
provision of any of the Transaction Documents has ceased to be or otherwise
is not valid, binding and enforceable in accordance with its terms), or any
first priority security interest created under any Transaction Document
shall cease to be a valid and perfected security interest, or Lien in any
of the Collateral purported to be covered thereby; or
(k) the Company or any of its Subsidiaries shall default in the
payment of any amounts due pursuant to the terms of any document executed
and delivered by the Company or such Subsidiary in connection with this
Note (other than payments elsewhere in this Section specifically dealt
with).
5.2. Acceleration of Maturity. If any Event of Default (other than an
Event of Default specified in clause (g), (h), (i) or (j) of Section 5.1) shall
have occurred and be continuing, the Holder may, by notice to the Company,
declare the entire unpaid principal amount of this Note, plus all accrued and
unpaid interest thereon (together with the Holder's costs and expenses pursuant
to Section 8.8), to be immediately
<PAGE> 15
due and payable, and upon such declaration all of such amount shall be
immediately due and payable (the "Declared Acceleration Date"), in each and
every case without presentment, demand, protest or further notice, all of which
are hereby waived, anything in this Note to the contrary notwithstanding;
provided that if an Event of Default under clause (g), (h), (i) or (j) of
Section 5.1 shall have occurred, the entire unpaid principal amount of this Note
(to the full extent permitted by applicable Law), plus all accrued and unpaid
interest thereon (together with the Holder's costs and expenses pursuant to
Section 8.8), shall immediately become due and payable (the "Automatic
Acceleration Date"), without any declaration and without presentment, demand,
protest or further notice, all of which are hereby waived, anything in this Note
to the contrary notwithstanding.
5.3. Other Remedies. If any Event of Default shall have occurred and
be continuing, from and including the date of such Event of Default to but not
including the date such Event of Default is cured or waived, each Holder may
enforce its rights by suit in equity, by action at law, or by any other
appropriate proceedings, whether for the specific performance (to the extent
permitted by Law) of any covenant or agreement contained in this Note or in aid
of the exercise of any power granted in this Note, and each Holder may enforce
the payment of any Note held by such Holder and any of its other legal or
equitable rights.
5.4. Conduct; No Waiver; Collection Expenses. No course of dealing on
the part of the Holder, nor any delay or failure on the part of the Holder to
exercise any of its rights, shall operate as a waiver of such right or otherwise
prejudice the Holder's rights, powers and remedies. If the Company fails to pay,
when due, any payment in respect of this Note, the Company will pay such Holder,
to the extent permitted by Law, on demand, all costs and expenses incurred by
such Holder in the collection of any amount due in respect of this Note
hereunder, including reasonable legal fees incurred by such Holder in enforcing
its rights hereunder.
5.5. Annulment of Acceleration. If a declaration is made in accordance
with Section 5.2, then and in every such case, the Holder may, by an instrument
delivered to the Company, annul such declaration and the consequences thereof.
5.6. Remedies Cumulative. No right or remedy conferred upon or
reserved to the Holder under this Note is intended to be exclusive of any other
right or remedy, and every right and remedy shall be cumulative and in addition
to every other right and remedy given hereunder or now and hereafter existing
under applicable Law. Every right and remedy given by this Note or by applicable
Law to the Holder may be exercised from time to
<PAGE> 16
time and as often as may be deemed expedient by such Holder.
6. Rollover
6.1. Rollover. On the same day that the stockholders' approval
referred to in Section 4.4 has been obtained (the "Rollover Date"), subject to
Section 6.2, the Company and the Purchasers shall enter into (i) the Convertible
Note Purchase Agreement attached hereto as Exhibit 6.1(i) (the "Convertible Note
Purchase Agreement"), (ii) warrants to purchase 1,500,000 shares of Common Stock
at an exercise price of $7 attached hereto as Exhibit 6.1(ii) (the "Rollover
Warrant"), (iii) the Registration Rights Agreement attached hereto as Exhibit
6.1(iii) (the "Rollover Registration Rights Agreement") and (iv) the Convertible
Note Security Agreement attached hereto as Exhibit 6.1(iv) (the "Convertible
Note Security Agreement"); provided, however, that if a Governmental Entity
shall determine that any of the transactions contemplated by the Rollover
Transactions violate any applicable rules or regulations of such Governmental
Entity, the Holder shall, at the Holder's sole discretion, either (i) abandon
the Rollover Transactions or (ii) modify the structure of the Rollover
Transactions in a manner to comply with such rule or regulation.
6.2. Conditions to Rollover. (a) The obligation of each party to
consummate the Rollover Transactions shall be subject to there having been no
enactment, issuance, promulgation, enforcement or entering into of any Law by a
Governmental Entity that effects or has the effect of making any of the Rollover
Transactions illegal or otherwise restraining or prohibiting such transactions.
(b) The obligation of the Purchasers to consummate the Rollover
Transactions shall be subject to the following conditions:
(i) no change (or any condition, event or development
involving a prospective change) shall have occurred or be threatened
that could, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect;
(ii) no Default shall have occurred and be continuing under
this Note and no Default (as defined in the 7.5% Secured Note) shall
have occurred and be continuing under the 7.5% Secured Note;
(iii) concurrently with the consummation of the Rollover
Transactions, the principal amount of this Note (plus all accrued and
unpaid interest on this Note) and the 7.5% Secured Note (plus all
accrued and unpaid interest on the 7.5% Secured Note) shall have been
repaid in full;
(iv) the Company shall have delivered to the Purchasers any
document, instrument or certificate required to be delivered by the
Company pursuant to the Rollover Transaction Documents;
<PAGE> 17
and
(v) each Purchaser shall have received such other
instruments and documents reasonably requested by such Purchaser.
(c) The obligation of the Company to consummate the Rollover
Transactions shall be subject to the delivery by each Purchaser to the Company
of any document, instrument or certificate required to be delivered by such
Purchaser pursuant to the Rollover Transaction Documents.
6.3. Failure to Consummate the Rollover Transactions. Notwithstanding
anything herein to the contrary, if the Company shall fail to consummate the
Rollover Transactions described in Section 6.1 for any reason whatsoever, then
the Company's sole liability to the Holder will be the: (i) payment of the
Holder's costs and, in each case, expenses pursuant to Section 8.8; (ii) payment
of principal and interest under this Note and the 7.5% Note (and, in each case,
default interest, if applicable); and (iii) execution of the Registration Rights
Agreement by the Company pursuant to Section 6.4.
6.4. Registration Rights Agreement. In the event the approval of the
Company's stockholders described in Section 4.4 shall not have been obtained at
the Company Meeting on or prior to February 28, 2000, or in the event that the
Rollover Transactions shall not have occurred on or prior to the Rollover Date,
the Company shall immediately execute the Registration Rights Agreement attached
hereto as Exhibit 6.4 (the "Registration Rights Agreement") and deliver such
executed Registration Rights Agreement by fax to the Holder.
7. Interpretation.
7.1. Definitions.
"7.5% Note" shall have the meaning ascribed thereto in Section
1.3.
"Acceleration Date" shall mean the Declared Acceleration Date or the
Automatic Acceleration Date, as the case may be.
"Action" shall have the meaning ascribed thereto in Section
8.1(b)(i).
"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act. "Affiliate" shall also include partners of a Person.
Notwithstanding the foregoing, "Affiliate" shall not include the limited
partners of the Holder or any limited partners of a limited partner
<PAGE> 18
of the Holder.
"Automatic Acceleration Date" shall have the meaning ascribed thereto
in Section 5.2.
"Board of Directors" shall mean the Board of Directors of the
Company.
"Business Day" shall mean any day other than a Saturday, Sunday, or a
day on which banking institutions in the State of New York are authorized or
obligated by Law or executive order to close.
"Capital Stock" means, in the case of the Company, any and all shares
(however designated) of the capital stock of the Company now or hereafter
outstanding.
"Capitalized Lease" shall mean, with respect to any Person, any lease
or any other agreement for the use of property which, in accordance with
generally accepted accounting principles, should be capitalized on the lessee's
or user's balance sheet.
"Capitalized Lease Obligation" of any Person shall mean and include,
as of any date as of which the amount thereof is to be determined, the amount of
the liability capitalized or disclosed (or which should be disclosed) in a
balance sheet of such Person in respect of a Capitalized Lease of such Person.
"Change of Control" shall mean
(a) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30% or more of the combined
voting power of the then outstanding Voting Securities of the Company,
but excluding, for this purpose, any such acquisition by (i) the
Company or any Subsidiary), (ii) any Benefit Plan (or related trust)
of the Company or any Subsidiary or (iii) the Holder or any of its
Affiliates or in connection with the Rollover Transactions; or
(b) the Incumbent Board shall cease for any reason to
constitute at least 50% of the members of the Board.
"Collateral" means all real and personal property and interests in
real and personal property including, without limitation, Intellectual Property,
rights under leases and royalty rights and agreements, now owned or hereafter
acquired by the Company or its Subsidiaries in or upon which a Lien is granted
or made under the Collateral Documentation.
"Collateral Documentation" means the Security Agreement, the
<PAGE> 19
Financing Statements, and all other deeds of trust, assignments, endorsements,
pledged stock, collateral assignments and other instruments, documents,
agreements or conveyances at any time creating or evidencing Liens or assigning
Liens to the Holder, to secure the obligations of the Company or any of its
Subsidiaries under this Note and the Registration Rights Agreement.
"Common Stock" shall mean the Common Stock, no par value, of the
Company.
"Company" shall have the meaning ascribed thereto in the
Preamble.
"Company Meeting" shall have the meaning ascribed thereto in
Section 4.4.
"Contracts" shall mean all agreements, contracts, leases, purchase
orders, arrangements, commitments and licenses to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound.
"Convertible Note Purchase Agreement" shall have the meaning ascribed
thereto in Section 6.1.
"Convertible Note Security Agreement" shall have the meaning ascribed
thereto in Section 6.1.
"Debentures" shall have the meaning ascribed thereto in the
Subscription Agreement.
"Declared Acceleration Date" shall have the meaning ascribed thereto
in Section 5.2.
"Default" shall have the meaning ascribed thereto in Section 5.1.
"Due Date" shall mean the earlier of the Maturity Date and the
Acceleration Date, as applicable.
"Environmental Laws" means any and all Laws, permits, concessions,
grants, franchises, licenses, agreements or governmental restrictions relating
to pollution and the protection of the environment or the release of any
materials into the environment, including but not limited to those related to
hazardous substances or wastes, air emissions and discharges to waste or public
systems.
"Equity Interests" means any capital stock, partnership interest,
joint venture interest or other equity interest or warrants, options or other
rights to acquire any capital stock, partnership interest, joint venture
interest or other equity interest.
"Equity Securities" shall mean with respect to any Person, shares of
capital stock or other equity interest of such Person, and any rights, options
or warrants to purchase stock or other securities exchangeable for or
convertible into capital stock of or other equity interest in the Company.
<PAGE> 20
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Event of Default" shall have the meaning ascribed thereto in
Section 5.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
SEC thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include reference to the comparable section, if any, of any such successor
federal statute.
"Financing Statements" means Form UCC-1 financing statements filed in
all jurisdictions necessary or desirable in order to perfect the Holder's
security interest in the Collateral and shall include any Form UCC-1 financing
statements assigned to the Holder and filings to be made in the U.S. Patent and
Trademark Office and the U.S. Copyright Office.
"GAAP" shall mean U.S. generally accepted accounting principles.
"Governmental Entity" shall mean any supernational, national, foreign,
federal, state or local judicial, legislative, executive, administrative or
regulatory or self-regulatory body or authority.
"Guaranty" or "Guarantee" by any Person shall mean all obligations
(other than endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) of any Person guaranteeing, or in effect
guaranteeing, any Indebtedness, dividend or other obligation of any other Person
(the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, all obligations incurred through an agreement,
contingent or otherwise, by such Person: (i) to purchase such Indebtedness or
obligation or any property or assets constituting security therefor, (ii) to
advance or supply funds (x) for the purchase or payment of such Indebtedness or
obligation, (y) to maintain working capital or other balance sheet condition or
otherwise to advance or make available funds for the purchase or payment of such
Indebtedness or obligation, (iii) to lease property or to purchase securities or
other property or services primarily for the purpose of assuring the owner of
such Indebtedness or obligation of the ability of the primary obligor to make
payment of such Indebtedness or obligation, or (iv) otherwise to assure the
owner of the Indebtedness or obligation of the primary obligor against loss in
respect thereof. For the purposes of any computations made under this Note, a
Guarantee in respect of any Indebtedness for borrowed money shall be deemed to
be Indebtedness equal to the outstanding amount of the Indebtedness for borrowed
money which has been guaranteed, and a Guarantee in respect of any other
Liability or any
<PAGE> 21
dividend shall be deemed to be Indebtedness equal to the maximum aggregate
amount of such Liability or dividend.
"Holder" shall have the meaning ascribed thereto in the Preamble.
"Incumbent Board" shall mean the individuals who, immediately after
the Closing, constitute the Board of Directors; provided, however, that any
individual becoming a director subsequent to the Closing whose election, or
nomination for election by the Company's stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be deemed to be a member of the Incumbent Board
"Indebtedness" shall mean, with respect to any Person, (i) all
obligations of such Person for borrowed money, or with respect to deposits or
advances of any kind, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (iii) all obligations of such Person
under conditional sale or other title retention agreements relating to property
purchased by such Person, (iv) all obligations of such Person issued or assumed
as the deferred purchase price of property or services (other than accounts
payable to suppliers and similar accrued liabilities incurred in the ordinary
course of business and paid in a manner consistent with industry practice), (v)
all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any lien or security interest on property owned or acquired by such Person
whether or not the obligations secured thereby have been assumed, (vi) all
Capitalized Lease Obligations of such Person, (vii) all Guarantees of such
Person, (viii) all obligations (including but not limited to reimbursement
obligations) relating to the issuance of letters of credit for the account of
such Person, (ix) all obligations arising out of foreign exchange contracts, and
(x) all obligations arising out of interest rate and currency swap agreements,
cap, floor and collar agreements, interest rate insurance, currency spot and
forward contracts and other agreements or arrangements designed to provide
protection against fluctuations in interest or currency exchange rates.
"Indemnified Person" shall have the meaning ascribed thereto in
Section 8.1(b).
"Intellectual Property" means (a) Patents, (b) all trademarks, service
marks, trade dress, logos, trade names, domain names and corporate names,
together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith, (c) all copyrightable works,
all copyrights and all applications, registrations and renewals in connection
therewith, (d) all mask works and all applications, registrations and renewals
in connection therewith, (e)
<PAGE> 22
all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information and
business and marketing plans and proposals), (f) all computer software
(including data and related documentation), (g) all other proprietary rights,
(h) all copies and tangible embodiments of the foregoing (in whatever form or
medium) and (i) all licenses, sublicenses, permissions or agreements in
connection with the foregoing.
"Law" shall include any foreign, federal, state, or local law,
statute, rule, regulation, Order or other restriction of any court or other
Governmental Entity.
"Liability" shall mean any debt, liability or obligation, whether
known or unknown, asserted or unasserted, accrued, absolute, contingent or
otherwise, whether due or to become due.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"Litigation" shall mean any claim, demand, notice, action, suit,
proceeding, arbitration, investigation, civil, criminal or administrative
action, audit, inquiry or hearing by or before any Governmental Entity or
private arbitration tribunal.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the properties, business, prospects, operations, earnings, assets, Liabilities
or the condition (financial or otherwise) of the Company and its Subsidiaries
taken as a whole, whether or not in the ordinary course of business, (b) the
ability of the Company or any of its Subsidiaries to perform its obligations
under any of the Transaction Documents to which it is a party, (c) the validity
or enforceability of any of the Transaction Documents, (d) the rights, remedies,
powers and privileges of the Holder under any of the Transaction Documents or
(e) the timely payment or performance of the Secured Obligations.
"Maturity Date" shall mean the earlier of February 28, 2000 and the
Rollover Date.
"Order" shall mean any judgment, order, injunction, ruling, decree,
stipulation or award of any Governmental Entity or private
<PAGE> 23
arbitration tribunal.
"Patents" shall mean, collectively, (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice) and all
improvements thereon, (b) all patents, patent applications and patent
disclosures, (c) all reissues, divisions, continuations, revisions
reexaminations, renewals, extensions and continuations-in-part thereof) and (d)
all rights, now existing or hereafter coming into existence, (i) to all income,
royalties, damages, and other payments (including in respect of all past,
present and future infringements) now or hereafter due or payable under or with
respect to any of the foregoing, (ii) to sue for all past, present and future
infringements with respect to any of the foregoing and (iii) otherwise accruing
under or pertaining to any of the foregoing throughout the world, including all
inventions and improvements described or discussed in all such patents and
patent applications.
"Permitted Indebtedness" means, without duplication, any of the
following Indebtedness of the Company or any of its Subsidiaries, as the case
may be: (i) Indebtedness and obligations under this Note; (ii) any Indebtedness
and obligations outstanding on the date hereof, as set forth on Schedule 4.1; or
(iii) Indebtedness incurred in the ordinary course of business and consistent
with past practice not to exceed $10,000 individually or in the aggregate.
