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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
January 16, 1997
(Date of earliest event reported)
Cephalon, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-19119 23-2484489
(State or other jurisdiction (Commission (IRS Employer
of incorporation or organization) File Number) ID No.)
145 Brandywine Parkway
West Chester, Pennsylvania 19380
(Address of principal executive offices) (Zip Code)
(610) 344-0200
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
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ITEM 5. OTHER EVENTS.
On January 16, 1997 Cephalon, Inc. ("Cephalon" or the "Company") announced
an agreement to issue, in a private placement, $30 million of senior convertible
notes. Cephalon plans to use the proceeds of the private placement for general
purposes, which may include funding potential technology acquisitions.
The convertible notes will be sold at par, mature in January 1998 and bear
interest at a rate of seven percent per annum. They are convertible into common
stock of the company, subject to certain limitations, at a six percent discount
to a market price formula at the time of conversion. If not converted into
common stock prior to maturity, the securities will be exchanged for
higher-yield, fifteen-year debentures.
The convertible notes cannot be converted at a price less than $25 per
share until 75 days after the effectiveness of the registration statement.
Cephalon may redeem the notes, at a redemption price equal to 110 percent of the
outstanding principal amount plus interest, if the conversion price falls below
approximately $21 per share. The closing of the placement is subject to the
effectiveness of a registration statement to be filed by the company with the
Securities and Exchange Commission covering the resale by the investors of the
common stock issuable upon conversion of the convertible notes. Cephalon expects
to initially register 1.43 million shares of common stock. Owen, Diaz & Altschul
Securities, LLC of New York was the placement agent in the transaction.
The Company also announced that Schering-Plough Corporation will
discontinue its funding of the companies' research collaboration to develop
compounds for the treatment of Alzheimer's disease.
The collaboration has been focused on the development of protease
inhibitors that prevent the secretion of beta-amyloid peptide, a major component
of the neuritic plaques that cause neuronal death in patients with Alzheimer's
disease. Schering-Plough has been Cephalon's collaborator in this area since
1991.
Other provisions of the companies' agreement continue, including Cephalon's
non-exclusive right to use the technology developed in the program and the right
to receive royalties on net sales of any products licensed exclusively to
Schering-Plough under the agreement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired: None
(b) Pro Forma Financial Information: None
(c) Exhibits: Reference is made to the Exhibit Index annexed
hereto and made a part hereof.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CEPHALON, INC.
Date: January 21, 1997 By: /s/ Bruce A. Peacock
------------------------------
Bruce A. Peacock
Executive Vice President and
Chief Operating Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
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<S> <C>
4.1 Form of 7% Senior Convertible Note due 1998, without exhibits
4.2 Form of 10 3/4% Debenture due 2013, without exhibits
4.3 Form of Warrant to purchase shares of the Registrant's
Common Stock, without exhibits
10.1 Form of Note Purchase Agreement, dated as of January 15, 1997,
between the Registrant and the several purchasers of the
Registrant's Senior Convertible Notes, without exhibits
99.1 Press Release dated January 16, 1997
99.2 Press Release dated January 16, 1997
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Exhibit 4.1
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS. THE SALE TO THE HOLDER OF THIS NOTE
OF THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE AND IN
PAYMENT OF INTEREST ON THIS NOTE ARE NOT COVERED BY A REGISTRATION STATEMENT
UNDER THE ACT OR REGISTRATION UNDER STATE SECURITIES LAWS. THIS NOTE HAS BEEN
ACQUIRED, AND SUCH SHARES MUST BE ACQUIRED, FOR INVESTMENT ONLY AND MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF REGISTRATION OF THE RESALE
THEREOF OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM, SCOPE AND
SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THIS NOTE IS ISSUED PURSUANT TO A NOTE PURCHASE AGREEMENT, DATED AS OF
JANUARY 15, 1997, BY AND BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THIS
NOTE, AS AMENDED FROM TIME TO TIME, AND THE HOLDER OF THIS NOTE AND THIS NOTE
ARE SUBJECT TO THE TERMS OF THE NOTE PURCHASE AGREEMENT.
THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS PROVIDED IN SECTION 8.7.
CEPHALON, INC.
SENIOR CONVERTIBLE NOTE
New York, New York $_______________
, 1997
FOR VALUE RECEIVED, CEPHALON, INC., a Delaware corporation
(hereinafter called the "Company"), hereby promises to pay to
__________________________,
[Address], or registered assigns (the "Holder") or order, the sum of
_____________ Dollars ($___________), on [BEFORE SIGNING THE NOTE, INSERT DATE
WHICH IS ONE YEAR AFTER THE CLOSING DATE], 1998 (the "Maturity Date"), and to
pay interest on the unpaid principal balance hereof at the rate of seven percent
(7%) per annum from the date hereof, until the same becomes due and payable,
whether at maturity or upon acceleration or by prepayment or otherwise. Any
amount of principal of or interest on this Note which is not paid when due shall
bear interest at the rate of fourteen percent (14%) per annum from the due date
thereof until the same is paid ("Default Interest"). Interest shall be payable
in arrears on the 1st day of each February, May, August and November, on the
principal amount outstanding on such date, commencing on May 1, 1997, and at
maturity (the "Interest Payment Dates"). Interest on this Senior Convertible
Note (this "Note") shall be computed on the basis of a 360-day year of 12 30-day
months and actual days elapsed.
Except as otherwise specifically provided in Article VI, all
payments of principal of and premium, if any, and interest on this Note shall be
made in lawful money of the United States of America, or, at the option of the
Company and subject to the provisions of this Note, interest payable on the
Interest Payment Dates may be paid in whole or in part in fully paid and
nonassessable shares of Common Stock, $.01 par value, together with the related
Preferred Share
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Purchase Rights or similar rights of the Company as and if such rights or other
similar rights exist on the payment date, or any shares of capital stock and
related rights of the Company into which such stock shall hereafter be changed
or reclassified (the "Common Stock"). All cash payments shall be made by wire
transfer of immediately available funds to such account as the Holder may from
time to time designate by written notice in accordance with the provisions of
this Note. Whenever any amount expressed to be due by the terms of this Note is
due on any day which is not a Business Day, the same shall instead be due on the
next succeeding day which is a Business Day and, in the case of any Interest
Payment Date which is not the date on which this Note is paid in full, the
extension of the due date thereof shall not be taken into account for purposes
of determining the amount of interest due on such date. As used in this Note,
the term "Business Day" shall mean any day other than a Saturday, Sunday or a
day on which commercial banks in The City of New York are authorized or required
by law or executive order to remain closed.
The obligations of the Company under this Note shall rank in
right of payment on a parity with all other unsubordinated obligations of the
Company for indebtedness for borrowed money or the purchase price of property.
This Note is issued pursuant to a Note Purchase Agreement, dated as of January
15, 1997, by and between the Company and the original Holder of this Note, as
amended from time to time (the "Note Purchase Agreement"), and the Holder of
this Note and this Note are subject to the terms of the Note Purchase Agreement.
The obligations of the Company under this Note are secured pursuant to, and the
Holder of this Note is entitled to the benefits of, a Pledge and Security
Agreement, dated as of , 1997, by and between the Company and Owen, Diaz &
Altschul Fund I, Ltd., a British Virgin Islands corporation, as Collateral Agent
(the "Security Agreement").
The following terms shall apply to this Note:
ARTICLE I
PREPAYMENT; INTEREST IN COMMON STOCK
1.1 PREPAYMENT. Except as otherwise specifically provided in
Article II, this Note may not be prepaid or redeemed at the option of the
Company prior to maturity.
1.2 ISSUANCE OF COMMON STOCK IN LIEU OF CASH INTEREST. (a) If
the Company exercises its option to make a payment of interest on this Note
wholly or partly in shares of Common Stock (herein sometimes called the "Stock
Payment Option"), the issuance of shares of Common Stock upon such exercise of
the Stock Payment Option shall have been authorized by the Board of Directors of
the Company.
(b) The Company shall not be permitted to exercise the Stock
Payment Option with respect to any payment of interest on this Note if:
(i) the number of shares of Common Stock authorized,
unissued and unreserved for all purposes, or held in the
Company's treasury, is insufficient to pay the portion of such
interest to be paid in Common Stock;
(ii) the issuance or delivery of shares of Common
Stock pursuant to the Stock Payment Option or the public
resale of such shares by the Holder would require registration
with or approval of any governmental authority under any law
or regulation, and such registration or approval has not been
effected or obtained; provided, however, that with respect to
compliance with the securities or blue sky laws of the states
of the United States, the requirements of this clause (ii)
shall be deemed satisfied if at the
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applicable time the Company is in compliance with Section 8(c)
of the Note Purchase Agreement;
(iii) the shares of Common Stock to be issued upon
exercise of the Stock Payment Option shall not then have been
authorized for listing, upon official notice of issuance, on
the principal securities exchange on which the Common Stock is
then listed and traded;
(iv) the Computed Price (as defined herein) is less
than the par value of the Common Stock;
(v) an Event of Default (as defined herein) or a
Repurchase Event (as defined herein) has occurred and is
continuing;
(vi) the Common Stock is neither (i) listed or
admitted for trading on a national securities exchange nor
(ii) quoted on the Nasdaq National Market; or
(vii) the issuance of shares of Common Stock in
payment of interest on this Note would result in any
Restricted Person (as defined in Section 2.1) beneficially
owning more than 4.9% of the Common Stock, determined as
provided in the proviso to the first sentence of Section 2.1.
(c) If the Stock Payment Option is elected, the Company shall
issue and dispatch or cause to be dispatched to the Holder one or more
certificates for the aggregate number of whole shares of Common Stock determined
by dividing the per share Computed Price of the Common Stock on the applicable
Interest Payment Date into the total amount of lawful money of the United States
of America which the Holder would receive if the aggregate amount of interest on
this Note which is being paid in shares of Common Stock were being paid in such
lawful money; provided, however, that if in connection with any such election
the Company shall have failed to deliver the appropriate number of shares of
Common Stock to the Holder within three Business Days after the applicable
Interest Payment Date, then the Company shall not be entitled to use the Stock
Payment Option in respect of such Interest Payment Date, such cash interest
shall be immediately due and payable and the Company shall pay the interest for
such Interest Payment Date in cash with Default Interest, at the rate provided
in the Note, from such Interest Payment Date until paid. No fractional shares
will be issued in payment of interest on this Note. In lieu thereof, the Company
may, at its option, issue a number of shares of Common Stock which reflects a
rounding up to the next whole number or may pay lawful money of the United
States of America. The shares of Common Stock issued or to be issued by the
Company in payment of interest on this Note are sometimes referred to herein as
the "Payment Shares."
(d) If the Company exercises the Stock Payment Option with
respect to a payment of interest on this Note, the Company shall deliver to the
Holder, on the date on which Payment Shares for such payment of interest on this
Note are to be received by the Holder, a Company Certificate setting forth (i)
the total amount of the interest payment to which the Holder is entitled, (ii)
the portion of the interest payment being made in Payment Shares, (iii) the
number of Payment Shares allocable to such payment, as calculated pursuant to
this Section 1.2, (iv) any rounding adjustment to such number or any payment
necessary to be made pursuant to Section 1.2(c), (v) a brief statement of the
facts requiring such adjustment, (vi) the number of Payment Shares issuable with
respect to each $100 of interest on this Note after such adjustment and (vii) a
brief statement that none of the conditions set forth in Section 1.2(b) has
occurred and is existing. Such Company Certificate shall be accompanied by the
certificates, each duly issued in the name of the Holder, representing the
Payment Shares. Such Company Certificate shall be conclusive evidence of the
correctness of the calculation of the number of Payment Shares allocable to the
payments to which such Company Certificate relates and of any adjustments to
such number made
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pursuant to this Section 1.2 in the absence of manifest error. In addition, on
or before the pertinent payment date, the Company shall cause the transfer agent
for the Common Stock to prepare and issue the certificates representing the
Payment Shares in the name of the Holder before being so delivered by the
Company on the payment date.
(e) The Payment Shares, when issued pursuant to and in
compliance with this Section 1.2, shall be, and for all purposes shall be deemed
to be, validly issued, fully paid and nonassessable shares of Common Stock; the
issuance and delivery thereof is in all respects hereby authorized; and the
issuance thereof, together with lawful money of the United States of America, if
any, paid in lieu of fractional shares of such Common Stock, will be, and for
all purposes shall be deemed to be, in full discharge and satisfaction of the
Company's obligation to pay the interest on this Note to which such Payment
Shares relate.
ARTICLE II
CONVERSION; REDEMPTION RIGHTS AND OBLIGATIONS
2.1 CONVERSION RIGHT. The Holder shall have the right from and
after the date of original issuance of this Note and then at any time on or
prior to the date this Note is paid in full, to convert at any time all or from
time to time any part of the outstanding and unpaid principal amount of this
Note of at least $50,000, or such lesser amount as shall remain unpaid at the
time of the conversion or may be permitted from time to time by the Company in
its discretion, and accrued and unpaid interest on the principal amount to be
converted and on any such interest, into fully paid and nonassessable shares of
Common Stock at the conversion price determined as provided herein (the
"Conversion Price"). Notwithstanding any other provision of this Note, in no
event shall the Holder be entitled at any time to convert any portion of the
principal amount of this Note (and accrued and unpaid interest thereon and on
any such interest) in excess of that portion of the principal amount of this
Note (and accrued and unpaid interest thereon and on any such interest) upon
conversion of which the sum of (1) the number of shares of Common Stock
beneficially owned by the Holder (including shares of Common Stock beneficially
owned by any person whose beneficial ownership of shares of Common Stock would
be aggregated with the Holder's beneficial ownership of shares of Common Stock
for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and Regulation 13D-G thereunder (each an "Aggregated Person"
and collectively, the "Restricted Persons")) (other than shares of Common Stock
deemed beneficially owned by the Holder or any Aggregated Person of the Holder
through the ownership of (x) the unconverted portion of the principal amount of
this Note and the Other Notes and accrued and unpaid interest thereon and on any
such interest and (y) the unconverted or unexercised portion of any instrument
which contains limitations similar to those set forth in this sentence) and (2)
the number of shares of Common Stock issuable upon conversion of the portion of
the principal amount of this Note and accrued and unpaid interest thereon and on
any such interest with respect to which the determination in this sentence is
being made, would result in beneficial ownership by the Holder and all
Aggregated Persons of the Holder of more than 4.9% of the outstanding shares of
Common Stock. For purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the 1934 Act,
and Regulation 13D-G thereunder, except as otherwise provided in clause (1) of
the immediately preceding sentence. For purposes of the second preceding
sentence, the Company shall be entitled to rely, and shall be fully protected in
relying, on any statement or representation made by the Holder to the Company in
connection with a particular conversion, without any obligation on the part of
the Company to make any inquiry or investigation or to examine its records or
the records of any transfer agent for the Common Stock and without any liability
of the Company with respect thereto. The number of shares of Common Stock to be
issued upon each conversion of this Note shall be determined by dividing the sum
of (1) that portion of the principal amount of this Note to be converted plus
(2) accrued and unpaid interest on
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such principal amount to the date the Conversion Notice for such conversion is
given to the Company plus (3) Default Interest, if any, on the amount referred
to in the immediately preceding clause (2) at the rate provided in this Note to
the date such Conversion Notice is given to the Company, by the Conversion Price
in effect on the date the Conversion Notice for such conversion is given to the
Company.
2.2 CONVERSION PRICE. The Conversion Price shall be (x) during
the period of 75 days commencing on the SEC Effective Date, the greater of (1)
$25.00 (subject to equitable adjustment from time to time on terms reasonably
acceptable to the Majority Holders for (a) stock splits, (b) stock dividends,
(c) combinations, (d) capital reorganizations, (e) issuance to all holders of
Common Stock of rights or warrants to purchase shares of Common Stock, (f) the
distribution by the Company to all holders of Common Stock of evidences of
indebtedness of the Company or cash (other than regular quarterly cash
dividends), (g) tender offers by the Company or any subsidiary of the Company
for, or other repurchases of shares of, Common Stock in one or more transactions
which, individually or in the aggregate, result in the purchase of more than ten
percent of the Common Stock outstanding and (h) similar events relating to the
Common Stock, in each such case which occur on or after the date of the Note
Purchase Agreement) and (2) the Computed Price for the date on which the
applicable Conversion Notice is given to the Company and (y) from the date which
is 76 days after the SEC Effective Date and thereafter, the Computed Price for
the date on which the applicable Conversion Notice is given to the Company.
Notwithstanding any other provision of this Section 2.2, if in connection with a
proposed acquisition of the Company or its business, whether by means of tender
offer, merger, consolidation or purchase of all or substantially all of the
assets of the Company the Company notifies the Holder as contemplated by Section
8(c)(5) of the Note Purchase Agreement that the Registration Statement may not
be used for any period by the Holder for resale of the shares of Common Stock
acquired upon conversion of this Note or of any Payment Shares, then for a
period of six Trading Days commencing on the first full Trading Day that such
Registration Statement once again is available for such resales, the Conversion
Price shall be the lower of (x) the Conversion Price determined in accordance
with the first sentence of this Section 2.2 and (y) the last reported sale price
of the Common Stock on the Trading Day immediately preceding the date the
Company so notified the Holder (or, if no trading of the Common Stock occurred
on such date, on the then most recent Trading Day next preceding the date the
Company so notified the Holder on which Trading Date the Common Stock traded).
2.3 AUTHORIZED SHARES. The Company covenants that, during the
period the conversion rights exist, the Company will reserve from its authorized
and unissued Common Stock [INSERT THE AGGREGATE NUMBER OF SHARES REGISTERED FOR
THIS NOTE AND THE OTHER NOTES AT THE TIME THIS NOTE IS ISSUED] shares, or such
greater number of shares as the Company shall, by notice to the Holder, specify
and which shall be registered on the Registration Statement (in each such case
such amount to be subject to equitable adjustment from time to time on terms
reasonably acceptable to the Majority Holders for stock splits, stock dividends,
combinations, capital reorganizations and similar events relating to the Common
Stock occurring on or after the date of the Note Purchase Agreement) to provide
for the issuance of Common Stock upon the full conversion of this Note and the
Other Notes, subject to reduction from time to time by the number of shares of
Common Stock issued on conversion of this Note and the Other Notes. The Company
shall, from time to time, authorize additional shares of Common Stock to be
issuable pursuant to the terms of this Note as shall be necessary to ensure that
an adequate number of shares of Common Stock are at all times authorized for
issuance upon full conversion of this Note and the Other Notes and the payment
of interest on this Note in accordance with Section 1.2 and on the Other Notes
in accordance with the terms thereof. The Company represents and warrants that
upon issuance, such shares of Common Stock will be duly and validly issued,
fully paid and non-assessable. The Company agrees that its issuance of this Note
shall constitute full authority to its officers and agents who are charged with
the duty of executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock upon the conversion of this Note.
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2.4 METHOD OF CONVERSION. (a) The right of the Holder to
convert this Note shall be exercised by delivering to the Company a Conversion
Notice stating the principal amount of this Note which, together with interest
as provided in this Note, is being converted. The Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issue and delivery of shares of Common Stock or other securities or property on
conversion of this Note in a name other than that of the Holder, and the Company
shall not be required to issue or deliver any such shares or other securities or
property unless and until the person or persons requesting the issuance thereof
shall have paid to the Company the amount of any such tax or shall have
established to the satisfaction of the Company that such tax has been paid. The
Holder shall be responsible for the amount of any withholding tax payable in
connection with such conversion.
(b) If the Holder elects to convert this Note in accordance
with Section 2.1, the Holder shall not be required to physically surrender this
Note to the Company unless the entire unpaid principal amount of this Note is so
converted. The Company shall maintain records showing the principal amount so
converted and the dates of such conversions or shall use such other method,
reasonably satisfactory to the Holder and the Company, so as not to require
physical surrender of this Note upon each such conversion. In the event of any
dispute or discrepancy, such records of the Company shall be controlling and
determinative in the absence of manifest error. Notwithstanding the foregoing,
if any portion of this Note is converted as aforesaid the Holder may not
transfer this Note unless (1) the Holder first physically surrenders this Note
to the Company, whereupon the Company will forthwith issue and deliver upon the
order of the Holder a new note of like tenor, registered as the Holder (upon
payment by the Holder of any applicable transfer taxes) may request,
representing in the aggregate the remaining unpaid principal amount of this Note
and (2) such transfer is otherwise in compliance with Section 8.7 hereof and the
applicable provisions of the Note Purchase Agreement. THE HOLDER AND ANY
ASSIGNEE, BY ACCEPTANCE OF THIS NOTE, ACKNOWLEDGES AND AGREES THAT, BY REASON OF
THE PROVISIONS OF THIS PARAGRAPH, FOLLOWING CONVERSION OF A PORTION OF THIS
NOTE, THE UNPAID AND UNCONVERTED PRINCIPAL AMOUNT OF THIS NOTE REPRESENTED BY
THIS NOTE MAY BE LESS THAN THE AMOUNT STATED ON THE FACE HEREOF.
(c) In case of any consolidation or merger of the Company with
any other corporation (other than a wholly-owned subsidiary of the Company) in
which the Company is not the surviving corporation, or in case of any sale or
transfer of all or substantially all of the assets of the Company, or in the
case of any share exchange pursuant to which all of the outstanding shares of
Common Stock are converted into other securities or property, the Company shall
make appropriate provision or cause appropriate provision to be made so that the
Holder shall have the right thereafter to convert this Note into the kind of
shares of stock and other securities and property receivable upon such
consolidation, merger, sale, transfer or share exchange by the persons who were
holders of Common Stock immediately prior to the effective date of such
consolidation, merger, sale, transfer or share exchange and on a basis which
preserves the economic benefits of the conversion rights of the Holder on a
basis as nearly as practical as such rights existed prior to such consolidation,
merger, sale, transfer or share exchange. If, in connection with any such
consolidation, merger, sale, transfer or share exchange each holder of shares of
Common Stock is entitled to elect to receive either securities, cash or other
assets upon completion of such transaction, the Company shall provide or cause
to be provided to the Holder the right to elect the securities, cash or other
assets into which this Note shall be convertible after completion of any such
transaction on the same terms and subject to the same conditions applicable to
holders of the Common Stock (including, without limitation, notice of the right
to elect, limitations on the period in which such election shall be made, and
the effect of failing to exercise the election). Notwithstanding the foregoing,
in connection with any such merger, consolidation, sale, transfer or exchange,
the Company shall have the right, in lieu of making provision for
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preservation of the economic benefits of the conversion rights of the Holder, to
redeem this Note immediately after completion of such transaction at a
redemption price equal to the sum of (1) the product obtained by multiplying (A)
the sum of (i) the outstanding principal amount of this Note on the date of such
redemption plus (ii) accrued and unpaid interest on such principal amount to the
date of such redemption times (B) 125% plus (2) accrued and unpaid Default
Interest, if any, on the amount referred to in the immediately preceding clause
(1)(A)(ii) at the rate provided in this Note to the date of such redemption. The
Company shall not effect any such transaction unless the provisions of this
paragraph have been complied with. The above provisions shall similarly apply to
successive consolidations, mergers, sales, transfers or share exchanges.
Whenever the Company shall propose to take any of the actions
specified in this Section 2.4(c), the Company shall cause a notice to be mailed
at least 20 days prior to the date on which the books of the Company will close
or on which a record will be taken for such action, to the Holder. Such notice
shall specify the action proposed to be taken by the Company and the date as of
which holders of record of the Common Stock shall participate in any such
actions or be entitled to exchange their Common Stock for securities or other
property, as the case may be. Failure by the Company to mail the notice or any
defect in such notice shall not affect the validity of the transaction.
