<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 30, 1998
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AgriBioTech, Inc.
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(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Nevada 0-19352 85-0325742
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<S> <C> <C>
(State or Other Jurisdiction (Commission File Number) (IRS Employer Ident. No.)
of Incorporation)
</TABLE>
120 Corporate Park Drive, Henderson, Nevada 89014
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(Address of Principal Executive Offices) (Zip Code)
(702) 566-2440
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Registrant's telephone number, including area code
<PAGE>
Item 5. Other Information.
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AgriBioTech, Inc., a Nevada corporation (the "Registrant"), issued an
aggregate of $23,297,000 principal amount of 5% Convertible Debentures due
December 30, 2001 (the "Convertible Debentures") and 1,703,000 common stock
purchase warrants (the "Warrants") at a purchase price of $1.00 per warrant, for
an aggregate consideration of $25 million to six institutional investors (the
"Investors") in private transactions that were exempt from the registration
requirements of the Securities Act of 1933 (the "Securities Act"). The
Registrant offered and sold the Convertible Debentures and Warrants pursuant to
the terms and conditions of a Securities Purchase Agreement dated as of December
30, 1998 by and among the Registrant and the Investors (the "Securities Purchase
Agreement"). The Convertible Debentures give the Investors the right to convert
their Convertible Debentures into shares of the Registrant's Common Stock at
$13.68 per share at any time between the date the Convertible Debentures were
sold and December 30, 2001. The Warrants give the Investors the right to
purchase shares of the Registrant's Common Stock at $15.00 per share at any time
before December 30, 2001. The terms of the Convertible Debentures were agreed to
on December 30, 1998, based on the closing price of the Registrant's Common
Stock on December 29, 1998 of $12.44. The proceeds from the sale of the
Convertible Debentures and Warrants will be used for short-term debt retirement,
working capital and pending acquisitions.
In conjunction with the closing of the transactions contemplated by the
Securities Purchase Agreement, the Registrant agreed, pursuant to the terms and
conditions of a Registration Rights Agreement, that by January 29, 1999, it
would file with the Securities and Exchange Commission a registration statement
covering all shares of the Registrant's Common Stock issuable upon conversion of
the Convertible Debentures and exercise of the Warrants for resale on a
continuous basis in accordance with Rule 415 promulgated under the Securities
Act.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
4.1 Form of Securities Purchase Agreement.
4.2 Form of Registration Rights Agreement.
4.3 Form of 5% Convertible Debentures
4.4 Form of Common Stock Purchase Warrants.
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<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AGRIBIOTECH, INC.
(Registrant)
Date: January 11, 1999 /s/ Henry A. Ingalls
--------------------------
Henry A. Ingalls,
Vice President
EXHIBIT INDEX
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Exhibit No. Description
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4.1 Form of Securities Purchase Agreement.
4.2 Form of Registration Rights Agreement.
4.3 Form of 5% Convertible Debentures
4.4 Form of Common Stock Purchase Warrants.
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<PAGE>
Exhibit 4.1
================================================================================
SECURITIES PURCHASE AGREEMENT
Among
AGRIBIOTECH, INC.,
and
THE PURCHASERS LISTED ON SCHEDULE I
Dated as of December 30, 1998
================================================================================
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated as of
---------
December 30, 1998 among AgriBioTech, Inc., a Nevada corporation (the "Company"),
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and the various purchasers identified and listed on Schedule I hereto (each
referred to herein as a "Purchaser" and, collectively, the "Purchasers").
--------- ----------
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to sell to the Purchasers, and the Purchasers
desire to acquire from the Company, an aggregate of $_________ principal amount
of 5% Convertible Debentures due 2001 (the "Debentures"), in the form of Exhibit
---------- -------
A annexed hereto, and warrants (the "Warrants") to purchase the Company's common
- - --------
stock, par value $.001 per share (the "Common Stock"), in the form of Exhibit B
------------ ---------
annexed hereto, each in the amount specified in Schedule I hereto; and
----------
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering an Amended and
Restated Registration Rights Agreement substantially in the form of Exhibit C
---------
attached hereto (the "Registration Rights Agreement") pursuant to which the
-----------------------------
Company has agreed to provide certain registration rights under the Securities
Act and the rules and regulations promulgated thereunder, and applicable state
securities laws.
NOW THEREFORE, in consideration of the promises and mutual covenants
and agreements hereinafter, the Company and the Purchasers hereby agree as
follows:
ARTICLE I.
PURCHASE AND SALE OF THE DEBENTURES AND WARRANTS
1.1 Purchase and Sale. Subject to the terms and conditions set forth
-----------------
herein, the Company shall issue and sell to each Purchaser, and each Purchaser,
severally and not jointly, shall purchase from the Company on the Closing Date
(as defined below), the principal amount of Debentures and Warrants as set forth
for such Purchaser on Schedule I.
----------
1.2 Closing.
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a. The Closing. The closing of the purchase and sale of the
-----------
Debentures and Warrants (the "Closing")
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<PAGE>
shall take place at the offices of Akin, Gump, Strauss, Hauer &
Feld, L.L.P., 590 Madison Avenue, New York, New York 10022, or by transmission
by facsimile and overnight courier, immediately following the execution hereof
or such later date or different location as the parties shall agree, but not
prior to the date that the conditions set forth in Section 4.1 have been
satisfied or waived by the appropriate party (the "Closing Date"). At the
------------
Closing:
(i) Each Purchaser shall deliver, as directed by the Company,
its portion of the purchase price as set forth next to its name on Schedule I in
United States dollars in immediately available funds to an account or accounts
designated in writing by the Company;
(ii) The Company shall deliver to each Purchaser a Debenture,
substantially in the form of Exhibit A hereto, representing the principal amount
---------
purchased by such Purchaser as set forth on Schedule I hereto;
----------
(iii) The Company shall deliver to each Purchaser a Warrant,
substantially in the form of Exhibit B hereto, representing the right to acquire
---------
the number of shares of Common Stock purchased by such Purchaser as set forth on
Schedule I hereto; and
(iv) The parties shall execute and deliver each of the
documents referred to in Section 4.1 hereof.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The
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Company hereby makes the following representations and warranties to each of the
Purchasers:
a. Organization and Qualification. The Company is a corporation duly
------------------------------
incorporated, validly existing and in good standing under the laws of the State
of Nevada, with the requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Except as set forth on Schedule 2.1(a), the Company has no subsidiaries
---------------
(collectively, the "Subsidiaries"). Each of the Subsidiaries (which for
------------
purposes of this Agreement means any entity in which the Company, directly or
indirectly, owns the majority of such entity's capital stock or holds an
equivalent equity or similar interest) is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, with the full corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified as a foreign corporation
to do business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary, except where the failure
2
<PAGE>
to be so qualified or in good standing, as the case may be, would not,
individually or in the aggregate, (x) adversely affect the legality, validity or
enforceability of any of this Agreement or the Transaction Documents (as defined
in Section 2.1(b)) or any of the transactions contemplated hereby or thereby,
(y) have or result in a material adverse effect on the results of operations,
assets, prospects, or financial condition of the Company and its Subsidiaries,
taken as a whole or (z) adversely impair the Company's ability to perform fully
on a timely basis its obligations under any Transaction Document (any of (x),
(y) or (z), being a "Material Adverse Effect").