"Permitted Liens" means: (i) Liens existing on the date hereof and set
forth on Schedule 4.2, all of which are subordinate to the Lien of the
Collateral Documentation except as set forth in Schedule 4.2; (ii) Liens (other
than any Lien imposed under ERISA or any Environmental Laws) for taxes,
assessments or charges of any Governmental Entity for claims not yet due or
which are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted, and with respect to which adequate reserves
or other appropriate provisions are being maintained in accordance with the
provisions of GAAP and enforcement thereof is stayed; (iii) Liens of landlords,
carriers, warehousemen, mechanics, materialmen and other Liens (other than any
Lien imposed under ERISA) not voluntarily granted for amounts not yet due or
which are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted, and with respect to which adequate reserves
or other appropriate provisions are being maintained in accordance with the
provisions of GAAP, and enforcement thereof is stayed; (iv) Liens (other than
any Lien imposed under ERISA), incurred or deposited made in the ordinary course
of business, including without limitation, surety bonds and appeal bonds, in
connection with workers' compensation, unemployment insurance and other types of
social security benefits or to secure the performance of tenders, bids, leases,
contracts (other than for the repayment of indebtedness), statutory obligations
and other similar
<PAGE> 24
obligations or arising as a result of progress payments under government
contracts; (v) easements (including without limitation reciprocal easement
agreements and utility agreements), rights-of-way, covenants, consents,
reservations, encroachments, variations and other similar restrictions, charges
or encumbrances (whether or not recorded) and other Liens incurred in the
ordinary course of business, which do not secure indebtedness or the deferred
purchase price of any asset and which do not interfere materially with the
ordinary conduct of the business of the Company or any Subsidiary of the Company
and which do not materially detract from the value of the property to which they
attach or materially impair the use thereof to the Company or any Subsidiary of
the Company; and (vi) building restrictions, zoning laws and other statutes,
laws, rules, regulations, ordinances and restrictions, and any amendments
thereto, now or at any time hereafter adopted by any Governmental Entity having
jurisdiction.
"Person" shall mean any individual, firm, corporation, limited
liability company, partnership, company or other entity, and shall include any
successor (by merger or otherwise) of such entity.
"Preferred Stock" shall have the meaning ascribed thereto in
Section 3.3.
"Proxy Statement" shall mean the proxy statement in a definitive form
relating to the Company Meeting.
"Put Option" shall have the meaning ascribed thereto in the
Subscription Agreement.
"Purchaser" shall mean the purchasers listed on Exhibit A to the
Convertible Note Purchase Agreement.
"Registration Rights Agreement" shall have the meaning ascribed
thereto in Section 6.4.
"Representatives" shall have the meaning ascribed thereto in
Section 4.10.
"Restricted Encumbrance" shall have the meaning ascribed thereto
in Section 4.2.
"Rollover Date" shall have the meaning ascribed thereto in
Section 6.1.
"Rollover Registration Rights Agreement" shall have the meaning
ascribed thereto in Section 6.1.
"Rollover Transactions" shall mean the transactions contemplated by
Section 6.1 of this Note.
"Rollover Transaction Documents" shall mean the Convertible Note
<PAGE> 25
Purchase Agreement, the Rollover Warrant, the Rollover Registration Rights
Agreement, the Convertible Note Security Agreement and any documents and
instruments required to be executed or delivered pursuant to any of the
foregoing agreements.
"Rollover Warrant" shall have the meaning ascribed thereto in
Section 6.1.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SEC Reports" shall have the meaning ascribed thereto in Section
3.4.
"Secured Obligations" shall mean any and all obligations of the
Company or any of its Subsidiaries at any time and from time to time for the
performance of its agreements, covenants and undertakings under or in respect of
the Transaction Documents to which it is a party.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Act shall include reference to the
comparable section, if any, of such successor federal statute.
"Security Agreement" shall mean the agreement, dated as of October 21,
1999, between Appaloosa Investment Limited Partnership I, L.P. and the Company,
providing for a security interest in the Collateral.
"Subscription Agreement" shall mean the Subscription Agreement, dated
as of April 21, 1999, by and among the Company and certain subscribers thereto.
"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of whose capital stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such Person,
by one or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries thereof, (ii) any other Person (other than a corporation),
including without limitation a joint venture, in which such Person, one or more
Subsidiaries thereof or such Person and one or more Subsidiaries thereof,
directly or indirectly, at the date of determination thereof, has at least
majority ownership interest entitled to vote in the election of directors,
managers or trustees thereof (or other Persons performing similar functions),
(iii) the management of which is otherwise controlled, directly or indirectly,
by such Person or (iv) any other Person required to be consolidated with such
Person in accordance with generally accepted accounting principles. For purposes
of this definition (and for the determination of whether or not a Subsidiary is
a wholly-owned Subsidiary of a Person), any directors' qualifying shares
<PAGE> 26
or investment by foreign nationals mandated by applicable law shall be
disregarded in determining the ownership of a Subsidiary.
"Tax" and "Taxes" shall mean any federal, state, local or foreign
income, gross receipts, property, sales, use, value added, license, excise,
franchise, capital, net worth, estimated, withholding, employment, payroll,
premium, withholding, alternative or added minimum, ad valorem, inventory,
asset, gains, transfer or excise tax, or any other tax, levy, custom, duty,
impost, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest, penalty or additions to tax,
imposed by any Governmental Entity and, including, without limitation, any
Taxes of another Person owing under a contract, as transferee or successor,
under Treas. Reg. ss. 1.1502-6 or analogous state, local or foreign law, or
otherwise.
"Tax Return" shall mean any return, report or similar statement
required to be filed with respect to any Tax (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return or declaration of estimated Tax.
"Transaction Documents" shall mean this Note, the 7.5% Note, the side
letter, dated December 30, 1999, between the Company and the Holder, the
Security Agreement, the Registration Rights Agreement, the warrants to be issued
to Affiliates of the Holder pursuant to section (c) of the aforesaid side letter
and the Warrants (as defined in the 7.5% Note).
"Transfer" shall have the meaning ascribed thereto in 4.9.
"Voting Securities" shall mean at any time shares of any class of
Capital Stock of the Company (or other corporation) which are then entitled to
vote generally in the election of directors of the Company (or such other
corporation).
7.2. Accounting Principles. The character or amount of any asset,
liability, capital account or reserve and of any item of income or expense
required to be determined pursuant to this Note, and any consolidation or other
accounting computation required to be made pursuant to this Note, and the
construction of any definition in this Note containing a financial term, shall
be determined or made, as the case may be, in accordance with GAAP, to the
extent applicable, unless such principles are inconsistent with the express
requirements of this Note.
8. Miscellaneous.
<PAGE> 27
8.1. Payment; Indemnity; Taxes. (a) If the date on which any payment
under this Note is required to be made occurs on a day other than a Business
Day, such payment shall be due and payable on the next succeeding Business Day.
(b) (i) The Company and its Subsidiaries shall jointly and
severally indemnify and hold harmless the Holder and its Representatives (each,
an "Indemnified Person") from and against any and all suits, actions,
proceedings, claims (collectively, "Actions"), damages, losses, Liabilities and
out-of-pocket expenses (including reasonable attorneys' fees and disbursements
and other costs of investigation or defense, including those incurred upon any
appeal) which may be instituted or asserted against or incurred by any such
Indemnified Person as the result of credit having been extended, suspended or
terminated under this Note and the other Transaction Documents and the
administration of such credit, and in connection with or arising out of the
transactions contemplated hereunder and thereunder and any actions or failures
to act in connection therewith.
(ii) Upon receipt by any Indemnified Person of any Action
against such Indemnified Person with respect to which indemnity may be sought
under this Note or any other Transaction Document, such Indemnified Person shall
promptly notify the Company in writing, provided that failure so to notify the
Company shall not relieve the Company from any liability which the Company may
have on account of this indemnity or otherwise, except to the extent the Company
shall have been materially prejudiced by such failure. The Company shall, at its
option, assume the defense of any Action including the employment of counsel
reasonably satisfactory to the Indemnified Person. Any Indemnified Person shall
have the right to employ separate counsel in any such action and participate in
the defense thereof but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person, unless: (i) the Company has failed promptly
to assume the defense and employ counsel or (ii) the named parties to such
Action (including any impleaded parties) include such Indemnified Person and the
Company, and such Indemnified Person and the Company shall have been advised by
counsel that there may be one or more legal defenses available to it which are
different from or in addition to those available to the Company or there is or
may be a conflict between the Company and any Indemnified Person (in which case
the Company may not assume the defense). In the event that any Indemnified
Person shall become entitled to separate counsel under this Note or any other
Transaction Document, the Company shall not in such event be responsible
hereunder for the fees and expenses of more than one firm of separate counsel in
connection with any Action
<PAGE> 28
in the same jurisdiction, in addition to any local counsel. In addition, the
Company will not, without prior written consent of the Indemnified Person,
settle, compromise or consent to the entry of any judgment in or otherwise seek
to terminate any pending or threatened Action in which indemnification may be
sought hereunder (whether or not any Indemnified Person is a party thereto)
unless such settlement, compromise, consent or termination includes an
unconditional release of such Indemnified Person from all liabilities and
expenses arising out of such Action.
(c) The Company shall bear all sales, documentary, transfer,
stamp or other similar taxes and all filing fees and expenses incurred in
connection with the transactions contemplated by this Note and shall indemnify
and hold harmless each Indemnified Purchaser from and against any such taxes.
8.2. Severability. If any term, provision, covenant or restriction of
this Note or any exhibit hereto is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Note and such exhibits shall remain in full
force and effect and shall in no way be affected, impaired or invalidated. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such which may be hereafter declared invalid, void or
unenforceable.
8.3. Specific Enforcement. The Holder, on the one hand, and the
Company, on the other, acknowledge and agree that irreparable damage would occur
in the event that any of the provisions of this Note were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the Holder shall be entitled to an injunction to prevent
breaches of the provisions of this Note and to enforce specifically the terms
and provisions hereof in any court of the United States or any state thereof
having jurisdiction, this being in addition to any other remedy to which they
may be entitled at Law or equity.
8.4. Entire Agreement. The Transaction Documents (including the
Schedules and Exhibits hereto and thereto) contain the entire understanding of
the parties with respect to the transactions contemplated hereby and thereby.
8.5. Notices and other Communications. All notices, consents,
requests, instructions, approvals, financial statements, proxy statements,
reports and other communications provided for herein shall be deemed given,
<PAGE> 29
if in writing and delivered personally, by telecopy or sent by registered mail,
postage prepaid, if to:
The Company, to:
129 Reservoir Road
Vernon, CT 06066
Attention: Carl Sahi
Fax: (860) 870-6118
With a copy to:
Pepe & Hazard LLP
Goodwin Square
Hartford, CT 06103
Attention: Walter W. Simmers, Esq.
Fax: (860) 522-2796
The Holder, to:
c/o Appaloosa Management, L.P.
26 Main Street, 1st Floor
Chatham, New Jersey 07928
Attention: Mr. James Bolin
Fax: (973) 701-7055
With a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Attention: Robert C. Schwenkel, Esq.
Fax: (212) 859-4000
or to such other address as any party may, from time to time, designate in a
written notice given in a like manner.
8.6. Successors and Assigns. All covenants and agreements contained
herein shall bind and inure to the benefit of the Holder and its respective
successors and assigns. The Company many not assign this Note without the
written consent of the Holder.
8.7. Amendments. No amendment or waiver of any provision of this Note,
nor consent to any departure by the Company therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Holder and then
such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
8.8. Expenses. The Company agrees to promptly (but in no event later
than 2 business days) pay the Holder all costs and expenses (including the fees
and expenses of its counsel) incurred by it in connection with the transactions
contemplated hereby (to the extent not already paid by the Company on the date
hereof) and the Rollover Transactions (regardless of whether the Rollover
Transactions are consummated) upon the earlier to occur of (i) the prepayment of
the entire outstanding principal amount of the Note in accordance with Section
1.3 and (ii) the Due Date. In addition, the Company agrees to pay to the Holder
<PAGE> 30
all reasonable costs and expenses incurred by the Holder relating to any future
amendment or supplement to any of the Transaction Documents (or any proposal by
the Company for such amendment or supplement) whether or not consummated or any
waiver or consent with respect thereto (or any proposal for such waiver or
consent) whether or not consummated, and all costs and expenses of such Holder
relating to the enforcement of any of the Transaction Documents
8.9 Survival. All covenants, agreements, representations and
warranties contained herein in connection with the transactions contemplated
hereby shall survive the date hereof and the delivery of the Transaction
Documents, regardless of any investigation made by or on behalf of any party;
provided, that, all covenants, agreements, representations and warranties
contained herein shall terminate when this Note and any amounts due hereunder
have been indefeasibly repaid in full; provided, however, that notwithstanding
anything to the contrary contained herein, Sections 6.3, 8.1(b), 8.2, 8.3, 8.4,
8.5 and 8.8 shall survive forever.
8.10. Public Announcements. Neither the Company nor the Holder shall
make any public statements, including, without limitation, any press releases,
with respect to this Note or the other Transaction Documents and the
transactions contemplated hereby or thereby without the prior written consent of
the other party (which consent shall not be unreasonably withheld) except as may
be required by Law. If a public statement is required to be made by Law, the
parties shall consult with each other in advance as to the contents and timing
thereof.
8.11. GOVERNING LAW. THIS NOTE AND THE OTHER TRANSACTION DOCUMENTS
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE
PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK EXCLUDING
CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE
APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
8.12. Submission to Jurisdiction. If any Litigation shall be brought
by the Holder in order to enforce any right or remedy under this Note or any of
the other Transaction Documents, the Company hereby consents and will submit,
and will cause each of its Subsidiaries to submit, to the jurisdiction of any
state or federal court of competent jurisdiction sitting within the area
comprising the Southern District of New York on the date of this Note. The
Company hereby irrevocably waives any objection, including, but not limited to,
any objection to the laying of venue or based on the grounds of forum non
conveniens, which it may now or hereafter have to the bringing of any such
Litigation in such jurisdiction.
8.13. Service of Process. Nothing herein shall affect the right of the
Holder to serve process in any other manner permitted by Law or to commence
legal proceedings or otherwise proceed against the Company in any
<PAGE> 31
other jurisdiction.
8.14. WAIVER OF JURY TRIAL. THE COMPANY HEREBY WAIVES ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS NOTE OR
ANY OF THE OTHER TRANSACTION DOCUMENTS
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed as of the date first above written.
BIO-PLEXUS, INC.
By: /s/ Carl Sahi
-----------------------------
Name: Carl Sahi
Title:
<PAGE> 1
Exhibit 10.40(1a)
FIRST AMENDMENT TO THE 15 % SECURED NOTE
FIRST AMENDMENT, dated as of April 3, 2000 (this "First
Amendment"), to the 15% Secured Note issued by Bio-Plexus, Inc. (the
"Company") to Appaloosa Investment Limited Partnership I (the "Holder") on
January 5, 2000 (as such Note may be amended and restated from time to
time, the "Note")
W I T N E S S E T H:
-------------------
WHEREAS, the Company has issued the Note to the Holder;
WHEREAS, the Company has requested that the Holder amend certain
provisions of the Note;
WHEREAS, the Holder is willing to agree to the requested
amendments, but upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, the Company and the Holder hereby agree as
follows:
1. Defined Terms. Unless otherwise defined herein, capitalized
terms which are defined in the Note are used herein as therein defined.
2. Amendment to Note.
(a) Subsection 4.4 of the Note is amended by deleting the date at
the end of the first clause of the first sentence thereof and substituting
in lieu therefor "April 30, 2000".
(b) Subsection 5.1(d) of the Note is amended by deleting all
references therein to "February 28, 2000" and substituting in lieu therefor
"April 30, 2000".
(c) Subsection 6.1 of the Note is amended by deleting clause (i)
thereof in its entirety and substituting in lieu therefore the following:
(i) the Convertible Note Purchase Agreement attached to the
First Amendment to this Note as Exhibit A (the "Convertible Note Purchase
Agreement"),
(d) Subsection 6.4 of the Note is amended by deleting the
reference to "February 28, 2000" and substituting in lieu therefor "April
30, 2000".
(e) (i) Subsection 7.1 of the Note is amended by adding the
following definition:
<PAGE> 2
"Note" shall mean this Note, as amended from time to time.
(ii) Subsection 7.1 of the Note is further amended by
deleting the definitions of "Maturity Date," "Proxy Statement" and
"Transaction Documents" in their entirety and substituting in lieu therefor
the following:
"Maturity Date" shall mean the earlier of April 30, 2000 and
the Rollover Date.
"Proxy Statement" shall mean the proxy statement in a
definitive form relating to the Company Meeting and any
amendments, supplements or other solicitation materials
relating thereto.
"Transaction Documents" shall mean, the 7.5% Note, this
Note, the 15% Secured Note, in the initial aggregate
principal amount of $2,200,000, issued by the Company to the
Holder on the date hereof (as such 15% Secured Note may be
amended from time to time), the side letter, dated December
30, 1999, between the Company and the Holder (as such side
letter may be amended and restated from time to time), the
Security Agreement, the Registration Rights Agreement, the
warrants to be issued to Affiliates of the Holder pursuant
to section (c) of the aforesaid side letter, the Warrants
and the side letter, dated April 3, 2000, between the
Company and the Holder (as such side letter may be amended
and restated from time to time).
3. Representations and Warranties. The Company hereby confirms,
reaffirms and restates the representations and warranties set forth in
Section 3 of the Note. The Company represents and warrants that as of the
date hereof and, after giving effect to this First Amendment and the
transactions contemplated hereby, no Default or Event of Default has
occurred and is continuing.
4. Effectiveness. The First Amendment shall become effective as
of the date upon which the Holder receives the counterpart of this First
Amendment duly executed by the Company and a duly executed copy of the side
letter, dated the date hereof, between the Company and the Holder.
5. Continuing Effect of the Transaction Documents. This First
Amendment shall not constitute an amendment of any other provisions of the
Note or any other Transaction Documents not expressly referred to herein
and shall not be construed as a waiver or consent to any further or future
action on the part of the Company that would require a waiver or consent of
the Holder. Except as expressly amended hereby, the provisions of the
<PAGE> 3
Note and the other Transaction Documents are and shall remain in full force and
effect.