(d) Upon receipt by the Company from the Holder of a telephone
line facsimile transmission of a Conversion Notice meeting the requirements for
conversion as provided in Section 2.1 and this Section 2.4, the Company shall
issue and deliver or cause to be issued and delivered to the Holder certificates
for the Common Stock issuable upon such conversion by the close of business on
the third Business Day after the date of such receipt, and as of the close of
business on the date of receipt of such facsimile the Holder shall be deemed to
be the holder of record of the Common Stock issuable upon such conversion, the
outstanding principal amount and the amount of accrued and unpaid interest on
this Note shall be reduced to reflect such conversion, and all rights with
respect to the portion of this Note being so converted shall forthwith terminate
except the right to receive the Common Stock or other securities, cash or other
assets, as herein provided, on such conversion. If the Company shall fail to
issue and deliver or cause to be issued and delivered the certificates for
shares of Common Stock upon any such conversion as required by the preceding
sentence and, as a result of such failure the Holder shall suffer any direct
damages or liabilities from such failure (including, without limitation, margin
interest and the cost of covering a purchase (whether by the Holder or the
Holder's securities broker) or borrowing of shares of Common Stock by the Holder
for purposes of settling any trade involving a sale of shares of Common Stock
made by the Holder during the period beginning on the date of giving such
Conversion Notice and ending on the date the Company delivers or causes to be
delivered to the Holder the shares of Common Stock issuable upon such
conversion), then the Company shall upon demand of the Holder pay to the Holder
an amount equal to the actual direct, out-of-pocket damages and liabilities
suffered by the Holder which the Holder documents to the reasonable satisfaction
of the Company; provided, however, that the Company shall not be liable to the
Holder to the extent the failure of the Company to deliver or cause to be
delivered such shares of Common Stock results from fire, flood, storm,
earthquake, shipwreck, strike, war, acts of terrorism, crash involving
facilities of a common carrier, act of God or any similar event outside the
control of the Company; provided further, however, that the Holder (1) shall
notify the Company in writing (or by telephone conversation, confirmed in
writing) as promptly as practicable after becoming aware that shares of Common
Stock issued on conversion of this Note have not been received as provided in
the preceding sentence and (2) upon becoming aware such certificates have not
been received as provided in the preceding sentence, thereafter use commercially
reasonable steps to mitigate any damages or liabilities for which the Company
may be held liable to the Holder hereunder; and provided even further, however,
that in computing the amount of such actual direct, out-of-pocket damages from
covering a purchase of shares of Common Stock, the amount thereof shall be
reduced by the Market Value on the date of delivery to the Holder of the shares
of Common Stock the failure of which to deliver on a timely basis gave rise to
liability of the
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Company hereunder. As used herein, the "Market Value" on any date shall mean (i)
if the Common Stock is listed on a national securities exchange, the last
reported bid price per share of the Common Stock on the principal securities
exchange on which the Common Stock is listed that shall be consolidated for
consolidated trading, if applicable to such exchange on the date immediately
preceding such date of delivery, or (ii) if the Common Stock is not so listed,
the last reported bid price per share of the Common Stock as reported on the
Nasdaq National Market on the date immediately preceding such date of delivery
or (iii) if the Common Stock is neither so listed nor so reported, the last
reported bid price per share of the Common Stock as quoted by a registered
broker-dealer on the date immediately preceding such date of delivery or for
which such quote is available immediately prior to such date; provided that such
quotes must have been available for at least 15 days in the preceding thirty-day
period, or (iv) if the Common Stock is not so listed, so reported or so quoted,
the fair value of the Common Stock on such date, as determined by a qualified
investment banking firm selected and paid by the Company and reasonably
acceptable to the Holder.
(e) No fractional shares of Common Stock shall be issued upon
conversion of this Note but, in lieu of any fraction of a share of Common Stock
which would otherwise be issuable in respect of the aggregate number of such
shares converted at one time by the same holder, the Company may round the
number of shares of Common Stock issued on such conversion up to the next
highest whole share or may pay lawful money of the United States of America,
based on a value of one share of Common Stock being equal to the last sale price
of the Common Stock on the date the applicable Conversion Notice is given to the
Company, as reported by Bloomberg, L.P.
2.5 LIMITATION ON SHARES ISSUABLE ON CONVERSION; MANDATORY
REDEMPTION. (a) Notwithstanding any other provision herein, the Company shall
not be required to issue upon conversion of this Note more than [INSERT PRO RATA
PORTION OF THE NUMBER OF SHARES REGISTERED AT THE TIME THE NOTE IS ISSUED]
shares, or such greater number of shares as shall be included in the
Registration Statement for resale by the Holder and which the Company shall
specify by notice to the Holder from time to time (in each such case such amount
to be subject to equitable adjustment from time to time on terms reasonably
acceptable to the Majority Holders for stock splits, stock dividends,
combinations, capital reorganizations and similar events relating to the Common
Stock occurring after the date of the Note Purchase Agreement) of Common Stock
(the "Maximum Share Amount"), upon conversion of this Note unless the Company
shall have defaulted in its obligation to redeem any portion of this Note in
accordance with this Section 2.5 or its obligation to pay the Repurchase Price
in full as and when due (such events referred to hereto as "Maximum Share Amount
Exception Events"). In the case of any such default, the Holder shall be
entitled to convert this Note without regard to the Maximum Share Amount upon
the terms and subject to the limitations in Section 2.5(e). If this Note is
surrendered for split-up into two or more Notes representing an aggregate
principal amount equal to the principal amount of this Note at the time so
surrendered (as reduced by any contemporaneous conversion of this Note), each
Note issued on such split-up shall bear a notation of the portion of the Maximum
Share Amount allocated thereto determined by pro rata allocation from among the
remaining portion of the Maximum Share Amount allocated to this Note at the time
so surrendered.
(b) The Company shall promptly, but in no event later than
three Business Days after the occurrence, give notice to the Holder in the form
attached hereto as EXHIBIT B (by telephone line facsimile transmission at such
number as the Holder has specified in writing to the Company for such purposes
or, if the Holder shall not have specified any such number, by overnight courier
or first class mail, postage prepaid, at the Holder's address as the same
appears on the records of the Company) and the Holder may at any time after the
occurrence give notice to the Company in the form attached hereto as EXHIBIT C,
in either case, if on any five trading days ending on or after the 76th day
after the date of the original issuance of this Note (the
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<PAGE> 9
"Inconvertibility Days") within any period of ten consecutive trading days the
Company would not have been required to convert this Note in full as a
consequence of the limitations set forth in Section 2.5(a) had this Note been
converted in full into Common Stock on each such day, determined at the
Conversion Price applicable on each such date and without regard to the
limitation, if any, on the Holder contained in the proviso to the first sentence
of Section 2.1 and without regard to any Maximum Share Amount Exception Event
which has occurred (any such notice, whether given by the Company or the Holder,
an "Inconvertibility Notice"). If the Company shall have given or been required
to give any Inconvertibility Notice, or if the Holder shall have given any
Inconvertibility Notice, then within three Business Days (the "Mandatory
Redemption Period") after the earlier of (x) the date such Inconvertibility
Notice is given and (y) the date such Inconvertibility Notice was required to be
given, the Company shall redeem the portion of this Note (which, if applicable,
shall be all of this Note) as shall not, on the Business Day prior to the date
of such redemption, be convertible into shares of Common Stock by reason of the
limitations set forth in Section 2.5(a) (determined without regard to the
limitation, if any, on the Holder contained in the proviso to the first sentence
of Section 2.1) at a price per share equal to the Redemption Price (as defined
herein) (such portion, the "Inconvertible Portion") unless prior to the
expiration of the applicable Mandatory Redemption Period the Company and the
Majority Holders shall, by one or more mutual agreements in the form attached
hereto as EXHIBIT D (a "Mandatory Redemption Waiver"), waive the Company's
obligation to make such redemption. If a Mandatory Redemption Waiver is to be
given, then on or before the date of execution and delivery of such Mandatory
Redemption Waiver, the Company shall, in accordance with the Security Agreement,
deposit Collateral (as defined in the Security Agreement) solely for the benefit
of the Holder having a Collateral Value at least equal to the lesser of (a) 200%
of the Inconvertible Portion and (b) 110% of the original principal amount of
this Note, and thereafter during the Waiver Period set forth in such Mandatory
Redemption Waiver maintain Collateral having a Collateral Value under and in
accordance with the Security Agreement in an amount at least equal to the lesser
of (x) 200% of the Inconvertible Portion from time to time and (y) 110% of the
original principal amount of this Note. If the Company shall have become
obligated to redeem all or any portion of this Note pursuant to this Section 2.5
and, prior to the expiration of the Mandatory Redemption Period with respect
thereto, the Company would have been able, within the limitations set forth in
Section 2.5(a), to satisfy its obligations to the Holder to convert all of this
Note (determined without regard to the limitation, if any, on the Holder
contained in the proviso to the first sentence of Section 2.1) on any two
trading days within any period of five consecutive trading days commencing after
the period of ten consecutive trading days which gave rise to the applicable
Inconvertibility Notice from the Company or the Holder, as the case may be, had
this Note been surrendered for conversion in full into Common Stock on each of
such two trading days within such five-trading-day period, then the Company
shall not be required to redeem any of this Note by reason of such
Inconvertibility Notice. The occurrence of a Maximum Share Amount Exception
Event shall not relieve the Company of its obligations under this Section
2.5(b).
(c) Notwithstanding the giving of any Inconvertibility Notice
by the Company or the giving or the absence of any Inconvertibility Notice by
the Holder or any redemption of any portion of this Note, thereafter the
provisions of Section 2.5(b) shall continue to be applicable on any occasion.
(d) As used herein, the term "Redemption Date" means the date
on which the Company is required to redeem all or any portion of this Note as
provided in this Section 2.5. On the Redemption Date, the Company shall make
payment in immediately available funds of the applicable Redemption Price to the
Holder or upon the order of the Holder as specified by the Holder in writing to
the Company at least one Business Day prior to the Redemption Date. If the
Company is required to redeem all or any portion of this Note pursuant to this
Section 2.5, the Company shall make payment to the Holder of an amount equal to
the sum of (1) the product obtained by multiplying (A) the sum of (i) the
principal amount of this Note to be redeemed plus (ii) accrued and unpaid
interest on such principal amount to the Redemption Date times (B) 110%
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<PAGE> 10
plus (2) accrued and unpaid Default Interest, if any, on the amount referred to
in the immediately preceding clause (1)(A)(ii) at the rate provided in this Note
to the Redemption Date (such sum being referred to herein as the "Redemption
Price"). Upon redemption of less than all of this Note, promptly, but in no
event later than three Business Days after surrender of this Note to the
Company, the Company shall issue a replacement Note of like tenor for the
portion of this Note which has not been redeemed.
(e) Notwithstanding the limitation in Section 2.5(a), if the
Company shall have failed to pay in full the Redemption Price or the Repurchase
Price for any portion (which may be all) of this Note when the same is due and
payable, the Holder shall have the right to convert such portion of this Note
into Common Stock in accordance with Section 2.1 (subject to the numerical limit
contained therein based on the number of shares of Common Stock beneficially
owned by the Holder); provided, however, that the shares of Common Stock
received by the Holder upon any such conversion may be subject to restrictions
on resale by the Holder arising under applicable securities laws to the extent
not registered for resale by the Holder pursuant to the Registration Statement;
and provided, further, however, that in no event shall the aggregate number of
shares of Common Stock issued upon conversion of this Note and the Other Notes
and upon payment of interest thereon exceed [BEFORE SIGNING NOTE INSERT 20% OF
THE COMMON STOCK OUTSTANDING] (such amount to be subject to equitable adjustment
from time to time for stock splits, stock dividends, combinations, capital
reorganizations and similar events relating to the Common Stock occurring after
the date of the Note Purchase Agreement).
2.6 OPTIONAL REDEMPTION BY COMPANY. (a) If on any day the
Conversion Price which would be applicable to a Conversion Notice given on such
day would be less than $20.83 per share of Common Stock (adjusted as provided
herein, the "Minimum Conversion Price"), then the Company shall have the right
to redeem this Note in whole, but not in part, pursuant to this Section if and
only if the Company simultaneously redeems all Other Notes, in whole but not in
part, on the same terms. The Minimum Conversion Price shall be adjusted as
follows: (x) equitable adjustment from time to time on terms reasonably
acceptable to the Majority Holders for (1) stock splits, (2) stock dividends,
(3) combinations, (4) capital reorganizations, (5) issuance to all holders of
Common Stock of rights or warrants to purchase shares of Common Stock at a price
per share less than the Minimum Conversion Price as theretofore adjusted in
accordance herewith, (6) the distribution by the Company to all holders of
Common Stock of evidences of indebtedness of the Company or cash (other than
regular quarterly cash dividends), (7) tender offers by the Company or any
subsidiary of the Company or other repurchases of shares of Common Stock in one
or more transactions which, individually or in the aggregate, result in the
purchase of more than ten percent of the Common Stock outstanding and (8)
similar events relating to the Common Stock, in any such case which occur on or
after the date of the Note Purchase Agreement, and (y) in case at any time
following the date which is 75 days after the date of original issuance of this
Note the Company shall file a registration statement under the Act covering the
resale by the Holder of shares of Common Stock issuable on conversion of this
Note which shares are in addition to the shares so registered under the Act on
or before such 75th day (the "Additional Shares"), then at the time such
registration statement is ordered effective by the SEC, the Minimum Conversion
Price shall be adjusted by multiplying the Minimum Conversion Price in effect
immediately prior to the time such registration statement is ordered effective
by the SEC by a fraction the numerator which is the sum of (A) [INSERT PRO RATA
PORTION OF THE NUMBER OF SHARES REGISTERED AT THE TIME OF INITIAL ISSUANCE OF
THIS NOTE] plus (B) such additional shares as have been registered for resale
after the date of initial issuance of this Note other than the Additional
Shares, and the denominator of which is the sum of (A) [INSERT PRO RATA PORTION
OF THE NUMBER OF SHARES REGISTERED AT THE TIME OF INITIAL ISSUANCE OF THIS NOTE]
plus (B) such additional shares as have been registered for resale after the
date of initial issuance of this Note other than the Additional Shares plus (C)
the number of Additional Shares.
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<PAGE> 11
(b) In order to exercise its right of redemption under this
Section , the Company shall, not later than 8:45 a.m., New York City time, on a
day on which it shall have the right to redeem this Note pursuant to this
Section , give notice to the Holder in the form attached hereto as EXHIBIT E (an
"Optional Redemption Notice") stating that: (1) on the date of such Optional
Redemption Notice the Conversion Price which would be applicable to a Conversion
Notice given on such date would be less than the Minimum Conversion Price, (2)
the Company is exercising its right to redeem this Note in whole in accordance
with this Section 2.6 at the Optional Redemption Price and (3) that this Note
may not be converted after such Optional Redemption Notice is given except as
provided in Section 2.6(a) hereof. The Company shall, contemporaneously with the
giving of the Optional Redemption Notice, contact the Holder by telephone at
such number as shall have been provided by the Holder to the Company for such
purpose to inform the Holder than an Optional Redemption Notice is being given
on such date.
(c) If the Company shall have given an Optional Redemption
Notice, then thereafter the Holder shall not be entitled to convert this Note
except (1) on the date such Optional Redemption Notice is given (the "Optional
Redemption Notice Date") the Holder may convert up to five percent of the
principal amount of this Note outstanding at the time (and in connection
therewith may convert the accrued and unpaid interest on the principal amount to
be converted and on any such interest) in accordance with the terms of this Note
(such conversion being referred to herein as an "Excepted Conversion"); (2) if
the Majority Holders give an Optional Redemption Revocation (as defined herein),
the Holder may convert this Note in accordance with Section 2.6(e); and (3) if
the Majority Holders do not give an Optional Redemption Revocation and the
Company fails to pay the Optional Redemption Price of this Note on the Optional
Redemption Date, then thereafter the Holder may convert this Note in accordance
with its terms.
(d) If the Company gives an Optional Redemption Notice, then,
unless revoked by an Optional Redemption Revocation as provided in Section
2.6(e), on the date which is three Business Days after the Optional Redemption
Notice Date (the "Optional Redemption Date") the Company shall pay to or upon
the order of the Holder by wire transfer of immediately available funds to such
account as shall be specified for such purpose by the Holder an amount equal to
the Optional Redemption Price. The "Optional Redemption Price" of this Note
shall be an amount equal to the sum of (1) the product obtained by multiplying
(A) the sum of (i) the outstanding principal amount of this Note on the day
following the date the Company gives an Optional Redemption Notice plus (ii)
accrued and unpaid interest on such principal amount to the Optional Redemption
Date times (B) 110% plus (2) accrued and unpaid Default Interest, if any, on the
amount referred to in the immediately preceding clause (1)(A)(ii) at the rate
provided in this Note to the Optional Redemption Date.
(e) Notwithstanding any other provision of this Section 2.6,
if the Company shall have given an Optional Redemption Notice, the Majority
Holders, acting in their sole discretion, may by one or more notices to the
Company in the form attached hereto as EXHIBIT F (an "Optional Redemption
Revocation") given at any time prior to payment of the Optional Redemption Price
on the Optional Redemption Date in respect of such Optional Redemption Notice
(x) revoke such Optional Redemption Notice and (y) in addition to the right to
make Excepted Conversions on the date such Optional Redemption Notice is given,
have the right during the period from the applicable Optional Redemption Notice
Date to the date which is five trading days after such date (the "Revocation
Period"), to convert this Note only as provided in such Optional Redemption
Revocation, in which case such Optional Redemption Notice shall be deemed
revoked and this Note shall be convertible by the Holder during the Revocation
Period as set forth in such Optional Redemption Revocation. Any Optional
Redemption Revocation shall be evidenced by the execution and delivery by
telephone line facsimile transmission by the Majority Holders of one or more
Optional Redemption Revocations prior to payment by the Company of the
applicable Optional Redemption Price on the Optional Redemption Date. An
Optional Redemption Revocation shall be valid and apply only as to the Optional
Redemption Notice given on such date
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and shall not affect the Company's right to deliver an Optional Redemption
Notice on any other date after the Revocation Period covered by such Optional
Redemption Revocation.
ARTICLE III
CERTAIN COVENANTS
3.1 MAINTENANCE OF CASH, CASH EQUIVALENT AND INVESTMENT
BALANCES. So long as any amount shall be payable by the Company pursuant to this
Note, during the period commencing on the date which is 76 days after the date
of original issuance of this Note, the Company shall at all times maintain
unrestricted Cash, Cash Equivalent and Investment Balances equal to not less
than 200 percent of the portion (which may be all) of the outstanding principal
amount of this Note which at the time is not secured by Government Obligations,
pursuant to a Mandatory Redemption Waiver and the Security Agreement. For
purposes of this Section , the cash and Government Obligations which are pledged
to secure a portion of this Note with respect to which any Mandatory Redemption
Waiver has been given shall not be counted as Cash, Cash Equivalent and
Investment Balances.
3.2 LIMITATIONS ON CERTAIN INDEBTEDNESS. So long as any amount
shall be payable by the Company pursuant to this Note, the Company will not
itself, and will not permit any subsidiary of the Company to, create, assume,
incur or in any manner become liable in respect of, including, without
limitation, by reason of any business combination transaction (all of which are
referred to herein as "incurring"), any Indebtedness (other than Excluded
Indebtedness) on the date hereof unless (1) immediately after the incurring of
such Indebtedness no Event of Default or Repurchase Event shall be continuing
and (2) such Indebtedness contains the provisions set forth in EXHIBIT G
attached hereto providing for the subordination of such Indebtedness to this
Note.
3.3 DEFEASANCE. (a) If (i) the Company shall have deposited
pursuant to the Security Agreement, in trust, Government Obligations, having a
Collateral Value at least equal to 110% of the outstanding principal amount of
this Note and (ii) the Holder shall have at the time of such deposit and at all
times thereafter until all amounts payable by the Company under this Note shall
have been paid in full a first priority perfected security interest in such
Government Obligations, not subject to any other Lien, pursuant to the Security
Agreement, then on the date which is 90 days after such deposit the provisions
of Section 3.1 and Section 3.2 of this Note shall cease to be of further effect.
(b) Promptly, but in no event later than ten days after a
deposit pursuant to Section 3.3(a), the Company shall notify the Holder of the
making of such deposit and the Collateral Value of the amount of such deposit.
3.4 TENDER OFFERS. The Company will not itself, and will not
permit any subsidiary of the Company to (1) make any tender offer or exchange
offer (a "Tender Offer") for outstanding shares of Common Stock unless the
Company contemporaneously therewith makes an offer, or (2) enter into an
agreement regarding a Tender Offer for outstanding shares of Common Stock by any
person other than the Company or any subsidiary of the Company unless such
person agrees with the Company to make an offer, in either such case, to the
Holder to purchase the same percentage of the outstanding principal amount of
this Note held by the Holder as the percentage of outstanding shares of Common
Stock offered to be purchased in such Tender Offer, at a price equal to the sum
of the product obtained by multiplying (A) the sum of (i) the principal amount
of this Note to be purchased plus (ii) accrued and unpaid interest on such
principal amount to the date of purchase times (B) 110% plus (2) accrued and
unpaid Default Interest, if any, on the amount referred to in the immediately
preceding clause (1)(A)(ii) at the rate provided in this Note to the date of
purchase .
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3.5 CERTIFICATE OF COMPLIANCE. Within five days after the end
of each calendar month, so long as any amount remains unpaid on this Note, the
Company shall furnish to the Holder a certificate, signed by the Chief Financial
Officer of the Company, in the form attached hereto as Exhibit H, as to the
compliance by the Company with Section 3.1 of this Note and Section 3 of the
Security Agreement or Section 3.3 of this Note and Section 3(f) of the Security
Agreement, as the case may be. In addition, the Company shall from time to time
on written request of the Majority Holders provide such information concerning
such compliance as may reasonably be requested by the Majority Holders.
ARTICLE IV
EVENTS OF DEFAULT
If any of the following events of default (each, an "Event of
Default") shall occur:
4.1 FAILURE TO PAY PRINCIPAL OR INTEREST. The Company fails
(a) to pay the principal, Redemption Price or Repurchase Price hereof when due,
whether at maturity, upon redemption, upon acceleration or otherwise, as
applicable, or (b) to pay any installment of interest hereon when due and, in
the case of this clause (b) of this Section 4.1 only, such failure continues for
a period of ten (10) days after the due date thereof;
4.2 CONVERSION AND THE SHARES. The Company fails to issue
shares of Common Stock to the Holder upon exercise by the Holder of the
conversion rights of the Holder in accordance with the terms of this Note or
fails to transfer any certificate for shares of Common Stock issued to the
Holder upon conversion of this Note or in payment of interest on this Note as
and when required by this Note;
4.3 BREACH OF COVENANT. The Company (a) fails to comply with
any provision of Article III of this Note or (b) breaches any other material
covenant or other material term or condition of this Note (other than as
specifically provided in Sections 4.1, 4.2 and 4.3(a) hereof), the Note Purchase
Agreement, and in the case of this clause (b) of this Section 4.3 only, such
breach continues for a period of ten (10) days after written notice thereof to
the Company from the Holder or within 30 days after delivery of such notice if,
and only if, such default is reasonably capable of cure within 30 days after
such notice and at all times during such 30-day period the Company has been
diligently taking action to cure such default and such cure cannot be completed
within such 10-day period;
4.4 BREACH OF REPRESENTATIONS AND WARRANTIES. Any
representation or warranty of the Company made herein or in any agreement,
statement or certificate given in writing pursuant hereto or in connection
herewith (including, without limitation, the Note Purchase Agreement) shall be
false or misleading in any material respect when made;
4.5 CERTAIN VOLUNTARY PROCEEDINGS. The Company or any material
subsidiary of the Company shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due or shall
admit in writing its inability generally to pay its debts as they become due;
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4.6 CERTAIN INVOLUNTARY PROCEEDINGS. An involuntary case or
other proceeding shall be commenced against the Company or any material
subsidiary of the Company seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of sixty (60) consecutive
days;
4.7 JUDGMENTS. Any court of competent jurisdiction shall enter
one or more final judgments against the Company or any subsidiary of the Company
or any of their respective properties or other assets in an aggregate amount in
excess of $5,000,000, which is not vacated, bonded, stayed, discharged,
satisfied or waived for a period of thirty (30) consecutive days;
4.8 DEFAULT UNDER OTHER AGREEMENTS. (a) the Company or any
subsidiary shall (i) default in any payment with respect to any indebtedness for
borrowed money (other than this Note) which indebtedness has an outstanding
principal amount in excess of $10,000,000 individually or $15,000,000 in the
aggregate for the Company and its subsidiaries, beyond the period of grace, if
any, provided in the instrument or agreement under which such indebtedness was
created or (ii) default in the observance or performance of any agreement,
covenant or condition relating to any such indebtedness 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 a trustee or agent on behalf of such holder or holders) to
cause, any such indebtedness to become due prior to its stated maturity and such
default or event shall continue beyond the period of grace, if any, provided in
the instrument or agreement under which such indebtedness was created (after
giving effect to any consent or waiver obtained and then in effect thereunder);
or (b) any indebtedness of the Company or any of its subsidiaries which has an
outstanding principal amount in excess of $10,000,000 individually or
$15,000,000 in the aggregate shall, in accordance with its terms, be declared to
be due and payable, or required to be prepaid other than by a regularly
scheduled or required payment prior to the stated maturity thereof;
4.9 DELISTING OF COMMON STOCK. The Common Stock shall cease to
be listed on any of the Nasdaq National Market, the NYSE or the AMEX; or
4.10 SECURITY AGREEMENT. The occurrence of any Event of
Default (as defined in the Security Agreement),
then upon the occurrence and during the continuation of any Event of Default
specified in Section 4.1, 4.2, 4.3, 4.4, 4.7, 4.8, 4.9 or 4.10 at the option of
the Holder the Company shall, and upon the occurrence of any Event of Default
specified in Section 4.5 or 4.6, the Company shall, pay to the Holder an amount
equal to the sum of (1) the product obtained by multiplying (A) the sum of (i)
the outstanding principal amount of this Note plus (ii) accrued and unpaid
interest on such principal amount to the date of payment times (B) 110% plus (C)
accrued and unpaid Default Interest, if any, on the amount referred to in the
immediately preceding clause (1)(A)(ii) at the rate provided in this Note to the
date of payment and all other amounts payable hereunder shall immediately become
due and payable, all without demand, presentment or notice, all of which hereby
are expressly waived, together with all costs, including, without limitation,
legal fees and expenses, of collection, and the Holder shall be entitled to
exercise all other rights and remedies available at law or in equity, including
all rights and remedies under or in connection with the Security Agreement.