-----------------------
b. Authorization; Enforcement. The Company has the requisite
--------------------------
corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement and the Debentures, the Warrants and the
Registration Rights Agreement (collectively, the "Transaction Documents"), and
---------------------
otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of each of this Agreement and the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action and no
further action is required by the Company, its Board of Directors or its
stockholders. Each of this Agreement and the Transaction Documents has been duly
executed by the Company and when delivered in accordance with the terms hereof
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
c. Capitalization. As of the date hereof, the authorized capital
--------------
stock of the Company is as set forth in Schedule 2.1(c). All of such outstanding
---------------
shares of capital stock have been, or upon issuance will be, validly authorized
and issued, fully paid and nonassessable and were issued in accordance with the
registration or qualification provisions of the Securities Act, or pursuant to
valid exemptions therefrom. Except as disclosed in Schedule 2.1(c), (i) no
---------------
shares of the Company's capital stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by the
Company, nor is any holder of the Common Stock entitled to preemptive or similar
rights arising out of any agreement or understanding with the Company by virtue
of any Transaction Document, (ii) there are no outstanding options, warrants,
scrips, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for, or
giving any Person (as defined below) any right to subscribe for or acquire, any
shares of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrips, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (iii) there are no outstanding debt
securities, (iv) the Company has not granted or agreed to grant to any Person
any rights (including "piggy-back" registration rights) to have any securities
of the Company registered with the Securities and Exchange Commission (the
"Commission") or any other governmental authority which has not been satisfied
----------
(except the Registration Rights Agreement), (v) there are no outstanding
securities of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may
3
<PAGE>
become bound to redeem a security of the Company or any of its Subsidiaries,
(vi) there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the shares of Common Stock
as described in this Agreement; (vii) the Company does not have any stock
appreciation rights or "phantom stock" plans or agreements or any similar plan
or agreement and (viii) to the best Knowledge (as defined at the end of this
Section 2.1) of the Company and except as specifically disclosed in the SEC
Documents (as defined in Section 2.1(k) hereof), no Person or group of related
Persons beneficially owns (as determined pursuant to Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) or
------------
has the right to acquire by agreement with or by obligation binding upon the
Company beneficial ownership of in excess of 5% of the Common Stock. "Person"
------
means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
d. Authorization and Validity; Issuance of Shares. The shares of
----------------------------------------------
Common Stock issuable upon conversion of the Debentures and exercise of the
Warrants (collectively, the "Underlying Shares") are and will at all times
-----------------
hereafter continue to be duly authorized and reserved for issuance and the
shares of Common Stock issued upon conversion of the Debentures (the "Debenture
---------
Shares") and exercise of the Warrants (the "Warrant Shares") will be validly
- ------ --------------
issued, fully paid and non-assessable, free and clear of all liens, encumbrances
and Company rights of first refusal, other than liens and encumbrances created
by the Purchasers, (collectively, "Liens") and will not be subject to any
-----
preemptive or similar rights.
e. No Conflicts. The execution, delivery and performance of this
------------
Agreement and each of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including the issuance of the Underlying Shares) do not and will not (i)
conflict with or violate any provision of the Company's Certificate of
Incorporation, as amended and as in effect on the date hereof (the "Certificate
-----------
of Incorporation"), the Company's Bylaws, as amended and in effect on the date
- ----------------
hereof (the "Bylaws") or other charter documents of the Company or any of the
------
Subsidiaries, (ii) subject to obtaining the consents referred to in Section
2.1(f), conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument (evidencing a Company
or Subsidiary debt or otherwise) to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or any Subsidiary is subject
(including Federal and state securities laws and regulations and the rules and
regulations of the principal market or exchange on which the Common Stock is
traded or listed) applicable to the Company or any of its Subsidiaries, or by
which any material property or asset of the Company or any Subsidiary is bound
or affected.
f. Consents and Approvals. Except as specifically set forth on
----------------------
Schedule 2.1(f), neither the Company nor any Subsidiary is required to obtain
- ---------------
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority, regulatory or self regulatory agency, or other Person
4
<PAGE>
in connection with the execution, delivery and performance by the Company of
this Agreement or the Transaction Documents, other than (i) the filing of the
Registration Statement (as defined in the Registration Rights Agreement) with
the Commission, which shall be filed in accordance with and in the time periods
set forth in the Registration Rights Agreement, (ii) the application(s) or any
letter(s) acceptable to the National Market System of Nasdaq Stock Market
("Nasdaq") for the listing of the Underlying Shares with Nasdaq (and with any
------
other national securities exchange or market on which the Common Stock is then
listed), and (iii) any filings, notices or registrations under applicable state
securities laws (together with the consents, waivers, authorizations, orders,
notices and filings referred to on Schedule 2.1(f), the "Required Approvals").
--------------- ------------------
g. Litigation; Proceedings. There is no action, suit, notice of
-----------------------
violation, proceeding or investigation pending or, to the Knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
or any of their respective properties before or by any court, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) which (i) adversely affects or challenges the legality, validity or
enforceability of any of this Agreement or the Transaction Documents or (ii)
would individually or in the aggregate, have a Material Adverse Effect.
h. No Default or Violation. Neither the Company nor any Subsidiary
-----------------------
(i) is in default under or in violation of any indenture, loan or other credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound, and which is required to be included
as an exhibit to the SEC Documents (as defined in Section 2.1(k) hereof) or will
be required to be included as an exhibit to the Company's next report filed
under the Exchange Act, (ii) is in violation of any order of any court,
arbitrator or governmental body applicable to it, (iii) is in violation of any
statute, rule or regulation of any governmental authority to which it is
subject, (iv) is in default under or in violation of its Certificate of
Incorporation, Bylaws or other organizational documents, respectively, or (v) is
in default under or in violation of any of the listing requirements of Nasdaq as
in effect on the date hereof and is not aware of any facts which would
reasonably lead to delisting or suspension of the Common Stock by Nasdaq in the
foreseeable future. The business of the Company and its Subsidiaries is not
being conducted, and shall not be conducted, in violation of any law, ordinance,
rule or regulation of any governmental entity, except where such violations have
not resulted or would not reasonably result, individually or in the aggregate,
in a Material Adverse Effect.