6. Counterparts. This First Amendment may be executed by the
parties hereto in any number of separate counterparts, each of which shall
be deemed to be an original, and all of which taken together shall be
deemed to constitute one and the same instrument.
7. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed and delivered by their respective proper and
duly authorized officers as of the day and year first above written.
BIO-PLEXUS, INC.
By: /s/ Carl R. Sahi
--------------------------------
Name: Carl R. Sahi
Title: President and Chief
Executive Officer
APPALOOSA INVESTMENT LIMITED
PARTNERSHIP I
By: Appaloosa Management L.P., its
General Partner
By: Appaloosa Partners Inc., its
General Partner
By: /s/ James E. Bolin
--------------------------------
Name: James E. Bolin
Title: Vice President
<PAGE> 1
EXHIBIT 10.41
WARRANT
To Purchase Shares of Common Stock of
BIO-PLEXUS, INC.
At a Purchase Price of
$____ per Share
(Subject to Adjustment as Provided herein)
No. of Shares of Common Stock: _________
<PAGE> 2
TABLE OF CONTENTS
Section Page
- ------- ----
1. DEFINITIONS 1
- --------------------------------------------------------------------------
2. EXERCISE OF WARRANT 4
- --------------------------------------------------------------------------
2.1. MANNER OF EXERCISE. 4
2.2. PAYMENT OF TAXES. 5
2.3. FRACTIONAL SHARES. 5
3. TRANSFER, DIVISION AND COMBINATION 6
- --------------------------------------------------------------------------
3.1. TRANSFER. 6
3.2. DIVISION AND COMBINATION. 6
3.3. EXPENSES. 6
3.4. MAINTENANCE OF BOOKS. 6
4. ADJUSTMENTS 6
- --------------------------------------------------------------------------
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. 6
4.2. CERTAIN OTHER DISTRIBUTIONS. 7
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. 8
4.4. ISSUANCE OF WARRANTS OR OTHER RIGHTS. 8
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. 9
4.6. SUPERSEDING ADJUSTMENT. 10
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION. 10
4.8. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. 12
4.9. OTHER ACTION AFFECTING COMMON STOCK. 13
4.10.CERTAIN LIMITATIONS. 13
<PAGE> 3
5. NOTICES TO WARRANT HOLDERS 13
- --------------------------------------------------------------------------
5.1. NOTICE OF ADJUSTMENTS. 13
5.2. NOTICE OF CORPORATE ACTION. 13
6. RIGHTS OF HOLDERS 14
- --------------------------------------------------------------------------
6.1 NO IMPAIRMENT. 14
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY 15
- --------------------------------------------------------------------------
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS 15
- --------------------------------------------------------------------------
9. RESTRICTIONS ON TRANSFERABILITY 15
- --------------------------------------------------------------------------
9.1. RESTRICTIVE LEGEND. 15
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION. 16
9.3. TERMINATION OF RESTRICTIONS. 16
10. PREEMPTIVE RIGHTS 16
- --------------------------------------------------------------------------
11. SUPPLYING INFORMATION 17
- --------------------------------------------------------------------------
12. LOSS OR MUTILATION 17
- --------------------------------------------------------------------------
<PAGE> 4
13. LIMITATION OF LIABILITY 18
- --------------------------------------------------------------------------
14. MISCELLANEOUS 18
- --------------------------------------------------------------------------
14.1. NONWAIVER AND EXPENSES. 18
14.2. NOTICE GENERALLY. 18
14.3. REMEDIES. 19
14.4. SUCCESSORS AND ASSIGNS. 19
14.5. AMENDMENT. 19
14.6. SEVERABILITY. 19
14.7. HEADINGS. 19
14.8. GOVERNING LAW. 19
<PAGE> 5
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR
SUCH LAWS
No. of Shares of Common Stock:
WARRANT
To Purchase Shares of Common Stock of
BIO-PLEXUS, INC.
THIS IS TO CERTIFY THAT _______________, or its registered assigns
(the "Holder"), is entitled, at any time prior to the Expiration Date (as
hereinafter defined), to purchase from BIO-PLEXUS, INC., a Connecticut
corporation (the "Company"), _________ (subject to adjustment as provided
herein) shares of Common Stock (as hereinafter defined), in whole or in part, at
a purchase price of $ ____ per share (subject to adjustment as provided herein),
all on the terms and conditions and pursuant to the provisions hereinafter set
forth.
<PAGE> 6
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Issue Date, other than (i) Warrant Stock,
(ii) shares of Common Stock issuable upon the conversion of the Convertible
Notes to be issued under the Convertible Note Purchase Agreement and (iii)
shares of Common Stock issuable upon exercise of the $7 Warrants to be issued
pursuant to the Convertible Note Purchase Agreement.
"Average Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the daily volume weighted average sale price
per share of Common Stock for such date. The closing price for each day shall be
the last quoted sale price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc., Automated Quotation System or such
other system then in use, or, if on any such date the Common Stock or such other
securities are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Common Stock selected by the Board of Directors of the Company. If the
Common Stock is listed or admitted to trading on a national securities exchange,
the closing price shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Common Stock is not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading.
"Business Day" shall mean any day that is not a Saturday or Sunday or
a day on which banks are required or permitted to be closed in the State of New
York.
"Capital Stock" means, in the case of the Company, any and all shares
(however designated) of the capital stock of the Company now or hereafter
outstanding.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, no par value, of the Company as constituted on the
Issue Date, and any capital stock into which such Common Stock may thereafter be
changed, and shall also include (i) capital stock of the
<PAGE> 7
Company of any other class (regardless of how denominated) issued to the holders
of shares of Common Stock upon any reclassification thereof and (ii) shares of
common stock of any successor or acquiring corporation (as defined in Section
4.8) received by or distributed to the holders of Common Stock of the Company in
the circumstances contemplated by Section 4.8.
"Convertible Note Purchase Agreement" shall mean the convertible note
purchase agreement to be entered into by and among the Company, the purchasers
listed on Exhibit A thereto and Appaloosa Management L.P., as collateral agent.
"Convertible Notes" shall mean the notes to be issued pursuant to the
Convertible Note Purchase Agreement.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable or
exercisable, with or without payment of additional consideration in cash or
property, for Additional Shares of Common Stock, either immediately or upon the
occurrence of a specified date or a specified event.
"Current Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the average of the Average Market Price for
the twenty Business Days ending five days prior to such date.
"Current Warrant Price" shall mean, in respect of a share of Common
Stock at any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date. The Current Warrant
Price as of the date of the issuance of this Warrant is $ ______.
"Expiration Date" shall mean a date which is nine years from the
issuance of this Warrant.
"Holder" shall mean the Person in whose name this Warrant is
registered on the books of the Company maintained for such purpose. "Holders"
shall mean, collectively, each Holder of a Warrant, in the event of any division
of this Warrant.
"Issue Date" shall mean __________, 2000.
"Majority Holders" shall mean the holders of Warrants exercisable for
in excess of 50% of the aggregate number of shares of Warrant Stock then
purchasable upon exercise of all Warrants.
"Other Property" shall have the meaning set forth in Section 4.8.
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company or any subsidiary thereof, and shall include all shares
issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common
<PAGE> 8
Stock. For the purposes of Sections 4.3, 4.4, 4.5, 4.6 and 4.7, Common Stock
Outstanding shall include all shares of Common Stock issuable in respect of
options or warrants to purchase, or securities convertible into, shares of
Common Stock, the exercise or conversion price of which is less than the Current
Market Price as of any date on which the number of shares of Common Stock
Outstanding is to be determined.
"Permitted Issuances" shall mean issuances of shares of Common Stock
and upon exercise of the warrants and options and other convertible securities,
in each case listed on Schedule 1.
"Person" shall mean any individual, firm, corporation, partnership or
other entity, and shall include any successor by merger or otherwise of such
entity.
"Restricted Common Stock" shall mean shares of Common Stock which are,
or which upon their issuance on the exercise of this Warrant would be, evidenced
by a certificate bearing the restrictive legend set forth in Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Security" or "Securities" shall mean any equity or debt security of
the Company (including, without limitation, subscriptions, options, warrants,
rights, stock-based or stock-related awards or convertible or exchangeable
securities to which the Company is a party or by which the Company may be bound
of any character relating to, or obligating the Company to issue, grant, award,
transfer or sell any issued or unissued shares of the Company's Capital Stock or
other securities of the Company).
"Trading Day" means a Business Day or, if the Common Stock is listed
or admitted to trading in any national securities exchange, a day on which such
exchange is open for the transaction of business.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof, which would constitute a sale thereof
within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
"Warrants" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, any thereof. All
Warrants shall at all times be identical as to terms and conditions and date,
except as to the number of shares of Common Stock for which they
<PAGE> 9
may be exercised.
"Warrant Stock" shall mean the shares of Common Stock purchased by the
holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1. MANNER OF EXERCISE. At any time or from time to time from and after
the Issue Date and until 5:00 P.M., New York time, on the Expiration Date,
Holder may exercise this Warrant, on any Business Day, for all or any part of
the number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at its principal office at 129 Reservoir Road, Vernon, CT
06066 (i) a written notice of Holder's election to exercise this Warrant, which
notice shall specify the number of shares of Common Stock to be purchased, (ii)
payment of the aggregate Current Warrant Price for such shares and (iii) this
Warrant. Such notice shall be substantially in the form appearing at the end of
this Warrant as Exhibit A, duly executed by Holder. Thirty days after receipt of
the items specified in the second preceding sentence, the Company shall execute
or cause to be executed and deliver or cause to be delivered to Holder a
certificate or certificates representing the aggregate number of full shares of
Common Stock issuable upon such exercise, together with cash in lieu of any
fraction of a share, as hereinafter provided. The stock certificate or
certificates so delivered shall be in such denomination or denominations as
Holder shall request in the notice and shall be registered in the name of Holder
or, subject to Section 9, such other name as shall be designated in the notice.
This Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and Holder or any other Person
so designated shall be deemed to have become a holder of record of such shares
for all purposes, as of the date which is thirty days after the date of the
notice, together with the Current Warrant Price and this Warrant, are received
by the Company as described above. If this Warrant shall have been exercised in
part, the Company shall, at the time of delivery of the certificate or
certificates representing Warrant Stock, deliver to Holder a new Warrant
evidencing the right of Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant, or, at the request of Holder, appropriate
notation may be made on this Warrant and the same returned to Holder.
Payment of the Current Warrant Price shall be made at the option of
Holder by (i) certified or official bank check, (ii) wire transfer of
immediately available funds, (iii) tendering Convertible Notes having an
<PAGE> 10
Accreted Value (as defined in the Convertible Note Purchase Agreement) equal to
the Current Warrant Price (the Company hereby agreeing to reissue any
Convertible Notes of a Holder into one or more Convertible Notes in
denominations requested by such Holder) or (iv) the surrender of this Warrant to
the Company, with a duly executed exercise notice marked to reflect "Net Issue
Exercise," and, in either case, specifying the number of shares of Common Stock
to be purchased, during normal business hours on any Business Day. Upon a Net
Issue Exercise, Holder shall be entitled to receive shares of Common Stock equal
to the value of this Warrant (or the portion thereof being exercised by Net
Issue Exercise) by surrender of this Warrant to the Company together with notice
of such election, in which event the Company shall issue to Holder a number of
shares of the Company's Common Stock computed as of the date of surrender of
this Warrant to the Company using the following formula:
X = Y x(A-B)
--------
A
Where X = the number of shares of Common Stock to be issued to the
Holder
Y = the number of shares of Warrant Stock being exercised under
this Warrant;
A = the Current Market Price of one share of the Company's Common
Stock (at the date of such calculation);
B = the Current Warrant Price (as adjusted to the date of such
calculation).
2.2. PAYMENT OF TAXES. All shares of Common Stock issuable upon the
exercise of this Warrant shall be validly issued, fully paid and nonassessable.
The Company shall pay all expenses in connection with, and all taxes (other than
income taxes or capital gain tax of the Holder) and other governmental charges
that may be imposed with respect to, the issue or delivery thereof.
2.3. FRACTIONAL SHARES. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of this Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such
fraction in an amount equal to the same fraction of the Current Market Price per
share of Common Stock on the date of exercise.
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject to compliance with Section 9, transfer of this
Warrant and all rights hereunder, in whole or in part, shall be registered on
the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Company referred to in Section 2.1,
together with a written assignment of this Warrant
<PAGE> 11
substantially in the form of Exhibit B hereto duly executed by Holder and funds
sufficient to pay any transfer taxes payable upon the making of such transfer.
Upon such surrender and, if required, such payment, the Company shall, subject
to Section 9, execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the portion
of this Warrant not so assigned, and this Warrant shall promptly be canceled. A
Warrant, if properly assigned in compliance with Section 9, may be exercised by
a new Holder for the purchase of shares of Common Stock without having a new
Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9, this Warrant may be
divided into multiple Warrants or combined with other Warrants upon presentation
hereof at the aforesaid office or agency of the Company, together with a written
notice specifying the names and denominations in which new Warrants are to be
issued, signed by Holder. Subject to compliance with Section 3.1 and with
Section 9, as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 3.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at its aforesaid
office, books for the registration and the registration of transfer of the
Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable and/or the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give each Holder notice of any event
described below which requires an adjustment pursuant to this Section 4 at the
time of such event.
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time the
Company shall:
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution
of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
<PAGE> 12
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
per share shall be adjusted to equal (A) the Current Warrant Price multiplied by
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
4.2. CERTAIN OTHER DISTRIBUTIONS. If at any time the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of:
(a) cash,
(b) any evidences of its indebtedness, any shares of stock or any
other securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock), or
(c) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock),
then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
adjustment and a fraction (A) the numerator of which shall be the Current Market
Price per share of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Current Market Price per share of Common
Stock minus the amount allocable to one share of Common Stock of any such cash
so distributable and of the fair value (as determined in good faith by the Board
of Directors of the Company) of any and all such evidences of indebtedness,
shares of stock, other securities or property or warrants or other subscription
or purchase rights so distributable, and (ii) the Current Warrant Price shall be
adjusted to equal (A) the Current Warrant Price multiplied by the number of
shares of Common Stock for which this Warrant is exercisable immediately prior
to the adjustment divided by (B) the number of shares for which this Warrant is
exercisable immediately after such adjustment. A reclassification of the Common
Stock (other than a change in par value, or from par value to no par
<PAGE> 13
value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by the Company to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 4.2 and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4.1.
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. (a) If at any time the
Company shall (except as hereinafter provided) issue or sell any Additional
Shares of Common Stock, other than Permitted Issuances, in exchange for
consideration in an amount per Additional Share of Common Stock less than the
Current Warrant Price at the time the Additional Shares of Common Stock are
issued, then (i) the Current Warrant Price as to the number of shares for which
this Warrant is exercisable prior to such adjustment shall be reduced to a price
determined by multiplying (A) the Current Warrant Price by (B) a fraction, the
numerator of which shall be the sum of (x) the number of shares of Common Stock
Outstanding immediately prior to such issue or sale multiplied by the then
applicable Current Warrant Price (the "Adjustment Price") and (y) the aggregate
consideration receivable by the Company for the total number of shares of Common
Stock so issued, and the denominator of which shall be the sum of (a) the total
number of shares of Common Stock Outstanding on such date and (b) the number of
Additional Shares issued, multiplied by the Adjustment Price; and (ii) the
number of shares of Common Stock for which this Warrant is exercisable shall be
adjusted to equal the product obtained by multiplying the Current Warrant Price
in effect immediately prior to such issue or sale by the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
issue or sale and dividing the product thereof by the Current Warrant Price
resulting from the adjustment made pursuant to clause (i) above. For purposes of
this Section 4.3 and for the purposes of making adjustments of the number of
shares of Common Stock for which this Warrant is exercisable and the Current
Warrant Price as provided in this Section 4, the aggregate consideration
receivable by the Company in connection with the issuance of shares of Common
Stock or of rights, warrants or other securities convertible into shares of
Common Stock shall be deemed to be equal to the sum of the aggregate offering
price (before deduction of underwriting discounts or commissions and expenses
payable to third parties) of all such Common Stock, rights, warrants and
convertible securities plus the aggregate amount (as determined on the date of
issuance), if any, payable upon exercise or conversion of any such rights,
warrants and convertible securities into shares of Common Stock. If, subsequent
to the date of issuance of such rights, warrants or Convertible Securities, the
exercise or conversion price thereof is reduced, such aggregate amount shall be
recalculated and the Current Warrant Price and number of shares of Common Stock
for which the Warrant is exercisable adjusted retroactively to give effect to
such reduction. If Common Stock is sold as a unit with other securities, the
aggregate consideration received for such Common Stock shall be deemed
<PAGE> 14
to be net of the Fair Market Value of such other securities.
4.4. ISSUANCE OF WARRANTS OR OTHER RIGHTS. If at any time the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a distribution of, or shall in any manner (whether directly or
by assumption in a merger in which the Company is the surviving corporation)
issue or sell, any warrants or other rights to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Securities (other than
Permitted Issuances), whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such warrants or other rights or upon
conversion or exchange of such Convertible Securities shall be less than the
Current Warrant Price in effect immediately prior to the time of such issue or
sale, then the number of shares for which this Warrant is exercisable and the
Current Warrant Price shall be adjusted as provided in Section 4.3 on the basis
that the maximum number of Additional Shares of Common Stock issuable pursuant
to all such warrants or other rights or necessary to effect the conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
and outstanding and the Company shall have received all of the consideration
payable therefor, if any, as of the date of the actual issuance of the number
such warrants or other rights. No further adjustments of the Current Warrant
Price shall be made upon the actual issue of such Common Stock or of such
Convertible Securities upon exercise of such warrants or other rights or upon
the actual issue of such Common Stock upon such conversion or exchange of such
Convertible Securities. Notwithstanding the foregoing, no adjustment shall be
required under this Section 4.4 solely by reason of the issuance or distribution
of stock purchase rights pursuant to a shareholder rights plan or any other
rights plan of the Company, provided that the adjustments required by this
Section 4.4 shall be made if any "flip-in" or "flip-over" event shall occur
under such stockholder rights plan.