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ARTICLE V
REPURCHASE UPON A REPURCHASE EVENT
5.1 REPURCHASE RIGHT. If there shall occur a Repurchase Event
(as defined in Section 5.3 hereof), then the Holder shall have the right, at the
Holder's option, to require the Company to repurchase all of this Note, or any
portion hereof (in a minimum principal amount of $500,000 or integral multiples
thereof (or such lesser remaining principal amount of this Note)), on the
repurchase date that is three (3) Business Days after the date of the Holder
Notice (as defined in Section 5.2(b) below) delivered with respect to such
Repurchase Event. The Holder shall have the right to require the Company to
repurchase all or any such portion of this Note if a Repurchase Event occurs at
any time while any portion of the principal amount of this Note is outstanding
at a purchase price equal to the sum of (1) the product obtained by multiplying
(A) the sum of (i) the principal amount of this Note to be repurchased plus (ii)
accrued and unpaid interest on such principal amount to the date of such
repurchase times (B) 110% plus (2) accrued and unpaid Default Interest, if any,
on the amount referred to in the immediately preceding clause (b) at the rate
provided in this Note to the repurchase date (such sum being referred to herein
as the "Repurchase Price"). The occurrence of a Maximum Share Amount Exception
Event shall not relieve the Company of its obligations under this Article V.
5.2 NOTICES; METHOD OF EXERCISING REPURCHASE RIGHTS, ETC. (a)
On or before the fifth (5th) Business Day after the occurrence of a Repurchase
Event, the Company shall give to the Holder a notice in the form attached hereto
as EXHIBIT I (the "Company Notice") of the occurrence of the Repurchase Event
and of the repurchase right set forth herein arising as a result thereof. Such
notice shall set forth:
(i) the date by which the repurchase right must be exercised,
and
(ii) a description of the procedure (set forth below) which
the Holder must follow to exercise the repurchase right.
No failure of the Company to give a Company Notice or defect
therein shall limit the Holder's right to exercise the repurchase right or
affect the validity of the proceedings for the repurchase of this Note or
portion hereof.
(b) To exercise the repurchase right, the Holder shall deliver
to the Company on or before the thirtieth (30th) day after the Company Notice
(or if no such Company Notice has been given, within forty (40) days after the
Holder first learns of the Repurchase Event) (i) notice to the Company (or an
agent designated by the Company for such purpose) of the Holder's exercise of
such right, which notice shall set forth the name of the Holder, the principal
amount of this Note to be repurchased, and a statement that an election to
exercise the repurchase right is being made thereby in the form attached hereto
as EXHIBIT J (the "Holder Notice"), and (ii) this Note, duly endorsed for
transfer to the Company of the portion of the principal amount of this Note to
be repurchased. Such notice by the Holder shall be irrevocable.
(c) If the Company fails to repurchase on the repurchase date
this Note (or portion hereof) as to which the repurchase right has been properly
exercised, then the Repurchase Price for the principal of this Note shall bear
interest to the extent not prohibited by applicable law from the repurchase date
until paid at the rate for Default Interest provided in this Note.
(d) If a portion of this Note is to be repurchased, upon
surrender of this Note to the Company in accordance with the terms of this
Section 5.2, the Company shall execute and deliver to the Holder without service
charge, a new Note or Notes, having the same date hereof and containing
identical terms and conditions, of such denomination or denominations as
requested
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<PAGE> 16
by the Holder in aggregate principal amount equal to, and in exchange
for, the unrepurchased portion of the principal of the Note so surrendered.
5.3 REPURCHASE EVENT. A Repurchase Event shall be defined as
the occurrence of any one of the following events:
(a) For any period of five consecutive trading days following
the date hereof there shall be no Trading Price of the Common Stock on any of
the Nasdaq National Market, the NYSE or the AMEX;
(b) The Common Stock ceases to be listed for trading on the
Nasdaq National Market, the NYSE or the AMEX;
(c) Any consolidation or merger of the Company or any
subsidiary of the Company with or into another entity (other than a merger or
consolidation of a subsidiary of the Company into the Company or a wholly-owned
subsidiary of the Company) where the shareholders of the Company immediately
prior to such transaction do not collectively own at least 51% of the
outstanding voting securities of the surviving corporation of such consolidation
or merger immediately following such transaction;
(d) The adoption of any amendment to the Company's Certificate
of Incorporation (other than any certificate designating a series of preferred
stock of the Company) or the taking of any other action which materially and
adversely affects the rights of the Holder;
(e) The inability for a period of 30 consecutive calendar days
or more or any 30 Trading Days or more (whether or not consecutive) of the
Holder to sell shares of Common Stock issued upon conversion of this Note
pursuant to the Registration Statement required to be filed by the Company
pursuant to the Note Purchase Agreement (1) by reason of the requirements of the
Act, the 1934 Act or any of the rules or regulations under either thereof or (2)
due to the Registration Statement containing any untrue statement of material
fact or omitting to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or other failure of the
Registration Statement to comply with the rules and regulations of the SEC,
provided, however, that the number of such days for purposes of the
determination in this Section 5.3(e) shall not include any such days when the
Registration Statement is unavailable for use for the sale of shares of Common
Stock due to the requirement for the Company to amend or supplement the
Registration Statement to reflect new or additional information regarding the
Holder or the holder
of any Other Note or any of their intended plans of distribution so long as the
Company shall have used its best efforts to effect such amendment or supplement
promptly as required by the Note Purchase Agreement or any Other Note Purchase
Agreement, as the case may be; or
(f) The occurrence of any Event of Default specified in
Article IV of this Note.
ARTICLE VI
PAYMENT AT MATURITY
6.1 HOLDER ELECTION. The Holder shall have the right,
exercisable at any time prior to the Maturity Date (or such later date as the
Company may permit) by notice to the Company in the form attached hereto as
EXHIBIT K (the "Final Conversion Election"), to elect that upon the Maturity
Date the outstanding amount of this Note shall be converted into shares of
Common Stock in accordance with Section 2.1. The Holder may make such election
by giving notice of the Final Conversion Election at any time prior to the
Maturity Date. If the Holder gives a
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<PAGE> 17
Final Conversion Election, then on the Maturity Date the outstanding amount of
this Note shall be converted into the number of shares of Common Stock
determined in accordance with Section 2.1 (determined without regard to the
limitation, if any, on the Holder contained in the proviso to the first sentence
of Section 2.1). Such conversion, however, shall be subject to the limitations
contained in Section 2.5.
6.2 DEBENTURE ISSUANCE. (a) If the Holder fails timely to make
the Final Conversion Election, then as of the Maturity Date of this Note, the
Company shall issue to the Holder a debenture in the form attached hereto as
EXHIBIT L (the "Debenture") in the principal amount herein provided. The
principal amount of the Debenture shall be (a) the sum of (1) the outstanding
principal amount of this Note, (2) the amount of accrued and unpaid interest on
such principal amount to the Maturity Date and (3) Default Interest, if any, on
the amount referred to in the immediately preceding clause (2) to the Maturity
Date less (b) the sum of (1) the principal amount of this Note, if any, which on
the Maturity Date is inconvertible pursuant to Section 2.5, (2) accrued and
unpaid interest on such principal amount to the Maturity Date and (3) Default
Interest, if any, on the amount referred to in the immediately preceding clause
(2) to the Maturity Date. Notwithstanding the issuance of the Debenture, the
Company shall remain liable for payment of all unpaid amounts due under this
Note which are not included in the principal amount of the Debenture, including,
without limitation, the Redemption Price and the Repurchase Price. If the Holder
shall have failed to give a Final Conversion Election prior to the Maturity
Date, then prior to issuance of the Debenture, the Company shall have the right
within 15 days to contact the Holder and for a period of 15 days after such
notice to seek a Final Conversion Election from the Holder; provided, however,
that if the Holder fails to give a Final Conversion Election within such 15
days, the Company shall immediately issue the Debenture, which shall be dated
the Maturity Date.
(b) The Holder of this Note by its acceptance hereof,
acknowledges and agrees that the Debenture shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the Debenture):
This Debenture has not been registered under the Securities
Act of 1933, as amended (the "Act") or any state securities laws. This
Debenture has been acquired for investment only and may not be sold,
transferred or assigned in the absence of such registration or an
opinion of counsel reasonably satisfactory in form, scope and substance
to the Company that such registration is not required.
This Debenture may not be transferred except as provided in
Section 3.7.
ARTICLE VII
DEFINITIONS
7.1 As used in this Note, the following capitalized terms
shall have the following meanings:
(a) "Act" shall have the meaning provided in the legend on the
first page of this Note.
(b) "Additional Shares" shall have the meaning provided in
Section 2.6(a).
(c) "AMEX" shall mean the American Stock Exchange, Inc.
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<PAGE> 18
(d) "Business Day" shall have the meaning provided in the
second paragraph of this Note.
(e) "Cash, Cash Equivalent and Investment Balances" of any
person at any date shall be determined from books of such person
maintained in accordance with generally accepted accounting principles,
and shall mean the sum of
(1) the cash owned by such person on such date
plus
(2) all assets which would on a balance sheet of such person
prepared as of such date in accordance with generally accepted
accounting principles be classified as cash, cash equivalents or
investments and which, in the case of investments, are within the
investment policies of the Company set forth in Exhibit M hereto,
in each case which are not subject to any Lien other than the Lien
created by the Security Agreement.
(f) "Collateral" shall have the meaning provided in the
Security Agreement.
(g) "Collateral Value" shall have the meaning provided in the
Security Agreement.
(h) "Common Stock" shall have the meaning provided in the
second paragraph of this Note.
(i) "Company" shall have the meaning provided in the first
paragraph of this Note.
(j) "Company Certificate" means a certificate of the Company
signed by an Officer.
(k) "Company Notice" shall have the meaning provided in
Section 5.2(a).
(l) "Computed Price" for any date means 94% of the lowest per
share Trading Price during the Measurement Period with respect to such
date.
(m) "Conversion Notice" means a Notice of Conversion of Senior
Convertible
Note substantially in the form attached hereto as EXHIBIT A, properly
completed and duly executed by the Holder or the Holder's
attorney-in-fact.
(n) "Conversion Price" shall have the meaning provided in
Section 2.2.
(o) "Debenture" shall have the meaning provided in Section
6.2.
(p) "Default Interest" shall have the meaning provided in the
first paragraph of this Note.
(q) "Event of Default" shall have the meaning provided in
Article IV.
(r) "Excepted Conversion" shall have the meaning provided in
Section 2.6(c).
(s) "Excluded Indebtedness" means
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<PAGE> 19
(1) Indebtedness which is outstanding and which would be
reflected on a balance sheet of the Company and its subsidiaries as of
the date hereof prepared in accordance with Generally Accepted
Accounting Principles; and
(2) Indebtedness incurred after the date hereof not in excess
of $10,000,000 aggregate principal outstanding at any one time.
(t) "Final Conversion Election" shall have the meaning
provided in Section 6.1.
(u) "Generally Accepted Accounting Principles" for any Person
shall mean the generally accepted accounting principles and practices
applied by such Person as at and for the year ended December 31, 1995.
(v) "Government Obligations" shall mean direct obligations of,
or obligations the timely payment of the principal of and the interest
on which are unconditionally guaranteed by, the United States of
America and which mature not later than one year after the Maturity
Date.
(w) "Holder" shall have the meaning provided in the first
paragraph of this Note.
(x) "Holder Notice" shall have the meaning provided in Section
5.2(b).
(y) "Inconvertibility Days" shall have the meaning provided in
Section 2.5(b).
(z) "Inconvertibility Notice" shall have the meaning provided
in Section 2.5(b).
(aa) "Inconvertible Portion" shall have the meaning provided
in Section 2.5(b).
(bb) "Indebtedness" as used in reference to any person shall
mean all indebtedness of such person for borrowed money, the purchase
price of goods and services and obligations under leases which are
required to be capitalized in accordance with Generally Accepted
Accounting Principles and shall include all such indebtedness
guaranteed in any manner by such person or in effect guaranteed by such
person through a contingent agreement to purchase and all indebtedness
for the payment or purchase of which such person has contingently
agreed to advance or supply funds and all indebtedness secured by
mortgage or other lien upon property owned by such person, although
such person has not assumed or become liable for the payment of such
indebtedness, and, for all purposes hereof, such indebtedness shall be
treated as though it has been assumed by such person; provided,
however, that "Indebtedness" shall exclude indebtedness which at any
time does not exceed $10,000,000 in the aggregate.
(cc) "Interest Payment Dates" shall have the meaning provided
in the first paragraph of this Note.
(dd) "Lien" shall mean, when used with respect to any
Property, any interest in such Property securing an obligation owed to,
or a claim by any Person other than the owner of the property, whether
the interest is based on common law, statute or contract (including the
security interest lien arising from a mortgage, encumbrance, pledge,
conditional sale or trust receipt or a lease, consignment or bailment
for security purposes). The term "Lien" shall not include minor
reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions and other minor title
19
<PAGE> 20
exceptions affecting Property, provided that they do not constitute
security for a monetary obligation. For the purposes of this Note, the
Company shall be deemed to be the owner of any Property which it has
acquired or holds subject to a conditional sale agreement, financing
lease or other arrangement pursuant to which title to the Property has
been retained by or vested in some other Person for security purposes,
and such retention or vesting shall be deemed to be a Lien.
(ee) "Majority Holders" shall mean at any time holders of this
Note and the Other Notes which hold Notes and Other Notes which, based
on the original principal amount thereof, represent a majority of the
original aggregate principal amount of this Note and the Other Notes,
whether or not outstanding at such time.
(ff) "Mandatory Redemption Period" shall have the meaning
provided in Section 2.5(b).
(gg) "Mandatory Redemption Waiver" shall have the meaning
provided in Section 2.5(b).
(hh) "Market Value" shall have the meaning provided in Section
2.4(d).
(ii) "Maturity Date" shall have the meaning provided in the
first paragraph of this Note.
(jj) "Maximum Share Amount" shall have the meaning provided in
Section 2.5(a).
(kk) "Maximum Share Amount Exception Events" shall have the
meaning provided in Section 2.5(a).
(ll) "Measurement Period" means, with respect to any date, the
period of six (6) consecutive Trading Days ending one Trading Day prior
to such date.
(mm) "Minimum Conversion Price" shall have the meaning
provided in Section 2.6(a).
(nn) "1934 Act" shall have the meaning provided in Section
2.1.
(oo) "Note" shall have the meaning provided in Section 8.3.
(pp) "Note Purchase Agreement" shall have the meaning provided
in the third paragraph of this Note.
(qq) "NYSE" shall mean the New York Stock Exchange, Inc.
(rr) "Officer" means the Chairman of the Board, the Chief
Executive Officer, the President, the Chief Operating Officer, any
Senior Vice President or the Chief Financial Officer of the Company.
(ss) "Optional Redemption Date" shall have the meaning
provided in Section 2.6(d).
(tt) "Optional Redemption Notice" shall have the meaning
provided in Section 2.6(b).
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<PAGE> 21
(uu) "Optional Redemption Notice Date" shall have the meaning
provided in Section 2.6(c).
(vv) "Optional Redemption Price" shall have the meaning
provided in Section 2.6(d).
(ww) "Optional Redemption Revocation" shall have the meaning
provided in Section 2.6(e).
(xx) "Other Notes" shall mean the several Senior Convertible
Notes issued pursuant to the Other Note Purchase Agreements.
(yy) "Other Note Purchase Agreements" shall mean the several
Note Purchase Agreements, dated as of the date of the Note Purchase
Agreement, between the Company and the several buyers named therein.
(zz) "Payment Shares" shall have the meaning provided in
Section 1.2(c).
(aaa) "Permitted Transferee" shall have the meaning provided
in Section 8.7(b).
(bbb) "Person" shall mean an individual, partnership,
corporation, trust or incorporated organization, and a government or a
governmental agency or political subdivision.
(ccc) "Property" shall mean any kind of property, asset or
right, whether real, personal or mixed, or tangible or intangible.
(ddd) "Redemption Date" shall have the meaning provided in
Section 2.5(d).
(eee) "Redemption Price" shall have the meaning provided in
Section 2.5(d).
(fff) "Registration Statement" shall mean the Registration
Statement required to be filed by the Company with the SEC pursuant to
Section 8(b) of the Note Purchase Agreement.
(ggg) "Repurchase Event" shall have the meaning provided in
Section 5.3.
(hhh) "Repurchase Price" shall have the meaning provided in
Section 5.1.
(iii) "Restricted Person" or "Restricted Persons" shall have
the meaning provided in Section 2.1.
(jjj) "Revocation Period" shall have the meaning provided in
Section 2.6(e).
(kkk) "Revocation Period Conversion Price" shall have the
meaning provided in EXHIBIT F hereto.
(lll) "Revocation Commencement Date" shall have the meaning
provided in EXHIBIT F hereto.
(mmm) "SEC" shall mean the Securities and Exchange Commission.
(nnn) "SEC Effective Date" shall mean the date on which the
Registration Statement is first declared effective.
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<PAGE> 22
(ooo) "Security Agreement" shall have the meaning provided in
the third paragraph of this Note.
(ppp) "Senior Indebtedness" shall have the meaning provided in
EXHIBIT G hereto.
(qqq) "Stock Payment Option" shall have the meaning provided
in Section 1.2(a).
(rrr) "Tender Offer" shall have the meaning provided in
Section 3.4.
(sss) "Trading Days" means days on which either the national
securities exchange or the Nasdaq National Market which then
constitutes the principal securities market for the Common Stock is
open for general trading.
(ttt) "Trading Price" on any date means the lowest sale price
(regular way) for one share of the Common Stock on such date, on the
first applicable among the following: (a) the national securities
exchange on which the shares of Common Stock are listed which
constitutes the principal securities market for the Common Stock or (b)
the Nasdaq National Market, in either case as reported by Bloomberg,
L.P. (subject to equitable adjustment from time to time on terms
reasonably acceptable to the Majority Holders for (i) stock splits,
(ii) stock dividends, (iii) combinations, (iv) capital reorganizations,
(v) issuance to all holders of Common Stock of rights or warrants to
purchase shares of Common Stock at a price per share less than the
Trading Price which would otherwise be applicable, (vi) the
distribution by the Company to all holders of Common Stock of evidences
of indebtedness of the Company or cash (other than regular quarterly
cash dividends), (vii) tender offers by the Company or any subsidiary
of the Company or other repurchases of shares of Common Stock in one or
more transactions which, individually or in the aggregate, result in
the purchase of more than ten percent of the Common Stock outstanding
and (viii) similar events relating to the Common Stock, in each such
case which occur on or after the date of the Note Purchase Agreement).
(uuu) "Waiver Commencement Date" shall have the meaning
provided in EXHIBIT D hereto.
(vvv) "Waiver Period" shall have the meaning provided in
EXHIBIT D hereto.
ARTICLE VIII
MISCELLANEOUS
8.1 FAILURE OR INDULGENCY NOT WAIVER. No failure or delay on
the part of the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privileges. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
8.2 NOTICES. Except as otherwise specifically provided herein,
any notice herein required or permitted to be given shall be in writing and may
be personally served, sent by telephone line facsimile transmission or delivered
by courier or sent by United States mail and shall be deemed to have been given
upon receipt if personally served, sent by telephone line facsimile transmission
or sent by courier or three (3) days after being deposited in the United States
mail,
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<PAGE> 23
certified, with postage pre-paid and properly addressed, if sent by mail. For
the purposes hereof, the address of the Holder shall be as shown on the records
of the Company (telephone line facsimile transmission number ( ) - ); and
the address of the Company shall be 145 Brandywine Parkway, West Chester,
Pennsylvania 19380 Attention: Senior Vice President, Finance and Chief Financial
Officer (telephone line facsimile transmission number (610) 344-7563). Both the
Holder and the Company may change the address for service by service of written
notice to the other as herein provided.
8.3 AMENDMENT PROVISION. The term "Note" and all reference
thereto, as used throughout this instrument, shall mean this instrument as
originally executed, or if later amended or supplemented, then as so amended or
supplemented. Neither this Note or any Other Note nor the Security Agreement or
any Other Security Agreement nor any terms hereof or thereof may be changed,
waived, discharged or terminated unless such change, waiver, discharge or
termination is in writing signed by the Majority Holders, provided that no such
change, waiver, discharge or termination shall, without the consent of the
Holder and the holders of the Other Notes affected thereby, (i) extend the
scheduled final maturity of this Note or any Other Note, or reduce the rate or
extend the time of payment of interest (other than as a result of waiving the
applicability of any post-default increase in interest rates) hereon or thereon
or reduce the principal amount hereof or thereof or the Redemption Price or
Repurchase Price, (ii) release of the Collateral or reduction of the amount of
Collateral required to be deposited or maintained by the Company (in each case
except as expressly provided in the Security Agreement), (iii) amend, modify or
waive any provision of this Section , (iv) reduce any percentage specified in,
or otherwise modify, the definition of Majority Holders or (v) other than in
connection with an Optional Redemption Revocation, increase the Conversion Price
or change the method of calculating the Conversion Price.
8.4 ASSIGNABILITY. This Note shall be binding upon the Company
and its successors and assigns, and shall inure to the benefit of and be binding
upon the Holder and its successors and permitted assigns.
8.5 COST OF COLLECTION. If default is made in the payment of
this Note, the Company shall pay the Holder hereof costs of collection,
including attorneys' fees.
8.6 GOVERNING LAW. This Note shall be governed by the internal
laws of the State of New York, without regard to the principles of conflict of
laws.
8.7 TRANSFER OF NOTE. (a) This Note has not been and is not
being registered under the provisions of the Act or any state securities laws
and this Note may not be transferred unless the Holder shall have delivered to
the Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that this Note may be sold or
transferred pursuant to an exemption from such registration.
(b) In addition to the requirements of the Act and applicable
state securities or "blue sky" laws which may be applicable to this Note,
neither this Note nor any interest herein may be sold, assigned, or otherwise
transferred except to a Permitted Transferee. As used herein, "Permitted
Transferee" means (1) a person who is an "accredited investor" as defined in
Regulation D under the Act and (2) an entity of which 70% or more of the
beneficial ownership of such entity is beneficially owned by [NAME OF ORIGINAL
BUYER] or which entity has the same investment adviser as [NAME OF ORIGINAL
BUYER]. Prior to any such transfer to a Permitted Transferee, such Permitted
Transferee shall (x) have made written representations and warranties to the
Company with respect to such Permitted Transferee in the form of Section 2(a)
and 2(c) of the Note Purchase Agreement, (y) shall have further represented in
writing to the Company that such Permitted Transferee has requested and received
from the Company all information relating to the business, properties,
operations, condition (financial or other), results of operations or
23
<PAGE> 24
prospects of the Company deemed relevant by such Permitted Transferee; that such
Permitted Transferee has been afforded the opportunity to ask questions of the
Company concerning the foregoing and has had the opportunity to obtain and
review the Registration Statement and the prospectus included therein, each as
amended or supplemented to the date of transfer to such Permitted Transferee,
and the reports and other information concerning the Company which at the time
of such transfer have been filed by the Company with the SEC pursuant to the
1934 Act and which are incorporated by reference in such prospectus as of the
date of such transfer and (z) shall have agreed in writing with the Company to
be bound by the provisions of Sections 4(a), 4(b), 4(g) and 8 of the Note
Purchase Agreement.
8.8 CERTAIN AMOUNTS. Whenever pursuant to this Note the
Company is required to pay an amount in excess of the outstanding principal
amount (or the portion thereof required to be paid at that time) plus accrued
and unpaid interest plus Default Interest on such interest, the Company and the
Holder agree that the actual damages to the Holder from the receipt of cash
payment on this Note may be difficult to determine and the amount to be so paid
by the Company represents stipulated damages and not a penalty and is intended
to compensate the Holder in part for loss of the opportunity to convert this
Note and to earn a return from the sale of shares of Common Stock acquired upon
conversion of this Note at a price in excess of the price paid for such shares
pursuant to this Note. The Company and the Holder hereby agree that such amount
of stipulated damages is not plainly disproportionate to the possible loss to
the Holder from the receipt of a cash payment without the opportunity to convert
this Note into shares of Common Stock.
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<PAGE> 25
IN WITNESS WHEREOF, the Company has caused this Note to be
signed in its name by its duly authorized officer on the day and in the year
first above written.
CEPHALON, INC.
By ______________________________
Name:
Title:
25
<PAGE> 1
EXHIBIT 4.2
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS. THIS DEBENTURE HAS BEEN
ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN
FORM, SCOPE AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THIS DEBENTURE MAY NOT BE TRANSFERRED EXCEPT AS PROVIDED IN SECTION 3.7.
CEPHALON, INC.
DEBENTURE
---------
New York, New York $__________
, 1998
FOR VALUE RECEIVED, CEPHALON, INC., a Delaware corporation
(hereinafter called the "Company"), hereby promises to pay to ________________,
[Address], or registered assigns (the "Holder") or order, the sum of ________
Dollars ($ ________), on [before signing the Debenture, insert month and day of
Closing Date], 2013, and to pay interest on the unpaid principal balance hereof
at the rate of ten and three quarters percent (10.75%) per annum from the date
hereof, until the same becomes due and payable, whether at maturity or upon
acceleration or by prepayment or otherwise. Any amount of principal of or
interest on this Debenture which is not paid when due shall bear interest at the
rate of twenty percent (20%) per annum from the due date thereof until the same
is paid ("Default Interest"). Interest shall be payable on the 1st day of each
February and August, commencing on February 1, 1999, and at maturity (the
"Interest Payment Dates"). Interest on this Debenture shall be computed on the
basis of a 360-day year of 12 30-day months and actual days elapsed.