i. Disclosure; Absence of Certain Changes. Neither this Agreement,
--------------------------------------
the Schedules to this Agreement, the Transaction Documents nor the SEC Documents
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements made herein and therein, in light
of the circumstances under which they were made, not misleading. Except as
disclosed in the SEC Documents filed on EDGAR at least five business days prior
to the date hereof, since June 30, 1998, there has been no material adverse
change and no material adverse development in the business, properties,
operations, financial condition, liabilities or results of operations or,
insofar as can reasonably be foreseen, prospects of the Company or the
Subsidiaries. The Company has not taken any steps, and does not currently
expect to take any steps, to seek protection pursuant to any bankruptcy law nor
does the Company or any of its Subsidiaries have any Knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy
proceedings. No event, liability, development or
5
<PAGE>
circumstance has occurred or exists, or is reasonably contemplated to occur,
with respect to the Company or its Subsidiaries or their respective businesses,
properties, operations or financial condition or, insofar as can reasonably be
foreseen, prospects, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement (including by way of
incorporation by reference) filed with the Commission, on the date this
representation is made or deemed to be made, relating to an issuance and sale by
the Company of its Common Stock and which has not been publicly disclosed.
j. Private Offering. The Company and all Persons acting on its
----------------
behalf have not directly or indirectly made, and will not make, offers or sales
of any securities or solicited any offers to buy any security under
circumstances that would require registration of the Debentures, the Warrants,
the Debentures Shares, the Warrant Shares or the Underlying Shares or the
issuance of such securities under the Securities Act. The issuance of the
Debentures, the Warrants, the Debenture Shares, the Warrant Shares to the
Purchasers will not be integrated with any other issuance of the Company's
securities (past, current, or future) under the Securities Act or for purposes
of any stockholder approval provision applicable to the Company or its
securities. Subject to the accuracy and completeness of the representations and
warranties of the respective Purchasers contained in Section 2.2 hereof, the
offer and sale by the Company to the Purchasers of the Debentures, the Warrants
and the Underlying Shares is exempt from the registration requirements of the
Securities Act.
k. SEC Documents; Financial Statements. The Common Stock of the
-----------------------------------
Company is registered pursuant to Section 12(g) of the Exchange Act. The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the Commission pursuant to the reporting
requirements of the Exchange Act, including pursuant to Section 13, 14 or 15(d)
thereof (the foregoing materials and all exhibits included therein and financial
statements and schedules thereto and documents (other than exhibits to such
documents) incorporated by reference therein being collectively referred to
herein as the "SEC Documents"), on a timely basis or has received a valid
-------------
extension of such time of filing and has filed any such SEC Documents prior to
the expiration of any such extension. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All agreements to which the Company or any Subsidiary is a party or
to which the property or assets of the Company or any Subsidiary are subject and
which are required to be filed as exhibits to the SEC Documents have been filed
as exhibits to the SEC Documents as required; neither the Company nor any of its
Subsidiaries is in breach of any agreement where such breach, individually or in
the aggregate, would have a Material Adverse Effect. As of their respective
dates, the financial statements of the Company included in the SEC Documents
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods involved,
except as may be otherwise specified in such financial statements or the notes
thereto, and fairly present in all material respects the financial position of
the Company as of and for the dates thereof and
6
<PAGE>
the results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal year-end audit adjustments. Schedule
--------
2.1(k) contains a complete list of all documents provided to the Purchasers by
- ------
the Company. Except as disclosed on Schedule 2.1(k) and except for third party
---------------
reports, including analyst reports, no written information provided by or on
behalf of the Company to the Purchasers which is not included in the SEC
Documents contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements therein, in the light of
the circumstance under which they are or were made, not misleading. Neither the
Company nor any of its Subsidiaries or any of their officers, directors,
employees or agents have provided the Purchasers with any material, nonpublic
information. The Company acknowledges that the Purchasers will be trading in the
securities of the Company in reliance on the foregoing representation and
warranty.
l. Investment Company. The Company is not, and is not controlled by
------------------
or under common control with an affiliate (an "Affiliate") of an "investment
---------
company" within the meaning of the Investment Company Act of 1940, as amended.
m. Broker's Fees. No fees or commissions or similar payments with
-------------
respect to the transactions contemplated by this Agreement or the Transaction
Documents have been paid or will be payable by the Company to any broker,
financial advisor, finder, investment banker, or bank, other than as set forth
in Schedule 2.1(m). The Purchasers shall have no obligation with respect to any
---------------
fees or with respect to any claims made by or on behalf of other Persons for
fees of a type contemplated in this Section 2.1(m) that may be due in connection
with the transactions contemplated by this Agreement and the Transaction
Documents.
n. Form S-3 Eligibility. The Company is, and at each Closing Date
--------------------
will be, eligible to register securities (including the Underlying Shares) for
resale with the Commission under Form S-3 (or any successor form) promulgated
under the Securities Act.
o. Listing and Maintenance Requirements Compliance. The principal
-----------------------------------------------
market on which the Common Stock is currently traded is Nasdaq. Except as
disclosed on Schedule 2.1(o), the Company has not in the three years preceding
---------------
the date hereof received notice (written or oral) from Nasdaq (or any stock
exchange, market or trading facility on which the Common Stock is or has been
listed (or on which it has been quoted)) to the effect that the Company is not
in compliance with the listing or maintenance requirements of such market or
exchange. The Company is not aware of any facts which would reasonably lead to
delisting or suspension of the Common Stock by Nasdaq. After giving effect to
the transactions contemplated by this Agreement and the Transaction Documents,
the Company believes that it is and will be in compliance with all such
maintenance requirements.
p. Intellectual Property Rights. The Company and its Subsidiaries
----------------------------
own or possess adequate rights or licenses to use all trademarks, trademark
applications, trade names and service marks, whether or not registered, and all
patents, patent applications, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and intellectual property rights
(collectively, "Intellectual Property Rights") which are necessary for use in
----------------------------
connection with their respective businesses as now conducted and as described in
the SEC Documents. Except as set forth on Schedule 2.1(p), none of the
---------------
Company's Intellectual Property
7
<PAGE>
Rights have expired or terminated, or are expected to expire or terminate within
two years from the date of this Agreement. The Company and its Subsidiaries do
not have any Knowledge of any infringement by the Company or its Subsidiaries of
any of the Intellectual Property Rights of others and, except as set forth on
Schedule 2.1(p), there is no claim, action or proceeding which has been made or
- ---------------
brought against, or to the Company's Knowledge, is being made, brought or
threatened against, the Company or its Subsidiaries regarding the infringement
of any of the Intellectual Property Rights, and the Company and its Subsidiaries
are unaware of any facts or circumstances which might give rise to any of the
foregoing, except where any of the foregoing would not have a Material Adverse
Effect. The Company and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
intellectual properties.