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a distribution of, or shall in any manner (whether directly or
by assumption in a merger in which the Company is the surviving corporation)
issue or sell, any Convertible Securities (other than Permitted Issuances),
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange shall be less than the Current Warrant Price in
effect immediately prior to the time of such issue or sale, then the number of
shares for which this Warrant is exercisable and the Current Warrant Price shall
be adjusted as provided in Section 4.3 on the basis that the maximum number of
Additional shares of
<PAGE> 15
Common Stock necessary to effect the conversion or exchange of all such
Convertible Securities shall be deemed to have been issued and outstanding and
the Company shall have received all of the consideration payable therefor, if
any, as of the date of actual issuance of such Convertible Securities. No
adjustment of the number of shares for which this Warrant is exercisable and the
Current Warrant Price shall be made under this Section 4.5 upon the issuance of
any Convertible Securities which are issued pursuant to the exercise of any
warrants or other subscription or purchase rights therefor, if any such
adjustment shall previously have been made upon the issuance of such warrants or
other rights pursuant to Section 4.4. No further adjustments of the number of
shares for which this Warrant is exercisable and the Current Warrant Price shall
be made upon the actual issue of such Common Stock upon conversion or exchange
of such Convertible Securities and, if any issue or sale of such Convertible
Securities is made upon exercise of any warrant or other right to subscribe for
or to purchase any such Convertible Securities for which adjustments of the
number of shares for which this Warrant is exercisable and the Current Warrant
Price have been or are to be made pursuant to other provisions of this Section
4, no further adjustments of the number of shares for which this Warrant is
exercisable and the Current Warrant Price shall be made by reason of such issue
or sale.
4.6. SUPERSEDING ADJUSTMENT. If, at any time after any adjustment of the
number of shares for which this Warrant is exercisable and the Current Warrant
Price shall have been made pursuant to Section 4.4 or Section 4.5 as the result
of any issuance of warrants, rights or Convertible Securities, such warrants or
rights, or the right of conversion or exchange in such other Convertible
Securities, shall expire, and all of such warrants or rights, or the right of
conversion or exchange with respect to all or a portion of such other
Convertible Securities, as the case may be, shall not have been exercised and no
outstanding Warrant shall have been exercised (in whole or in part), then for
each outstanding Warrant such previous adjustment shall be rescinded and
annulled and the Additional Shares of Common Stock which were deemed to have
been issued by virtue of the computation made in connection with the adjustment
so rescinded and annulled shall no longer be deemed to have been issued by
virtue of such computation.
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price provided for in this Section 4:
(a) Computation of Consideration. To the extent that any Additional
Shares of Common Stock or any Convertible Securities or any
<PAGE> 16
warrants or other rights to subscribe for or purchase any Additional Shares of
Common Stock or any Convertible Securities shall be issued for cash
consideration, the consideration received by the Company therefor shall be the
amount of the cash received by the Company therefor, or, if such Additional
Shares of Common Stock or Convertible Securities are offered by the Company for
subscription, the subscription price, or, if such Additional Shares of Common
Stock or Convertible Securities are sold to underwriters or dealers for public
offering without a subscription offering, the public offering price (in any such
case subtracting any amounts paid or receivable for accrued interest or accrued
dividends). To the extent that such issuance shall be for a consideration other
than cash, then, except as herein otherwise expressly provided, the amount of
such consideration shall be deemed to be the fair value of such consideration at
the time of such issuance as determined in good faith by the Board of Directors
of the Company. In case any Additional Shares of Common Stock or any Convertible
Securities or any warrants or other rights to subscribe for or purchase such
Additional Shares of Common Stock or Convertible Securities shall be issued in
connection with any merger in which the Company issues any securities, the
amount of consideration therefor shall be deemed to be the fair value, as
determined in good faith by the Board of Directors of the Company, of such
portion of the assets and business of the nonsurviving corporation as such Board
in good faith shall determine to be attributable to such Additional Shares of
Common Stock, Convertible Securities, warrants or other rights, as the case may
be. The consideration for any Additional Shares of Common Stock issuable
pursuant to any warrants or other rights to subscribe for or purchase the same
shall be the consideration received by the Company for issuing such warrants or
other rights plus the additional consideration payable to the Company upon
exercise of such warrants or other rights. The consideration for any Additional
Shares of Common Stock issuable pursuant to the terms of any Convertible
Securities shall be the consideration received by the Company for issuing
warrants or other rights to subscribe for or purchase such Convertible
Securities, plus the consideration paid or payable to the Company in respect of
the subscription for or purchase of such Convertible Securities, plus the
additional consideration, if any, payable to the Company upon the exercise of
the right of conversion or exchange in such Convertible Securities. In case of
the issuance at any time of any Additional Shares of Common Stock or Convertible
Securities in payment or satisfaction of any dividends upon any class of stock
other than Common Stock, the Company shall be deemed to have received for such
Additional Shares of Common Stock or Convertible Securities a consideration
equal to the amount of such dividend so paid or satisfied.
(b) When Adjustments to Be Made. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except that any adjustment of the
<PAGE> 17
number of shares of Common Stock for which this Warrant is exercisable that
would otherwise be required may be postponed (except in the case of a
subdivision or combination of shares of the Common Stock, as provided for in
Section 4.1) up to, but not beyond the date of exercise if such adjustment
either by itself or with other adjustments not previously made results in an
increase or decrease of less than 1% of the shares of Common Stock for which
this Warrant is exercisable immediately prior to the making of such adjustment.
Any adjustment representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Section 4 and not
previously made, would result in a minimum adjustment or on the date of
exercise. For the purpose of any adjustment, any specified event shall be deemed
to have occurred at the close of business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments under this Section
4, fractional interests in Common Stock shall be taken into account to the
nearest 1/100th of a share.
(d) When Adjustment Not Required. If the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to receive
a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(e) Escrow of Warrant Stock. If Holder exercises this Warrant after
any property becomes distributable pursuant to this Section 4 by reason of the
taking of any record of the holders of Common Stock, but prior to the occurrence
of the event for which such record is taken, any additional shares of Common
Stock issuable upon exercise by reason of such adjustment shall be deemed the
last shares of Common Stock for which this Warrant is exercised (notwithstanding
any other provision to the contrary herein) and such shares or other property
shall be held in escrow for Holder by the Company to be issued to Holder when
and to the extent that the event actually takes place, upon payment of the then
Current Warrant Price. Notwithstanding any other provision to the contrary
herein, if the event for which such record was taken fails to occur or is
rescinded, then such escrowed shares shall be canceled by the Company and
escrowed property returned.
(f) Challenge to Good Faith Determination. Whenever the Board of
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under this Section 4, such
<PAGE> 18
determination may be challenged in good faith by the Majority Holders, and any
dispute shall be resolved by an investment banking firm of recognized national
standing selected by the Majority Holders and acceptable to the Company.
4.8. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR DISPOSITION
OF ASSETS. In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of this Warrant and payment of the Current Warrant Price, the number of
shares of common stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and Other Property receivable upon
or as a result of such reorganization, reclassification, merger, consolidation
or disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event. In case of
any such reorganization, reclassification, merger, consolidation or disposition
of assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Warrant to be performed and observed by
the Company and all the obligations and liabilities hereunder, subject to such
modifications as may be deemed appropriate (as determined by resolution of the
Board of Directors of the Company) in order to provide for adjustments of shares
of the Common Stock for which this Warrant is exercisable which shall be as
nearly equivalent as practicable to the adjustments provided for in this Section
4. For purposes of this Section 4.8, "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified
<PAGE> 19
date or the happening of a specified event and any warrants or other rights to
subscribe for or purchase any such stock. The foregoing provisions of this
Section 4.8 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
4.9. OTHER ACTION AFFECTING COMMON STOCK. In case at any time or from time
to time the Company shall take any action in respect of its Common Stock, other
than any action described in this Section 4, then, unless such action will not
have a materially adverse effect upon the rights of the Holders, the number of
shares of Common Stock or other stock for which this Warrant is exercisable
and/or the purchase price thereof shall be adjusted in such manner as may be
equitable in the circumstances.
4.10. CERTAIN LIMITATIONS. Notwithstanding anything herein to the contrary,
the Company agrees not to enter into any transaction which, by reason of any
adjustment hereunder, would cause the Current Warrant Price to be less than the
par value per share of Common Stock.
5. NOTICES TO WARRANT HOLDERS
5.1. NOTICE OF ADJUSTMENTS. Whenever the number of shares of Common Stock
for which this Warrant is exercisable, or whenever the price at which a share of
such Common Stock may be purchased upon exercise of the Warrants, shall be
adjusted pursuant to Section 4, the Company shall forthwith prepare a
certificate to be executed by the chief financial officer of the Company setting
forth, in reasonable detail, the event requiring the adjustment and the method
by which such adjustment was calculated (including a description of the basis on
which the Board of Directors of the Company determined the fair value of any
evidences of indebtedness, shares of stock, other securities or property or
warrants or other subscription or purchase rights referred to in Section 4.2 or
4.7(a)), specifying the number of shares of Common Stock for which this Warrant
is exercisable and (if such adjustment was made pursuant to Section 4.8 or 4.9)
describing the number and kind of any other shares of stock or Other Property
for which this Warrant is exercisable, and any change in the purchase price or
prices thereof, after giving effect to such adjustment or change. The Company
shall promptly cause a signed copy of such certificate to be delivered to each
Holder in accordance with Section 14.2. The Company shall keep at its principal
office copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by any Holder or any
prospective purchaser of a Warrant designated by a Holder thereof.
5.2. NOTICE OF CORPORATE ACTION. If at any time
(a) the Company shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend
<PAGE> 20
(other than a cash dividend payable out of earnings or earned surplus
legally available for the payment of dividends under the laws of the
jurisdiction of incorporation of the Company) or other distribution, or any
right to subscribe for or purchase any evidences of its indebtedness, any
shares of stock of any class or any other securities or property, or to
receive any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or
other disposition of all or substantially all the property, assets or
business of the Company to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 20 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 13.2.
6. RIGHTS OF HOLDERS
6.1 NO IMPAIRMENT. The Company shall not by any action, including, without
limitation, amending its Certificate of Incorporation, by-laws or comparable
governing instruments or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking
<PAGE> 21
of all such actions as may be necessary or appropriate to protect the rights of
Holder against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant, and (c) use its best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form reasonably
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Issue Date, the Company shall at all times reserve
and keep available for issue upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants. All shares of Common Stock
which shall be so issuable, when issued upon exercise of any Warrant and payment
therefor in accordance with the terms of such Warrant, shall be duly and validly
issued and fully paid and nonassessable.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of a record of such holders, the Company will in each such
case take such a record and will take such record as of the close of business on
a Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Stock. Holder, by acceptance of this Warrant,
<PAGE> 22
agrees to be bound by the provisions of this Section 9.
9.1. RESTRICTIVE LEGEND. Except as otherwise provided in this Section 9,
each Warrant and each certificate for Warrant Stock initially issued upon the
exercise of a Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"[THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY] [THE SECURITIES
REPRESENTED BY THIS CERTIFICATE] HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH ACT OR SUCH LAWS."
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR REGISTRATION. Prior to any
Transfer or attempted Transfer of any Warrants or any shares of Restricted
Common Stock, the holder of such Warrants or Restricted Common Stock shall give
ten days' prior written notice (a "Transfer Notice") to the Company of such
holder's intention to effect such Transfer, describing the manner and
circumstances of the proposed Transfer, and obtain from counsel to such holder
who shall be reasonably satisfactory to the Company, an opinion that the
proposed Transfer of such Warrants or such Restricted Common Stock may be
effected without registration under the Securities Act. After receipt of the
Transfer Notice and opinion, the Company shall, within five days thereof, notify
the holder of such Warrants or such Restricted Common Stock as to whether such
opinion is reasonably satisfactory and, if so, such holder shall thereupon be
entitled to Transfer such Warrants or such Restricted Common Stock, in
accordance with the terms of the Transfer Notice. Each certificate, if any,
evidencing such shares of Restricted Common Stock issued upon such Transfer and
each Warrant issued upon such Transfer shall bear the restrictive legend set
forth in Section 9.1, unless in the opinion of such counsel such legend is not
required in order to ensure compliance with the Securities Act. The holder of
the Warrants or the Restricted Common Stock, as the case may be, giving the
Transfer Notice shall not be entitled to Transfer such Warrants or such
Restricted Common Stock until receipt of notice from the Company under this
Section 9.2 that such opinion is reasonably satisfactory.
9.3. TERMINATION OF RESTRICTIONS. Notwithstanding the foregoing provisions
of this Section 9, the restrictions imposed by this Section upon the
transferability of the Warrants, the Warrant Stock and the Restricted Common
Stock and the legend requirements of Section 9.1 shall terminate
<PAGE> 23
as to any particular Warrant or share of Warrant Stock or Restricted Common
Stock (i) when and so long as such security shall have been effectively
registered under the Securities Act and disposed of pursuant thereto or (ii)
when the Company shall have received an opinion of counsel reasonably
satisfactory to it that such shares may be transferred without registration
thereof under the Securities Act.
10. PREEMPTIVE RIGHTS
(a) The Company shall not issue, sell or exchange, or agree to issue,
sell or exchange (collectively, "Issue," and any issuance, sale or exchange
resulting therefrom, an "Issuance") any Securities unless the Company shall have
first given written notice (the "Section 10 Notice") to each holder of Warrants
or Warrant Stock (for purposes of this Section, each a "Section 10 Offeree")
that shall (i) state the Company's intention to Issue Securities, the amount to
be issued, sold or exchanged, the terms of such Securities, the purchase price
therefor and a summary of the other material terms of the proposed issuance,
sale or exchange and (ii) offer (a "Section 10 Offer") to Issue to each Section
10 Offeree and their affiliates such Section 10 Offeree's Proportionate
Percentage (as defined below) of such Securities (with respect to each Section
10 Offeree, the "Offered Securities") upon the terms and subject to the
conditions set forth in the Section 10 Notice, which Section 10 Offer by its
terms shall remain open and irrevocable for a period of 15-days from the date it
is delivered by the Company to such holder, as the case may be (and, to the
extent the Section 10 Offer is accepted during such 15-day period, until the
closing of the Issuance contemplated by the Section 10 Offer). "Proportionate
Percentage" for the purposes of this Section shall mean the quotient obtained by
dividing: (A) the Warrant Stock held by such Section 10 Offeree (assuming for
purposes of this Section 10 that all issued and outstanding Warrants have been
exercised) on the date of the Section 10 Offer, by (B) the Warrant Stock issued
and outstanding on the date of the Section 10 Offer.
(b) Notice of a Section 10 Offeree's intention to accept a Section 10
Offer, in whole or in part, shall be evidenced by a writing signed by such party
and delivered to the Company prior to the end of the 15-day period of such
Section 10 Offer (each, a "Notice of Acceptance"), setting forth the portion of
the Offered Securities that the Section 10 Offeree elects to purchase, which
election shall be binding.
(c) In the event that a Notice of Acceptance is not given by a Section
10 Offeree in respect of all the Offered Securities, the Company shall have 60
days following the 15-day period referred to in clause (b) above to Issue all or
any part of such remaining Offered Securities not covered by the Notice of
Acceptance to any other Person(s), but only at a price not less than the price,
and on terms no more favorable to the person than the terms, stated in the
Section 10 Offer Notice. If the Company
<PAGE> 24
does not consummate the Issuance of all or part of the remaining Offered
Securities to such other Person(s) within such period, the right provided
hereunder shall be deemed to be revived and such securities shall not be offered
unless first re-offered to each Section 10 Offeree in accordance with this
Section 10. Upon the closing of the Issuance to such other Person(s) (the "Other
Buyers") of all or part of the remaining Offered Securities, each Section 10
Offeree shall purchase from the Company, and the Company shall Issue to each
such Section 10 Offeree, the Offered Securities covered by the Notice of
Acceptance delivered to the Company by the Section 10 Offeree, on the terms
specified in the Section 10 Offer. The purchase by a Section 10 Offeree of any
Offered Securities is subject in all cases to the execution and delivery by the
Company and the Section 10 Offeree of a purchase agreement relating to such
Offered Securities in form and substance similar in all material respects to the
extent applicable to that executed and delivered between the Company and the
Other Buyers.
11. SUPPLYING INFORMATION
The Company shall cooperate with each Holder of a Warrant and each
holder of Restricted Common Stock in supplying such information as may be
reasonably necessary for such holder to complete and file any reports or forms
presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any Warrant
or Restricted Common Stock.
12. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it being
understood that, in the case of the initial holder, the written agreement of
Appaloosa Management L.P. shall be sufficient indemnity), and in case of
mutilation upon surrender and cancellation hereof, the Company will execute and
deliver in lieu hereof a new Warrant of like tenor to such Holder; provided, in
the case of mutilation, no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of such Holder for
the purchase price of any Common Stock or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
14. MISCELLANEOUS
14.1. NONWAIVER AND EXPENSES. No course of dealing or any delay or
<PAGE> 25
failure to exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Holder's rights, powers or remedies.