All payments of principal of and interest on this Debenture
shall be made in lawful money of the United States of America, or, at the option
of the Company and subject to the provisions of this Debenture, interest payable
on the Interest Payment Dates may be paid in whole or in part in fully paid and
nonassessable shares of Common Stock, $.01 par value, together with the related
Preferred Share Purchase Rights of the Company as such stock and rights exist on
the date of issuance of this Debenture, or any shares of capital stock and
related rights of the Company into which such stock shall hereafter be changed
or reclassified (the "Common Stock"). All cash payments shall be made by wire
transfer of immediately available funds to such account as the Holder may from
time to time designate by written notice in accordance with the provisions of
this Debenture. Whenever any amount expressed to be due by the terms of this
Debenture is due on any day which is not a business day, the same shall instead
be due on the next succeeding day which is not a business day and, in the case
of any Interest Payment Date which is not the date on which this Debenture is
paid in full, the extension of the due date thereof shall not be taken into
account for purposes of determining the amount of interest due on such date. As
used in this Debenture, the term "business day" shall mean any day other than a
Saturday, Sunday or a day on which commercial banks in The City of New York are
authorized or required by law or executive order to remain closed.
The obligations of the Company under this Debenture shall rank
in right of payment on a parity with all other unsubordinated obligations of the
Company for indebtedness for borrowed money or the purchase price of property.
This Debenture is issued pursuant to a Senior Convertible Note, dated
_____________, 1997, issued by the Company (the "Note").
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<PAGE> 2
The following terms shall apply to this Debenture:
ARTICLE I
PREPAYMENT; INTEREST IN COMMON STOCK
1.1 PREPAYMENT. The Company shall have the right to prepay
this Debenture in whole at any time or in any part from time to time.
1.2 ISSUANCE OF COMMON STOCK IN LIEU OF CASH INTEREST. (a) If
the Company exercises its option to make a payment of interest on this Debenture
wholly or partly in shares of Common Stock (herein sometimes called the "Stock
Payment Option"), the issuance of shares of Common Stock upon such exercise of
the Stock Payment Option shall have been authorized by the Board of Directors of
the Company.
(b) The Company shall not be permitted to exercise the Stock
Payment Option with respect to any payment of interest on this Debenture if:
(i) the number of shares of Common Stock authorized,
unissued and unreserved for all purposes, or held in the Company's
treasury, is insufficient to pay the portion of such interest to be paid
in Common Stock;
(ii) the issuance or delivery of shares of Common Stock
pursuant to the Stock Payment Option or the public resale of such shares
by the Holder would require registration with or approval of any
governmental authority under any law or regulation, and such registration
or approval has not been effected or obtained;
(iii) the shares of Common Stock to be issued upon
exercise of the Stock Payment Option have not been authorized for listing,
upon official notice of issuance, on the principal securities exchange on
which the Common Stock is then listed and traded;
(iv) the Computed Price is less than the par value of
the Common Stock;
(v) an Event of Default (as defined herein) has occurred
and is continuing; or
(vi) the Common Stock is neither (i) listed or admitted
for trading on a national securities exchange nor (ii) quoted on the
Nasdaq National Market.
(c) If the Stock Payment Option is elected, the Company shall
issue and dispatch or cause to be dispatched to the Holder one or more
certificates for the aggregate number of whole shares of Common Stock determined
by dividing the per share Computed Price of the Common Stock on the applicable
Interest Payment Date into the total amount of lawful money of the United States
of America which the Holder would receive if the aggregate amount of interest on
this Debenture which is being paid in shares of Common Stock were being paid in
such lawful money; provided, however, that if in connection with any such
election the Company shall have failed to deliver the appropriate number of
shares of Common Stock to the Holder within three business days after the
applicable Interest Payment Date, then the Company shall not be entitled to use
the Stock Payment Option in respect of such Interest Payment Date, such cash
interest shall be immediately due and payable and the Company shall pay the
interest for such Interest Payment Date in cash with Default Interest, at the
rate provided in this Note, from such Interest Payment
2
<PAGE> 3
Date until paid. No fractional shares will be issued in payment of interest on
this Debenture. In lieu thereof, the Company may issue a number of shares of
Common Stock which reflects a rounding up to the next whole number or may pay
lawful money of the United States of America. The shares of Common Stock issued
or to be issued by the Company in payment of interest on this Debenture are
sometimes referred to herein as the "Payment Shares."
(d) If the Company exercises the Stock Payment Option with
respect to a payment of interest on this Debenture, the Company shall deliver to
the Holder, on or prior to the date on which Payment Shares for such payment of
interest on this Debenture are to be received by the Holder, a Company
Certificate setting forth (i) the total amount of the interest payment to which
the Holder is entitled, (ii) the portion of the interest payment being made in
Payment Shares, (iii) the number of Payment Shares allocable to such payment, as
calculated pursuant to this Section 1.2, (iv) any rounding adjustment to such
number or any payment necessary to be made pursuant to Section 1.2(c), (v) a
brief statement of the facts requiring such adjustment, (vi) the number of
Payment Shares issuable with respect to each $100 of interest on this Debenture
after such adjustment and (vii) a brief statement that none of the conditions
set forth in Section 1.2(b) has occurred and is existing. Such Company
Certificate shall be accompanied by the certificates, each duly issued in the
name of the Holder, representing the Payment Shares. Such Company Certificate
shall be conclusive evidence of the correctness of the calculation of the number
of Payment Shares allocable to the payments to which such Company Certificate
relates and of any adjustments to such number made pursuant to this Section 1.2
in the absence of manifest error. In addition, on or before the pertinent
payment date, the Company shall cause the transfer agent for the Common Stock to
prepare and issue the certificates representing the Payment Shares in the name
of the Holder before being so delivered by the Company.
(e) The Payment Shares, when issued pursuant to and in
compliance with this Section 1.2, shall be, and for all purposes shall be deemed
to be, validly issued, fully paid and nonassessable shares of Common Stock; the
issuance and delivery thereof is in all respects hereby authorized; and the
issuance thereof, together with lawful money of the United States of America, if
any, paid in lieu of fractional shares of such Common Stock, will be, and for
all purposes shall be deemed to be, in full discharge and satisfaction of the
Company's obligation to pay the interest on this Debenture to which such Payment
Shares relate.
(f) As used in this Debenture, the following terms shall have
the meanings provided herein:
(1) "Company Certificate" means a certificate of the
Company signed by an Officer.
(2) "Computed Price" for any date means the average per
share Trading Price during the Measurement Period with respect to such
date.
(3) "Majority Holders" shall mean at any time holders of
this Debenture and the Other Debentures which hold this Debenture and
Other Debentures which, based on the original principal amount thereof,
represent a majority of the original aggregate principal amount of this
Debenture and the Other Debentures, whether or not outstanding at such
time.
(4) "Measurement Period" means, with respect to any
date, the period of five consecutive trading days ending three trading
days prior to such date.
(5) "Officer" means the Chairman of the Board, the Chief
Executive Officer, the President, the Chief Operating Officer, any Senior
Vice President or the Chief Financial Officer of the Company.
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<PAGE> 4
(6) "Other Debentures" shall mean the several Debentures
issued pursuant to the Other Notes.
(7) "Other Notes" shall mean the several Senior
Convertible Notes dated ___, 1997 issued by the Company.
(8) "Trading Price" on any date means the closing bid
price for one share of the Common Stock on such date, on the first
applicable among the following: (a) the national securities exchange on
which the shares of Common Stock are listed which constitutes the
principal securities market for the Common Stock or (b) the Nasdaq
National Market, in either case as reported by Bloomberg, L.P. (subject to
equitable adjustment from time to time on terms reasonably acceptable to
the Majority Holders for (i) stock splits, (ii) stock dividends, (iii)
combinations, (iv) capital reorganizations, (v) issuance to all holders of
Common Stock of rights or warrants to purchase shares of Common Stock at a
price per share less than the Trading Price which would otherwise be
applicable, (vi) the distribution by the Company to all holders of Common
Stock of evidences of indebtedness of the Company or cash (other than
regular quarterly cash dividends), (vii) tender offers by the Company or
any subsidiary of the Company or other repurchases of shares of Common
Stock in one or more transactions which, individually or in the aggregate,
result in the purchase of more than ten percent of the Common Stock
outstanding and (viii) similar events relating to the Common Stock, in
each such case which occur during a particular Measurement Period).
ARTICLE II
EVENTS OF DEFAULT
If any of the following events of default (each, an "Event of
Default") shall occur:
2.1 FAILURE TO PAY PRINCIPAL OR INTEREST. The Company fails
(a) to pay the principal hereof when due, whether at maturity, upon redemption,
upon acceleration or otherwise or (b) to pay any installment of interest hereon
when due and, in the case of this clause (b) of this Section 2.1 only, such
failure continues for a period of ten (10) days after the due date thereof;
2.2 BREACH OF COVENANT. The Company breaches any material
covenant or other material term or condition of this Debenture (other than as
specifically provided in Section 2.1 hereof), and such breach continues for a
period of twenty (20) days after written notice thereof to the Company from the
Holder or within 60 days after delivery of such notice if and only if, such
default is reasonably capable of cure and during such 60-day period, the Company
has been diligently taking action to cure such default and such cure cannot be
completed within such 20-day period;
2.3 BREACH OF REPRESENTATIONS AND WARRANTIES. Any
representation or warranty of the Company made herein or in any agreement,
statement or certificate given in writing pursuant hereto or in connection
herewith (including, without limitation, the Note Purchase Agreement) shall be
false or misleading in any material respect when made;
2.4 CERTAIN VOLUNTARY PROCEEDINGS. The Company or any material
subsidiary of the Company shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or
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<PAGE> 5
shall consent to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding commenced
against it, or shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due or shall admit in
writing its inability generally to pay its debts as they become due;
2.5 CERTAIN INVOLUNTARY PROCEEDINGS. An involuntary case or
other proceeding shall be commenced against the Company or any material
subsidiary of the Company seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of sixty (60) consecutive
days;
2.6 JUDGMENTS. Any court of competent jurisdiction shall enter
one or more final judgments against the Company or any subsidiary of the Company
or any of their respective properties or other assets in an aggregate amount in
excess of $5,000,000, which is not vacated, bonded, stayed, discharged,
satisfied or waived for a period of thirty (30) consecutive days; or
2.7 DEFAULT UNDER OTHER AGREEMENTS. (a) the Company or any
subsidiary shall (i) default in any payment with respect to any indebtedness for
borrowed money (other than this Debenture) which indebtedness has an outstanding
principal amount in excess of $10,000,000 individually or $15,000,000 in the
aggregate for the Company and its subsidiaries, beyond the period of grace, if
any, provided in the instrument or agreement under which such indebtedness was
created or (ii) default in the observance or performance of any agreement,
covenant or condition relating to any such indebtedness 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 a trustee or agent on behalf of such holder or holders) to
cause, any such indebtedness to become due prior to its stated maturity and such
default or event shall continue beyond the period of grace, if any, provided in
the instrument or agreement under which such indebtedness was created (after
giving effect to any consent or waiver obtained and then in effect thereunder);
or (b) any such indebtedness of the Company or any of its subsidiaries shall, in
accordance with its terms, be declared to be due and payable, or required to be
prepaid other than by a regularly scheduled or required payment prior to the
stated maturity thereof;
then upon the occurrence and during the continuation of any Event of Default
specified in Section 2.1, 2.2, 2.3, 2.6 or 2.7 at the option of the Holder the
Company shall, and upon the occurrence of any Event of Default specified in
Section 2.4 or 2.5, the Company shall, pay to the Holder an amount equal to the
sum of (A) the outstanding principal amount of this Debenture plus (B) accrued
and unpaid interest on such principal amount to the date of payment plus (C)
accrued and unpaid Default Interest, if any, on the amount referred to in the
immediately preceding clause (B) at the rate provided in this Debenture to the
date of payment and all other amounts payable hereunder shall immediately become
due and payable, all without demand, presentment or notice, all of which hereby
are expressly waived, together with all costs, including, without limitation,
legal fees and expenses, of collection, and the Holder shall be entitled to
exercise all other rights and remedies available at law or in equity.
ARTICLE III
MISCELLANEOUS
3.1 FAILURE OR INDULGENCY NOT WAIVER. No failure or delay on
the part of the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver
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<PAGE> 6
thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privileges. All rights and remedies existing hereunder are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
3.2 NOTICES. Any notice herein required or permitted to be
given shall be in writing and may be personally served, sent by telephone line
facsimile transmission or delivered by courier or sent by United States mail and
shall be deemed to have been given upon receipt if personally served, sent by
telephone line facsimile transmission or sent by courier or three (3) days after
being deposited in the United States mail, certified, with postage pre-paid and
properly addressed, if sent by mail. For the purposes hereof, the address of the
Holder shall be as shown on the records of the Company (telephone line facsimile
transmission number ( ) - ); and the address of the Company shall be
145 Brandywine Parkway, West Chester, Pennsylvania 19380 Attention: Senior Vice
President, Finance and Chief Financial Officer (telephone line facsimile
transmission number (610) 344-7563). Both the Holder and the Company may change
the address for service by service of written notice to the other as herein
provided.
3.3 AMENDMENT PROVISION. The term "Debenture" and all
reference thereto, as used throughout this instrument, shall mean this
instrument as originally executed, or if later amended or supplemented, then as
so amended or supplemented.
3.4 ASSIGNABILITY. This Debenture shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of and be
binding upon the Holder and its successors and permitted assigns.
3.5 COST OF COLLECTION. If default is made in the payment of
this Debenture, the Company shall pay the Holder hereof costs of collection,
including attorneys' fees.
3.6 GOVERNING LAW. This Debenture shall be governed by the
internal laws of the State of New York, without regard to the principles of
conflict of laws.
3.7 TRANSFER OF DEBENTURE. (a) This Debenture has not been and
is not being registered under the provisions of the Act or any state securities
laws and this Debenture may not be sold, transferred, pledged or hypothecated
unless the Holder shall have delivered to the Company an opinion of counsel,
reasonably satisfactory in form, scope and substance to the Company, to the
effect that this Debenture may be sold, transferred, pledged or hypothecated
pursuant to an exemption from such registration.
(b) In addition to the requirements of the Act and applicable
state securities or "blue sky" laws which may be applicable to this Debenture,
neither this Debenture nor any interest herein may be sold, assigned, pledged,
hypothecated or otherwise transferred except to a Permitted Transferee. As used
herein, "Permitted Transferee" means (1) a person who is an "accredited
investor" as defined in Regulation D under the Act and (2) an entity of which
70% or more of the beneficial ownership of such entity is beneficially owned by
[NAME OF ORIGINAL BUYER] and which entity has the same investment adviser as
[NAME OF ORIGINAL BUYER]. Prior to any such transfer to a Permitted Transferee,
such Permitted Transferee shall (x) have made written representations and
warranties to the Company with respect to such Permitted Transferee in the form
of Section 2(a) and 2(c) of the Note Purchase Agreement, (y) shall have further
represented in writing to the Company that such Permitted Transferee has
requested and received from the Company all information relating to the
business, properties, operations, condition (financial or other), results of
operations or prospects of the Company deemed relevant by such Permitted
Transferee; that such Permitted Transferee has been afforded the opportunity to
ask questions of the Company concerning the foregoing and has had the
opportunity to obtain and review the Registration Statement and the prospectus
included therein, each as amended or supplemented to
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<PAGE> 7
the date of transfer to such Permitted Transferee, and the reports and other
information concerning the Company which at the time of such transfer have been
filed by the Company with the SEC pursuant to the 1934 Act and which are
incorporated by reference in such prospectus as of the date of such transfer and
(z) shall have agreed in writing with the Company to be bound by the applicable
provisions of Section 4(a) of the Note Purchase Agreement.
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<PAGE> 8
IN WITNESS WHEREOF, the Company has caused this Debenture to
be signed in its name by its duly authorized officer on the day and in the year
first above written.
CEPHALON, INC.
By
---------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 4.3
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED OR REGISTERED
UNDER STATE SECURITIES OR BLUE SKY LAWS. NEITHER THIS WARRANT NOR SUCH
SECURITIES MAY BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF 1933,
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AND THE APPLICABLE RULES AND
REGULATIONS THEREUNDER.
------------------------------------------
THIS WARRANT MAY NOT BE TRANSFERRED, DIVIDED, COMBINED OR
EXCHANGED, EXCEPT AS DESCRIBED IN SECTION 6 HEREIN.
------------------------------------------
CEPHALON, INC.
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
--------------------------------------------------
Name of Registered Holder:
-------------------------------------
No. Shares of Common Stock
-------- ---------------------
For good and valuable consideration the receipt of which is
hereby acknowledged, Cephalon, Inc., a Delaware corporation (the "Company"),
hereby grants the rights herein specified and certifies that __________ (the
"Initial Holder") (or any registered assignee of the Initial Holder) (each of
the Initial Holder and any such registered assignee being hereinafter referred
to as the "Holder"), is entitled, subject to the conditions and upon the terms
of this Warrant, to purchase from the Company, at any time or from time to time
during the Exercise Period (as defined in Section 1 hereof), the number of
shares of Common Stock (as defined in Section 1 hereof) set forth above. The
number of shares of Common Stock to be received upon the exercise of this
Warrant and the Exercise Price are subject to adjustment from time to time as
hereinafter set forth.
Section 1. Certain Definitions. Terms defined in the preceding
paragraph and elsewhere in this Warrant have the respective meanings provided
for therein. The following additional terms, as used herein, have the following
respective meanings:
"Acceleration Date" means the earliest of the date on which a
Reorganization Event occurs or the date on which the Company shall agree to
effect a Reorganization Event, provided, that if approval of the stockholders of
the Company is required in connection with such Reorganization Event, the
Acceleration Date means the date of such approval.
"Act" means the Securities Act of 1933, as amended.
"Closing Price" means the closing price per share of the
Common Stock on the principal national securities exchange on which the Common
Stock is listed or admitted to trading or, if not listed or traded on any such
exchange, on the Nasdaq National Market, or if not listed or traded on any such
exchange or system, the average of the bid and asked price per share on the
Nasdaq Stock Market or, if such quotations are not available, the fair market
value as reasonably determined by the Board of Directors of the Company or any
committee of such Board.
<PAGE> 2
"Common Stock" means the Company's Common Stock, $.01 par
value, and the related Preferred Share Purchase Rights as authorized on the date
hereof, and any other securities into which or for which the Common Stock or
such Preferred Share Purchase Rights may be converted or exchanged pursuant to a
plan of recapitalization, reorganization, merger, sale of assets or otherwise.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exercise Period" means the period beginning on the date
hereof, and ending on [INSERT DATE WHICH IS 3 YEARS FROM CLOSING DATE], 2000.
"Exercise Price" means $ ___________ [INSERT 130% OF AVERAGE
CLOSING BID PRICE FOR 5 TRADING DAYS PRIOR TO CLOSING DATE], subject to change
or adjustment pursuant to Section 9 hereof.
"Inspectors" shall have the meaning provided in Section
5(c)(9).
"Nasdaq" means the Nasdaq Stock Market.
"Nasdaq National Market" means the Nasdaq National Market of
Nasdaq.
"Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the Holder of this Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of this Warrant, in lieu of or
in addition to the Warrant Shares, or which at any time shall be issuable or
shall have been issued in exchange for or in replacement of the Warrant Shares
or Other Securities pursuant to Section 9.
"Permitted Transfer" means (a) any transfer, assignment or
succession by operation of law or pursuant to any court order issued by a court
of competent jurisdiction, (b) any transfer to an immediate family member, (c)
any transfer through probate or through intestate succession, (d) in the case of
a transfer by a corporation, partnership, or trust, any transfer to any person
that, directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the transferor, (e) any
distribution by a retirement plan to any participant in the plan or (f) any
transfer or assignment by the Initial Holder to its employees.
"Prospectus" shall have the meaning provided in Section
5(c)(1).
"Records" shall have the meaning provided in Section 5(c)(9).
"Register," "registered" and "registration" shall have the
meaning provided in Section 5(a)(1).
"Registration Securities" shall have the meaning provided in
Section 5(a)(2).
"Registrable Statement" shall have the meaning provided in
Section 5(a)(3).
"Reorganization Event" means (i) any capital reorganization or
leveraged recapitalization of the Company or reclassification of the Common
Stock (other than a subdivision, combination or reclassification of the
outstanding Common Stock for which adjustment is provided in Section 9(a) hereof
and other than a change in the par value of the Common Stock or an increase in
the authorized capital stock of the Company not involving the issuance of any
shares thereof), (ii) any consolidation of the Company with, or merger of the
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<PAGE> 3
Company with or into, another person (including any individual, partnership,
joint venture, corporation, trust or group thereof) (other than a consolidation
or merger with a subsidiary of the Company in which the Company is the
continuing corporation for which adjustment is provided in Section 9(a) hereof)
or any sale, lease, transfer or conveyance of all or substantially all of the
property and assets of the Company or (iii) the announcement or commencement by
any "person" or "group" (within the meaning of Section 13(d) and Section 14(d)
of the Exchange Act) of a bona fide tender offer or exchange offer in accordance
with the rules and regulations of the Exchange Act to purchase, or the
acquisition of securities in the Company, such that after such acquisition or
proposed purchase, the acquiror "beneficially owns" or would "beneficially own"
(as defined in Rule 13d-3 under the Exchange Act), securities in the Company
representing 30% or more of the combined voting power of the Company's then
outstanding securities having power to vote in the election of directors.
"Rule 415" shall have the meaning provided in Section 5(a)(2).
"SEC" shall mean the Securities and Exchange Commission.
"Warrant" means this Warrant and any Warrant or Warrants which
may be issued pursuant to Section 4 or 6 hereof in substitution or exchange for
or upon transfer of this Warrant, any Warrant which may be issued pursuant to
Section 2 hereof upon partial exercise of this Warrant and any Warrant which may
be issued pursuant to Section 7 hereof upon the loss, theft, destruction or
mutilation of this Warrant.
"Warrant Register" means the register maintained at the
principal office of the Company, or at the office of its agent, in which the
name of the Holder of this Warrant shall be registered.
"Warrant Shares" means the shares of Common Stock, as adjusted
from time to time in accordance with Section 9 hereof, deliverable upon exercise
of this Warrant.
Section 2. Exercise of Warrant. This Warrant may be exercised,
in whole or in part, at any time or from time to time during the Exercise
Period, by presentation and surrender hereof to the Company at its principal
office at the address set forth on the signature page hereof (or at such other
address of the Company or any agent appointed by the Company to act hereunder as
the Company or such agent may hereafter designate in writing to the Holder),
with the purchase form attached hereto as Annex I (the "Purchase Form") duly
executed and accompanied by cash or a certified or official bank check drawn to
the order of "CEPHALON, INC." (or its successor in interest, if any) in the
amount of the Exercise Price, multiplied by the number of Warrant Shares
specified in such Purchase Form. If this Warrant should be exercised in part
only, the Company or its agent shall, upon surrender of this Warrant, execute
and deliver a Warrant evidencing the right of the Holder thereof to purchase the
balance of the Warrant Shares purchasable hereunder. Upon receipt by the Company
during the Exercise Period of this Warrant and such Purchase Form in proper form
for exercise, together with proper payment of the Exercise Price at its
principal office, or by its agent at its office, the Holder shall be deemed to
be the holder of record of the number of Warrant Shares specified in such
Purchase Form; provided, however, that if the date of such receipt by the
Company or its agent is a date on which the stock transfer books of the Company
are closed, such person shall be deemed to have become the record holder of such
Warrant Shares on the next business day on which the stock transfer books of the
Company are open. The Company shall pay any and all documentary, stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
such Warrant Shares. Any Warrant issued upon partial exercise of this Warrant
pursuant to this Section 2 shall be dated the date of this Warrant.
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<PAGE> 4
Section 3. Reservation of Shares. The Company agrees that at
all times it will keep reserved solely for issuance and delivery pursuant to
this Warrant the number of shares of its Common Stock (or other securities) that
are or would be issuable from time to time upon exercise of this Warrant. All
such shares shall be duly authorized and, when issued upon such exercise, shall
be validly issued, fully paid and nonassessable, free and clear of all liens,
security interests, charges and other encumbrances or restrictions on sale and
free of all preemptive rights. Before taking any action that would cause an
adjustment pursuant to Section 9 hereof reducing the Exercise Price below the
then par value (if any) of the Warrant Shares issuable upon exercise of this
Warrant, the Company will take any corporate action that may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.
Section 4. Transfer in Compliance with Applicable Securities
Laws.
(a) Neither this Warrant nor any of the Warrant Shares, nor
any interest in either, may be sold, assigned, pledged, hypothecated, encumbered
or in any other manner transferred or disposed of, in whole or in part, except
in accordance with Section 6 hereof and in compliance with applicable United
States federal and state securities laws and the terms and conditions hereof.