q. Employee Relations. Neither the Company nor any of its
------------------
Subsidiaries is involved in any union labor dispute nor, to the Knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened. Neither the
Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that relations with
their employees are good. Since December 1, 1998, no executive officer (as
defined in Rule 501(f) under the Securities Act) has notified the Company that
such officer intends to leave the Company or otherwise terminate such officer's
employment with the Company.
r. Registration Rights; Rights of Participation. Except as
--------------------------------------------
described on Schedule 2.1(r) hereto, (i) the Company has not granted or agreed
---------------
to grant to any Person any rights (including "piggy-back" registration rights)
to have any securities of the Company registered with the Commission or any
other governmental authority which has not been satisfied and (ii) no Person,
including, but not limited to, current or former stockholders of the Company,
underwriters, brokers or agents, has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by this Agreement or any Transaction Document.
s. Title. Except as disclosed on Schedule 2.1(s), the Company and
----- ---------------
the Subsidiaries have good and marketable title in fee simple to all real
property and personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all Liens,
except for Liens that do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such property by the
Company and the Subsidiaries. Any real property and facilities held under lease
by the Company and the Subsidiaries are held by them under valid, subsisting
and, to the Company's best Knowledge, enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and the Subsidiaries.
t. Permits. The Company and the Subsidiaries possess all
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certificates, authorizations, licenses, easements, consents, approvals, orders
and permits necessary to own, lease and operate their respective properties and
to conduct their respective businesses as currently conducted except where the
failure to possess such permits would not, individually or in the aggregate,
have a Material Adverse Effect ("Material Permits"), and there is no proceeding
----------------
pending, or, to the Knowledge of the Company, threatened relating to the
revocation,
8
<PAGE>
modification, suspension or cancellation of any Material Permit.
Neither the Company nor any of the Subsidiaries is in conflict with or default
or violation of any Material Permit.
u. Insurance. The Company and each of its Subsidiaries are insured
---------
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverages as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business, at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its Subsidiaries, taken as a whole.
v. Internal Accounting Controls. The Company and each of the
----------------------------
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with United States generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
w. Tax Status; Firpta. Except where extensions have been granted by
------------------
the United States and appropriate state tax authorities for the fiscal year
ended June 30, 1998, the Company and each of the Subsidiaries has made or filed
all federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject (unless and only to the
extent that the Company and each of its Subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes) and has paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and for
which extensions have been granted by the appropriate tax authority, and has set
aside on it books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim. The Company is not a "United States
real property holding corporation" within the meaning of Section 847(c)(2) of
the Internal Revenue Code of 1986, as amended.
x. Transactions With Affiliates. Except as set forth on Schedule
---------------------------- --------
2.1(c), none of the officers, directors, or employees of the Company is
- ------
presently a party to any transaction with the Company or any of its Subsidiaries
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the Knowledge of the Company, any corporation, partnership,
trust or entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner other than
9
<PAGE>
transactions that would not require disclosure under Section 404 of Regulation
S-K of the Securities Act and the Exchange Act.
y. Application to Takeover Protection. The Company and its Board of
----------------------------------
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination or other
similar anti-takeover provision under the Certificate of Incorporation, Bylaws
or the laws of the state of incorporation which is or could become applicable to
the Purchasers or the Transaction Documents as a result of the transactions
contemplated by this Agreement or the Transaction Documents. None of the
transactions contemplated by this Agreement or the Transaction Documents,
including the conversion of the Debentures and the exercise of the Warrants,
will trigger any poison pill provisions of any of the Company's stockholders'
rights or similar agreements.
z. Environmental Laws. The Company and its Subsidiaries (i) are in
------------------
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
------------------
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permits, licenses or other approvals except where the
failure of any of the foregoing would not result in a Material Adverse Effect.
aa. Foreign Corrupt Practices. To the Knowledge of the Company,
-------------------------
neither the Company, nor any of its Subsidiaries, nor any director, officer,
agent, employee or other Person acting on behalf of the Company or any of its
Subsidiaries has, in the course of its actions for, or on behalf of, the Company
used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee form corporate funds; violated or is in violation of any provision of
the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.
bb. Solicitation Materials. The Company has not (i) distributed any
----------------------
offering materials in connection with the offering and sale of the Debentures or
the Warrants, other than the SEC Documents, the Schedules to this Agreement, any
amendments and supplements thereto or (ii) solicited any offer to buy or sell
the Debentures or the Warrants by means of any form of general solicitation or
advertising. Neither the Company, nor any of its Affiliates, nor any Person
acting on its or their behalf, has engaged or will engage in any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) in connection with the offer or sale of the Debentures or
Warrants.
cc. Acknowledgement of Dilution. The Company understands and
---------------------------
acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Debenture Shares and Warrant Shares upon conversion of the
Debenture or exercise of the Warrants. The Company further acknowledges that its
obligation to issue Debenture Shares and Warrant Shares upon conversion of the
Debentures or exercise of the Warrants in accordance with this Agreement, the
Debentures and the Warrants is absolute and unconditional regardless of the
10
<PAGE>
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.
dd. Acknowledgement Regarding Purchasers' Purchase of Securities.
------------------------------------------------------------
The Company acknowledges and agrees that the Purchasers are acting solely in the
capacity of arm's length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any statement made by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is merely
incidental to the Purchasers' purchaser of the securities. The Company further
represents to each Purchaser that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation of the Company and
its representatives.
ee. Solvency. The Company (both before and after giving effect to
--------
the transactions contemplated by this Agreement) is solvent (i.e., its assets
----
have a fair market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured) and
currently the Company has no information that would lead it to reasonably
conclude that the Company would not have the ability to, nor does it intend to
take any action that would impair its ability to, pay its debts from time to
time incurred in connection therewith as such debts mature. The Company did not
receive a qualified opinion from its auditors with respect to its most recent
fiscal year end and does not anticipate or know of any basis upon which its
auditors might issue a qualified opinion in respect of its current fiscal year.
ff. Other Agreements. The Company has not, directly or indirectly,
----------------
made any agreements with any Purchasers relating to the terms and conditions of
the transactions contemplated by the Transaction Documents except as set forth
in the Transaction Documents.
gg. Loan Agreement. As of the close of business on December 30,
--------------
1998, the Company had the ability to borrow an additional $14.1 million under
the Loan and Security Agreement, dated June 23, 1998, among Bankamerica Business
Credit, Inc., as agent and the lenders and administrative agent named therein
(as such agreement may have been amended, modified, or restated, the "Loan
Agreement").