If the Company fails to make, when due, any payments provided for hereunder, or
fails to comply with any other provision of this Warrant, the Company shall pay
to Holder such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees, including those of
appellate proceedings, incurred by Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
14.2. NOTICE GENERALLY. Any notice, demand, request, consent, approval,
declaration, delivery or other communication hereunder to be made pursuant to
the provisions of this Warrant shall be sufficiently given or made if in writing
and either delivered in person with receipt acknowledged or sent by registered
or certified mail, return receipt requested, postage prepaid, or by telecopy and
confirmed by telecopy answerback, addressed as follows:
(a) If to any Holder or holder of Warrant Stock, at its last known
address appearing on the books of the Company maintained for such purpose.
(b) If to the Company at
Bio-Plexus, Inc.
129 Reservoir Road
Vernon, CT 06066
Attention: Mr. Carl Sahi
Fax: (860) 870-6118
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback, or three Business Days after the same shall have been deposited in
the United States mail. Failure or delay in delivering copies of any notice,
demand, request, approval, declaration, delivery or other communication to the
person designated above to receive a copy shall in no way adversely affect the
effectiveness of such notice, demand, request, approval, declaration, delivery
or other communication.
14.3. REMEDIES. Each holder of Warrant and Warrant Stock, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under of this
Warrant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it
<PAGE> 26
of the provisions of this Warrant and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
14.4. SUCCESSORS AND ASSIGNS. Subject to the provisions of Sections 3.1 and
9, this Warrant and the rights evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and assigns
of Holder. The provisions of this Warrant are intended to be for the benefit of
all Holders from time to time of this Warrant and, with respect to Section 9
hereof, holders of Warrant Stock, and shall be enforceable by any such Holder or
holder of Warrant Stock.
14.5. AMENDMENT. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the Company
and the Majority Holders, provided that no such Warrant may be modified or
amended to reduce the number of shares of Common Stock for which such Warrant is
exercisable or to increase the price at which such shares may be purchased upon
exercise of such Warrant (before giving effect to any adjustment as provided
therein) without the prior written consent of the Holder thereof, provided
however, that the foregoing shall not limit the operation of Section 4.6.
14.6. SEVERABILITY. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Warrant.
14.7. HEADINGS. The headings used in this Warrant are for the convenience
of reference only and shall not, for any purpose, be deemed a part of this
Warrant.
14.8. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES OF AMERICA, IN EACH
CASE LOCATED IN THE COUNTY OF NEW YORK, FOR ANY ACTION, PROCEEDING OR
INVESTIGATION IN ANY COURT OR BEFORE ANY GOVERNMENTAL AUTHORITY ("LITIGATION")
ARISING OUT OF OR RELATING TO THIS WARRANT AND THE TRANSACTIONS CONTEMPLATED
HEREBY (AND AGREES NOT TO COMMENCE ANY LITIGATION RELATING THERETO EXCEPT IN
SUCH COURTS), AND FURTHER AGREES THAT SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR
DOCUMENT BY U.S. REGISTERED MAIL TO ITS RESPECTIVE ADDRESS SET FORTH IN THIS
WARRANT SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY LITIGATION BROUGHT AGAINST
IT IN ANY SUCH COURT. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY
<PAGE> 27
OBJECTION TO THE LAYING OF VENUE OF ANY LITIGATION ARISING OUT OF THIS WARRANT
OR THE TRANSACTIONS CONTEMPLATED HEREBY IN THE COURTS OF THE STATE OF NEW YORK
OR THE UNITED STATES OF AMERICA, IN EACH CASE LOCATED IN THE COUNTY OF NEW YORK,
AND HEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO
PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH LITIGATION BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE PARTIES IRREVOCABLY
AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY AND ALL RIGHTS TO TRIAL BY JURY IN CONNECTION WITH ANY LITIGATION ARISING
OUT OF OR RELATING TO THIS WARRANT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
<PAGE> 28
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by an officer thereunto duly authorized.
Dated:
--------------------
BIO-PLEXUS, INC.
By:
----------------------------
Name:
Title:
<PAGE> 29
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
Net Issue Exercise _____No ______Yes
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of _____ shares of Common Stock of Bio-Plexus,
Inc. and herewith makes payment therefor, all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
shares of Common Stock hereby purchased (and any securities or other property
issuable upon such exercise) be issued in the name of and delivered to
_____________ whose address is ________________ and, if such shares of Common
Stock shall not include all of the shares of Common Stock issuable as provided
in this Warrant, that a new Warrant of like tenor and date for the balance of
the shares of Common Stock issuable hereunder be delivered to the undersigned.
-----------------------------------
(Name of Registered Owner)
-----------------------------------
(Signature of Registered Owner)
-----------------------------------
(Street Address)
-----------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
<PAGE> 30
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of Common Stock
- ---------------------------- -----------------------------
and does hereby irrevocably constitute and appoint
attorney-in-fact to register such transfer on the books of BIO-PLEXUS, INC.
maintained for the purpose, with full power of substitution in the premises.
Dated: Print Name:
------------------ ----------------------------
Signature:
-----------------------------
Witness:
-------------------------------
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed and delivered by their respective proper and duly
authorized officers as of the day and year first above written.
BIO-PLEXUS, INC.
By: /s/ Carl R. Sahi
--------------------------------
Name: Carl R. Sahi
Title: President and Chief
Executive Officer
APPALOOSA INVESTMENT LIMITED
PARTNERSHIP I
By: Appaloosa Management L.P., its
General Partner
By: Appaloosa Partners Inc., its
General Partner
By: /s/ James E. Bolin
--------------------------------
Name: James E. Bolin
Title: Vice President
<PAGE> 1
Exhibit 10.42
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF
SUCH ACT OR SUCH LAWS.
BIO-PLEXUS, INC.
15% SECURED NOTE
No. R-1 Dated as of April 3, 2000
<PAGE> 2
$2,200,000
FOR VALUE RECEIVED, the undersigned, BIO-PLEXUS, INC. (herein called the
"Company"), a corporation organized and existing under the laws of the State of
Connecticut, hereby unconditionally promises to pay to the order of Appaloosa
Investment Limited Partnership I, or its registered assigns (the "Holder"), the
principal sum of TWO MILLION TWO HUNDRED THOUSAND DOLLARS ($2,200,000) in
immediately available lawful money of the United States of America, together
with interest on the unpaid balance hereof, in accordance with the terms and
conditions set forth below.
1. Payment.
1.1. Principal. The entire unpaid principal balance of this Note shall
be paid in full by the Company on the Due Date.
1.2. Home Office Payment. The Company will pay to the Holder or any
transferee thereof all sums becoming due on this Note at the account/address to
be specified by the Holder or transferee for such purpose by notice to the
Company, by wire transfer of immediately available funds, or at such other
address or by such other method as the Holder or transferee shall have
designated by notice to the Company.
1.3. Prepayment. After all amounts owed under the 7.5% Secured Note
issued by the Company to the Holder on October 21, 1999 (as amended from time to
time, the "7.5% Note") and the 15% Secured Note issued by the Company to the
Holder on January 5, 2000 (as amended from time to time, the "15% Note") have
been repaid in full, subject to Section 8.8, (i) upon at least ten days prior
notice to the Holder, this Note may be prepaid, without premium or penalty, in
whole or in part by the Company at any time and from time to time and (ii)
concurrently with the receipt of any proceeds received by the Company in respect
of any sale of Debentures pursuant to section 1.4 of the Subscription Agreement,
the Company shall make a mandatory prepayment of the Note in an amount equal to
100% of such proceeds; provided, that, upon any prepayment under (i) or (ii)
above, all accrued and unpaid interest shall be paid on the principal of the
Note being repaid.
1.4. Interest. The unpaid principal balance of this Note outstanding
at any time shall accrue interest, at a rate per annum equal to 15% (including
during the pendency of any bankruptcy or similar proceeding, whether or not a
claim for post-petition interest is allowed as a claim in any such bankruptcy or
proceeding). Interest shall begin to accrue from the date hereof and shall be
computed on the basis of a year of 360 days and actual days elapsed and shall be
payable in one lump sum on the Due Date.
1.5. Default Interest. If the Company shall fail to pay any
<PAGE> 3
principal amount of, or interest on, or other amount payable under, this Note
when due and payable (whether at the Due Date, the Acceleration Date or
otherwise), such principal amount, interest or other amount shall thereafter
bear interest, until paid in full (after as well as before judgment) to the
extent lawful, at a rate per annum equal to 15% (including during the pendency
of any bankruptcy or similar proceeding, whether or not a claim for
post-petition interest is allowed as a claim in any such bankruptcy or
proceeding). The Company shall pay such default interest in cash on demand from
time to time.
1.6. Limitation on Interest. No provision of this Note shall require
the payment or permit the collection of interest in excess of the maximum rate
which is permitted by Law. If any such excess interest is provided for herein,
or shall be adjudicated to be so provided for, then the Company shall not be
obligated to pay such interest in excess of the maximum rate permitted by Law,
and the right to demand payment of any such excess interest is hereby waived,
any other provisions in this Note to the contrary notwithstanding.
2. Deliveries by the Company. Simultaneously with the execution of this
Note, the Company is delivering to the Holder the following:
(a) an opinion of the Company's counsel, dated as of the date hereof,
addressed to such Holder in the form of Exhibit 2(a) hereto;
(b) a good standing certificate for the Company, dated no earlier than
seven days prior to the date hereof, from the State of Connecticut;
(c) a copy of the resolutions of the Board of Directors authorizing
the execution of each of the Transaction Documents and the performance
of the transactions contemplated by the Transaction Documents, which
shall be certified as true, correct and effective as of the date
hereof by an officer of the Company; and
(d) the Holder's costs and expenses (including the reasonable fees and
expenses of its counsel, Fried, Frank, Harris, Shriver & Jacobson, in
an aggregate amount not to exceed $200,000 which amounts shall be
deducted from the proceeds of this Note and shall be wired transferred
by the Holder, on behalf of the Company, to one or more accounts
designated by such party on or prior to the date hereof) incurred in
connection with the transactions contemplated hereby.
3. Representations and Warranties of the Company. The Company
represents and warrants to the Holder as follows:
3.1. Organization; Subsidiaries.(a) The Company is a corporation duly
organized and existing in good standing under the laws of the State
<PAGE> 4
of Connecticut and has the corporate power to own its property and to carry on
its business as now being conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary and where the failure to so qualify could, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(b) The Company does not have any Subsidiaries. Except as set
forth on Schedule 3.1(b), the Company does not own, directly or indirectly, or
have the right or obligation to acquire, any interest in any business
association or other Person.
3.2. Due Authorization. (a) The Company has all right, power and
authority to enter into, deliver and perform the Transaction Documents to which
it is a party and to consummate the transactions contemplated thereby. The
execution and delivery of each Transaction Document by the Company and the
performance by it of the transactions contemplated thereby (including, without
limitation, the issuance and sale of this Note) and compliance by the Company
with all the provisions of each Transaction Document (as applicable) has been
duly authorized by all requisite corporate proceedings on the part of the
Company. Each of the Transaction Documents has been duly executed and delivered
on behalf of the Company, and each such Transaction Document constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its respective terms, except to the extent that such
enforceability (i) may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally or (ii)
is subject to general principles of equity.
(b) The Board of Directors has taken all necessary action so that
no "fair price," "moratorium," "control share acquisition," "interested holder"
or other similar anti-takeover statute or regulation (including, without
limitation, Sections 33-840 through 33-845 of the Connecticut Business
Corporation Act) or any applicable anti-takeover provision in the Company's
Certificate of Incorporation or By-Laws is applicable to the transactions
contemplated by the Transaction Documents. To the knowledge of the Company, no
other state takeover statute is applicable to the transactions contemplated by
the Transaction Documents.
3.3. Capitalization. The authorized capital stock of the Company
consists of (i) 25,000,000 shares of Common Stock, of which, as of the date
hereof, 14,369,746 shares were issued and outstanding, 622,650 shares were
reserved for issuance upon the exercise of outstanding stock options pursuant to
the Company's option plans, 3,958,244 shares were reserved for issuance upon the
exercise of the outstanding warrants, and 1,963,860 shares were reserved for
issuance upon the conversion of certain 6%
<PAGE> 5
Convertible Debentures due 2004 and (ii) 3,000,000 shares of Preferred Stock, no
par value (the "Preferred Stock"), of which, as of the date hereof, no shares
were issued and outstanding. All of the outstanding shares of Common Stock are
validly issued and are fully paid and nonassessable. No class of Capital Stock
of the Company is entitled to preemptive rights. Except as set forth on Schedule
3.3, there are no outstanding options, warrants, preemptive rights, subscription
rights, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, shares of any class of Capital Stock of
the Company, or Contracts, by which the Company is or may become bound to issue
additional shares of its Capital Stock or options, warrants or other rights to
purchase or acquire any shares of its Capital Stock. Except as set forth on
Schedule 3.3, no warrants, bonds, debentures, notes or other Indebtedness or
other security having the right to vote (or convertible into or exercisable for
securities having the right to vote) on any matters on which stockholders may
vote were issued or outstanding. Except as set forth on Schedule 3.3 or as
contemplated by the Transaction Documents, the Company is not a party to, and,
to the Company's best knowledge, there are, and immediately after the Closing,
there will be, no agreement, restriction or encumbrance (such as a preemptive or
similar right of first refusal, right of first offer, proxy, voting agreement,
voting trust, registration rights agreement, shareholders' agreement, etc.,
whether or not the Company is a party thereto) with respect to the purchase,
sale or voting of any shares of Capital Stock of the Company (whether
outstanding or issuable upon conversion, exchange or exercise of outstanding
securities) or other securities of the Company pursuant to any provision of Law,
the Certificate of Incorporation or By-Laws, any agreement or otherwise. Except
as set forth on Schedule 3.3, no person has the right to nominate or elect one
or more directors of the Company. Immediately following the transactions
contemplated hereby, the Company's capitalization will be as set forth on
Schedule 3.3. The Company has not declared or paid any dividend or made any
other distribution of cash, stock or other property to its stockholders since
January 1, 1996.
3.4. SEC Reports Correspondence. The Company has filed all proxy
statements, reports and other documents required to be filed by it under the
Exchange Act from and after January 1, 1995 (collectively, the "SEC Reports").
Each SEC Report was in compliance in all material respects with the requirements
of its respective report form and did not on the date of filing contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and as of the date
hereof there is no fact or facts not disclosed in the SEC Reports which relate
specifically to the
<PAGE> 6
Company and which could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
3.5. Financial Statements. The financial statements (including any
related schedules and/or notes) included in the SEC Reports have been prepared
in accordance with GAAP consistently followed (except as indicated in the notes
thereto) throughout the periods involved and fairly present the consolidated
financial condition, results of operations, cash flows and changes in
stockholders' equity of the Company as of the respective dates thereof and for
the respective periods then ended (in each case subject, as to interim
statements, to changes resulting from year-end adjustments, none of which were
material in amount or effect). Except as set forth on Schedule 3.5, the Company
is not subject to any Liabilities, except (i) Liabilities in the respective
amounts reflected or reserved against in the Company's balance sheet as of
December 31, 1998 included in the SEC Reports or (ii) Liabilities incurred in
the ordinary course of business since December 31, 1998 which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
3.6. No Material Adverse Change. Since December 31, 1998, no event has
occurred or failed to occur which could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
3.7. Intellectual Property Rights. Schedule 3.7 sets forth a complete
and correct list of all Intellectual Property of the Company (the "Company
Intellectual Property"). Except as set forth on Schedule 3.7, the Company owns
and possesses all right, title and interest in, or possesses adequate licenses
to (without the making of any payment to others or the obligation to grant
rights to others in exchange) all the Company Intellectual Property, free and
clear of any Liens, licenses or other restrictions. The Company has the right to
require the applicant of any Company Intellectual Property which is an
application, including but not limited to patent applications, trademark
applications, service mark applications, copyright applications, or mask work
applications, to transfer ownership to the Company of the application and of the
registration once it issues. All registered patents, trademarks, service marks
and copyrights listed on Schedule 3.7 are valid and subsisting and in full force
and effect. The Company Intellectual Property is all the Intellectual Property
that is necessary for the ownership, maintenance and operation of the Company's
properties and assets and the Company has the right to use all of the Company
Intellectual Property in all jurisdictions in which the Company conducts or
proposes to conduct its business, and the consummation of the transactions
contemplated hereby will not alter or impair any such rights. The Company has
never agreed to indemnify any person for or against any interference,
infringement, misappropriation or other conflict with respect to any Company
Intellectual Property. Except
<PAGE> 7
as set forth in Schedule 3.7, no third party has interfered with, infringed
upon, misappropriated or otherwise come into conflict with any Company
Intellectual Property. The Company has taken all reasonably necessary and
desirable action to maintain and protect each item of Company Intellectual
Property. The validity, ownership, enforceability, use or legality of the
Company Intellectual Property is not being questioned or opposed in any
Litigation or Order to which the Company or any Person who has granted a license
of Intellectual Property to the Company, is a party or subject, nor, to the
knowledge of the Company, is any such Litigation or Order threatened. The
conduct of the Company as currently conducted and as currently proposed to be
conducted does not and will not infringe, interfere with, misappropriate or
otherwise come into conflict with any Intellectual Property of any other Person,
and the Company has not received any charge, complaint, claim, demand or notice
alleging any such infringement, interference, misappropriation or conflict
(including any claim that the Company must license or refrain from using any
Intellectual Property of any other Person). Except as set forth on Schedule 3.7,
the Company has not granted any licenses of Intellectual Property to any Person.