Except as provided in subsection (b) of this Section 4, each Warrant shall bear
the following legend:
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED OR
REGISTERED UNDER STATE SECURITIES OR BLUE SKY LAWS. NEITHER THIS WARRANT
NOR SUCH SECURITIES MAY BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED
OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE
SECURITIES ACT OF 1933, APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AND
THE APPLICABLE RULES AND REGULATIONS THEREUNDER.
(b) If (i) the Warrant Shares have been registered under the
Act and registered or qualified under applicable state securities or Blue Sky
laws or (ii) the Holder has received an opinion of counsel reasonably
satisfactory to the Company that the Warrant Shares may be freely transferred
without registration under the Act or registration or qualification under
applicable state securities or Blue Sky laws, the Holder may require the Company
to issue, in substitution for a Warrant with the foregoing legend, a Warrant
with the following legend:
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
QUALIFIED OR REGISTERED UNDER STATE SECURITIES OR BLUE SKY LAWS. THIS
WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE
SECURITIES ACT OF 1933, APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AND
THE APPLICABLE RULES AND REGULATIONS THEREUNDER.
(c) The Holder may require the Company to issue a Warrant
without either of the foregoing legends in substitution for a Warrant bearing
one of such legends if either (i) this Warrant and the Warrant Shares issuable
upon the exercise hereof have been registered under the Act and registered or
qualified under applicable state securities laws or (ii) the Holder has received
an opinion of counsel reasonably satisfactory to the Company that this Warrant
may be freely transferred without registration under the Act or registration or
qualification under applicable state securities laws. The provisions of this
Section 4 shall be binding on all subsequent holders of this Warrant.
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<PAGE> 5
Section 5. Registration Rights.
(a) Definitions. As used in this Section 5, the following
terms shall have the following meanings:
(1) "Investor" means the Holder; "Investors" means the
Investor together with other holders (and their assignees) of substantially
identical warrants issued by the Company in varying amounts on the date hereof.
(2) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Act and pursuant to Rule 415 under the Act or
any successor rule providing for offering securities on a continuous basis
("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the SEC.
(3) "Registrable Securities" means the Warrant Shares and the
Other Securities.
(4) "Registration Statement" means a registration statement on
Form S-3 of the Company under the Act.
(b) Mandatory Registration. Prior to the date hereof, the
Company shall have prepared and filed with the SEC a Registration Statement on
Form S-3 covering the resale of the Warrant Shares, and which Registration
Statement shall state that, in accordance with Rule 416 under the Act, such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon exercise of this Warrant to
prevent dilution resulting from stock splits, stock dividends or similar
transactions.
(c) Obligations of the Company. In connection with the
registration of the Registrable Securities, the Company shall:
(1) have caused each Registration Statement relating to
Registrable Securities to become effective, and shall thereafter, subject to
Section 5(c)(5), keep the Registration Statement effective pursuant to Rule 415
at all times until the earlier of (a) such time as all of the Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the Investors and (b) the expiration of the Exercise Period. The
Company represents and warrants to the Investors that (a) the Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein), at the time it was first filed with the SEC, at the time it
was ordered effective by the SEC and at all times during which it is required to
be effective hereunder (and each such amendment and supplement at the time it is
filed with the SEC and at all times during which it is available for use in
connection with the offer and sale of the Registrable Securities) did not and
shall not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (b) the prospectus used in connection with the
Registration Statement and any amendment or supplement thereto (the
"Prospectus") shall not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading;
(2) subject to Section 5(c)(5), prepare and file with the SEC
such amendments (including post-effective amendments) and supplements to the
Registration Statement and the Prospectus as may be necessary to keep the
Registration Statement effective, and the Prospectus current, at all times until
the earlier of (a) such time as all of the Registrable Securities have been
disposed of in accordance with the intended method of disposition by the
Investors and (b) the
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expiration of the Exercise Period, and, during such period, comply with the
provisions of the Act applicable to the Company in order to permit the
disposition by the Investors of all Registrable Securities of the Company
covered by the Registration Statement;
(3) furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel, (1) promptly after
the same is prepared and publicly distributed, filed with the SEC or received by
the Company, one copy of the Registration Statement and any amendment thereto,
each Prospectus and each amendment or supplement thereto, (2) each letter
written by or on behalf of the Company to the SEC or the staff of the SEC and
each item of correspondence from the SEC or the staff of the SEC relating to
such Registration Statement (other than any portion of any thereof which
contains information for which the Company has sought confidential treatment),
each of which the Company hereby determines to be confidential information and
which the Buyer hereby agrees to keep confidential as a confidential Record in
accordance with Section 5(c)(9) and (3) such number of copies of a Prospectus
and all amendments and supplements thereto and such other documents, as such
Investor may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor;
(4) subject to Section 5(c)(5), use its best efforts to (i)
register and qualify the Registrable Securities covered by the Registration
Statement under the securities or blue sky laws of such jurisdictions as the
Investors who hold a majority in interest of the Registrable Securities
reasonably request, (ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at all
times until the earlier of (a) such time as all of the Registrable Securities
have been disposed of in accordance with the intended method of disposition by
the Investors and (b) the expiration of the Exercise Period, (iii) take such
other actions as may be necessary to maintain such registrations and
qualifications in effect at all times until the earlier of (a) such time as all
of the Registrable Securities have been disposed of in accordance with the
intended method of disposition by the Investors and (b) the expiration of the
Exercise Period and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale by the Investors in
such jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto (I) to qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 5(c)(4), (II) to subject itself to general taxation in any such
jurisdiction, (III) to file a general consent to service of process in any such
jurisdiction, (IV) to provide any undertakings that cause more than nominal
expense or burden to the Company or (V) to make any change in its charter or
by-laws, which the Board of Directors of the Company determines to be contrary
to the best interests of the Company and its stockholders;
(5) (i) as promptly as practicable after becoming aware of
such event, notify each Investor of the happening of any event of which the
Company has knowledge, (A) as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading or (B) which requires the Company to amend
or supplement the Registration Statement due to the receipt of new or additional
information about an Investor or its intended plan of distribution of its
Shares, and use its best efforts promptly to prepare a supplement or amendment
to the Registration Statement to correct such untrue statement or omission or to
reflect such new or additional information, and deliver a number of copies of
such supplement or amendment to each Investor as such Investor may reasonably
request;
(ii) notwithstanding Section 5(c)(5)(i) above, if at the time
the Company notifies the Investor as contemplated by Section 5(c)(5)(i) the
event giving rise to such notice relates to a development involving the Company
which occurred subsequent to the later of (x)
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<PAGE> 7
the date the Registration Statement was declared effective by the SEC and (y)
the latest date prior to such notice on which the Company has amended or
supplemented the Registration Statement, then the Company shall not be required
to use best efforts to make such amendment or supplement until information
concerning such development first becomes publicly available.
(6) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold of the
issuance by the SEC of any stop order or other suspension of effectiveness of
the Registration Statement at the earliest possible time;
(7) have permitted and will permit a single firm of counsel
designated as selling stockholders' counsel by the Investors who hold a majority
in interest of the Registrable Securities being sold to review at such
Investors' sole expense the Registration Statement and all amendments and
supplements thereto at least two business days (or such shorter period as may
reasonably be specified by the Company) prior to their filing with the SEC;
(8) make generally available to its security holders as soon
as practical, but not later than ninety (90) days after the close of the period
covered thereby, an earning statement (in form complying with the provisions of
Rule 158 under the Act) covering a twelve-month period beginning not later than
the first day of the Company's fiscal quarter next following the effective date
of the Registration Statement;
(9) make available for inspection by any Investor and any
attorney, accountant or other agent retained by any such Investor (collectively,
the "Inspectors") at such Investor's sole expense, all pertinent financial and
other records, pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably necessary solely to enable
each Investor to exercise its due diligence responsibility with respect to
Section 11 of the Act as it relates to the Registration Statement, and cause the
Company's officers, directors and employees to supply all information which any
Inspector may reasonably request for purposes of such due diligence; provided,
however, that each Inspector shall hold in confidence and shall not make any
disclosure (except to an Investor) of any Record or other information which the
Company determines in good faith to be confidential, and of which determination
the Inspectors are so notified, unless (i) the release of such Records is
ordered pursuant to a subpoena or other order from a court or government body of
competent jurisdiction or (ii) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
or any other agreement. The Company shall not be required to disclose any
confidential information in such Records to any Inspector until and unless such
Inspector shall have entered into confidentiality agreements (in form and
substance satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 5(c)(9). Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at the Company's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. The Company shall hold in confidence
and shall not make any disclosure of information concerning an Investor provided
to the Company pursuant to this Agreement unless (i) disclosure of such
information is necessary to comply with federal or state securities laws, (ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction or (iv) such information has been
made generally available to the public other than by disclosure in violation of
this or any other agreement. The Company agrees that it shall, upon learning
that disclosure of such information concerning an Investor is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt notice to such
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<PAGE> 8
Investor and allow such Investor, at such Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information;
(10) have used its best efforts to cause all the Registrable
Securities covered by the Registration Statement as of its SEC effective date to
be listed on the NASDAQ or such other principal securities market on which
securities of the same class or series issued by the Company are then listed or
traded;
(11) provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the date hereof;
(12) cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts as the Investors may
reasonably request and registered in such names as the Investors may request;
and the Company has delivered, and has caused legal counsel selected by the
Company to deliver, to the transfer agent for the Registrable Securities (with
copies to the Investors whose Registrable Securities are included in such
Registration Statement) an instruction substantially in the form attached hereto
as ANNEX II and an opinion of such counsel, if required by the Company's
transfer agent, in the form attached hereto as ANNEX III; and
(13) during the period the Company is required to maintain
effectiveness of the Registration Statement pursuant to Section 5(c)(1), the
Company shall not bid for or purchase any Common Stock or any right to purchase
Common Stock or attempt to induce any person to purchase any such security or
right if such bid, purchase or attempt would in any way limit the right of the
Investors to sell Registrable Securities by reason of the limitations in Rule
10b-6 under the Exchange Act, so long as it remains in effect, and Regulation M
under the Exchange Act, once it becomes effective.
(d) Obligations of the Investors. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(1) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Warrant with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. Prior to the
filing of the Registration Statement, the Investor shall have completed and
submitted to the Company an Investor Questionnaire in the form attached hereto
as ANNEX IV;
(2) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder;
(3) Each Investor agrees that it will not effect any
disposition of the Registrable Securities that would constitute a sale within
the meaning of the Act except as contemplated in the Registration Statement or
as otherwise in compliance with applicable securities laws and that it will
promptly notify the Company of any material changes in the information set forth
in the Registration Statement regarding such Investor or its plan of
distribution; each Investor agrees (a) to notify the Company in writing in the
event that such Investor enters into any material agreement with a broker or a
dealer for the sale of the
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<PAGE> 9
Registrable Securities through a block trade, special offering, exchange
distribution or a purchase by a broker or dealer and (b) in connection with such
agreement, to provide to the Company in writing the information necessary to
prepare any supplemental prospectus pursuant to Rule 424(c) under the Act which
is required with respect to such transaction;
(4) Each Investor acknowledges that there may occasionally be
times, including such times as specified in Section 5(c)(5) or 5(c)(6), when the
Company must suspend the use of the prospectus forming a part of the
Registration Statement until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the SEC
(including, without limitation, an amendment required to reflect new or
additional information about an Investor or its intended plan of distribution of
its Registrable Securities), or until such time as the Company has filed an
appropriate report with the SEC pursuant to the Exchange Act. Each Investor
hereby covenants that it will not sell any Registrable Securities pursuant to
said prospectus during the period commencing at the time at which the Company
gives such Investor notice of the suspension of the use of said prospectus and
ending at the time the Company gives such Investor notice that such Investor may
thereafter effect sales pursuant to said prospectus, or until the Company
delivers to such Investor an amended or supplemented prospectus;
(5) Each Investor agrees not to make any sale or other
transfer of the Registrable Securities pursuant to the Registration Statement
without effectively causing the prospectus delivery requirement under the Act to
be satisfied;
(6) Each Investor agrees to notify the Company promptly after
the event of the completion of the sale by such Investor of all Registrable
Securities to be sold by such Investor pursuant to the Registration Statement;
and
(7) Each Investor agrees not to use Registrable Securities for
the purpose of covering any short sale by such Investor of Common Stock unless
at the time of such short sale such Investor shall have complied with the
requirements of Section 5(d)(5) with respect to such short sale.
(e) Expenses of Registration. All reasonable expenses incurred
in connection with registrations, filings or qualifications pursuant to this
Agreement shall be paid by the Company, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees and
the fees and disbursements of counsel for the Company, but excluding (a) fees
and expenses of investment bankers retained by any Investor, (b) brokerage
commissions incurred by any Investors and (c) fees and disbursements of counsel
for the Investors.
(f) Indemnification.
(1) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor who holds such Registrable Securities and each
Investor who sells such Registrable Securities in the manner permitted this
Agreement, the directors, if any, of such Investor, the officers, if any, of
such Investor, each person, if any, who controls any Investor within the meaning
of the Securities Act or the 1934 Act, any underwriter (as defined in the
Securities Act) acting on behalf of an Investor who participates in the offering
of Registrable Securities of such Investor in accordance with the plan of
distribution contained in any prospectus included in the Registration Statement,
the directors, if any, of such underwriter and the officers, if any, of such
underwriter, and each person, if any, who controls any such underwriter within
the meaning of the Securities Act or the 1934 Act (each, an "Indemnified
Person"), against any losses, claims, damages, liabilities or expenses (joint or
several) incurred (collectively, "Claims") to which any of them may become
subject under the Securities Act, the 1934 Act or otherwise, insofar as such
Claims (or actions or proceedings, whether commenced or
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<PAGE> 10
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement, or
any post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any prospectus (as amended or supplemented, if the Company files
any amendment thereof or supplement thereto with the SEC) or the omission or
alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading (the matters in the foregoing
clauses (i) through (ii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 5(f)(3) with respect to the number of legal
counsel, the Company shall reimburse the Investors and each such controlling
person, promptly as such expenses are incurred and are due and payable, for any
documented and reasonable legal fees or other documented and reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 5(f)(1): shall not apply to (I) a Claim
arising out of or based upon a Violation which occurs in reliance upon and in
conformity with information relating to an Indemnified Person furnished in
writing to the Company by any Indemnified Person or underwriter for such
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, if
such prospectus was timely made available by the Company pursuant to Section
5(c)(3) hereof; (II) any Claim arising out of or based on the failure of the
Indemnified Person to comply with the covenants and agreements contained in this
Section 5 respecting sales of the Registrable Securities or any statement or
omission in any prospectus which was corrected in any subsequent prospectus that
was delivered to the Indemnified Person prior to the pertinent sale or sales by
the Indemnified Person; and (III) amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors. The Company and the Investor agree that the
information set forth in the Investor Questionnaire and under the heading "Plan
of Distribution" was the only information furnished by the Investor in writing
expressly for use in connection with preparation of the Registration Statement
on or prior to the date the Registration Statement was first declared effective
by the SEC.
(2) In connection with the Registration Statement, each
Investor agrees to indemnify and hold harmless, to the same extent and in the
same manner set forth in Section 5(f)(1), the Company, each of its directors,
each of its officers who signs the Registration Statement, each person, if any,
who controls the Company within the meaning of the Securities Act or the 1934
Act, any underwriter and any other stockholder selling securities pursuant to
the Registration Statement or any of its directors or officers or any person who
controls such stockholder or underwriter within the meaning of the Securities
Act or the 1934 Act (collectively and together with an Indemnified Person, an
"Indemnified Party"), against any Claim to which any of them may become subject,
under the Securities Act, the 1934 Act or otherwise, insofar as such Claim
arises out of or is based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and such
Investor will reimburse any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 5(f)(2) shall not apply
to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor; provided further, however,
that the Investor shall be liable under this Section 5(f)(2) for only that
amount of a Claim as does not exceed the amount of the proceeds to
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<PAGE> 11
such Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 5(f)(2) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented.
(3) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 5(f) of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 5(f), deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel reasonably satisfactory to the
Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding; provided further, however, that no indemnifying person shall be
responsible for the fees and expenses of more than one separate counsel for all
Indemnified Persons hereunder. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 5(f), except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 5(f) shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as such expense, loss, damage or liability is incurred and is due
and payable.
(g) Contribution. To the extent any indemnification by an
indemnifying party as set forth in Section 5(f) above is applicable by its terms
but is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 5(f) to the fullest extent permitted by law. In determining
the amount of contribution to which the respective parties are entitled, there
shall be considered the relative fault of each party, the parties' relative
knowledge of and access to information concerning the matter with respect to
which the claim was asserted, the opportunity to correct and prevent any
statement or omission and any other equitable considerations appropriate under
the circumstances; provided, however, that (a) no contribution shall be made
under circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Section 5(f), (b) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any other
person who was not guilty of such fraudulent misrepresentation and (c)
contribution by any seller of Registrable Securities shall be limited in amount
to the proceeds received by such seller from the sale of such Registrable
Securities.
(h) Reports under 1934 Act. With a view to making available to
the Investors the benefits of Rule 144, the Company agrees to:
(1) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company and (ii) such other
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<PAGE> 12
information as may be necessary to permit the Investors to sell such securities
pursuant to Rule 144 without registration; and
(2) if at any time the Company is not required to file such
reports with the SEC, use its best efforts to, upon the request of an Investor,
make publicly available other information so long as is necessary to permit
publication by bankers and dealers of quotations for the Common Stock and sales
of the Registrable Securities in accordance with Rule 15c2-11 under the Exchange
Act.
Section 6. Exchange, Transfer or Assignment of Warrant.
(a) If the Holder has received an opinion of counsel
satisfactory to the Company that this Warrant may be freely sold or transferred
without registration under the Act, as contemplated by Section 4 hereof, this
Warrant, subject to subsection (b) of this Section 6, may be, at the option of
the Holder, and upon presentation and surrender hereof to the Company at its
principal office or to the Company's agent at its office, (i) exchanged for
other Warrants of different denominations, entitling the Holder or Holders to
purchase in the aggregate the same number of Warrant Shares at the Exercise
Price or, (ii) if delivered together with a written notice specifying the
denominations in which new Warrants are to be issued and signed by the Holder,
divided or combined with other Warrants that carry the same rights.
(b) If the Holder has received an opinion of counsel
satisfactory to the Company that this Warrant may be freely sold or transferred
without registration under the Act, as contemplated by Section 4 hereof, (x)
this Warrant may be transferred and assigned, subject to subparagraph (y) of
this Section 6(b), at the option of the Holder, upon surrender of this Warrant
to the Company at its principal office or to the Company's agent at its office,
with the warrant assignment form attached hereto as ANNEX V (the "Warrant
Assignment Form") duly executed and accompanied by funds sufficient to pay any
transfer tax, except that (y) no transfer or assignment of this Warrant may be
made unless (i) such transfer or assignment is a Permitted Transfer or (ii) the
Company consents in writing to such transfer or assignment, which consent may be
withheld in its absolute discretion. The Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees named in such
Warrant Assignment Form and, if the Holder's entire interest is not being
transferred or assigned, in the name of the Holder; and this Warrant shall
promptly be cancelled.
(c) Any transfer or exchange of this Warrant shall be without
charge to the Holder and any Warrant or Warrants issued pursuant to this Section
6 shall be dated the date hereof.
Section 7. Lost, Mutilated or Missing Warrant. Upon receipt by
the Company or its agent of evidence satisfactory to it of the loss, theft or
destruction of this Warrant, and of satisfactory indemnification, and upon
surrender and cancellation of this Warrant if mutilated, the Company or its
agent shall execute and deliver a Warrant of like tenor and date in exchange for
this Warrant.
Section 8. Rights of the Holder. The Holder shall not, by
virtue hereof, be entitled to any rights of a shareholder in the Company, either
at law or in equity, and the rights of the Holder are limited to those expressed
in this Warrant.
Section 9. Anti-dilution. (a) If the Company shall fix or have
fixed a record date at any time after the date hereof and before the expiration
of the Exercise Period for:
(i) Stock Dividends, Subdivisions, Combinations,
Reclassifications, etc. (A) The declaration of a dividend or
distribution on the Common Stock (or other securities
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<PAGE> 13
deliverable hereunder) payable in shares of capital stock (whether
shares of Common Stock or of capital stock of any other class), (B) the
subdivision of shares of the Common Stock into a greater number of
shares, (C) the combination of the Common Stock into a smaller number
of shares or (D) the issuance of any shares of its capital stock by
reclassification of the Common Stock in connection with a consolidation
or merger with a subsidiary of the Company in which the Company is the
continuing corporation, then, in any such event, the Holder shall be
entitled to receive the aggregate number and kind of shares which, if
the Warrant had been exercised immediately prior to such record date,
the Holder would have been entitled to receive by virtue of such
dividend, distribution, subdivision, combination or reclassification,
and the Exercise Price shall be appropriately adjusted. Such adjustment
shall be made successively whenever any event listed above shall occur.
(ii) Issuance at Less Than Current Market Price. The issuance of
rights, options or warrants to all holders of Common Stock (or other
securities deliverable hereunder) entitling them to subscribe for or
purchase Common Stock (or other securities deliverable hereunder) at a
price per share or having a conversion or exercise price per share
(including the amount paid, if any, for such rights, options or
warrants) less than the Closing Price on such record date (excluding
rights or warrants that are not immediately exercisable and for which
provision is made for the Holder to receive comparable rights or
warrants), then the number of Warrant Shares to be received hereunder
after such record date shall be determined by multiplying the number of
shares receivable hereunder immediately prior to such record date by a
fraction, the denominator of which shall be the number of shares of
Common Stock (or other securities deliverable hereunder) outstanding on
such record date plus the number of shares of Common Stock (or other
securities deliverable hereunder) that the aggregate offering price of
the total number of shares so offered for subscription or purchase
would purchase at such Closing Price, and the numerator of which shall
be the number of shares of Common Stock (or other securities
deliverable hereunder) outstanding on such record date plus the number
of additional shares of Common Stock (or other securities deliverable
hereunder) offered for subscription or purchase, and the Exercise Price
shall be appropriately adjusted so that the aggregate purchase price of
the Warrant Shares to be received hereunder after such record date is
equal to the aggregate purchase price of the Warrant Shares receivable
hereunder immediately prior to such record date. Shares of Common Stock
owned by or held for the account of the Company or any subsidiary of
the Company on such record date shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall become effective
immediately after such record date. Such adjustment shall be made
successively whenever any such event shall occur. If such rights,
options or warrants are not so issued, the number of Warrant Shares
receivable hereunder shall again be adjusted to be the number that
would have been in effect had such record date not been fixed. On the
expiration of such rights, options or warrants the number of Warrant
Shares receivable hereunder shall be readjusted to be the number that
would have obtained had the adjustment made upon the issuance of such
rights, options or warrants been made upon the basis of the issuance of
only the number of shares of Common Stock (or other securities
deliverable hereunder) actually issued upon the exercise of such
rights, options or warrants, provided, however, that if the Holder of
this Warrant shall have exercised this Warrant prior to any such
readjustment, the number of Warrant Shares that have been delivered or
the number of Warrant Shares to be delivered shall not be subject to
any readjustment. In any case in which this subsection (ii) shall
require that an adjustment in the number of shares receivable hereunder
or the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of
such event issuing to the Holder of any Warrant exercised after such
record date the number of Warrant Shares, if any, issuable upon such
exercise over and above the number of Warrant Shares, if any, issuable
upon such exercise on the basis of the
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<PAGE> 14
Exercise Price in effect prior to such adjustment; provided, however,
that the Company shall deliver to such Holder a due bill or other
appropriate instrument evidencing such Holder's right to receive such
additional Warrant Shares upon the occurrence of the event requiring
such adjustments.