The Purchasers acknowledge and agree that the Company make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.1 and in the
Schedules hereto. With respect to the representations and warranties of the
Company herein, "Knowledge" means the actual knowledge after due inquiry of all
executive officers and those persons who have been executive officers during the
past 12 months.
2.2 Representations and Warranties of the Purchasers. Each of the
------------------------------------------------
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
a. Organization; Authority. Such Purchaser is a corporation,
-----------------------
limited duration company, limited liability company or limited partnership duly
formed, validly existing and in
11
<PAGE>
good standing under the laws of the jurisdiction of its incorporation or
formation with the requisite power and authority, corporate or otherwise, to
enter into and to consummate the transactions contemplated hereby and by the
Transaction Documents and otherwise to carry out its obligations hereunder and
thereunder. The purchase by such Purchaser of the Debentures and the Warrants
hereunder has been duly authorized by all necessary action on the part of such
Purchaser. Each of this Agreement and the Registration Rights Agreement has
been duly executed and delivered by such Purchaser and constitutes the valid and
legally binding obligation of such Purchaser, enforceable against such Purchaser
in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally and to general principles
of equity.
b. Investment Intent. As of the date hereof, such Purchaser is
-----------------
acquiring the Debentures and the Warrants for its own account and not with a
present view to or for distributing or reselling the Debentures, the Warrants,
the Debentures Shares or the Warrant Shares or any part thereof or interest
therein in violation of the Securities Act; provided, however, that by making
-------- -------
the representations herein, such Purchaser does not agree to hold any of the
Debentures, the Warrants, the Debentures Shares or the Warrant Shares for any
minimum or other specific term and reserves the right to dispose of the
securities at any time in accordance with or pursuant to a registration
statement or an exemption under the Securities Act.
c. Purchaser Status. At the time such Purchaser was offered the
----------------
Debentures and the Warrants, and at each Closing Date, (i) it was and will be an
"accredited investor" as defined in Rule 501 under the Securities Act and (ii)
such Purchaser, either alone or together with its representatives, had and will
have such knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of the
prospective investment in the Debentures and the Warrants.
d. Reliance. Such Purchaser understands and acknowledges that (i)
--------
the Debentures and the Warrants are being offered and sold to such Purchaser
without registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act under Section 4(2)
of the Securities Act or Regulation D promulgated thereunder and (ii) the
availability of such exemption depends in part on, and the Company will rely
upon the accuracy and truthfulness of, the representations set forth in this
Section 2.2 and such Purchaser hereby consents to such reliance.
e. Information. Such Purchaser and its advisors, if any, have been
-----------
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Debentures
and Warrants which have been requested by such Purchaser or its advisors. Such
Purchaser and its advisors, if any, have been afforded the opportunity to ask
questions of the Company. Neither such inquiries nor any other due diligence
investigation conducted by Purchaser or any of its advisors or representatives
shall modify, amend or affect Purchaser's right to rely on the Company's
representations and warranties contained in Section 2.1 above. Such Purchaser
understands that its investment in the Debentures and Warrants involves a
significant degree of risk.
12
<PAGE>
f. Governmental Review. Such Purchaser understands that no United
-------------------
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Debentures or
Warrants.
g. Residency. Such Purchaser is a resident of the jurisdiction set
---------
forth immediately below such Purchaser's name on Schedule II hereto.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III.
OTHER AGREEMENTS
3.1 Transfer Restrictions.
---------------------
a. If any Purchaser should decide to dispose of the Debentures, the
Warrants, the Debentures Shares or the Warrant Shares held by it, each Purchaser
understands and agrees that it may do so only pursuant to an effective
registration statement under the Securities Act, to the Company or pursuant to
an available exemption from the registration requirements of the Securities Act
or Rule 144 promulgated under the Securities Act ("Rule 144"). The Company shall
--------
announce any material non-public information that it legally is required to
announce on or prior to the Effectiveness Date (as defined in the Registration
Rights Agreement) of the registration statement filed pursuant to the
Registration Rights Agreement and shall not enter into any subsequent non-
disclosure agreements that would prevent it from announcing any such information
that otherwise legally could have been announced on or prior to the
Effectiveness Date, unless confidential treatment for such information is
granted by the SEC. In connection with any transfer of any Debentures, Warrants,
Debenture Shares or Warrant Shares other than pursuant to an effective
registration statement, Rule 144 or to the Company, the Company may require the
transferor thereof to provide to the Company a written opinion of counsel
experienced in the area of United States securities laws selected by the
transferor, the form and substance of which opinion shall be customary for
opinions of counsel in comparable transactions, to the effect that such transfer
does not require registration of such transferred securities under the
Securities Act; provided, however, that if the Debentures, Warrants, Debenture
-------- -------
Shares or Warrant Shares may be sold pursuant to Rule 144(k), no written opinion
of counsel shall be required from the Purchaser if such Purchaser provides
reasonable assurances that such security can be sold pursuant to Rule 144(k).
Notwithstanding the foregoing, the Company hereby consents to and agrees to
register any transfer by any Purchaser to an Affiliate of such Purchaser,
provided that the transferee certifies to the Company that it is an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Any such
transferee shall agree in writing to be bound by the terms of this Agreement and
shall have the rights of a Purchaser under this Agreement and the Transaction
Documents. Notwithstanding the foregoing or anything else contained herein to
the contrary, the securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement.
13
<PAGE>
b. Each Purchaser agrees to the imprinting, so long as is required
by this Section 3.1(b), of the following legend on the Debentures, the Warrants,
the Debenture Shares and the Warrant Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
Neither the Debentures, the Warrants, the Debenture Shares, nor the
Warrant Shares shall contain the legend set forth above (i) at any time while a
registration statement is effective under the Securities Act covering such
security, (ii) if in the written opinion of counsel to the Company experienced
in the area of United States securities laws such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission) or
(iii) if such Debentures, Warrants, Debenture Shares or Warrant Shares may be
sold pursuant to Rule 144. The Company agrees that it will provide each
Purchaser, upon request, with a certificate or certificates representing
Debentures, Warrants, Debenture Shares or Warrant Shares, free from such legend
at such time as such legend is no longer required hereunder.
3.2 Stop Transfer Instruction. The Company may not make any notation on
-------------------------
its records or give instructions to any transfer agent of the Company which
enlarge the restrictions on transfer set forth in Section 3.1.