3.8. Existing Indebtedness; Future Liens. (a) Schedule 3.8 sets forth
a complete and correct list of all outstanding Indebtedness of the Company as of
the date hereof. Except as set forth on Schedule 3.8, the Company has not
defaulted and no waiver of default is currently in effect, in the payment of any
principal or interest on any such Indebtedness and no event or condition exists
with respect to any such Indebtedness that would permit (or that with notice or
the lapse of time, or both, would permit) one or more Persons to cause such
Indebtedness to become due and payable before its stated maturity or before its
regularly scheduled dates of payment. The Company has not received any notice
from any Person declaring or threatening to declare any Indebtedness owed by the
Company to such Person due and payable prior to the stated maturity of such
Indebtedness or before its regularly scheduled dates of payment.
(b) The Company has not agreed or consented to cause or permit in
the future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to any Lien
(other than Permitted Liens).
3.9. Litigation. (a) Except as set forth on Schedule 3.9, there is no
Litigation pending or, to the knowledge of the Company, threatened against the
Company or any of its properties or assets by or before any court, arbitrator or
other Governmental Entity.
(b) The Company is not in default under or in breach of any Order
of any court, arbitrator or other Governmental Entity, and the Company is not
subject to or a party to any Order of any court, arbitrator or other
Governmental Entity arising out of any claim, demand, notice,
<PAGE> 8
action, suit or proceeding under any Law.
3.10. Compliance with Laws. The Company is in compliance with all
applicable Laws including, without limitation, all rules, regulations and other
Laws of the Food and Drug Administration relating to the design, development,
manufacturing, sales and distribution of safety medical products and
accessories, except where the failure to comply could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect. No
Order has been issued nor any Law enacted which prevents, nor does any Law
prohibit the consummation of the transactions contemplated by any of the
Transaction Documents.
3.11. Offering of the Securities. In connection with the offering of
this Note, neither the Company nor any Person acting on its behalf has offered
the Note, or any similar securities of the Company for sale to, solicited any
offers to buy the Note, or any similar securities of the Company from or
otherwise approached or negotiated with respect to the Company with any Person
other than the Purchasers and other "accredited investors" (as defined in Rule
501(a) under the Securities Act). Neither the Company nor any Person acting on
its behalf has taken or, except as contemplated hereby will take any action
(including, without limitation, any offering of any securities of the Company
under circumstances which would require the integration of such offering with
the offering of the Note under the Securities Act) which could reasonably be
expected to subject the offering, issuance or sale of the Note and the Warrants
to the registration requirements of Section 5 of the Securities Act or violate
the provisions of any securities, "blue sky", or similar law of any applicable
jurisdiction.
3.12. Solvency. The Company is not, and after giving effect to the
issuance of this Note and the application of the proceeds therefrom will not be,
insolvent within the meaning of Title 11 of the United States Code or any
comparable state law provision.
3.13. Security Documents. Except as set forth in Schedule 3.13, upon
proper filing of the Financing Statements (or assignments thereof) in the
offices of the Secretary of State of Connecticut with respect to the Company (or
assignments thereof) and in the locations identified in the Security Agreement,
the Liens granted under the Transaction Documents shall constitute a fully
perfected first priority security interest in all right, title and interest of
the Company in and to the personal property therein prior to any other security
interests against such property or interests therein.
3.14. Disclosure. Neither any Transaction Document nor any Schedule
hereto and thereto, nor any certificate furnished to any Holder by or on behalf
of the Company in connection with the transactions contemplated hereby and
thereby, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make
<PAGE> 9
the statements contained herein and therein not misleading. The financial
forecasts furnished by the Company to the Holder has been prepared in good faith
based upon reasonable assumptions. There is no fact or information relating to
the Company that could reasonably be expected to be material to the Company that
has not been disclosed to the Holder.
4. Covenants of the Company. The Company covenants that for so long as
this Note is outstanding or any amounts are due and unpaid hereunder:
4.1. Limitation on Indebtedness. The Company shall not, and shall not
permit any of its Subsidiaries to, create, incur, assume or directly or
indirectly guarantee or in any other manner become directly or indirectly liable
for the payment of any Indebtedness (excluding Permitted Indebtedness and
Indebtedness which is a Guaranty of an Indebtedness of the Company or any of its
Subsidiaries that is otherwise Permitted Indebtedness).
4.2. Limitation on Encumbrances. The Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, create, incur, assume
or otherwise suffer to exist or cause or otherwise suffer to become effective
any Lien in or on any right, title or interest to any property (real or
personal) that constitutes all or any portion of the Collateral (a "Restricted
Encumbrance," which term excludes the Lien created in favor of the Holder)
unless such Restricted Encumbrance is a Permitted Lien.
4.3. Limitation on Dividends; Stock Issuances. The Company shall not
offer or issue any shares of Preferred Stock or Common Stock for any purpose
whatsoever, except pursuant to Schedule 4.3. The Company shall not declare any
dividends on any shares of its Capital Stock, or make any payment on account of,
or set apart assets for a sinking or other analogous fund for, the purchase,
redemption, retirement, exchange or other acquisition of any shares of its
Capital Stock, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash,
securities, property or in obligations of the Company or any of its
Subsidiaries.
4.4. Stockholders' Meetings. As promptly as practicable hereafter but
in no event later than April 30, 2000, the Company shall take all action
necessary, in accordance with applicable Law and its Certificate of
Incorporation and By-laws, to convene a special meeting of its stockholders (the
"Company Meeting") for the purpose of considering and voting upon the approval
of the Rollover Transactions, including, without limitation, the issuance and
sale of the Convertible Notes, the Shares and the Rollover Warrants, and any
other transactions contemplated in furtherance thereof under applicable Law;
provided, however, that the Company shall adjourn the
<PAGE> 10
Company Meeting from time to time until all of the conditions set forth in
Section 6.2 are satisfied or waived (other than those conditions that by their
nature are to be satisfied on the Rollover Date), such that the Company Meeting
shall take place on the same day as the Rollover Date in accordance with Section
6.1. The Company will use its best efforts to obtain such stockholders'
approval, including, without limitation, taking all lawful actions to solicit
such approval. The Board of Directors will recommend that its stockholders vote
in favor of and approve the Rollover Transactions, including, without
limitation, the issuance and sale of the Convertible Notes, the Shares and the
Rollover Warrants, and any other transactions contemplated in furtherance
thereof under applicable Law.
4.5. Proxy Statement. The Proxy Statement shall comply as to form in
all material respects with the applicable provisions of the Exchange Act and the
rules and regulations thereunder. The Company shall use its best efforts, and
the Holder will cooperate with the Company, to have the Proxy Statement cleared
by the SEC as promptly as practicable. The Company shall, as promptly as
practicable, provide copies of any written comments received from the SEC with
respect to the Proxy Statement to the Holder and advise the Holder of any oral
comments with respect to the Proxy Statement received from the SEC. The Holder
agrees that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in the Proxy Statement and each
amendment or supplement thereto, at the time of mailing thereof and at the time
of the Company Meeting, will contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Company agrees that none of the information supplied
or to be supplied by the Company for inclusion or incorporation by reference in
the Proxy Statement and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the Company Meeting, will contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company will
provide the Holder with a reasonable opportunity to review and comment on the
Proxy Statement and any amendment or supplement thereto prior to filing such
with the SEC, and will provide the Holder with a copy of all such filings made
with the SEC. No amendment or supplement to the information supplied by the
Holder for inclusion in the Proxy Statement shall be made without the approval
of such Holder, which approval shall not be unreasonably withheld or delayed.
<PAGE> 11
4.6. Operations in Accordance with the Business Plan. The business and
operations of the Company and its Subsidiaries shall be conducted in accordance
with a business plan of the Company approved by the Holder.
4.7. Proceeds. The proceeds of the sale of this Note shall be used for
the purposes set forth on Schedule 4.7. No part of the proceeds from the sale of
this Note hereunder shall be used, directly or indirectly, for the purpose of
"purchasing" or "carrying" any "margin stock" within the respective meanings of
Regulation U of the Board of Governors of the Federal Reserve System or for any
purpose which violates or would be inconsistent with the provisions of
Regulations T, U or X of said Board.
4.8. Additional Offerings of Securities. The Company shall not seek
financing from any third party consisting of an issuance of Equity Securities
without the written consent of the Holder (which may be withheld at the Holder's
absolute discretion).
4.9. Existence. Neither the Company nor any of its Subsidiaries shall
enter into any transaction for the acquisition of, or merger or consolidation or
amalgamation with, any other Person (including any Subsidiary or Affiliate of
the Company or any of its Subsidiaries), or enter into any transaction or series
of transactions that could result in a Change of Control, or sell, transfer or
otherwise dispose of ("Transfer") all or substantially all of its assets in one
transaction or series of transactions to any Person, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or make any material
change in the present method of conducting business or engage in any type of
business other than of same general type now conducted by it. The Company shall
not, and shall not permit any of its Subsidiaries to, Transfer any property or
assets, unless the property or asset that is the subject of such Transfer
constitutes (i) inventory held for sale, (ii) marketable securities available
for sale, or (iii) real estate, equipment, fixtures, supplies or materials no
longer required in the operation of the business of the Company or such
Subsidiary or that is obsolete, and, in the case of any Transfer described in
clause (i) or (iii), such Transfer is in the ordinary course of business
consistent with past practice.
4.10. Access. Subject to a written confidentiality agreement, the
Company shall, and shall cause the Company's officers, directors, employees and
agents to, afford to the Holder and each of its Affiliates, officers, directors,
employees, counsel, investment bankers, accountants, advisors, agents and other
representatives (collectively, "Representatives"), reasonable access during
normal business hours to its officers, employees, accountants, agents,
properties, offices and other facilities, and to the books and records of the
Company (including, without limitation, all
<PAGE> 12
interim financial statements, tax returns and work papers of its accountants),
legal documents of the Company, and shall furnish the Holder and its
Representatives all financial, operating, technical and other data and
information which any of them may from time to time reasonably request.
4.11. 6% Convertible Debentures due 2004. The Company shall not
exercise its Put Option without the written consent of the Holder.
4.12. Security. The Secured Obligations will be secured by the
Collateral, subject to the terms and conditions of the Collateral Documentation.
5. Events of Default and Remedies.
5.1. Events of Default and Remedies. "Event of Default," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any Order of any court or any Order, rule or
regulation of any Governmental Entity) (or if the giving of notice or lapse of
time or both is required, then, prior to such notice or lapse of time, a
"Default"):
(a) default in the payment of any interest upon this Note when it
becomes due and payable; or
(b) default in the payment of any principal of this Note when it
becomes due and payable; or
(c) default in the performance of any agreement or covenant in,
or provision of, this Note or the other documents executed and delivered in
connection with this Note (including any other Transaction Document) and to
which the Company or any of its Subsidiaries is a party (other than a covenant
or a default in whose performance is elsewhere in this Section specifically
dealt with) which is not cured within thirty (30) days, or any representation or
warranty made in any document executed and delivered in connection with this
Note (including any other Transaction Document) was false in any material
respect on the date as of which made or deemed made; or
(d) the Company Meeting shall not have been held on or prior to
April 30, 2000 or the approval of the Company's stockholders described in
Section 4.4 shall not have been obtained at the Company Meeting on or prior to
April 30, 2000; or
(e) the Company or any of its Subsidiaries shall: (A) default in
any payment of principal of or interest on any Indebtedness (other than this
Note and any intercompany debt) or in the payment of any Guarantee, beyond the
period of grace, if any, provided in the
<PAGE> 13
instrument or agreement under which such Indebtedness or Guarantee was created;
or (B) default in the observance or performance of any other agreement or
condition relating to any such Indebtedness or Guarantee or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Guarantee (or a trustee or
agent on behalf of such holder or holders or beneficiary or beneficiaries) to
cause, with the giving of notice if required, such Indebtedness to become due
prior to its stated maturity, any applicable grace period having expired, or
such Guarantee to become payable, any applicable grace period having expired,
provided that the aggregate principal amount of all such Indebtedness and
Guarantee which would then become due or payable as described in this Section
5.1(e) would equal or exceed $100,000; or
(f) a final judgment or judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company or
any of its Subsidiaries and such remains undischarged for a period (during which
execution shall not effectively be stayed) of 60 days, provided that the
aggregate of all such judgments that are not covered by insurance under which
the Company or a Subsidiary is a beneficiary exceeds $100,000, or the Holder
shall determine that any regulatory body having jurisdiction over the Company or
any of its Subsidiaries including, without limitation, the SEC, shall have taken
or proposed to take any action that the Holder believes could, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect or
that adversely affects the Holder's security interest in the Collateral; or
(g) the Company or any of its Subsidiaries (i) is generally not
paying, or admits in writing its inability to pay, its debts as they become due,
(ii) files, or consents by answer or otherwise to the filing against it of, a
petition for relief or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any jurisdiction, (iii) makes
an assignment for the benefit of its creditors, (iv) consents to the appointment
of a custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for
the purpose of any of the foregoing; or
(h) a court or other Governmental Entity of competent
jurisdiction enters an Order appointing, without consent by the Company or any
of its Subsidiaries, a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial part of its
property, or constituting an order for relief or approving a petition for relief
or reorganization or any other petition in
<PAGE> 14
bankruptcy or for liquidation or to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution, winding-up or
liquidation of the Company or any of its Subsidiaries, or any such petition
shall be filed against the Company or any of its Subsidiaries and such petition
shall not be dismissed within 60 days; or
(i) a court or other Governmental Entity of competent
jurisdiction enters a final judgment holding this Note or any of the documents
delivered in connection with this Note (including any other Transaction
Document) to be invalid or unenforceable and such judgment remains unstayed and
in effect for a period of 20 consecutive days; or the Company or any of its
Subsidiaries shall assert, in any pleading filed in such a court, that this Note
or any of the documents delivered in connection with this Note (including any
other Transaction Document) are invalid or unenforceable; or
(j) any material provision of any Transaction Document shall for
any reason cease to be valid, binding and enforceable in accordance with its
terms (or the Company or any of its Subsidiaries shall challenge the
enforceability of any Transaction Document or shall assert in writing, or engage
in any action or inaction based on any such assertion, that any provision of any
of the Transaction Documents has ceased to be or otherwise is not valid, binding
and enforceable in accordance with its terms), or any first priority security
interest created under any Transaction Document shall cease to be a valid and
perfected security interest, or Lien in any of the Collateral purported to be
covered thereby; or
(k) the Company or any of its Subsidiaries shall default in the
payment of any amounts due pursuant to the terms of any document executed and
delivered by the Company or such Subsidiary in connection with this Note (other
than payments elsewhere in this Section specifically dealt with).
5.2. Acceleration of Maturity. If any Event of Default (other than an
Event of Default specified in clause (g), (h), (i) or (j) of Section 5.1) shall
have occurred and be continuing, the Holder may, by notice to the Company,
declare the entire unpaid principal amount of this Note, plus all accrued and
unpaid interest thereon (together with the Holder's costs and expenses pursuant
to Section 8.8) , to be immediately due and payable, and upon such declaration
all of such amount shall be immediately due and payable (the "Declared
Acceleration Date"), in each and every case without presentment, demand, protest
or further notice, all of which are hereby waived, anything in this Note to the
contrary notwithstanding; provided that if an Event of Default under clause (g),
(h), (i) or (j) of Section 5.1 shall have occurred, the entire unpaid principal
amount of this Note (to the full extent permitted by applicable
<PAGE> 15
Law), plus all accrued and unpaid interest thereon (together with the Holder's
costs and expenses pursuant to Section 8.8), shall immediately become due and
payable (the "Automatic Acceleration Date"), without any declaration and without
presentment, demand, protest or further notice, all of which are hereby waived,
anything in this Note to the contrary notwithstanding.
5.3. Other Remedies. If any Event of Default shall have occurred and
be continuing, from and including the date of such Event of Default to but not
including the date such Event of Default is cured or waived, each Holder may
enforce its rights by suit in equity, by action at law, or by any other
appropriate proceedings, whether for the specific performance (to the extent
permitted by Law) of any covenant or agreement contained in this Note or in aid
of the exercise of any power granted in this Note, and each Holder may enforce
the payment of any Note held by such Holder and any of its other legal or
equitable rights.
5.4. Conduct; No Waiver; Collection Expenses. No course of dealing on
the part of the Holder, nor any delay or failure on the part of the Holder to
exercise any of its rights, shall operate as a waiver of such right or otherwise
prejudice the Holder's rights, powers and remedies. If the Company fails to pay,
when due, any payment in respect of this Note, the Company will pay such Holder,
to the extent permitted by Law, on demand, all costs and expenses incurred by
such Holder in the collection of any amount due in respect of this Note
hereunder, including reasonable legal fees incurred by such Holder in enforcing
its rights hereunder.
5.5. Annulment of Acceleration. If a declaration is made in accordance
with Section 5.2, then and in every such case, the Holder may, by an instrument
delivered to the Company, annul such declaration and the consequences thereof.
5.6. Remedies Cumulative. No right or remedy conferred upon or
reserved to the Holder under this Note is intended to be exclusive of any other
right or remedy, and every right and remedy shall be cumulative and in addition
to every other right and remedy given hereunder or now and hereafter existing
under applicable Law. Every right and remedy given by this Note or by applicable
Law to the Holder may be exercised from time to time and as often as may be
deemed expedient by such Holder.
6. Rollover
6.1. Rollover. On the same day that the stockholders' approval
referred to in Section 4.4 has been obtained (the "Rollover Date"), subject to
Section 6.2, the Company and the Purchasers shall enter into (i) the Convertible
Note Purchase Agreement attached hereto as Exhibit 6.1(i)
<PAGE> 16
(the "Convertible Note Purchase Agreement"), (ii) warrants to purchase 1,500,000
shares of Common Stock at an exercise price of $7 attached hereto as Exhibit
6.1(ii) (the "Rollover Warrant"), (iii) the Registration Rights Agreement
attached hereto as Exhibit 6.1(iii) (the "Rollover Registration Rights
Agreement") and (iv) the Convertible Note Security Agreement attached hereto as
Exhibit 6.1(iv) (the "Convertible Note Security Agreement"); provided, however,
that if a Governmental Entity shall determine that any of the transactions
contemplated by the Rollover Transactions violate any applicable rules or
regulations of such Governmental Entity, the Holder shall, at the Holder's sole
discretion, either (i) abandon the Rollover Transactions or (ii) modify the
structure of the Rollover Transactions in a manner to comply with such rule or
regulation.