(iii) Distribution of Subscription Rights, Warrants, Evidences
of Indebtedness or Assets. The making of a distribution to all holders
of Common Stock (or other securities deliverable hereunder) (including
any such distribution to be made in connection with a consolidation or
merger in which the Company is to be the continuing corporation) of (A)
any shares of capital stock of the Company (other than Common Stock),
(B) subscription rights or warrants (excluding those for which
adjustment is provided in subsection 9(a)(ii) above and excluding those
that are not immediately exercisable and for which provision is made
for the Holder to receive comparable subscription rights or warrants)
or (C) evidences of its indebtedness or assets (excluding (x) dividends
paid in or distributions of the Company's capital stock for which the
number of Warrant Shares receivable hereunder shall have been adjusted
pursuant to paragraph 9(a)(i) and (y) cash dividends or distributions
payable out of earnings or surplus not in excess of 10% of the average
Closing Price for the thirty trading days prior to the fifth day before
the date of declaration multiplied by the number of outstanding shares
of Common Stock) (any of the foregoing being hereinafter in this
paragraph (iii) called the "Securities"), then in each such case
(unless the Company elects to reserve shares or other units of such
Securities for distribution to each Holder upon exercise of the Warrant
so that, in addition to the shares of the Common Stock (or other
securities deliverable hereunder) to which each Holder is entitled,
each Holder will receive upon such exercise the amount and kind of such
Securities which such Holder would have received if the Holder had,
immediately prior to the record date for the distribution of the
Securities, exercised the Warrant) the number of Warrant Shares
receivable hereunder after such record date shall be determined by
multiplying the number of Warrant Shares receivable hereunder
immediately prior to such record date by a fraction, the denominator of
which shall be the Closing Price on the trading day immediately prior
to the date the Common Stock (or other securities deliverable
hereunder) trades without the right to receive such Securities, less
the fair market value (as determined in the reasonable judgment of the
Board of Directors of the Company and described in a statement mailed
by certified mail to the Holder) of the portion of the assets or
evidences of indebtedness so to be distributed to a holder of one share
of the Common Stock or of such subscription rights or warrants
applicable to one share of the Common Stock, and the numerator of which
shall be the Closing Price of the Common Stock on such trading date;
and the Exercise Price shall be appropriately adjusted so that the
aggregate purchase price of the Warrant Shares to be received hereunder
after such record date is equal to the aggregate purchase price of the
Warrant Shares receivable hereunder immediately prior to such record
date. Such adjustment shall become effective immediately after such
record date and shall be made successively whenever such a record date
is fixed. If such distribution is not so made, the number of Warrant
Shares receivable hereunder shall be readjusted to be the number that
was in effect immediately prior to such record date. In the event that
the Holder of this Warrant exercises this Warrant after an adjustment
is made under this paragraph (iii) and prior to a readjustment under
this paragraph (iii), the number of Warrant Shares that have been
delivered or the number of Warrant Shares to be delivered shall not be
subject to any readjustment. In any case in which this paragraph (iii)
shall require that an adjustment in the number of Warrant Shares
receivable hereunder or the Exercise Price be made effective as of a
record date for a specified event, the Company may elect to defer until
the occurrence of such event issuing to the Holder of any Warrant
exercised after such record date the number of Warrant Shares, if any,
issuable upon such exercise over and above the number of Warrant
Shares, if any, issuable upon such exercise on the basis of the
Exercise Price in effect prior to such adjustment; provided,
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<PAGE> 15
however, that the Company shall deliver to such Holder a due bill or
other appropriate instrument evidencing such Holder's right to receive
such additional Warrant Shares upon the occurrence of the event
requiring such adjustments.
(b) Reorganization Event. (i) In case of any Reorganization
Event the Company shall, as a condition precedent to the consummation
of the transaction constituting, or announced as, such Reorganization
Event, cause effective provisions to be made so that the Holder shall
have the right immediately thereafter, by exercising this Warrant, to
receive the aggregate amount and kind of shares of stock and other
securities and property that were receivable upon such Reorganization
Event by a holder of the number of shares of Common Stock that would
have been received immediately prior to such Reorganization Event upon
exercise of this Warrant. Any such provision shall include provision
for adjustments in respect of such shares of stock and other securities
and property that shall be as nearly equivalent as may be practicable
to the adjustments provided for in Section 9(a). The foregoing
provisions of this Section 9(b) shall similarly apply to successive
Reorganization Events.
(ii) The Company shall, at least twenty days before the
Acceleration Date relating to any Reorganization Event (or if such
Reorganization Event was beyond the control of the Company, and the
Company did not have knowledge twenty days before such Acceleration
Date, as soon as practicable thereafter), cause to be mailed to the
Holder a notice describing in reasonable detail such Reorganization
Event and informing the Holder of the date that the Exercise Period
will (or did) commence and that the Holder may exercise this Warrant at
any time during the Exercise Period.
(c) Fractional Shares. No fractional shares of Common Stock
(or other securities deliverable hereunder) or scrip shall be issued to any
Holder in connection with the exercise of this Warrant. Instead of any
fractional share of Common Stock (or other securities deliverable hereunder)
that would otherwise be issuable to such Holder, the Company shall pay to such
Holder a cash adjustment in respect of such fractional interest in an amount
equal to such fractional interest multiplied by the Closing Price per share of
Common Stock (or other securities deliverable hereunder) on the date of such
exercise.
(d) Carryover. Notwithstanding any other provision of this
Section 9, no adjustment shall be made to the number of shares of Common Stock
(or other securities deliverable hereunder) to be delivered to each Holder (or
to the Exercise Price) if such adjustment would represent less than one percent
of the number of shares to be so delivered, but any such adjustment shall be
carried forward and shall be made at the time and together with the next
subsequent adjustment which, together with any adjustments so carried forward,
shall amount to one percent or more of the number of shares to be so delivered.
(e) Notices of Certain Events. If at any time after the date
hereof and before the expiration of the Exercise Period:
(i) the Company authorizes the issuance to all holders of its
Common Stock of (A) rights or warrants to subscribe for or purchase
shares of its Common Stock or (B) any other subscription rights or
warrants;
(ii) the Company authorizes the distribution to all holders of
its Common Stock of evidences of its indebtedness or assets (other than
cash dividends or distributions excluded from the operation of
paragraph 9(a)(iii));
(iii) there shall be any capital reorganization of the Company
or reclassification of the Common Stock (other than a change in par
value of the Common Stock or an
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<PAGE> 16
increase in the authorized capital stock of the Company not involving
the issuance of any shares thereof) or any consolidation or merger to
which the Company is a party (other than a consolidation or merger with
a subsidiary in which the Company is the continuing corporation and
that does not result in any reclassification or change in the Common
Stock outstanding) or a conveyance or transfer of all or substantially
all of the properties and assets of the Company:
(iv) there shall be any voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(v) there shall be any other event that would result in an
adjustment pursuant to this Section 9 in the Exercise Price or the
number of Warrant Shares that may be purchased upon the exercise
hereof;
the Company will cause to be mailed to the Holder, at least twenty days (or ten
days in any case specified in the clauses (i) or (ii) above) before the
applicable record or effective date hereinafter specified, a notice stating (A)
the date as of which the holders of Common Stock of record entitled to receive
any such rights, warrants or distributions is to be determined, or (B) the date
on which any such reorganization, reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding-up is expected to
become effective, and the date as of which it is expected that holders of Common
Stock of record will be entitled to exchange their shares of Common Stock for
securities or other property, if any, deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding-up.
(f) Failure to Give Notice. The failure to give the notice
required by Section 9(e) hereof or any defect therein shall not affect the
legality or validity of any distribution right, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding-up or the vote upon
any such action.
Section 10. Officers' Certificate. Whenever the number of
Warrant Shares that may be purchased on exercise of this Warrant or the Exercise
Price is adjusted as required by the provisions of Section 9 hereof, the Company
will forthwith file in the custody of its Secretary or an Assistant Secretary at
its principal office and at the office of its agent an officers' certificate
showing the adjusted number of Warrant Shares that may be purchased at the
Exercise Price on exercise of this Warrant and the adjusted Exercise Price
determined as herein provided, setting forth in reasonable detail the facts
requiring such adjustment and the manner of computing such adjustment. Each such
officers' certificate shall be signed by the President, Chief Financial Officer
or Treasurer of the Company and by the Secretary or an Assistant Secretary of
the Company. Each such officers' certificate shall be made available at all
reasonable times for inspection by the Holder. The Company shall, forthwith
after each such adjustment, cause such certificate to be mailed to the Holder.
Section 11. Availability of Information. In addition to the
requirements of Section 5(h), the Company shall comply with all applicable
public information reporting requirements of the SEC and applicable state
securities laws to which it may from time to time be subject. The Company will
also cooperate with each Holder of any Warrants and each holder of any Warrant
Shares in supplying such information concerning the Company as may be necessary
for such Holder or holder to complete and file any information reporting forms
currently or hereafter required by the SEC as a condition to the availability of
an exemption from the Act for the sales of any Warrants or Warrant Shares.
Section 12. Warrant Register. The Company will register this
Warrant in the Warrant Register in the name of the record holder to whom it has
been distributed or assigned in
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<PAGE> 17
accordance with the terms thereof. The Company may deem and treat the registered
Holder of this Warrant as the absolute owner hereof (notwithstanding any
notation of ownership or other writing hereon made by anyone) for the purpose of
any exercise hereof or any distribution to the Holder and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Section 13. Successors. All of the provisions of this Warrant
by or for the benefit of the Company or the Holder shall bind and inure to the
benefit of their respective successors and assigns.
Section 14. Headings. The headings of sections of this Warrant
have been inserted for convenience of reference only, are not to be considered a
part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
Section 15. Amendments. This Warrant may be amended by the
affirmative vote of Holders holding Warrants to purchase not less than
two-thirds of the Warrant Shares purchasable pursuant to all of the then
outstanding Warrants; provided, that, except as expressly provided herein, this
Warrant may not be amended, without the consent of the Holder, to change (i) any
price at which this Warrant may be exercised, (ii) the period during which this
Warrant may be exercised, (iii) the number or type of securities to be issued
upon the exercise hereof or (iv) the provisions of this Section 15.
Section 16. Notices. Unless otherwise provided in this
Warrant, any notice or other communication required or permitted to be made or
given to any party hereto pursuant to this Warrant shall be in writing and shall
be deemed made or given if delivered by hand, on the date of such delivery to
such party, or, if mailed, on the fifth day after the date of mailing, if sent
to such party by certified or registered mail, postage prepaid, addressed to it
(in the case of a Holder) at its address in the Warrant Register or (in the case
of the Company) at its address set forth below, or to such other address as is
designated by written notice, similarly given to each party hereto.
Section 17. Governing Law. This Warrant shall be deemed to be
a contract made under the laws of the Commonwealth of Pennsylvania and for all
purposes shall be construed in accordance with the laws of said Commonwealth as
applied to the contracts made and to be performed in Pennsylvania between
Pennsylvania residents.
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<PAGE> 18
IN WITNESS WHEREOF, the Company has duly caused this Warrant
to be signed and attested by its duly authorized officer and to be dated as of
_____________, 1997.
CEPHALON, INC.
By:
----------------------------
Name:
Title:
Address:
145 Brandywine Parkway
West Chester, Pennsylvania 19380
Attention:
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<PAGE> 1
EXHIBIT 10.1
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT, dated as of January 15, 1997, by
and between CEPHALON, INC., a Delaware corporation, with headquarters located at
145 Brandywine Parkway, West Chester, Pennsylvania 19380 (the "Company"), and
__________ (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Buyer wishes to purchase from the Company and the
Company wishes to sell to the Buyer, upon the terms and subject to the
conditions of this Agreement, a promissory note of the Company having the
aggregate principal amount set forth on the signature page of this Agreement and
which will be convertible into shares of Common Stock, $.01 par value, and, if
the Company's Preferred Stock Purchase Plan is at the time still in effect, the
related Preferred Share Purchase Rights, or if any similar preferred share
purchase or similar rights are in effect at the time, such rights (together, the
"Common Stock") of the Company; and
WHEREAS, prior to the issuance of such promissory note, the
Company and Owen, Diaz & Altschul Fund I, Ltd., a British Virgin Islands
corporation as Collateral Agent (in such capacity as Collateral Agent, the
"Collateral Agent"), shall execute and deliver, one to the other, a Pledge and
Security Agreement in the form referred to herein which provides for the grant
to the Collateral Agent of a first priority perfected security interest in
certain collateral upon the terms and with the effect provided as described
therein;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. PURCHASE AND SALE; PURCHASE PRICE.
(a) PURCHASE. The Buyer hereby agrees to purchase, and the
Company hereby agrees to sell to the Buyer, on the Closing Date (as defined
herein), a promissory note of the Company in the aggregate principal amount set
forth on the signature page of this Agreement and having the terms and
conditions and as set forth in the form of Senior Convertible Note attached
hereto as ANNEX I (the "Note") for the purchase price set forth on the signature
page of this Agreement. The shares of Common Stock issuable upon conversion of
the Note are herein collectively referred to as the "Shares." The Note, the
Debenture issuable on the maturity date of the Note, in the form attached as
Exhibit L to ANNEX I hereto (the "Debenture"), the shares of Common Stock
issuable upon the payment of interest on the Note (the "Interest Shares") and
the Shares are herein collectively referred to as the "Securities."
(b) FORM OF PAYMENT. Within three New York Stock Exchange
trading days after the date the Company and the Buyer execute and deliver this
Agreement, one to the other, the Buyer shall deposit the aggregate purchase
price for the Note in escrow by delivering funds in United States Dollars in the
amount set forth on the signature page of this Agreement to the escrow agent
(the "Buyer Escrow Agent") identified in the Buyer Escrow Instructions attached
hereto as ANNEX II (the "Buyer Escrow Instructions") against delivery by the
Company of the Note as provided herein on the Closing Date. Such funds shall at
all times remain the property of the Buyer, subject to the terms of the Buyer
Escrow Instructions, until required to be released to the Company in accordance
with the Buyer Escrow Instructions. By signing this Agreement, the Buyer agrees
to all of the terms and conditions of, and becomes a party to, the Buyer Escrow
Instructions, all of the provisions of which are incorporated herein by this
reference as if set forth in full. Neither the Company nor any creditor or
stockholder of the Company or any person claiming rights by, through or on
behalf of the Company shall have any claim, lien, equity,
<PAGE> 2
encumbrance or other right to or in respect of the funds or any other property
held pursuant to the Buyer Escrow Instructions prior to satisfaction of the
conditions to the release thereof to the Company in accordance with the terms of
this Agreement and the Buyer Escrow Instructions.
2. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE BUYER
The Buyer represents and warrants as of the date of this
Agreement to, and covenants and agrees with, the Company as follows:
(a) PURCHASE FOR INVESTMENT. The Buyer is purchasing the Note
for its own account for investment and not with a view to, or any resale in
connection with any, distribution thereof within the meaning of the Securities
Act of 1933, as amended (the "1933 Act"); any Shares and Interest Shares
acquired by the Buyer will only be acquired for its own account for investment;
and the Buyer has no intention of making any distribution, within the meaning of
the 1933 Act, of the Shares and the Interest Shares except in compliance with
the registration requirements of the 1933 Act or pursuant to an exemption
therefrom;
(b) ACCREDITED INVESTOR. The Buyer is an "accredited investor"
as that term is defined in Rule 501 of Regulation D ("Regulation D") under the
1933 Act by reason of Rule 501(a)(3);
(c) REOFFERS AND RESALES. The Buyer will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any of the
Securities except in compliance with the Securities Act and the rules and
regulations promulgated thereunder;
(d) COMPANY RELIANCE. The Buyer understands that the Note is
being offered and sold, the Shares and the Debenture are being offered and, upon
conversion of the Note, the Shares will be sold, and the Interest Shares will be
issued to it in reliance on one or more exemptions from the registration
requirements of the 1933 Act, including, without limitation, Regulation D, and
exemptions from state securities laws and that the Company is relying upon the
truth and accuracy of, and the Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein and in the Prospective Purchaser Questionnaire, a true and accurate
copy of which has been delivered by the Buyer to the Company (the
"Questionnaire"), in order to determine the availability of such exemptions and
the eligibility of the Buyer to acquire the Securities; and the information with
respect to the Buyer set forth in the Questionnaire is accurate and complete in
all material respects;
(e) INFORMATION PROVIDED. The Buyer and its advisors have
requested, received and considered all information relating to the business,
properties, operations, condition (financial or other), results of operations or
prospects of the Company and information relating to the offer and sale of the
Note and the offer and, upon exercise of the Note, sale of the Shares deemed
relevant by them; the Buyer and its advisors have been afforded the opportunity
to ask questions of the Company concerning the terms of the Securities and the
business, properties, operations, condition (financial or other), results of
operations or prospects of the Company and have received complete and
satisfactory answers to any such inquiries; without limiting the generality of
the foregoing, the Buyer has had the opportunity to obtain and to review (1) the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995
(the "1995 10-K"), (2) the Company's Current Reports on Form 8-K, dated January
19, 1996, February 12, 1996, February 20, 1996, March 14, 1996, April 16, 1996
and May 7, 1996, (3) the Company's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1996, June 30, 1996 and September 30, 1996 (the
"September 1996 10-Q") and (4) the Company's definitive
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<PAGE> 3
Proxy Statement for its 1996 Annual Meeting of Stockholders (collectively, the
"SEC Reports"), in each case as filed with the Securities and Exchange
Commission (the "SEC"); the Buyer and its advisors have received and reviewed a
draft of the Registration Statement dated January 13, 1997 referred to in
Section 8(b) (the "Draft Registration Statement"), including without limitation
the risk factors set forth therein; the Buyer has, in connection with its
decision to purchase the Note, relied solely upon the SEC Reports, the Draft
Registration Statement, the representations, warranties, covenants and
agreements of the Company set forth herein and to be contained in the Note, as
well as any investigation of the Company completed by the Buyer or its advisors;
the Buyer understands that its investment in the Securities involves a high
degree of risk; and the Buyer understands that the offering of the Note is being
made to the Buyer as part of an offering without any minimum or maximum amount
of the offering (subject, however, to the right of the Company at any time prior
to execution and delivery of this Agreement by the Company, in its sole
discretion, to accept or reject an offer by the Buyer to purchase the Note);
(f) ABSENCE OF APPROVALS. The Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities; and
(g) NOTE PURCHASE AGREEMENT. The Buyer has all requisite power
and authority, corporate or otherwise, to execute, deliver and perform its
obligations under this Agreement and the other agreements executed by the Buyer
in connection herewith and to consummate the transactions contemplated hereby
and thereby; and this Agreement has been duly and validly authorized, duly
executed and delivered by the Buyer and, assuming due execution and delivery by
the Company, is a valid and binding agreement of the Buyer enforceable in
accordance with its terms, except as the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and general principles of equity, regardless of
whether enforcement is considered in a proceeding in equity or at law.
(h) BUYER STATUS. The Buyer is not a "broker" or "dealer" as
those terms are defined in the Securities Exchange Act of 1934, as amended (the
"1934 Act"), which is required to be registered with the SEC pursuant to Section
15 of the 1934 Act.
(i) SHORT POSITION. As of the date of this Agreement, the
Buyer does not, directly or indirectly, maintain a short position in the Common
Stock or own any puts, calls, options or other derivative securities in respect
of the Common Stock.
3. REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE
COMPANY.
The Company represents and warrants as of the date of this
Agreement to, and covenants and agrees with, the Buyer that:
(a) ORGANIZATION AND AUTHORITY. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite corporate power and authority to (i)
own, lease and operate its properties and to carry on its business as described
in the SEC Reports and as currently conducted, and (ii) to execute, deliver and
perform its obligations under this Agreement, the Note and the other agreements
executed and delivered by the Company in connection herewith, and to consummate
the transactions contemplated hereby and thereby.
(b) SUBSIDIARIES. The Company has no subsidiaries other than
those subsidiaries listed in Exhibit 21 to the 1995 10-K (the "Subsidiaries")
and other subsidiaries of the Company which, individually and in the aggregate,
do not have any material assets or
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<PAGE> 4
liabilities. The Company either owns directly or indirectly through a Subsidiary
all of the outstanding capital stock of each of the Subsidiaries free and clear
of all liens, security interests and other encumbrances of any nature
whatsoever. Each of the Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to own or lease and
operate its properties and to conduct its business as described in the SEC
Reports and as currently conducted. There are no options or warrants for the
purchase of, or other rights to purchase or subscribe for, or outstanding voting
securities convertible into or exchangeable for, any capital stock or other
securities of any of the Subsidiaries.
(c) QUALIFICATIONS. The Company and the Subsidiaries are each
duly qualified to do business as a foreign corporation and are in good standing
in all jurisdictions wherein such qualification is necessary and where failure
so to qualify could have a material adverse effect on the condition (financial
or other), results of operations or prospects of the Company and its
Subsidiaries taken as a whole.
(d) CAPITALIZATION. The authorized capital of the Company
consists of (a) 100,000,000 shares of Common Stock, of which 24,618,220 shares
were outstanding as of December 31, 1996 and (b) 5,000,000 shares of Preferred
Stock, $.01 par value, of which 1,000,000 shares have been designated Series A
Junior Participating Preferred Shares and none are outstanding; on the Closing
Date there will be no material increase in the number of shares of Common Stock
and preferred stock outstanding, except for shares issued upon the exercise of
options and warrants outstanding on the date hereof or options or similar rights
granted subsequent to the date of this Agreement pursuant to the Company's stock
option plans in effect on the date of this Agreement. The September 1996 10-Q
discloses as of September 30, 1996 all outstanding options or warrants for the
purchase of, or other rights to purchase or subscribe for, or securities
convertible into or exchangeable for, Common Stock or other capital stock of the
Company, or any contracts or commitments to issue or sell Common Stock or other
capital stock of the Company or any such options, warrants, rights or other
securities; and from such date to the date hereof there has been no material
change in the amount or terms of any of the foregoing except for the grant of
514,416 shares of Common Stock pursuant to the Company's stock option plans. The
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable and all of such options, warrants and other
rights have been duly authorized by the Company. None of the holders of such
outstanding shares of Common Stock is subject to personal liability solely by
reason of being such a holder. None of the outstanding shares of Common Stock
and options, warrants and other rights to acquire Common Stock has been issued
in violation of the preemptive rights of any securityholder of the Company. The
offers and sales of the outstanding shares of Common Stock and options, warrants
and other rights to acquire Common Stock were at all relevant times either
registered under the 1933 Act and applicable state securities laws or exempt
from such requirements. No holder of any of the Company's securities has any
rights, "demand," "piggy-back" or otherwise, to have such securities registered
by reason of the intention to file, filing or effectiveness of the Registration
Statement (as defined in Section 8).
(e) MATERIAL LOSSES. Since the date as of which information is
given in the 1995 10-K or the September 1996 10-Q, the Company and the
Subsidiaries have not sustained any loss or interference with their respective
business or properties from fire, flood, hurricane, accident or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, which loss or interference would be
material to the business, properties, operations, condition (financial or
other), results of operations or prospects of the Company and the Subsidiaries
taken as a whole.
(f) CONCERNING THE SHARES AND THE COMMON STOCK. The Shares
have been duly authorized and, when issued upon conversion of the Note, will be
duly and validly issued,
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<PAGE> 5
fully paid and non-assessable and will not subject the holder thereof to
personal liability by reason of being such holder. The holders of outstanding
shares of capital stock of the Company are not entitled to preemptive or other
rights to subscribe for the Shares or the Note. The Shares have been duly
reserved by the Company for issuance upon conversion of the Note, and shall
remain so reserved as long as the Note may be converted. The Common Stock is
listed for trading on the Nasdaq National Market ("Nasdaq") and (1) the Company
and the Common Stock meet the criteria for continued listing and trading on
Nasdaq; (2) the Company has not been notified since January 1, 1995 by the
National Association of Securities Dealers, Inc. (the "NASD") of any failure or
potential failure to meet the criteria for continued listing and trading on
Nasdaq and (3) no suspension of trading in the Common Stock is in effect.
(g) CORPORATE AUTHORIZATION; PERMITS AND LICENSES. This
Agreement, the Pledge and Security Agreement in the form attached hereto as
ANNEX III (the "Security Agreement"), the Note and the Debentures have been duly
and validly authorized by the Company; this Agreement has been duly executed and
delivered by the Company and, assuming due execution and delivery by the Buyer,
this Agreement is, the Security Agreement will be, when executed and delivered
by the Company and the Buyer, and the Note and the Debenture will be, when
executed and delivered by the Company, valid and binding obligations of the
Company enforceable in accordance with their respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and general
principles of equity, regardless of whether enforcement is considered in a
proceeding in equity or at law.
(h) NON-CONTRAVENTION. The execution and delivery of this
Agreement, the Security Agreement, the Note and the Debenture by the Company and
the consummation by the Company of the issuance of the Securities and the other
transactions contemplated by this Agreement, the Security Agreement, the Note
and the Debenture do not and will not, with or without the giving of notice or
the lapse of time, or both, (i) result in any violation of any term of the
certificate of incorporation or by-laws of the Company, (ii) conflict with or
result in a breach by the Company of any of the terms or provisions of, or
constitute a default under, or result in the modification of, or result in the
creation or imposition of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company or any of the Subsidiaries
pursuant to, any indenture, mortgage, deed of trust or other agreement or
instrument to which the Company or any of the Subsidiaries is a party or by
which the Company or any Subsidiary or any of their respective properties or
assets are bound or affected (other than a loan in the outstanding principal
amount at December 31, 1996 of $3,750,000 to the Company from Sumitomo Bank,
Ltd. (the "Sumitomo Loan"), with regard to which the Company shall either (x)
repay such loan on or prior to the Closing Date or (y) obtain a written waiver
in form, scope and substance reasonably acceptable to the Buyer), or (iii)
violate or contravene any applicable law, rule or regulation or any applicable
decree, judgment or order of any court, United States federal or state
regulatory body, administrative agency or other governmental body having
jurisdiction over the Company or any Subsidiary or any of their respective
properties or assets or (iv) have any material adverse effect on any permit,
certification, registration, approval, consent, license or franchise necessary
for the Company or any of the Subsidiaries to own or lease and operate any of
their respective properties and to conduct any of their respective businesses or
the ability of the Company or any of the Subsidiaries to make use thereof.
(i) APPROVALS. No authorization, approval or consent of, or
filing with, any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the stockholders of the Company is
required to be obtained or made by the Company in connection with the execution,
delivery and performance of this Agreement, the Security Agreement, the Note and
the Debenture and the issuance and sale of the Securities as contemplated by
this Agreement and the terms of the Note, other than (1) listing of the Shares
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<PAGE> 6
and the Interest Shares on Nasdaq, (2) registration of the Shares and the
Interest Shares under the 1933 Act as contemplated by Section 8, (3) as may be
required under applicable state securities or "blue sky" laws, (4) the filing of
appropriate financing statements under the Uniform Commercial Code and (5)
filing of one or more Forms D with respect to the Securities as required under
Regulation D.