3.3 Furnishing of Information. As long as any Purchaser owns the
-------------------------
Debentures, the Warrants, the Debenture Shares or the Warrant Shares, the
Company will cause the Common Stock to continue at all times to be registered
under Section 12(g) of the Exchange Act, will timely file (or obtain extensions
in respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13, 14 or 15(d) of the Exchange Act and promptly furnish, but in no event later
than two (2) business days after the filing thereof with the Commission, the
Purchasers with true and complete copies of all such filings, and will not take
any action or file any document (whether or not permitted by the Exchange Act or
the rules thereunder) to terminate or suspend such reporting and filing
obligations. The Company further covenants that it will take such further
action as any holder of the Debentures, the Warrants, the Debenture Shares or
the Warrant Shares may reasonably request, all to the extent required from time
to time to enable such Person to sell the Debentures, the Warrants, the
Debenture Shares, or the Warrant Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act.
3.4 Blue Sky Laws. In accordance with the Registration Rights Agreement,
-------------
the Company shall qualify the Debentures Shares and the Warrant Shares under the
securities or
14
<PAGE>
Blue Sky laws of such jurisdictions as the Purchasers may request and shall
continue such qualification at all times through the resale of all Debenture
Shares or Warrant Shares, but in any event not past the fourth anniversary of
the Closing Date.
3.5 Integration. The Company shall not sell, offer for sale or solicit
-----------
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Debentures, the Warrants, the Debenture Shares or the Warrant Shares in a
manner that would require the registration under the Securities Act of the sale
of the Debentures, the Warrants, the Debenture Shares or the Warrant Shares to
any Purchaser or cause the offering of such securities to be integrated with any
other offering of securities by the Company for the purpose of any stockholder
approval provision applicable to the Company or its securities.
3.6 Listing and Reservation of Debenture Shares and Warrant Shares.
--------------------------------------------------------------
a. The Company shall (i) file with Nasdaq (as well as any other
national securities exchange or market on which the Common Stock is then
listed), as and when required, an additional shares listing application or a
letter acceptable to Nasdaq covering and listing a number of shares of Common
Stock which is at least equal to the aggregate amount of Underlying Shares sold
or deemed to be sold in the Closing, (ii) take all steps necessary to cause the
Underlying Shares to be approved for listing on Nasdaq (as well as on any other
national securities exchange or market on which the Common Stock is then listed)
as soon as possible thereafter, (iii) maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all such Underlying Shares, and
(iv) provide to the Purchasers evidence of such listing. Neither the Company nor
any of its Subsidiaries shall take any action which may result in the delisting
or suspension of the Common Stock on Nasdaq. The Company shall promptly provide
to each Purchaser copies of any notices it receives from Nasdaq regarding the
continued eligibility of the Common Stock for listing on such automated
quotation system, so long as such notice does not include material, nonpublic
information. The Company shall say all fees and expenses in connection with
satisfying its obligations under this Section 3.6(a).
b. The Company at all times shall reserve a sufficient number of
shares of its authorized but unissued Common Stock to provide for the full
conversion of the outstanding Debentures and full exercise of the outstanding
Warrants. Shares of Common Stock reserved for issuance upon conversion of the
Debentures and the exercise of the Warrants shall be allocated pro rata to each
of the Purchasers in accordance with the amount of Debentures and Warrants
issued and delivered to such Purchaser at the Closing. If at any time the
number of shares of Common Stock authorized and reserved for issuance is below
the number of Debenture Shares and Warrant Shares issued and issuable upon
conversion of the Debentures and exercise of the Warrants (based on the
Conversion Price (as defined in the Debentures) of the Debentures in effect from
time to time and the Exercise Price (as defined in the Warrants) of the Warrants
in effect from time to time) without regard to any limitation on conversions or
exercises, the Company will promptly take all corporate action necessary to
authorize and reserve a sufficient number of shares, including, without
limitation, calling a special meeting of stockholders to authorize additional
shares to meet the Company's obligations under this Section 3.6(b), in the case
of an insufficient number of authorized shares, and using its best efforts to
obtain stockholder approval of an increase in such authorized number of shares.
In addition, if, at any
15
<PAGE>
time within the 45-day period preceding a reset of the Conversion Price pursuant
to the terms of Section 5.2 of the Debentures, the closing bid price per share
of the Common Stock on Nasdaq (or any Subsequent Market (as defined in the
Debenture) on which the Common Stock is then listed, or if there is no such
price on such date, then the closing bid price on such exchange or quotation
system on the date nearest preceding such date) is less than $9.50 for any
consecutive five (5) Trading Day period, the Company shall be required to file
within five (5) business days after such five (5) Trading Day period a
registration statement covering the greater of (a) the product of (i) one and
one-half (1.5) and (ii) the aggregate number of Underlying Shares that would be
issuable based on a Conversion Price equal to the average closing bid price
during such five (5) Trading Day period, less the number of Underlying Shares
for which a registration statement is then effective or (b) the aggregate number
of Underlying Shares, calculated as if the Conversion Price (as defined in the
Debentures) was reset on such fifth day pursuant to the terms of Section 5.2 of
the Debentures, less the number of Underlying Shares for which a registration
statement is then effective; provided, however, that if on the actual reset date
-------- -------
(pursuant to Section 5.2 of the Debentures) the registration statements are
insufficient to register all Underlying Shares (after giving effect to such
reset), the Company shall immediately, but in no more than five (5) business
days thereafter, file a registration statement sufficient to register such
additional shares of Common Stock. All calculations of the above amount shall be
made without regard to any limitation on conversions of Debentures or exercises
of Warrants.
3.7 Notice of Breaches.
------------------
a. The Company and each Purchaser shall give prompt written notice
to the other of any breach by it of any representation, warranty or other
agreement contained in this Agreement or in the Transaction Documents, as well
as any events or occurrences arising after the date hereof and prior to the
Closing Date, which would reasonably be likely to cause any representation or
warranty or other agreement of such party, as the case may be, contained herein
to be incorrect or breached as of the Closing Date provided such notice will not
constitute material non-public information. However, no disclosure by either
party pursuant to this Section 3.7 shall be deemed to cure any breach of any
representation, warranty or other agreement contained herein or in the
Transaction Documents.
b. Notwithstanding the generality of Section 3.7(a), the Company
shall promptly notify, provided such notification will not constitute material
non-public information, each Purchaser of any notice or claim (written or oral)
that it receives from any lender of the Company or any Subsidiary to the effect
that the consummation of the transactions contemplated hereby and by the
Transaction Documents violates or would violate any written agreement or
understanding between such lender and the Company or any Subsidiary, and the
Company shall promptly furnish by facsimile to the Purchasers a copy of any
written statement in support of or relating to such claim or notice.
c. The default by any Purchaser of any of its obligations,
representations or warranties under this Agreement or the Transaction Documents
shall not be imputed to, and shall have no effect upon, any other Purchaser or
affect the Company's obligations under this Agreement or any Transaction
Document to any non-defaulting Purchaser.