6.2. Conditions to Rollover. (a) The obligation of each party to
consummate the Rollover Transactions shall be subject to there having been no
enactment, issuance, promulgation, enforcement or entering into of any Law by a
Governmental Entity that effects or has the effect of making any of the Rollover
Transactions illegal or otherwise restraining or prohibiting such transactions.
(b) The obligation of the Purchasers to consummate the Rollover
Transactions shall be subject to the following conditions:
(i) no change (or any condition, event or development
involving a prospective change) shall have occurred or be threatened
that could, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect;
(ii) no Default shall have occurred and be continuing under
this Note, no Default (as defined in the 7.5% Note) shall have
occurred and be continuing under the 7.5% Note and no Default (as
defined in the 15% Note) shall have occurred and be continuing under
the 15% Note;
(iii) concurrently with the consummation of the Rollover
Transactions, the principal amount of this Note (plus all accrued and
unpaid interest on this Note), the 7.5% Note (plus all accrued and
unpaid interest on the 7.5% Note) and 15% Note (plus all accrued and
unpaid interest on the 15% Note) shall have been repaid in full;
(iv) the Company shall have delivered to the Purchasers any
document, instrument or certificate required to be delivered by the
Company pursuant to the Rollover Transaction Documents; and
(v) each Purchaser shall have received such other
instruments and documents reasonably requested by such
<PAGE> 17
Purchaser.
(c) The obligation of the Company to consummate the Rollover
Transactions shall be subject to the delivery by each Purchaser to the Company
of any document, instrument or certificate required to be delivered by such
Purchaser pursuant to the Rollover Transaction Documents.
6.3. Failure to Consummate the Rollover Transactions. Notwithstanding
anything herein to the contrary, if the Company shall fail to consummate the
Rollover Transactions described in Section 6.1 for any reason whatsoever, then
the Company's sole liability to the Holder will be the: (i) payment of the
Holder's costs and, in each case, expenses pursuant to Section 8.8; (ii) payment
of principal and interest under this Note, the 7.5% Note and 15% Note (and, in
each case, default interest, if applicable); and (iii) execution of the
Registration Rights Agreements referred to in each of the 7.5% Note and the 15%
Note.
7. Interpretation.
7.1. Definitions.
"7.5% Note" shall have the meaning ascribed thereto in Section 1.3.
"15% Note" shall have the meaning ascribed thereto in Section 1.3.
"Acceleration Date" shall mean the Declared Acceleration Date or the
Automatic Acceleration Date, as the case may be.
"Action" shall have the meaning ascribed thereto in Section 8.1(b)(i).
"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act. "Affiliate" shall also include partners of a Person.
Notwithstanding the foregoing, "Affiliate" shall not include the limited
partners of the Holder or any limited partners of a limited partner of the
Holder.
"Automatic Acceleration Date" shall have the meaning ascribed thereto
in Section 5.2.
"Board of Directors" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day other than a Saturday, Sunday, or a
day on which banking institutions in the State of New York are authorized or
obligated by Law or executive order to close.
"Capital Stock" means, in the case of the Company, any and all shares
(however designated) of the capital stock of the Company now or hereafter
outstanding.
<PAGE> 18
"Capitalized Lease" shall mean, with respect to any Person, any lease
or any other agreement for the use of property which, in accordance with
generally accepted accounting principles, should be capitalized on the lessee's
or user's balance sheet.
"Capitalized Lease Obligation" of any Person shall mean and include,
as of any date as of which the amount thereof is to be determined, the amount of
the liability capitalized or disclosed (or which should be disclosed) in a
balance sheet of such Person in respect of a Capitalized Lease of such Person.
"Change of Control" shall mean
(a) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30% or more of the combined
voting power of the then outstanding Voting Securities of the Company,
but excluding, for this purpose, any such acquisition by (i) the
Company or any Subsidiary), (ii) any Benefit Plan (or related trust)
of the Company or any Subsidiary or (iii) the Holder or any of its
Affiliates or in connection with the Rollover Transactions; or
(b) the Incumbent Board shall cease for any reason to
constitute at least 50% of the members of the Board.
"Collateral" means all real and personal property and interests in
real and personal property including, without limitation, Intellectual Property,
rights under leases and royalty rights and agreements, now owned or hereafter
acquired by the Company or its Subsidiaries in or upon which a Lien is granted
or made under the Collateral Documentation.
"Collateral Documentation" means the Security Agreement, the Financing
Statements, and all other deeds of trust, assignments, endorsements, pledged
stock, collateral assignments and other instruments, documents, agreements or
conveyances at any time creating or evidencing Liens or assigning Liens to the
Holder, to secure the obligations of the Company or any of its Subsidiaries
under this Note and the Registration Rights Agreement.
"Common Stock" shall mean the Common Stock, no par value, of the
Company.
"Company" shall have the meaning ascribed thereto in the Preamble.
"Company Meeting" shall have the meaning ascribed thereto in
<PAGE> 19
Section 4.4.
"Contracts" shall mean all agreements, contracts, leases, purchase
orders, arrangements, commitments and licenses to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound.
"Convertible Note Purchase Agreement" shall have the meaning ascribed
thereto in Section 6.1.
"Convertible Note Security Agreement" shall have the meaning ascribed
thereto in Section 6.1.
"Debentures" shall have the meaning ascribed thereto in the
Subscription Agreement.
"Declared Acceleration Date" shall have the meaning ascribed thereto
in Section 5.2.
"Default" shall have the meaning ascribed thereto in Section 5.1.
"Due Date" shall mean the earlier of the Maturity Date and the
Acceleration Date, as applicable.
"Environmental Laws" means any and all Laws, permits, concessions,
grants, franchises, licenses, agreements or governmental restrictions relating
to pollution and the protection of the environment or the release of any
materials into the environment, including but not limited to those related to
hazardous substances or wastes, air emissions and discharges to waste or public
systems.
"Equity Interests" means any capital stock, partnership interest,
joint venture interest or other equity interest or warrants, options or other
rights to acquire any capital stock, partnership interest, joint venture
interest or other equity interest.
"Equity Securities" shall mean with respect to any Person, shares of
capital stock or other equity interest of such Person, and any rights, options
or warrants to purchase stock or other securities exchangeable for or
convertible into capital stock of or other equity interest in the Company.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Event of Default" shall have the meaning ascribed thereto in Section
5.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
SEC thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include reference to the comparable section, if any, of
<PAGE> 20
any such successor federal statute.
"Financing Statements" means Form UCC-1 financing statements filed in
all jurisdictions necessary or desirable in order to perfect the Holder's
security interest in the Collateral and shall include any Form UCC-1 financing
statements assigned to the Holder and filings to be made in the U.S. Patent and
Trademark Office and the U.S. Copyright Office.
"GAAP" shall mean U.S. generally accepted accounting principles.
"Governmental Entity" shall mean any supernational, national, foreign,
federal, state or local judicial, legislative, executive, administrative or
regulatory or self-regulatory body or authority.
"Guaranty" or "Guarantee" by any Person shall mean all obligations
(other than endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) of any Person guaranteeing, or in effect
guaranteeing, any Indebtedness, dividend or other obligation of any other Person
(the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, all obligations incurred through an agreement,
contingent or otherwise, by such Person: (i) to purchase such Indebtedness or
obligation or any property or assets constituting security therefor, (ii) to
advance or supply funds (x) for the purchase or payment of such Indebtedness or
obligation, (y) to maintain working capital or other balance sheet condition or
otherwise to advance or make available funds for the purchase or payment of such
Indebtedness or obligation, (iii) to lease property or to purchase securities or
other property or services primarily for the purpose of assuring the owner of
such Indebtedness or obligation of the ability of the primary obligor to make
payment of such Indebtedness or obligation, or (iv) otherwise to assure the
owner of the Indebtedness or obligation of the primary obligor against loss in
respect thereof. For the purposes of any computations made under this Note, a
Guarantee in respect of any Indebtedness for borrowed money shall be deemed to
be Indebtedness equal to the outstanding amount of the Indebtedness for borrowed
money which has been guaranteed, and a Guarantee in respect of any other
Liability or any dividend shall be deemed to be Indebtedness equal to the
maximum aggregate amount of such Liability or dividend.
"Holder" shall have the meaning ascribed thereto in the Preamble.
"Incumbent Board" shall mean the individuals who, immediately after
the Closing, constitute the Board of Directors; provided, however, that any
individual becoming a director subsequent to the Closing whose election, or
nomination for election by the Company's stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be deemed to be a member of the Incumbent Board
<PAGE> 21
"Indebtedness" shall mean, with respect to any Person, (i) all
obligations of such Person for borrowed money, or with respect to deposits or
advances of any kind, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (iii) all obligations of such Person
under conditional sale or other title retention agreements relating to property
purchased by such Person, (iv) all obligations of such Person issued or assumed
as the deferred purchase price of property or services (other than accounts
payable to suppliers and similar accrued liabilities incurred in the ordinary
course of business and paid in a manner consistent with industry practice), (v)
all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any lien or security interest on property owned or acquired by such Person
whether or not the obligations secured thereby have been assumed, (vi) all
Capitalized Lease Obligations of such Person, (vii) all Guarantees of such
Person, (viii) all obligations (including but not limited to reimbursement
obligations) relating to the issuance of letters of credit for the account of
such Person, (ix) all obligations arising out of foreign exchange contracts, and
(x) all obligations arising out of interest rate and currency swap agreements,
cap, floor and collar agreements, interest rate insurance, currency spot and
forward contracts and other agreements or arrangements designed to provide
protection against fluctuations in interest or currency exchange rates.
"Indemnified Person" shall have the meaning ascribed thereto in
Section 8.1(b).
"Intellectual Property" means (a) Patents, (b) all trademarks, service
marks, trade dress, logos, trade names, domain names and corporate names,
together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith, (c) all copyrightable works,
all copyrights and all applications, registrations and renewals in connection
therewith, (d) all mask works and all applications, registrations and renewals
in connection therewith, (e) all trade secrets and confidential business
information (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information and business and marketing plans and proposals), (f) all
computer software (including data and related documentation), (g) all other
proprietary rights, (h) all copies and tangible embodiments of the foregoing (in
whatever form or medium) and (i) all licenses, sublicenses, permissions or
agreements in connection with the foregoing.
<PAGE> 22
"Law" shall include any foreign, federal, state, or local law,
statute, rule, regulation, Order or other restriction of any court or other
Governmental Entity.
"Liability" shall mean any debt, liability or obligation, whether
known or unknown, asserted or unasserted, accrued, absolute, contingent or
otherwise, whether due or to become due.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"Litigation" shall mean any claim, demand, notice, action, suit,
proceeding, arbitration, investigation, civil, criminal or administrative
action, audit, inquiry or hearing by or before any Governmental Entity or
private arbitration tribunal.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the properties, business, prospects, operations, earnings, assets, Liabilities
or the condition (financial or otherwise) of the Company and its Subsidiaries
taken as a whole, whether or not in the ordinary course of business, (b) the
ability of the Company or any of its Subsidiaries to perform its obligations
under any of the Transaction Documents to which it is a party, (c) the validity
or enforceability of any of the Transaction Documents, (d) the rights, remedies,
powers and privileges of the Holder under any of the Transaction Documents or
(e) the timely payment or performance of the Secured Obligations.
"Maturity Date" shall mean the earlier of April 30, 2000 and the
Rollover Date.
"Note" shall mean this Note, as amended from time to time.
"Order" shall mean any judgment, order, injunction, ruling, decree,
stipulation or award of any Governmental Entity or private arbitration tribunal.
"Patents" shall mean, collectively, (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice) and all
improvements thereon, (b) all patents, patent applications and patent
disclosures, (c) all reissues, divisions, continuations, revisions
reexaminations, renewals, extensions and continuations-in-part thereof) and (d)
all rights, now existing or hereafter coming into existence, (i) to all income,
royalties, damages, and other payments (including in respect of all
<PAGE> 23
past, present and future infringements) now or hereafter due or payable under or
with respect to any of the foregoing, (ii) to sue for all past, present and
future infringements with respect to any of the foregoing and (iii) otherwise
accruing under or pertaining to any of the foregoing throughout the world,
including all inventions and improvements described or discussed in all such
patents and patent applications.
"Permitted Indebtedness" means, without duplication, any of the
following Indebtedness of the Company or any of its Subsidiaries, as the case
may be: (i) Indebtedness and obligations under this Note; (ii) any Indebtedness
and obligations outstanding on the date hereof, as set forth on Schedule 4.1; or
(iii) Indebtedness incurred in the ordinary course of business and consistent
with past practice not to exceed $10,000 individually or in the aggregate.
"Permitted Liens" means: (i) Liens existing on the date hereof and set
forth on Schedule 4.2, all of which are subordinate to the Lien of the
Collateral Documentation except as set forth in Schedule 4.2; (ii) Liens (other
than any Lien imposed under ERISA or any Environmental Laws) for taxes,
assessments or charges of any Governmental Entity for claims not yet due or
which are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted, and with respect to which adequate reserves
or other appropriate provisions are being maintained in accordance with the
provisions of GAAP and enforcement thereof is stayed; (iii) Liens of landlords,
carriers, warehousemen, mechanics, materialmen and other Liens (other than any
Lien imposed under ERISA) not voluntarily granted for amounts not yet due or
which are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted, and with respect to which adequate reserves
or other appropriate provisions are being maintained in accordance with the
provisions of GAAP, and enforcement thereof is stayed; (iv) Liens (other than
any Lien imposed under ERISA), incurred or deposited made in the ordinary course
of business, including without limitation, surety bonds and appeal bonds, in
connection with workers' compensation, unemployment insurance and other types of
social security benefits or to secure the performance of tenders, bids, leases,
contracts (other than for the repayment of indebtedness), statutory obligations
and other similar obligations or arising as a result of progress payments under
government contracts; (v) easements (including without limitation reciprocal
easement agreements and utility agreements), rights-of-way, covenants, consents,
reservations, encroachments, variations and other similar restrictions, charges
or encumbrances (whether or not recorded) and other Liens incurred in the
ordinary course of business, which do not secure indebtedness or the deferred
purchase price of any asset and which do not interfere materially with the
ordinary conduct of the business of the Company or any Subsidiary of the Company
and which do not materially detract from the value of the
<PAGE> 24
property to which they attach or materially impair the use thereof to the
Company or any Subsidiary of the Company; and (vi) building restrictions, zoning
laws and other statutes, laws, rules, regulations, ordinances and restrictions,
and any amendments thereto, now or at any time hereafter adopted by any
Governmental Entity having jurisdiction.
"Person" shall mean any individual, firm, corporation, limited
liability company, partnership, company or other entity, and shall include any
successor (by merger or otherwise) of such entity.
"Preferred Stock" shall have the meaning ascribed thereto in Section
3.3.
"Proxy Statement" shall mean the proxy statement in a definitive form
relating to the Company Meeting and any amendments, supplements or other
solicitation materials relating thereto.
"Put Option" shall have the meaning ascribed thereto in the
Subscription Agreement.
"Purchaser" shall mean the purchasers listed on Exhibit A to the
Convertible Note Purchase Agreement.
"Registration Rights Agreement" shall have the meaning ascribed
thereto in the 7.5% Note and the 15% Note.
"Representatives" shall have the meaning ascribed thereto in Section
4.10.
"Restricted Encumbrance" shall have the meaning ascribed thereto in
Section 4.2.
"Rollover Date" shall have the meaning ascribed thereto in Section
6.1.
"Rollover Registration Rights Agreement" shall have the meaning
ascribed thereto in Section 6.1.
"Rollover Transactions" shall mean the transactions contemplated by
Section 6.1 of this Note.
"Rollover Transaction Documents" shall mean the Convertible Note
Purchase Agreement, the Rollover Warrant, the Rollover Registration Rights
Agreement, the Convertible Note Security Agreement and any documents and
instruments required to be executed or delivered pursuant to any of the
foregoing agreements.
"Rollover Warrant" shall have the meaning ascribed thereto in Section
6.1.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC Reports" shall have the meaning ascribed thereto in
<PAGE> 25
Section 3.4.
"Secured Obligations" shall mean any and all obligations of the
Company or any of its Subsidiaries at any time and from time to time for the
performance of its agreements, covenants and undertakings under or in respect of
the Transaction Documents to which it is a party.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Act shall include reference to the
comparable section, if any, of such successor federal statute.
"Security Agreement" shall mean the agreement, dated as of October 21,
1999, between Appaloosa Investment Limited Partnership I and the Company,
providing for a security interest in the Collateral.
"Subscription Agreement" shall mean the Subscription Agreement, dated
as of April 21, 1999, by and among the Company and certain subscribers thereto.
"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of whose capital stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such Person,
by one or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries thereof, (ii) any other Person (other than a corporation),
including without limitation a joint venture, in which such Person, one or more
Subsidiaries thereof or such Person and one or more Subsidiaries thereof,
directly or indirectly, at the date of determination thereof, has at least
majority ownership interest entitled to vote in the election of directors,
managers or trustees thereof (or other Persons performing similar functions),
(iii) the management of which is otherwise controlled, directly or indirectly,
by such Person or (iv) any other Person required to be consolidated with such
Person in accordance with generally accepted accounting principles. For purposes
of this definition (and for the determination of whether or not a Subsidiary is
a wholly-owned Subsidiary of a Person), any directors' qualifying shares or
investment by foreign nationals mandated by applicable law shall be disregarded
in determining the ownership of a Subsidiary.