(j) INFORMATION PROVIDED. The information provided by or on
behalf of the Company to the Buyer and referred to in Section 2(e) of this
Agreement does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading, it
being understood that for purposes of this Section 3(j), any statement contained
in such information shall be deemed to be modified or superseded for purposes of
this Section 3(j) to the extent that a statement in any document included in
such information which was prepared or filed with the SEC on a later date
modifies or replaces such statement, whether or not such later prepared or filed
statement so states.
(k) CONDUCT OF BUSINESS. Except as set forth in the SEC
Reports, since the date as of which information is given in the 1995 10-K,
neither the Company nor any of the Subsidiaries has (i) incurred any material
obligation or liability (absolute or contingent) other than in the ordinary
course of business; (ii) canceled, without payment in full, any material notes,
loans or other obligations receivable or other debts or claims held by it other
than in the ordinary course of business; (iii) sold, assigned, transferred,
abandoned, mortgaged, pledged or subjected to lien any of its material
properties, tangible or intangible, or rights under any material contract,
permit, license, franchise or other agreement; (iv) conducted its business in a
manner materially different from its business as conducted on such date; (v)
declared, made or paid or set aside for payment any cash or non-cash
distribution on any shares of its capital stock; or (vi) consummated, or entered
into any agreement with respect to, any transaction or event which would
constitute a "Repurchase Event" (as defined in the Note). Except as disclosed in
the SEC Reports, the Company and each of the Subsidiaries owns, possesses or has
obtained all governmental, administrative and third party licenses, permits,
certificates, registrations, approvals, consents and other authorizations
necessary to own or lease (as the case may be) and operate its properties,
whether tangible or intangible, and to conduct its business or operations as
currently conducted, except such licenses, permits, certificates, registrations,
approvals, consents and authorizations the failure of which to obtain would not
have a material adverse effect on the business, properties, operations,
condition (financial or other), results of operations or prospects of the
Company, and the Subsidiaries taken as a whole.
(l) SEC FILINGS. The Company has timely filed all reports
required to be filed under the 1934 Act and any other material reports or
documents required to be filed with the SEC since January 1, 1994. All of such
reports and documents complied, when filed, in all material respects, with all
applicable requirements of the 1933 Act and the 1934 Act. The Company meets the
requirements for the use of Form S-3 for the registration of the resale of the
Shares by the Buyer and any Investor (as defined in Section 8).
(m) ABSENCE OF LITIGATION. Except as described in the SEC
Reports, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board or body pending or, to the knowledge of the
Company or any of the Subsidiaries, threatened against or affecting the Company
or any of the Subsidiaries wherein an unfavorable decision, ruling or finding is
reasonably likely and would reasonably be expected to have a material adverse
effect on the business, properties, operations, condition (financial or other),
results of operations or prospects of the Company and its Subsidiaries taken as
a whole or the transactions contemplated by this Agreement, the Security
Agreement, the Note, the Debenture or any of the documents contemplated thereby
or which would reasonably be expected to materially adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations
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<PAGE> 7
under, this Agreement, the Security Agreement, the Note, the Debenture or any of
such other documents.
(n) LIABILITIES. Except as and to the extent disclosed,
reflected or reserved against in the consolidated financial statements of the
Company and the notes thereto included in the 1995 10-K or the September 1996
10-Q, as of the respective dates thereof the Company and the Subsidiaries had no
material (individually or in the aggregate) liabilities, debts or obligations
whether accrued, absolute, contingent or otherwise, and whether due or to become
due of a type required to be reflected on a consolidated corporate balance sheet
prepared in accordance with generally accepted accounting principles. Subsequent
to September 30, 1996, neither the Company nor any of the Subsidiaries has
incurred any liabilities, debts or obligations of any nature whatsoever, other
than those incurred in the ordinary course of its business, which are
individually or in the aggregate material to the Company and the Subsidiaries
taken as a whole.
(o) TRANSFER AGENT INSTRUCTIONS. No instruction other than the
instructions referred to in Section 8(c)(12) will be given by the Company to its
transfer agent for the Common Stock with respect to the Shares and the Shares
shall be freely transferable on the books and records of the Company as and to
the extent provided in this Agreement and the Note.
(p) INTELLECTUAL PROPERTY. Except as disclosed in the SEC
Reports, the Company and the Subsidiaries own, or possess adequate rights to
use, all patents, patent rights, inventions, trade secrets, know-how,
proprietary techniques, including processes and substances, trademarks, service
marks, trade names and copyrights described or referred to in the SEC Reports or
owned or used by them or which are necessary for the conduct of their respective
businesses as they are presently conducted, except where the failure to own or
possess adequate rights to use such patents, patent rights, inventions, trade
secrets, service marks, trade names and copyrights would not have a material
adverse effect on the business, properties, operations, condition (financial or
other), results of operations or prospects of the Company and the Subsidiaries,
taken as a whole. Except as disclosed in the SEC Reports, neither the Company
nor any of the Subsidiaries has received any notice of infringement of or
conflict with asserted rights of others with respect to, any patents, patent
rights, inventions, trade secrets, know-how, proprietary techniques, including
processes and substances, trademarks, service marks, trade names or copyrights
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would reasonably be expected to materially adversely affect
the business, properties, operations, condition (financial or other), results of
operations or prospects of the Company and the Subsidiaries, taken as a whole,
as presently being conducted or as proposed to be conducted.
(q) INTERNAL ACCOUNTING CONTROLS. The Company maintains a
system of internal accounting controls meeting the requirements of Section
13(b)(2) of the 1934 Act in all material respects.
(r) COMPLIANCE WITH LAW. Neither the Company nor any of the
Subsidiaries is in violation of any statute, law, rule, regulation, ordinance,
decision or order of any governmental agency or body or any court, domestic or
foreign, including, without limitation, those relating to the use, operation,
handling, transportation, disposal or release of hazardous or toxic substances
or wastes or relating to the protection or restoration of the environment or
human exposure to hazardous or toxic substances or wastes, except where such
violation would not individually or in the aggregate have a material adverse
effect on the business, properties, operations, condition (financial or other),
results of operations or prospects of the Company and its Subsidiaries taken as
a whole; and the Company is not aware of any pending investigation which would
reasonably be expected to lead to such a claim.
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<PAGE> 8
(s) PROPERTIES. The Company and the Subsidiaries have good and
marketable title to all the properties and assets reflected in the consolidated
financial statements subject to no liens, mortgages, pledges, charges or
encumbrances of any kind except those reflected in such financial statements or
described in the 1995 10-K and the September 1996 10-Q or which are not material
in amount. The Company and the Subsidiaries occupy their leased properties under
valid and binding leases conforming to the description thereof set forth in the
SEC Reports. All material leases, contracts and agreements referred to in or
filed as exhibits to the SEC Reports to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the Subsidiaries is
bound, are in full force and effect or have expired or terminated in accordance
with their terms or have been superseded by other leases, contracts or
agreements.
(t) LABOR RELATIONS. Neither the Company nor any of the
Subsidiaries is involved in any labor disputes which, either individually or in
the aggregate, could reasonably be expected to have a material adverse effect on
the business, properties, operations, condition (financial or other), results of
operations or prospects of the Company and the Subsidiaries taken as a whole,
nor, to the knowledge of the Company, is any such dispute threatened.
(u) INSURANCE. The Company and the Subsidiaries maintain
insurance against loss or damage by fire or other casualty and such other
insurance, including but not limited to, product liability insurance, in such
amounts and covering such risks as the Company believes is commercially
reasonable.
4. CERTAIN COVENANTS.
(a) TRANSFER RESTRICTIONS. The Buyer acknowledges and agrees
that (1) the Note to be issued to it hereunder and the Debenture which may be
issued pursuant to the Note have not been and are not being registered under the
provisions of the 1933 Act or any state securities laws and, except as provided
in Section 8, the Shares and the Interest Shares have not been and are not being
registered under the 1933 Act or any state securities laws, and that the Note
and the Debenture may not be transferred unless the Buyer shall have delivered
to the Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the Note or the Debenture to be
transferred may be transferred without such registration; (2) no sale,
assignment or other transfer of the Note or the Debenture or any interest
therein may be made except to a Permitted Transferee (as defined in the Note and
the Debenture, respectively); (3) the Shares and the Interest Shares are not
transferable in the absence of registration under the 1933 Act, or applicable
state securities laws, or applicable exemptions therefrom; (4) any sale of the
Shares or the Interest Shares under the Registration Statement shall be made
only in compliance with the terms of this Section 4 and Section 8, including,
without limitation, the prospectus delivery requirements of the 1933 Act; (5)
any sale of the Securities made in reliance on Rule 144 promulgated under the
1933 Act or any other similar rule or regulation of the SEC that may at any time
permit a holder of any Securities to sell securities of the Company to the
public without registration ("Rule 144") may be made only in accordance with the
terms of said Rule and further, if the exemption provided by Rule 144 is not
available, any resale of the Securities under circumstances in which the seller,
or the person through whom the sale is made, may be deemed to be an underwriter,
as that term is used in the 1933 Act, may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (6) the Company is under no obligation to register the Securities (other
than registration of the Shares and the Interest Shares in accordance with
Section 8) under the 1933 Act or to comply with the terms and conditions of any
exemption thereunder. The Buyer may not transfer the Shares or Interest Shares
in a transaction which does not constitute a transfer thereof pursuant to the
Registration Statement in accordance with the plan of distribution set forth
therein unless the Buyer shall have delivered to the Company an opinion of
counsel, reasonably satisfactory in form, scope and substance to the Company,
that such Shares or Interest Shares may be transferred without registration
under the 1933 Act.
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<PAGE> 9
(b) RESTRICTIVE LEGENDS. The Buyer acknowledges and agrees
that the Note shall bear a restrictive legend in substantially the following
form (and a stop-transfer order may be placed against transfer of the Note):
This Note has not been registered under the Securities Act of 1933, as
amended (the "Act"), or any state securities laws. The sale to the holder
of this Note of the Shares of Common Stock issuable upon conversion of this
Note and in payment of interest on this Note are not covered by a
registration statement under the Act or registration under state securities
laws. This Note has been acquired, and such shares must be acquired, for
investment only and may not be sold, transferred or assigned in the absence
of registration of the resale thereof or an opinion of counsel reasonably
satisfactory in form, scope and substance to the Company that such
registration is not required.
(c) NASDAQ LISTING; REPORTING STATUS. On or before the date
which is 15 days prior to the Closing Date, the Company will file with Nasdaq an
application or other document required by Nasdaq for the listing of the Shares
with Nasdaq and shall provide evidence of such filing to the Buyer. So long as
the Buyer beneficially owns any portion of the Note or any Shares, the Company
will use its best efforts to maintain the listing of the Common Stock on Nasdaq
or another national securities exchange. So long as the Company is required to
maintain effectiveness of the Registration Statement in accordance with Section
8 and its shares of Common Stock are publicly traded, the Company shall timely
file all reports required to be filed with the SEC pursuant to Section 13 or
15(d) of the 1934 Act, and the Company shall not, during the period the Company
is required to keep the Registration Statement effective pursuant to Section
8(c), terminate its status as an issuer required to file reports under the 1934
Act even if the 1934 Act or the rules and regulations thereunder would permit
such termination.
(d) FORM D. The Company agrees to file one or more Forms D
with respect to the Securities as required under Regulation D to claim the
exemption provided by Rule 506 of Regulation D and to provide a copy thereof to
the Buyer promptly after such filing.
(e) SECURITY AGREEMENT; FINANCING STATEMENTS. The Company
agrees to execute and deliver to the collateral agent named therein (the
"Pledgee") the Security Agreement in the form attached hereto as ANNEX III on or
before the Closing Date. The Company shall prepare, and on or before the Closing
Date, file with the appropriate officials, Uniform Commercial Code financing
statements on Form UCC-1 relating to the collateral in which the Company is
granting a security interest to the Buyer pursuant to the Security Agreement.
The Company shall provide evidence of such filings and customary search reports
of the records of the relevant Uniform Commercial Code filing offices on or
prior to the Closing Date.
(f) STATE SECURITIES LAWS. On or before the Closing Date, the
Company shall take such action as shall be necessary to qualify, or to obtain an
exemption for, the Note for sale to the Buyer pursuant to this Agreement and the
Shares for sale upon conversion of the Note under such of the securities laws of
jurisdictions in the United States as shall be applicable to the sale of the
Note to the Buyer pursuant to this Agreement and issuance of the Shares upon
conversion of the Note. Prior to the issuance of the Debenture, the Company
shall take such actions under applicable state securities laws as shall be
necessary to qualify, or to obtain an exemption for, the Debenture under such
laws. In connection with the foregoing obligations of the Company in this
Section 4(f), the Company shall not be required (1) to qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 4(f), (2) to subject itself to general taxation in any such
jurisdiction, (3) to file a general consent to service of process in any such
jurisdiction, (4) to provide any undertakings that cause more than nominal
expense or burden to the Company or (5) to make any change in its charter or
by-laws which the Board of Directors of the Company determines to be contrary to
the best interests of
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<PAGE> 10
the Company and its stockholders. The Company shall furnish the Buyer with
copies of all filings, applications, orders and grants or confirmations of
exemptions relating to such securities laws on or before the Closing Date.
(g) LIMITATION ON CERTAIN SALES OF COMMON STOCK. The Buyer
agrees not to make, directly or indirectly, any short sales of shares of Common
Stock or purchase, acquire or hold any puts, calls or other options or
derivative securities in respect of the Common Stock until the date the
Registration Statement is declared effective by the SEC.
(h) CERTAIN FUTURE FINANCINGS. The Company shall not issue any
equity securities or securities convertible into, exchangeable for or otherwise
entitling the holder to acquire, any equity securities of the Company which
would, for purposes of Section 4460(i)(1)(D) of the rules of the NASD, be
integrated with the sale of the Note and the issuance of Shares upon conversion
of the Note.
(i) LIMITATION ON CERTAIN ACTIONS. From the date of execution
and delivery of this Agreement by the parties hereto to the date of issuance of
the Note, the Company (1) shall comply with Section 3.2 of the Note as if the
Note was outstanding, (2) shall not take any action which, if the Note was
outstanding, (A) would constitute an Event of Default (as defined in the Note)
or, with the giving of notice or the passage of time or both, would constitute
an Event of Default or (B) would constitute a Repurchase Event (as defined in
the Note) or, with the giving of notice or the passage of time or both, would
constitute a Repurchase Event.
(j) ESCROW RELEASE. (1) Contemporaneously with the submission
by the Company to the SEC of an acceleration request relating to the
Registration Statement (as defined herein) the Company will furnish a copy
thereof to the Buyer, together with the date and approximate time such
acceleration request was submitted to the SEC. The Company shall notify the
Buyer and the Buyer Escrow Agent (collectively, the "Company Notice") that the
Registration Statement shall have been declared effective by the SEC on the date
(the "SEC Effective Date") such event occurs. If the Company Notice shall have
been given and the conditions precedent in Section 7 shall have been satisfied
or waived by the Buyer, then promptly after the later of (x) the date the
Company Notice has been given to the Buyer, and (y) the date of satisfaction or
waiver by the Buyer of the conditions precedent in Section 7, the Buyer shall
notify the Buyer Escrow Agent that (1) the Registration Statement has been
declared effective and (2) all conditions precedent to the release of the
portion of the Escrow Funds (as defined in the Buyer Escrow Instructions) to be
released to the Company have been satisfied or waived. The Company and the Buyer
agree that, on the later of (1) the date of receipt by the Buyer Escrow Agent of
such notice from the Buyer, and (2) the date of receipt by the escrow agents
acting on behalf of the buyers in connection with the several other Note
Purchase Agreements, dated as of the date hereof, between the Company and the
several buyers named therein of the latest of the notices from such buyers to
release funds held by such escrow agents to the Company, or as promptly as
practicable thereafter, the portion of the Escrow Funds to be released to the
Company shall be released to the Company in accordance with Section 1 of the
Buyer Escrow Instructions.
(2) If the SEC Effective Date is not within 60 days after the
date the Company and the Buyer execute and deliver this Agreement, one to the
other, the Buyer shall have the right, exercisable pursuant to Section 10 to
terminate this Agreement with the effect provided in Section 10 and the right by
notice to the Buyer Escrow Agent pursuant to the Buyer Escrow Instructions, to
terminate the escrow under the Buyer Escrow Instructions as to all of the Note,
whereupon, the Buyer shall be entitled to release of all Escrow Funds (as
defined in the Buyer Escrow Instructions), together with interest thereon as
contemplated by the Buyer Escrow Instructions, from the escrow created by the
Buyer Escrow Instructions.
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<PAGE> 11
5. CLOSING DATE.
The date and time of the issuance and sale of the Note (the
"Closing Date") shall be 12:00 noon, New York City time, on the SEC Effective
Date or such other mutually agreed to time. The closing shall occur at the Law
Offices of Brian W Pusch, Penthouse Suite, 29 West 57th Street, New York, New
York.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell
the Note to the Buyer pursuant to this Agreement is conditioned upon the
following (any or all of which may be waived by the Company in its sole
discretion):
(a) The release by the Buyer Escrow Agent to the Company on
the Closing Date of an amount equal to the purchase price for the Note;
(b) On the Closing Date, no legal action, suit or proceeding
shall be pending or threatened which seeks to restrain or prohibit the
transactions contemplated by this Agreement;
(c) The representations and warranties of the Buyer contained
in this Agreement and in the Questionnaire shall have been true and correct on
the date of this Agreement and on or before the Closing Date the Buyer shall
have performed all covenants and agreements of the Buyer required to be
performed by the Buyer on or before the Closing Date;
(d) The Registration Statement shall have been declared
effective by the SEC and no stop order or similar proceeding relating to the
Registration Statement shall be pending or threatened (it being understood that
the inclusion of the closing condition set forth in this clause (d) shall not
limit the Company's obligations set forth in Section 8); and
(e) No event which, if the Note was outstanding, (1) would
constitute an Event of Default or, with the giving of notice or the passage of
time or both, would constitute an Event of Default shall have occurred and be
continuing or (2) would constitute a Repurchase Event or, with the giving of
notice or the lapse of time, or both, would constitute a Repurchase Event shall
have occurred and be continuing; and
(f) the Company shall have received an opinion of the Law
Offices of Brian W Pusch, dated the Closing Date, addressed to the Company,
substantially in the form of ANNEX IV attached hereto.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to
purchase the Note is conditioned upon the following (any or all of which may be
waived by the Buyer in its sole discretion):
(a) Delivery by the Company to the Buyer of the Note on the
Closing Date in accordance with this Agreement;
(b) On the Closing Date, no legal action, suit or proceeding
shall be pending or threatened which seeks to restrain or prohibit the
transactions contemplated by this Agreement;
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<PAGE> 12
(c) The representations and warranties of the Company
contained in this Agreement shall have been true and correct on the date of this
Agreement, and on or before the Closing Date the Company shall have performed
all covenants and agreements of the Company contained herein required to be
performed by the Company on or before the Closing Date;
(d) The Registration Statement shall have been declared
effective by the SEC and no stop-order or similar proceeding relating to the
Registration Statement shall be pending or threatened;
(e) No event which, if the Note was outstanding, (1) would
constitute an Event of Default or, with the giving of notice or the passage of
time or both, would constitute an Event of Default shall have occurred and be
continuing or (2) would constitute a Repurchase Event or, with the giving of
notice or the lapse of time, or both, would constitute a Repurchase Event shall
have occurred and be continuing;
(f) The Company shall have delivered to the Buyer its
certificate, dated the Closing Date, duly executed by its President and Chief
Executive Officer or Chief Operating Officer to the effect set forth in
subparagraphs (b), (c), (d) and (e) of this Section 7;
(g) The Buyer shall have (1) received written evidence
reasonably satisfactory to the Buyer of the repayment in full of the Sumitomo
Loan or (2) a written waiver from Sumitomo Bank, Ltd., in form, scope and
substance reasonably satisfactory to the Buyer, regarding the transactions
contemplated by this Agreement;
(h) On or prior to the Closing Date, the Buyer shall have
received written confirmation from the transfer agent of the Company that the
instructions set forth in ANNEX VII attached hereto and the form of opinion set
forth in ANNEX VIII attached hereto and required to be furnished by Company
counsel to the transfer agent pursuant to Section 8(c)(12) are satisfactory for
the purposes of causing certificates for the Shares to be issued and delivered
to or at the direction of the Buyer without further action by the Company, the
Buyer or any other person (other than completion, execution and delivery by the
Buyer of a Notice of Conversion of Convertible Note in the form attached to the
Note);
(i) On the Closing Date, the Buyer having received an opinion
of Morgan Lewis & Bockius LLP, counsel for the Company, dated the Closing Date,
addressed to the Buyer, in form, scope and substance reasonably satisfactory to
the Buyer, substantially in the form of ANNEX V attached hereto, and an opinion
of Barbara Schilberg, Esq., Senior Vice President and General Counsel of the
Company, dated the Closing Date and addressed to the Buyer, in form, scope and
substance reasonably acceptable to the Buyer, substantially in the form of ANNEX
VI attached hereto;
(j) On the Closing Date, the Buyer having received an opinion
of the Law Offices of Brian W Pusch, dated the Closing Date, addressed to the
Company substantially in the form of ANNEX IV attached hereto;
(k) On the Closing Date, (i) trading in securities on the New
York Stock Exchange, the American Stock Exchange or Nasdaq shall not have been
suspended or materially limited and (ii) a general moratorium on commercial
banking activities in the Commonwealth of Pennsylvania or the State of New York
shall not have been declared by either federal or state authorities; and
(l) The Pledgee shall have executed and delivered to the
Company the Security Agreement in the form attached hereto as ANNEX III.
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<PAGE> 13
8. REGISTRATION RIGHTS.
(a) DEFINITIONS. As used in this Section 8 and Section 11(j),
the following terms shall have the following meanings:
(1) "Investor" means the Buyer and any permitted transferee or
assignee who agrees to become bound by the provisions of Sections 4(a), 4(b) and
4(g) and this Section 8 of this Agreement in accordance with Section 11(j)(2)
hereof.
(2) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the SEC.
(3) "Registrable Securities" means the Shares and the Interest
Shares, in each case together with the related Preferred Share Purchase Rights
(so long as the Company's Preferred Stock Purchase Rights Plan is in effect),
and any stock or other securities into which or for which the Common Stock may
hereafter be changed, converted or exchanged by the Company or its successor, as
the case may be, and any other securities issued to holders of such Common Stock
(or such shares into which or for which such shares are so changed, converted or
exchanged) upon any reclassification, share combination, share subdivision,
share dividend, merger, consolidation or similar transaction or event.
(4) "Registration Statement" means a registration statement on
Form S-3 of the Company under the 1933 Act which names the Investors as selling
stockholders.
(b) MANDATORY REGISTRATION. The Company shall prepare and, on
or prior to the date which is 20 days after the date of this Agreement, file
with the SEC a Registration Statement on Form S-3 covering the resale of up to
[INSERT PRO RATA PORTION OF 1,440,000] shares of Common Stock (or such greater
number of shares of Common Stock as shall be included for resale by the Buyer in
the Registration Statement) which may be issued upon conversion of the Note and
the resale of such additional number of shares of Common Stock as the Company
shall in its discretion determine to register in connection with the issuance of
the Interest Shares, as Registrable Securities, and which Registration Statement
shall state that, in accordance with Rule 416 under the 1933 Act, such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the Note to
prevent dilution resulting from stock splits, stock dividends or similar
transactions.
(c) OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall:
(1) prepare promptly, and file with the SEC not later than 20
days after the date of this Agreement, a Registration Statement with respect to
the number of Registrable Securities provided in Section 8(b), and thereafter to
use its best efforts to cause each Registration Statement relating to
Registrable Securities to become effective within 60 days after the execution
and delivery of this Agreement by the parties hereto, and, subject to Section
8(c)(5), keep the Registration Statement effective pursuant to Rule 415 at all
times until the earlier of (a) such time as all of the Registrable Securities
have been disposed of in accordance with the intended methods of disposition by
the Investors and (b) such date as is three years after the Closing Date (or, if
(x) the Note shall have been fully converted into shares of Common Stock, (y)
the Maturity Date (as defined in the Note) shall have occurred or (z) the Note
shall no longer remain outstanding, such date after which each Investor may sell
all Registrable Securities
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<PAGE> 14
without registration under the 1933 Act pursuant to Rule 144, free of any
limitation on the volume of such securities which may be sold in any period).
The Company represents and warrants to the Investors that (a) the Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein), at the time it is first filed with the SEC, at the time it
is ordered effective by the SEC and at all times during which it is required to
be effective hereunder (and each such amendment and supplement at the time it is
filed with the SEC and at all times during which it is available for use in
connection with the offer and sale of the Registrable Securities) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (b) the prospectus used in connection with the Registration
Statement and any amendment or supplement thereto (the "Prospectus") shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
(2) subject to Section 8(c)(5), prepare and file with the SEC
such amendments (including post-effective amendments) and supplements to the
Registration Statement and the Prospectus as may be necessary to keep the
Registration Statement effective, and the Prospectus current, at all times until
such date as is three years after the Closing Date (or such earlier date as
shall be permitted under Section 8(c)(1)), and, during such period, comply with
the provisions of the 1933 Act applicable to the Company in order to permit the
disposition by the Investors of all Registrable Securities covered by the
Registration Statement.