16
<PAGE>
3.8 Form D; Blue Sky Laws. The Company shall, on or before the
---------------------
Closing Date, take such action as the Company shall reasonably determine is
necessary to qualify the Debentures and Warrants for sale to the Purchasers at
the Closing Date pursuant to this Agreement under applicable securities or
"blue sky" laws of the states of the United States (or to obtain an exemption
from such qualification), and shall provide evidence of any such action so taken
to each Purchaser on or prior to the applicable Closing.
3.9 Future Financings.
-----------------
a. Except for (i) issuance of the Underlying Shares; (ii) shares of
Common Stock deemed to have been issued by the Company in connection with any
contract, plan or agreement which has been approved by the Board of Directors of
the Company, pursuant to which the Company's securities may be issued to any
employee, officer, director or consultant of the Company; (iii) shares of Common
Stock issuable upon the exercise of any options or warrants outstanding on the
date hereof and listed in Schedule 2.1(c) hereto; or (iv) shares of Common Stock
issued or deemed to have been issued as consideration for an acquisition by the
Company of a division, assets or business (or stock constituting any portion
thereof) from another Person, if the Company agrees to issue shares of Common
Stock or other securities convertible into or exchangeable or exercisable for
Common Stock (the "New Security") while any Debentures are outstanding at (a) an
------------
effective price per share which is less or may be less (including, without
limitation, any security which is convertible into or exchangeable or
exercisable for Common Stock at a price which may change with the market price
of the Common Stock) than an amount equal to the Conversion Price (as defined in
the Debentures) of the Debentures as of the date thereof or (b) an effective
price per share greater than the Conversion Price but less than the Average
Price (as defined in the Debentures) on the date of such issuance or sale
(either of (a) or (b), a "Future Financing"), the Company shall provide to the
----------------
Purchasers by 5:00 p.m. (New York time) on or before the third (3rd) Trading Day
(as defined below) after the decision to issue the New Security has been made,
written notice of the Future Financing containing in reasonable detail (i) the
proposed terms of the Future Financing, (ii) the amount of the proceeds that
will be raised and (iii) the Person with whom such Future Financing shall be
effected, and attached to which shall be a term sheet or similar document
relating thereto (the "Future Financing Notice"). Upon receiving the Future
-----------------------
Financing Notice, each Purchaser shall have the pro rata right (based on the
principal amount of the Debentures held by such Purchaser relative to the
aggregate principal amount of Debentures outstanding) to purchase, on the same
terms as the Future Financing, an amount of New Securities having a purchase
price which shall not exceed the sum of (i) the then outstanding principal
amount of and any interest owing on such Purchaser's Debenture and (ii) the
number of shares of Common Stock which is the product of the Exercise Price (as
defined in the Warrants) multiplied by that number of shares of Common Stock
underlying the outstanding Warrants; provided, however, that thirty (30) Trading
Days after the effectiveness of the Initial Registration Statement (as defined
in the Registration Rights Agreement) and for so long as all registration
statements required under the Registration Rights Agreement are effective, the
Purchasers, in the aggregate, shall be entitled to purchase up to one-half of
the total amount of New Securities being offered pursuant to such Future
Financing Notice. In the event a Purchaser desires to exercise the right
granted under this Section 3.9, such Purchaser must notify the Company on or
prior to the fifth (5th) Trading Day after such Purchaser has received the
Future Financing Notice. In the event the terms and conditions of a
17
<PAGE>
proposed Future Financing are amended in any respect after delivery of the
Future Financing Notice but prior to the closing of the proposed Future
Financing to which such Future Financing Notice relates, the Company shall
deliver a new notice to each Purchaser describing the amended terms and
conditions of the proposed Future Financing and each Purchaser thereafter shall
have an option during the five (5) Trading Day period following delivery of such
new notice to purchase its pro rata share (based on the Holder's percentage of
the principal amount of the outstanding Debentures such Holder owns) of the New
Securities being offered on the same terms as contemplated by such proposed
Future Financing, as amended. The foregoing sentence shall apply to successive
amendments to the terms and conditions of any proposed Future Financing. In the
event one or more Purchasers elects not to exercise its rights granted hereby,
the Company shall permit those Purchasers electing to exercise the right granted
under this Section 3.9 to purchase on a pro rata basis equal to its percentage
ownership of the then aggregate outstanding principal of the Debentures, the sum
of the number of shares of Common Stock that the other Purchaser(s) were
eligible to Purchase, if they had exercised their right hereunder. Those
Purchasers desiring to purchase additional shares of Common Stock must notify
the Company of their intention to do so within five (5) Trading Days after the
Company has informed the Purchasers of their right to purchase additional shares
of Common Stock. Within five (5) Trading Days of the termination of the final
notice period, the transactions contemplated by this Section 3.9 shall close and
the Company shall tender to each Purchaser certificates representing the New
Securities that it agreed to purchase and the Purchasers shall make payment for
the entire purchase price in immediately available funds at the closing of such
sale; provided, however, that each Purchaser, in lieu of providing cash as
-------- -------
consideration for the purchase price, may retire all or a portion of the
outstanding principal amount of and any interest owing on the Debentures as
payment of the purchase price for the shares of Common Stock that it desires to
purchase pursuant to this Section 3.9. "Trading Day" shall mean a day on which
-----------
the Nasdaq (or in the event the Common Stock is not traded on Nasdaq, such other
securities market on which the Common Stock is listed) is open for trading.
b. If the Company shall enter into a transaction to issue any New
Securities prior to January 16, 1999 (a "Subsequent Transaction"), each
----------------------
Purchaser shall have the right to have such Purchaser's Transaction Documents
amended to reflect the terms of such Subsequent Transaction and the Company
shall, if requested, issue new Debentures and Warrants to such Purchaser
reflecting the terms of the Subsequent Transaction.
3.10 Use of Proceeds; Repayment; Future Debt. The Company shall use the
---------------------------------------
proceeds from the sale of the Debentures and Warrants for (a) the repayment in
full of the Deutschebank Bridge Loan (as defined in Loan Agreement), (b) the
repayment of $10 million of the $15,000,000 overdraft (the "Overdraft") owed to
---------
all lenders under the Loan Agreement and (c) any excess remaining, for working
capital and pending acquisitions. The Company covenants that immediately upon
receipt of the proceeds hereunder it shall also repay from its funds an
additional $5 million of the Overdraft such that the remaining balance of the
Overdraft immediately after the First Closing is $10 million. The Company
additionally covenants that it shall use all proceeds from future financings to
repay the remaining amount on the Overdraft. In addition the Company shall not
obtain any debt financing with an interest rate of 10% or higher until the
earlier of (i) sixty (60) days after the Closing Date or (ii) the
effectiveness of the Initial Registration Statement (as defined therein)
pursuant to the terms of the Registration Rights Agreement.