"Tax" and "Taxes" shall mean any federal, state, local or foreign
income, gross receipts, property, sales, use, value added, license, excise,
franchise, capital, net worth, estimated, withholding, employment, payroll,
premium, withholding, alternative or added minimum, ad valorem, inventory,
asset, gains, transfer or excise tax, or any other tax, levy, custom, duty,
<PAGE> 26
impost, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest, penalty or additions to tax, imposed by
any Governmental Entity and, including, without limitation, any Taxes of another
Person owing under a contract, as transferee or successor, under Treas. Reg. ss.
1.1502-6 or analogous state, local or foreign law, or otherwise.
"Tax Return" shall mean any return, report or similar statement
required to be filed with respect to any Tax (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return or declaration of estimated Tax.
"Transaction Documents" shall mean this Note, the 7.5% Note, the 15%
Note, the side letter, dated December 30, 1999, between the Company and the
Holder, the side letter, dated March __, 2000, between the Company and the
Holder, the Security Agreement, the Registration Rights Agreement, the warrants
to be issued to Affiliates of the Holder pursuant to section (c) of the December
30, 1999 side letter and the Warrants (as defined in the 7.5% Note).
"Transfer" shall have the meaning ascribed thereto in 4.9.
"Voting Securities" shall mean at any time shares of any class of
Capital Stock of the Company (or other corporation) which are then entitled to
vote generally in the election of directors of the Company (or such other
corporation).
7.2. Accounting Principles. The character or amount of any asset,
liability, capital account or reserve and of any item of income or expense
required to be determined pursuant to this Note, and any consolidation or other
accounting computation required to be made pursuant to this Note, and the
construction of any definition in this Note containing a financial term, shall
be determined or made, as the case may be, in accordance with GAAP, to the
extent applicable, unless such principles are inconsistent with the express
requirements of this Note.
8. Miscellaneous.
8.1. Payment; Indemnity; Taxes. (a) If the date on which any payment
under this Note is required to be made occurs on a day other than a Business
Day, such payment shall be due and payable on the next succeeding Business Day.
(b) (i) The Company and its Subsidiaries shall jointly and
severally indemnify and hold harmless the Holder and its Representatives
<PAGE> 27
(each, an "Indemnified Person") from and against any and all suits, actions,
proceedings, claims (collectively, "Actions"), damages, losses, Liabilities and
out-of-pocket expenses (including reasonable attorneys' fees and disbursements
and other costs of investigation or defense, including those incurred upon any
appeal) which may be instituted or asserted against or incurred by any such
Indemnified Person as the result of credit having been extended, suspended or
terminated under this Note and the other Transaction Documents and the
administration of such credit, and in connection with or arising out of the
transactions contemplated hereunder and thereunder and any actions or failures
to act in connection therewith.
(ii) Upon receipt by any Indemnified Person of any Action
against such Indemnified Person with respect to which indemnity may be sought
under this Note or any other Transaction Document, such Indemnified Person shall
promptly notify the Company in writing, provided that failure so to notify the
Company shall not relieve the Company from any liability which the Company may
have on account of this indemnity or otherwise, except to the extent the Company
shall have been materially prejudiced by such failure. The Company shall, at its
option, assume the defense of any Action including the employment of counsel
reasonably satisfactory to the Indemnified Person. Any Indemnified Person shall
have the right to employ separate counsel in any such action and participate in
the defense thereof but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person, unless: (i) the Company has failed promptly
to assume the defense and employ counsel or (ii) the named parties to such
Action (including any impleaded parties) include such Indemnified Person and the
Company, and such Indemnified Person and the Company shall have been advised by
counsel that there may be one or more legal defenses available to it which are
different from or in addition to those available to the Company or there is or
may be a conflict between the Company and any Indemnified Person (in which case
the Company may not assume the defense). In the event that any Indemnified
Person shall become entitled to separate counsel under this Note or any other
Transaction Document, the Company shall not in such event be responsible
hereunder for the fees and expenses of more than one firm of separate counsel in
connection with any Action in the same jurisdiction, in addition to any local
counsel. In addition, the Company will not, without prior written consent of the
Indemnified Person, settle, compromise or consent to the entry of any judgment
in or otherwise seek to terminate any pending or threatened Action in which
indemnification may be sought hereunder (whether or not any Indemnified Person
is a
<PAGE> 28
party thereto) unless such settlement, compromise, consent or termination
includes an unconditional release of such Indemnified Person from all
liabilities and expenses arising out of such Action.
(c) The Company shall bear all sales, documentary, transfer,
stamp or other similar taxes and all filing fees and expenses incurred in
connection with the transactions contemplated by this Note and shall indemnify
and hold harmless each Indemnified Purchaser from and against any such taxes.
8.2. Severability. If any term, provision, covenant or restriction of
this Note or any exhibit hereto is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Note and such exhibits shall remain in full
force and effect and shall in no way be affected, impaired or invalidated. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such which may be hereafter declared invalid, void or
unenforceable.
8.3. Specific Enforcement. The Holder, on the one hand, and the
Company, on the other, acknowledge and agree that irreparable damage would occur
in the event that any of the provisions of this Note were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the Holder shall be entitled to an injunction to prevent
breaches of the provisions of this Note and to enforce specifically the terms
and provisions hereof in any court of the United States or any state thereof
having jurisdiction, this being in addition to any other remedy to which they
may be entitled at Law or equity.
8.4. Entire Agreement. The Transaction Documents (including the
Schedules and Exhibits hereto and thereto) contain the entire understanding of
the parties with respect to the transactions contemplated hereby and thereby.
8.5. Notices and other Communications. All notices, consents,
requests, instructions, approvals, financial statements, proxy statements,
reports and other communications provided for herein shall be deemed given, if
in writing and delivered personally, by telecopy or sent by registered mail,
postage prepaid, if to:
The Company, to:
129 Reservoir Road
Vernon, CT 06066
Attention: Carl Sahi
Fax: (860) 870-6118
<PAGE> 29
With a copy to:
Paul, Hastings, Janofsky & Walker LLP
1055 Washington Boulevard
Stamford, CT 06901
Attention: Esteban A. Ferrer, Esq.
Fax: (203) 359-3031
The Holder, to:
c/o Appaloosa Management, L.P.
26 Main Street, 1st Floor
Chatham, New Jersey 07928
Attention: Mr. James Bolin
Fax: (973) 701-7309
With a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Attention: Robert C. Schwenkel, Esq.
Fax: (212) 859-4000
or to such other address as any party may, from time to time, designate in a
written notice given in a like manner.
8.6. Successors and Assigns. All covenants and agreements contained
herein shall bind and inure to the benefit of the Holder and its respective
successors and assigns. The Company may not assign this Note without the written
consent of the Holder.
8.7. Amendments. No amendment or waiver of any provision of this Note,
nor consent to any departure by the Company therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Holder and then
such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
8.8. Expenses. The Company agrees to promptly (but in no event later
than 2 business days) pay the Holder all costs and expenses (including the fees
and expenses of its counsel) incurred by it in connection with the transactions
contemplated hereby (to the extent not already paid by the Company on the date
hereof) and the Rollover Transactions (regardless of whether the Rollover
Transactions are consummated) upon the earlier to occur of (i) the prepayment of
the entire outstanding principal amount of the Note in accordance with Section
1.3 and (ii) the Due Date. In addition, the Company agrees to pay to the Holder
all reasonable costs and expenses incurred by the Holder relating to any future
amendment or supplement to any of the Transaction Documents (or any proposal by
the Company for such amendment or supplement) whether or not consummated or any
waiver or consent with respect thereto (or any proposal for such waiver or
consent) whether or not consummated, and all costs and expenses of such Holder
relating to the enforcement of any of the
<PAGE> 30
Transaction Documents.
8.9 Survival. All covenants, agreements, representations and
warranties contained herein in connection with the transactions contemplated
hereby shall survive the date hereof and the delivery of the Transaction
Documents, regardless of any investigation made by or on behalf of any party;
provided, that, all covenants, agreements, representations and warranties
contained herein shall terminate when this Note and any amounts due hereunder
have been indefeasibly repaid in full; provided, however, that notwithstanding
anything to the contrary contained herein, Sections 6.3, 8.1(b), 8.2, 8.3, 8.4,
8.5 and 8.8 shall survive forever.
8.10. Public Announcements. Neither the Company nor the Holder shall
make any public statements, including, without limitation, any press releases,
with respect to this Note or the other Transaction Documents and the
transactions contemplated hereby or thereby without the prior written consent of
the other party (which consent shall not be unreasonably withheld) except as may
be required by Law. If a public statement is required to be made by Law, the
parties shall consult with each other in advance as to the contents and timing
thereof.
8.11. GOVERNING LAW. THIS NOTE AND THE OTHER TRANSACTION DOCUMENTS
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE
PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK EXCLUDING
CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE
APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
8.12. Submission to Jurisdiction. If any Litigation shall be brought
by the Holder in order to enforce any right or remedy under this Note or any of
the other Transaction Documents, the Company hereby consents and will submit,
and will cause each of its Subsidiaries to submit, to the jurisdiction of any
state or federal court of competent jurisdiction sitting within the area
comprising the Southern District of New York on the date of this Note. The
Company hereby irrevocably waives any objection, including, but not limited to,
any objection to the laying of venue or based on the grounds of forum non
conveniens, which it may now or hereafter have to the bringing of any such
Litigation in such jurisdiction.
8.13. Service of Process. Nothing herein shall affect the right of the
Holder to serve process in any other manner permitted by Law or to commence
legal proceedings or otherwise proceed against the Company in any other
jurisdiction.
8.14. WAIVER OF JURY TRIAL. THE COMPANY HEREBY WAIVES ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS NOTE OR
ANY OF THE OTHER TRANSACTION DOCUMENTS.
<PAGE> 31
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed as of the date first above written.
BIO-PLEXUS, INC.
By:/s/ Carl R. Sahi
------------------------------
Name: Carl R. Sahi
Title: President and Chief
Executive Officer
<PAGE> 1
Exhibit 10.43
Bio-Plexus, Inc.
129 Reservoir Road
Vernon, CT 06066
April 3, 2000
Appaloosa Investment Limited
Partnership I
26 Main Street, 1st Floor
Chatham, New Jersey 07928
Attention: Mr. James Bolin
Dear Mr. Bolin:
Reference is made to the 7.5% Secured Note, dated October 21, 1999,
issued by Bio-Plexus, Inc. (the "Company") to Appaloosa Investment Limited
Partnership I ("Appaloosa") (as such 7.5% Secured Note may be amended and
restated from time to time, the "7.5% Note"), the 15% Secured Note, dated
January 5, 2000, issued by the Company to Appaloosa (as such 15% Secured Note
may be amended and restated from time to time, the "15% Note"), and the side
letter, dated December 30, 1999, between the Company and Appaloosa (the "First
Side Letter"). The purpose of this letter is to set forth the understanding of
the Company and Appaloosa with respect to the matters set forth herein:
(a) on the date hereof, the Company and Appaloosa will enter
into a second amendment to the 7.5% Note in the form
attached hereto as Exhibit A;
(b) on the date hereof, the Company and Appaloosa will enter
into a first amendment to the 15% Note in the form attached
hereto as Exhibit B;
(c) on the date hereof, the Company and Appaloosa will enter
into the 15% Secured Note in the form attached hereto as
Exhibit C (the "Third Bridge Note"); and
<PAGE> 2
(d) paragraph (d) of the First Side Letter is hereby amended by
deleting it in its entirety and substituting in lieu thereof
the following:
(d) (i) On the closing date of the Rollover Transactions
(but only if the Company has hired a new Chief Executive Officer
approved by Appaloosa in its sole discretion by that date), the $3
Warrants (as defined in the 7.5% Note) will be, at the election of
Appaloosa, cancelled and be of no further force and effect and,
simultaneously therewith, the Company will issue to one or more
affiliates of Appaloosa replacement warrants to purchase 1,000,000
shares of Common Stock with an exercise price of $4 per share in the
form attached hereto as Exhibit D (if so issued, the "Warrants"). If
the Company has not hired a new Chief Executive Officer approved by
Appaloosa in its sole discretion by the closing date of the Rollover
Transactions (or if the Company has hired a new Chief Executive
Officer approved by Appaloosa by the closing date of the Rollover
Transactions but Appaloosa elected not to exchange the $3 Warrants for
the Warrants at that time), the $3 Warrants shall be exchanged for the
Warrants six months and one day after the closing date of the Rollover
Transactions (and Appaloosa hereby agrees not to exercise any of the
$3 Warrants during such period).
(ii) If the Rollover Transactions are not consummated
for any reason, the $3 Warrants (as defined in the 7.5% Note) will
remain in full force and effect and the terms and conditions thereof
will remain unchanged.
The Company represents that (i) the execution and delivery of this
letter by the Company and the performance by it of the transactions contemplated
hereby (including, without limitation, the issuance of the Warrants and issuance
of shares of Common Stock (as defined in the 7.5% Note) upon exercise of the
Warrants) and compliance by the Company with all the provisions of the Warrants
(as applicable) have been duly authorized by all requisite corporate proceedings
on the part of the Company and (ii) the shares of Common Stock issuable upon
exercise of the Warrants have been validly reserved for issuance, and upon
issuance, will be validly issued and outstanding, fully paid and nonassessable.
The Company cannot assign its rights and obligations under this letter
without the written consent of Appaloosa.
Appaloosa represents that (a) it is acquiring the Third Bridge Note
for its own account for the purpose of investment and not with a view to or for
sale in connection with any distribution thereof except in compliance with all
applicable securities law and (b) it is an "accredited
<PAGE> 3
investor" within the meaning of Rule 501 promulgated under the Securities Act of
1933, as amended.
If any term, provision, covenant or restriction of this letter or any
exhibit hereto is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this letter and such exhibits shall remain in full force and
effect and shall in no way be affected, impaired or invalidated. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such which may be hereafter declared invalid, void or
unenforceable.
Appaloosa, on the one hand, and the Company, on the other, acknowledge
and agree that irreparable damage would occur in the event that any of the
provisions of this letter were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that Appaloosa shall
be entitled to an injunction to prevent breaches of the provisions of this
letter and to enforce specifically the terms and provisions hereof in any court
of the United States or any state thereof having jurisdiction, this being in
addition to any other remedy to which they may be entitled at Law (as defined in
the 7.5% Note) or equity.
Neither the Company nor Appaloosa shall make any public statements,
including, without limitation, any press releases, with respect to this letter
and the transactions contemplated hereby without the prior written consent of
the other party (which consent shall not be unreasonably withheld) except as may
be required by Law. If a public statement is required to be made by Law, the
parties shall consult with each other in advance as to the contents and timing
thereof.
This letter shall not constitute an amendment of any other provisions
of the First Side Letter not expressly referred to herein and shall not be
construed as a waiver or consent to any further or future action on the part of
the Company that would require a waiver or consent of the Holder. Except as
expressly amended hereby, the provisions of the First Side Letter shall remain
in full force and effect.
THIS LETTER SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND
THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE
THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
If any Litigation (as defined in the 7.5% Note) shall be brought by
Appaloosa in order to enforce any right or remedy under this letter, the Company
hereby consents and will submit to the jurisdiction of any state
<PAGE> 4
or federal court of competent jurisdiction sitting within the area comprising
the Southern District of New York on the date of this letter. The Company hereby
irrevocably waives any objection, including, but not limited to, any objection
to the laying of venue or based on the grounds of forum non conveniens, which it
may now or hereafter have to the bringing of any such Litigation in such
jurisdiction.
THE COMPANY HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH, THIS LETTER.
<PAGE> 5
Please confirm that the foregoing is in accordance with your
understanding by signing and returning to me this letter, whereupon this letter
shall be deemed accepted and binding.
Very truly yours,
BIO-PLEXUS, INC.
By:/s/ Carl R. Sahi
------------------------------
Name: Carl R. Sahi
Title: President and Chief
Executive Officer
ACCEPTED AND AGREED
THIS 3rd DAY OF APRIL 2000
APPALOOSA INVESTMENT LIMITED
PARTNERSHIP I
By: Appaloosa Management L.P., its
General Partner
By: Appaloosa Partners Inc., its
General Partner
By:/s/ James E. Bolin
----------------------------------
Name: James E. Bolin
Title: Vice President
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-80921) of Bio-Plexus, Inc. of our report dated
March 17, 2000 appearing on page F-2 of the Annual Report in Form 10-K filed
with the Securities and Exchange Commission on April 14, 2000.
/s/ Mahoney Sabol & Company, LLP
Mahoney Sabol & Company, LLP
Hartford, Connecticut
April 12, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 867,000
<SECURITIES> 0
<RECEIVABLES> 908,000
<ALLOWANCES> 0
<INVENTORY> 2,262,000
<CURRENT-ASSETS> 4,210,000
<PP&E> 4,384,000<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,647,000
<CURRENT-LIABILITIES> 3,508,000
<BONDS> 2,262,000
0
0
<COMMON> 71,833,000
<OTHER-SE> 149,000<F2>
<TOTAL-LIABILITY-AND-EQUITY> 9,647,000
<SALES> 7,024,000
<TOTAL-REVENUES> 7,024,000
<CGS> 0
<TOTAL-COSTS> 9,890,000
<OTHER-EXPENSES> 2,367,000<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,233,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,233,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,233,000)
<EPS-BASIC> (0.39)
<EPS-DILUTED> (0.39)
<FN>
<F1>This value is net of depreciation.
<F2>Value represents redeemable common stock warrants.
<F3>Amount includes $57,000 of interest income.
</FN>
</TABLE>