(3) furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel, (1) promptly after
the same is prepared and publicly distributed, filed with the SEC or received by
the Company, one copy of the Registration Statement and any amendment thereto,
each Prospectus and each amendment or supplement thereto, (2) each letter
written by or on behalf of the Company to the SEC or the staff of the SEC and
each item of correspondence from the SEC or the staff of the SEC relating to
such Registration Statement (other than any portion of any thereof which
contains information for which the Company has sought confidential treatment),
each of which the Company hereby determines to be confidential information and
which the Buyer hereby agrees to keep confidential as a confidential Record in
accordance with Section 8(c)(9) and (3) such number of copies of a Prospectus
and all amendments and supplements thereto and such other documents, as such
Investor may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor;
(4) subject to Section 8(c)(5), use its best efforts to (i)
register and qualify the Registrable Securities covered by the Registration
Statement under the securities or blue sky laws of such jurisdictions as the
Investors who hold a majority in interest of the Registrable Securities
reasonably request, (ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at all
times until such date as is three years after the Closing Date (or such earlier
date as shall be permitted under Section 8(c)(1)), (iii) take such other actions
as may be necessary to maintain such registrations and qualifications in effect
at all times until such date as is three years after the Closing Date (or such
earlier date as shall be permitted under Section 8(c)(1)) and (iv) take all
other actions reasonably necessary or advisable to qualify the Registrable
Securities for sale by the Investors in such jurisdictions; provided, however,
that the Company shall not be required in connection therewith or as a condition
thereto (I) to qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 8(c)(4), (II) to subject
itself to general taxation in any such jurisdiction, (III) to file a general
consent to service of process in any such jurisdiction, (IV) to provide any
undertakings that cause more than nominal expense or burden to the Company or
(V) to make any change in its charter or by-laws which the Board of Directors of
the Company determines to be contrary to the best interests of the Company and
its stockholders;
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(5) (i) as promptly as practicable after becoming aware of
such event, notify each Investor of the happening of any event of which the
Company has knowledge, (A) as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading or (B) which requires the Company to amend
or supplement the Registration Statement due to the receipt of new or additional
information about an Investor or its intended plan of distribution of its
Shares, and use its best efforts promptly to prepare a supplement or amendment
to the Registration Statement to correct such untrue statement or omission or to
reflect such new or additional information, and deliver a number of copies of
such supplement or amendment to each Investor as such Investor may reasonably
request;
(ii) notwithstanding Section 8(c)(5)(i) above, if at the time
the Company notifies the Investor as contemplated by Section 8(c)(5)(i) the
event giving rise to such notice relates to a development involving the Company
which occurred subsequent to the later of (x) the SEC Effective Date and (y) the
latest date prior to such notice on which the Company has amended or
supplemented the Registration Statement, then the Company shall not be required
to use best efforts to make such amendment or supplement until information
concerning such development first becomes publicly available.
(6) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold of the
issuance by the SEC of any stop order or other suspension of effectiveness of
the Registration Statement at the earliest possible time;
(7) permit a single firm of counsel designated as selling
stockholders' counsel by the Investors who hold a majority in interest of the
Registrable Securities being sold (and identified in writing to the Company by
such Investors prior to the Closing Date) to review at such Investors' sole
expense the Registration Statement and all amendments and supplements thereto at
least two business days (or such shorter period as may reasonably be specified
by the Company) prior to their filing with the SEC;
(8) make generally available to its security holders as soon
as practical, but not later than ninety (90) days after the close of the period
covered thereby, an earning statement (in form complying with the provisions of
Rule 158 under the 1933 Act) covering a twelve-month period beginning not later
than the first day of the Company's fiscal quarter next following the effective
date of the Registration Statement;
(9) make available for inspection by any Investor and any
attorney, accountant or other agent retained by any such Investor (collectively,
the "Inspectors") at such Investor's sole expense, all pertinent financial and
other records, pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably necessary solely to enable
each Investor to exercise its due diligence responsibility with respect to
Section 11 of the 1933 Act as it relates to the Registration Statement, and
cause the Company's officers, directors and employees to supply all information
which any Inspector may reasonably request for purposes of such due diligence;
provided, however, that each Inspector shall hold in confidence and shall not
make any disclosure (except to an Investor) of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (i) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction or (ii) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to disclose any confidential information in such Records to any Inspector until
and unless such
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<PAGE> 16
Inspector shall have entered into confidentiality agreements (in form and
substance satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 8(c)(9). Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at the Company's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. The Company shall hold in confidence
and shall not make any disclosure of information concerning an Investor provided
to the Company pursuant to this Agreement unless (i) disclosure of such
information is necessary to comply with federal or state securities laws, (ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction or (iv) such information has been
made generally available to the public other than by disclosure in violation of
this or any other agreement. The Company agrees that it shall, upon learning
that disclosure of such information concerning an Investor is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt notice to such Investor and allow such Investor, at such Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information;
(10) use its best efforts to cause all the Registrable
Securities covered by the Registration Statement as of the SEC Effective Date to
be listed on the Nasdaq National Market or such other principal securities
market on which securities of the same class or series issued by the Company are
then listed or traded;
(11) provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the SEC Effective
Date;
(12) cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts as the Investors may
reasonably request and registered in such names as the Investors may request;
and, not later than the day on which the Registration Statement is declared
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the transfer agent for the Registrable
Securities (with copies to the Investors whose Registrable Securities are
included in such Registration Statement) an instruction substantially in the
form attached hereto as ANNEX VII and an opinion of such counsel, if required by
the Company's transfer agent, in the form attached hereto as ANNEX VIII; and
(13) during the period the Company is required to maintain
effectiveness of the Registration Statement pursuant to Section 8(c)(1), the
Company shall not bid for or purchase any Common Stock or any right to purchase
Common Stock or attempt to induce any person to purchase any such security or
right if such bid, purchase or attempt would in any way limit the right of the
Investors to sell Registrable Securities by reason of the limitations in Rule
10b-6 under the 1934 Act, so long as it remains in effect, and Regulation M
under the 1934 Act, once it becomes effective.
(d) OBLIGATIONS OF THE BUYER AND OTHER INVESTORS. In
connection with the registration of the Registrable Securities, the Investors
shall have the following obligations:
(1) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the
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<PAGE> 17
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. Prior
to the execution of this Agreement, the Buyer shall complete and submit to the
Company an Investor Questionnaire in the form attached hereto as ANNEX IX;
(2) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder;
(3) Each Investor agrees that it will not effect any
disposition of the Registrable Securities except as contemplated in the
Registration Statement or as otherwise in compliance with applicable securities
laws and that it will promptly notify the Company of any material changes in the
information set forth in the Registration Statement regarding such Investor or
its plan of distribution; each Investor agrees (a) to notify the Company in
writing in the event that such Investor enters into any material agreement with
a broker or a dealer for the sale of the Registrable Securities through a block
trade, special offering, exchange distribution or a purchase by a broker or
dealer and (b) in connection with such agreement, to provide to the Company in
writing the information necessary to prepare any supplemental prospectus
pursuant to Rule 424(c) under the 1933 Act which is required with respect to
such transaction;
(4) Each Investor acknowledges that there may occasionally be
times, including such times as specified in Section 8(c)(5) or 8(c)(6), when the
Company must suspend the use of the prospectus forming a part of the
Registration Statement until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the SEC
(including, without limitation, an amendment required to reflect new or
additional information about an Investor or its intended plan of distribution of
the Shares or the Interest Shares), or until such time as the Company has filed
an appropriate report with the Commission pursuant to the Exchange Act. Each
Investor hereby covenants that it will not sell any Registrable Securities
pursuant to said prospectus during the period commencing at the time at which
the Company gives such Investor notice of the suspension of the use of said
prospectus and ending at the time the Company gives such Investor notice that
such Investor may thereafter effect sales pursuant to said prospectus, or until
the Company delivers to such Investor an amended or supplemented prospectus;
(5) Each Investor agrees not to make any sale or other
transfer of the Registrable Securities pursuant to the Registration Statement
without effectively causing the prospectus delivery requirement under the 1933
Act to be satisfied;
(6) Each Investor agrees to notify the Company promptly after
the event of the completion of the sale by such Investor of all Registrable
Securities to be sold by such Investor pursuant to the Registration Statement;
and
(7) Each Investor agrees not to use Registrable Securities for
the purpose of covering any short sale by such Investor of Common Stock unless
at the time of such short sale such Investor shall have complied with the
requirements of Section 8(d)(5) with respect to such short sale.
(e) EXPENSES OF REGISTRATION. All reasonable expenses incurred
in connection with registrations, filings or qualifications pursuant to this
Agreement shall be paid by the Company, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees and
the fees and disbursements of counsel for the Company, but excluding (a) fees
and expenses of investment bankers retained by any Investor, (b) brokerage
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<PAGE> 18
commissions incurred by any Investors and (c) fees and disbursements of counsel
for the Investors.
(f) INDEMNIFICATION.
(1) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor who holds such Registrable Securities and each
Investor who sells such Registrable Securities in the manner permitted this
Agreement, the directors, if any, of such Investor, the officers, if any, of
such Investor, each person, if any, who controls any Investor within the meaning
of the 1933 Act or the 1934 Act, any underwriter (as defined in the 1933 Act)
acting on behalf of an Investor who participates in the offering of Registrable
Securities of such Investor in accordance with the plan of distribution
contained in any prospectus included in the Registration Statement, the
directors, if any, of such underwriter and the officers, if any, of such
underwriter, and each person, if any, who controls any such underwriter within
the meaning of the 1933 Act or the 1934 Act (each, an "Indemnified Person"),
against any losses, claims, damages, liabilities or expenses (joint or several)
incurred (collectively, "Claims") to which any of them may become subject under
the 1933 Act, the 1934 Act or otherwise, insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any of the following statements, omissions or violations in
the Registration Statement, or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) any untrue statement or alleged
untrue statement of a material fact contained in any prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading (the
matters in the foregoing clauses (i) through (ii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 8(f)(3) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such controlling person, promptly as such expenses are
incurred and are due and payable, for any documented and reasonable legal fees
or other documented and reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 8(f)(1): shall not apply to (I) a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
relating to an Indemnified Person furnished in writing to the Company by any
Indemnified Person or underwriter for such Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 8(c)(3) hereof; (II) any Claim
arising out of or based on the failure of the Indemnified Person to comply with
the covenants and agreements contained in Section 4 or Section 8 hereof
respecting sales of the Registrable Securities or any statement or omission in
any prospectus which was corrected in any subsequent prospectus that was
delivered to the Indemnified Person prior to the pertinent sale or sales by the
Indemnified Person; and (III) amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 11(j)(2). The
Company and the Buyer agree that the information set forth in the Investor
Questionnaire and under the heading "Plan of Distribution" is the only
information furnished by the Buyer in writing expressly for use in connection
with preparation of the Registration Statement on or prior to the date hereof.
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<PAGE> 19
(2) In connection with the Registration Statement, each
Investor agrees to indemnify and hold harmless, to the same extent and in the
same manner set forth in Section 8(f)(1), the Company, each of its directors,
each of its officers who signs the Registration Statement, each person, if any,
who controls the Company within the meaning of the 1933 Act or the 1934 Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such stockholder or underwriter within the meaning of the 1933 Act or
the 1934 Act (collectively and together with an Indemnified Person, an
"Indemnified Party"), against any Claim to which any of them may become subject,
under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim arises out
of or is based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Investor expressly for use
in connection with such Registration Statement; and such Investor will reimburse
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such Claim; provided, however, that the indemnity
agreement contained in this Section 8(f)(2) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld;
provided, further, however, that the Investor shall be liable under this Section
8(f)(2) for only that amount of a Claim as does not exceed the amount of the
proceeds to such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 11(j)(2). Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 8(f)(2) with respect to any preliminary prospectus shall not inure to
the benefit of any Indemnified Party if the untrue statement or omission of
material fact contained in the preliminary prospectus was corrected on a timely
basis in the prospectus, as then amended or supplemented.
(3) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 8(f) of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 8(f), deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel reasonably satisfactory to the
Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding; provided, further, however, that no indemnifying person shall be
responsible for the fees and expenses of more than one separate counsel for all
Indemnified Persons hereunder. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 8(f), except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 8(f) shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as such expense, loss, damage or liability is incurred and is due
and payable.
(g) CONTRIBUTION. To the extent any indemnification by an
indemnifying party as set forth in Section 8(f) above is applicable by its terms
but is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any
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<PAGE> 20
amounts for which it would otherwise be liable under Section 8(f) to the fullest
extent permitted by law. In determining the amount of contribution to which the
respective parties are entitled, there shall be considered the relative fault of
each party, the parties' relative knowledge of and access to information
concerning the matter with respect to which the claim was asserted, the
opportunity to correct and prevent any statement or omission and any other
equitable considerations appropriate under the circumstances; provided, however,
that (a) no contribution shall be made under circumstances where the maker would
not have been liable for indemnification under the fault standards set forth in
Section 8(f), (b) no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any other person who was not guilty of such fraudulent misrepresentation and (c)
contribution by any seller of Registrable Securities shall be limited in amount
to the proceeds received by such seller from the sale of such Registrable
Securities.
(h) REPORTS UNDER 1934 ACT. With a view to making available to
the Investors the benefits of Rule 144, the Company agrees to:
(a) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company and (ii) such other information as may be necessary to
permit the Investors to sell such securities pursuant to Rule 144 without
registration; and
(b) if at any time the Company is not required to file such
reports with the SEC, use its best efforts to, upon the request of an Investor,
make publicly available other information so long as is necessary to permit
publication by brokers and dealers of quotations for the Common Stock and sales
of the Registrable Securities in accordance with Rule 15c2-11 under the 1934
Act.
9. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY.
All representations, warranties and agreements of the Company
and of the Buyer contained herein will survive the execution and delivery hereof
and the Closing hereunder and delivery of and payment for the Note, and shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of the Buyer or any person who controls the Buyer within
the meaning of the 1933 Act, or by or on behalf of the Company or any person who
controls the Company within the meaning of the 1933 Act.
10. TERMINATION.
Notwithstanding any other provision of this Agreement, if the
Registration Statement shall not have been declared effective by the SEC within
60 days after the date of execution and delivery of this Agreement by the
parties hereto, then at any time thereafter the Buyer shall have the right,
exercisable by notice to the Company, to terminate this Agreement, whereupon the
Buyer and the Company shall have no further liability or obligation of any kind
whatsoever one to the other under this Agreement or in connection with the
transactions contemplated hereby other than any liability or obligation arising
from a breach of this Agreement or any of the related agreements which breach
occurred prior to such termination. Notwithstanding any other provision of this
Agreement, if the Registration Statement shall not have been declared effective
by the SEC within 120 days after the date of execution and delivery of this
Agreement by the parties hereto, then at any time thereafter so long as at the
time the Company shall have performed all obligations required to be performed
by the Company under this Agreement and the related agreements at or prior to
such time, the Company shall have the right, exercisable by notice to the Buyer,
to terminate this Agreement, whereupon the Buyer and
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<PAGE> 21
the Company shall have no further liability or obligation of any kind whatsoever
one to the other under this Agreement or in connection with the transactions
contemplated hereby other than any liability or obligation arising from a breach
of this Agreement or any of the related agreements which breach occurred prior
to such termination.
11. MISCELLANEOUS.
(a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(b) HEADINGS. The headings, captions and footers of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement.
(c) SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
(d) NOTICES. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by mail, personal delivery, by
telephone line facsimile transmission or courier and shall be effective five
days after being placed in the mail, if mailed, or upon receipt, if delivered
personally, by telephone line facsimile transmission or by courier, in each case
addressed to a party at such party's address (or telephone line facsimile
transmission number) shown in the introductory paragraph or on the signature
page of this Agreement or such other address (or telephone line facsimile
transmission number) as a party shall have provided by notice to the other party
in accordance with this provision. In the case of any notice to the Company, a
copy shall also be given to: Morgan Lewis & Bockius LLP, 2000 One Logan Square,
Philadelphia, Pennsylvania 19103-6993, Attention: David R. King, Esq. (telephone
line facsimile transmission number (215) 963-5299), and in the case of any
notice to the Buyer, a copy shall be given to:
__________________________________________, Attention:, _______________, Esq.
(telephone line facsimile transmission number (___) ___-____), in each case with
a copy to: Owen, Diaz & Altschul Securities, 745 Fifth Avenue, Suite 3001, New
York, New York 10022 (telephone line facsimile transmission number (212)
751-5757).
(e) COUNTERPARTS. This Agreement may be executed in
counterparts and by the parties hereto on separate counterparts, each of which
shall be deemed to be an original but all of which together shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by telephone line facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
(f) ENTIRE AGREEMENT; BENEFIT. This Agreement, including the
Annexes hereto, constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof. There are no restrictions, promises,
warranties, or undertakings, other than those set forth or referred to herein.
This Agreement, including the Annexes hereto, supersedes all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof. This Agreement and the terms and provisions hereof are for the sole
benefit of only the Company, the Buyer and their respective successors and
permitted assigns.
(g) WAIVER. Failure of any party to exercise any right or
remedy under this Agreement or otherwise, or delay by a party in exercising such
right or remedy, shall not operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any
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<PAGE> 22
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or exercise of any other right or
power.
(h) AMENDMENT. No amendment, modification, waiver, discharge
or termination of any provision of this Agreement nor consent to any departure
by the Buyer or the Company therefrom shall in any event be effective unless the
same shall be in writing and signed by the party to be charged with enforcement,
and then shall be effective only in the specific instance and for the purpose
for which given. No course of dealing between the parties hereto shall operate
as an amendment of this Agreement.
(i) FURTHER ASSURANCES. Each party to this Agreement will
perform any and all acts and execute any and all documents as may be necessary
and proper under the circumstances in order to accomplish the intents and
purposes of this Agreement and to carry out its provisions.
(j) ASSIGNMENT; TRANSFER OF REGISTRATION RIGHTS. (1) On or
prior to the Closing Date, the Buyer may assign its rights under this Agreement
with respect to the purchase of all or any portion of the Note to any entity of
which 70% or more of the beneficial ownership of such entity is beneficially
owned by the beneficial owners of the Buyer or which entity has the same
investment adviser as the Buyer, if such assignee shall agree in writing to make
all of the representations and warranties of the Buyer hereunder and assume in
writing all obligations of the Buyer hereunder with respect to the purchase of
the portion of the Note so assigned, in which case the Buyer shall be relieved
of any further obligation hereunder with respect to the purchase of the portion
of the Note so assigned and, thereafter, all references herein to the Buyer
shall mean, with respect to the portion of the Note so assigned, such assignee;
provided, however, in the event that such assignee shall default in its
obligation to purchase the portion of the Note so assigned to it, the Buyer
shall remain obligated under this Agreement to purchase such portion of the Note
as if such assignment had not been made.
(2) The rights to have the Company register Registrable
Securities pursuant to Section 8 shall be automatically assigned by the Buyer or
any other Investor to any Permitted Transferee (as defined in the Note) only if:
(a) the Buyer or such other Investor agrees in writing with the transferee or
assignee to assign such rights, a copy of such agreement is furnished to the
Company within a reasonable time after such assignment and the transfer has been
made in compliance with the provisions of the Agreement and the Note, (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name, address and principal place of
business of such transferee or assignee and the information requested in the
Investor Questionnaire and (ii) the securities with respect to which such
registration rights are being transferred or assigned, (c) immediately following
such transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the 1933 Act and applicable state
securities laws, and (d) at or before the time the Company received the written
notice contemplated by clause (b) of this sentence the transferee or assignee
agrees in writing with the Company to be bound by all of the provisions
contained in Sections 4(a), 4(b) and 4(g) and Section 8, including without
limitation the obligation to submit an Investor Questionnaire to the Company. In
connection with any such transfer, the Company shall, at its sole cost and
expense, promptly after such transfer take such actions as shall be reasonably
acceptable to the Buyer or such other Investor, as the case may be, and such
transferee to assure that the Registration Statement and related Prospectus are
available for use by such transferee for sales of the Registrable Securities in
respect of which the rights to registration have been so assigned.
(k) EXPENSES. Each of the Company and the Buyer shall bear its
own expenses in connection with this Agreement and the transactions contemplated
hereby.
-22-
<PAGE> 23
IN WITNESS WHEREOF, this Agreement has been duly executed by
the Buyer or one of its officers thereunto duly authorized as of the date set
forth below.
Principal Amount: $________________
Purchase Price: $________________
[NAME OF BUYER]
By ____________________________________
Date: __________________________________
Address:
Facsimile No.:
CEPHALON, INC.
By: ___________________________________
J. Kevin Buchi
Senior Vice President, Finance
and Chief Financial Officer
Facsimile No.: 610-344-0065
<PAGE> 1
Contact: Jason Rubin
(610) 344-0200
FOR IMMEDIATE RELEASE
Cephalon Announces Private Placement of
$30 Million Senior Convertible Notes
West Chester, PA -- January 16, 1997 -- Cephalon, Inc. (NASDAQ: CEPH)
announced today an agreement to issue, in a private placement, $30 million of
senior convertible notes. Cephalon plans to use the proceeds of the private
placement for general purposes, which may include funding potential technology
acquisitions.
The convertible notes will be sold at par, mature in January 1998 and
bear interest at a rate of seven percent per annum. They are convertible into
common stock of the company, subject to certain limitations, at a six percent
discount to a market price formula at the time of conversion. If not converted
into common stock prior to maturity, the securities will be exchanged for
higher-yield, fifteen-year debentures.
The convertible notes cannot be converted at a price less than $25 per
share until 75 days after the effectiveness of the registration statement.
Cephalon may redeem the notes, at a redemption price equal to 110 percent of the
outstanding principal amount plus interest, if the conversion price falls below
approximately $21 per share. The closing of the placement is subject to the
effectiveness of a registration statement to be filed by the company with the
Securities and Exchange Commission covering the resale by the investors of the
common stock issuable upon conversion of the convertible notes. Cephalon expects
to initially register 1.43 million shares of common stock. Owen, Diaz & Altschul
Securities, LLC of New York was the placement agent in the transaction.
Cephalon, Inc., headquartered in West Chester, PA, is an international
biopharmaceutical company that discovers, develops and markets products to treat
neurological disorders. The company is developing products for the treatment of
ALS, narcolepsy, peripheral neuropathies, Alzheimer's disease, head and spinal
injury, and stroke, and currently copromotes two products in the United States
for the treatment of neurological conditions.
This news release may contain forward-looking statements that involve
risks and uncertainties. A full discussion of Cephalon's operations and
financial condition, including factors that may affect the company's business
and future prospects, is contained in documents the company files with the SEC,
such as form 10-Q and 10-K reports. These documents identify important factors
that could cause the company's actual performance to differ from current
expectations.
<PAGE> 1
Contact: Jason Rubin
(610) 344-0200
FOR IMMEDIATE RELEASE
Cephalon and Schering-Plough Conclude
Alzheimer's Disease Research Collaboration
West Chester, PA -- January 16, 1997 -- Cephalon, Inc. (NASDAQ: CEPH)
announced today that Schering-Plough Corporation (NYSE: SGP) will discontinue
its funding of the companies' research collaboration to develop compounds for
the treatment of Alzheimer's disease.
The collaboration has been focused on the development of protease
inhibitors that prevent the secretion of beta-amyloid peptide, a major component
of the neuritic plaques that cause neuronal death in patients with Alzheimer's
disease. Schering-Plough has been Cephalon's collaborator in this area since
1991.
"Protease inhibitors that significantly reduce beta-amyloid secretion
represent important therapeutic leads directed at the underlying pathogenesis of
Alzheimer's disease, " said Frank Baldino, Jr., Ph.D., Cephalon's president and
chief executive officer. "We have made substantial progress based upon this
approach, and are grateful to Schering-Plough for its long-standing financial
support for this program. We remain committed to pursuing this therapeutic
approach to treating Alzheimer's disease."
Other provisions of the companies' agreement continue, including
Cephalon's non-exclusive right to use the technology developed in the program
and the right to receive royalties on net sales of any products licensed
exclusively to Schering-Plough under the agreement.
Approximately 4 million people in the United States suffer from
Alzheimer's disease today. The age-dependent nature of the disorder indicates
that an ever-increasing percentage of the population will be affected by
Alzheimer's disease as the population ages.
Cephalon, Inc., headquartered in West Chester, PA, is an international
biopharmaceutical company that discovers, develops and markets products to treat
neurological disorders. The company is developing products for the treatment of
ALS, narcolepsy, peripheral neuropathies, Alzheimer's disease, head and spinal
injury, and stroke, and currently copromotes two products in the United States
for the treatment of neurological conditions.
This news release may contain forward-looking statements that involve
risks and uncertainties. A full discussion of Cephalon's operations and
financial condition, including factors that may affect the company's business
and future prospects, is contained in documents the company files with the SEC,
such as form 10-Q and 10-K reports. These documents identify important factors
that could cause the company's actual performance to differ from current
expectations.