18
<PAGE>
3.11 Transactions with Affiliates. So long as any Debentures or Warrants
----------------------------
are outstanding, the Company shall not, and shall cause each of its Subsidiaries
not to, enter into, amend, modify or supplement, or permit any Subsidiary to
enter into, amend, modify or supplement, any agreement, transaction, commitment
or arrangement with any Person who is or was an officer or director of the
Company at any time during the previous two years, any Subsidiary's officers or
directors, stockholders who beneficially own 5% or more of the Common Stock, or
Affiliates or with any individual related by blood, marriage or adoption to any
such individual or with any entity in which any such entity or individual owns a
5% or more beneficial interest (each a "Related Party"), except for (a)
-------------
customary employment arrangements and benefit programs on reasonable terms, (b)
any agreement, transaction, commitment or arrangement on an arms-length basis on
terms no less favorable than terms which would have been obtainable from a
Person other than such Related Party, or (c) any agreement, transaction,
commitment or arrangement which is approved by a majority of the disinterested
directors of the Company. For purposes hereof, any director who is also an
officer of the Company or any Subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment or arrangement. "Affiliate" for purposes of this section only hereof
---------
means, with respect to any person or entity, another person or entity that,
directly or indirectly, (i) has a 5% or more equity interest in that person or
entity, (ii) has 5% or more common ownership with that person or entity, (iii)
controls that person or entity, or (iv) shares common control with that person
or entity. "Control" or "Controls" for purposes of this section means that a
------- --------
person or entity has the power, direct or indirect, to conduct or govern the
policies of another person or entity.
3.12 Transfer Agent Instructions. At the Closing, the Company shall issue
---------------------------
irrevocable instructions to its transfer agent (and shall issue to any
subsequent transfer agent as required), to issue certificates, registered in the
name of each such Purchaser or its respective nominee(s), for the Debenture
Shares and/or the Warrant Shares in such amounts as specified from time to time
by each Purchaser to the Company in a form acceptable to such Purchaser (the
"Irrevocable Transfer Agent Instructions"). So long as required pursuant to
---------------------------------------
Section 3.1(b), all such certificates shall bear the restrictive legend
specified in Section 3.1(b) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 3.12, and stop transfer instructions to give effect to Section
3.1 hereof, prior to registration of the Debenture Shares and the Warrant Shares
under the Securities Act, will be given by the Company to its transfer agent and
that the Debentures, the Warrants, the Debenture Shares and the Warrant Shares
shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement and the Transaction Documents.
If a Purchaser provides the Company with an opinion of counsel, in form and
substance reasonably satisfactory to the Company, to the effect that a public
sale, assignment or transfer of the Debentures, the Debenture Shares, the
Warrants and the Warrant Shares may be made without registration under the
Securities Act or the Purchaser provides the Company with reasonable assurances
that the Warrants, the Debenture Shares and the Warrant Shares can be sold
pursuant to Rule 144 without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold, the Company
shall permit the transfer, and, in the case of the Debenture Shares and the
Warrant Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such
Purchaser and without any restrictive legend. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Purchasers by violating the intent and
19
<PAGE>
purpose of the transactions contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 3.12 will be inadequate and agrees, in the event of a beach or
threatened breach by the Company of the provisions of this Section 3.12, that
the Purchasers, shall be entitled, in addition to all other available remedies,
to an order and/or injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and
without any bond or other security being required.
3.13 Filing of Form 8-K. Subject to the provisions of Section 6.10 hereof,
------------------
prior to opening of Nasdaq on January 4, 1999, the Company shall file a press
release in form and substance acceptable to the Purchasers. On or before
January 12, 1999, the Company shall file a Form 8-K with the Commission
describing the terms of the transaction contemplated by this Agreement and the
Transaction Documents in the form required by the Exchange Act.
3.14 Financial Information. The Company agrees to send the following to
---------------------
each Purchaser during the Registration Period: (i) within three (3) business
days after the filing thereof with the SEC, a copy of its Annual Reports on Form
10-K, its Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and
any registration statements or amendments (other than on Form S-8) filed
pursuant to the Securities Act; (ii) on the same day as the release thereof,
facsimile copies of all press releases issued by the Company or any of its
Subsidiaries and (iii) copies of any notices and other information made
available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders.
3.15 Best Efforts. Each of the parties hereto shall use its reasonable
------------
best efforts to satisfy each of the conditions to be satisfied by it as provided
in Article IV of this Agreement.
3.16 Corporate Existence. Until such time as the Purchasers provide the
-------------------
Company with written notice that they do not beneficially own any Debentures or
Warrants, the Company shall maintain its corporate existence and shall not sell
all or substantially all of the Company's assets, except in the event of a
merger or consolidation or sale of all or substantially all of the Company's
assets, where the surviving or successor entity in such transaction (i) assumes
the Company's obligations hereunder and under the agreements and instruments
entered into in connection herewith and (ii) is a publicly traded corporation
whose common stock is listed for trading on the Nasdaq, the New York Stock
Exchange or the American Stock Exchange.
ARTICLE IV.
CONDITIONS
4.1 Closing Conditions.
------------------
a. Conditions Precedent to the Obligation of the Company to Sell.
-------------------------------------------------------------
The obligation of the Company to sell the Debenture and the Warrants at each
Closing is subject to
20
<PAGE>
the satisfaction or waiver (with prior written notice to each Purchaser) by the
Company, at or before each Closing, of each of the following conditions:
(i) Accuracy of the Purchasers' Representations and
-----------------------------------------------
Warranties. The representations and warranties of each Purchaser in this
- ----------
Agreement shall be true and correct in all material respects as of the date when
made (except for representations and warranties that speak as of a specific
date) and as of each Closing Date;
(ii) Performance by the Purchasers. Each Purchaser shall have
-----------------------------
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Purchaser at or prior to each Closing; and
(iii) No Injunction. No statute, rule, regulation, executive
-------------
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Transaction Documents.
b. Conditions Precedent to the Obligation of the Purchasers to
-----------------------------------------------------------
Purchase. The obligation of each Purchaser hereunder to acquire and pay for the
- --------
Debentures and Warrants is subject to the satisfaction or waiver (with prior
written notice to the Company and each other Purchaser) by such Purchaser, at or
before the Closing, of each of the following conditions:
(i) Accuracy of the Company's Representations and Warranties.
--------------------------------------------------------
The representations and warranties of the Company set forth in this Agreement
shall be true and correct in all respects as of the date when made and as of
each Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date);
(ii) Performance by the Company. The Company shall have
--------------------------
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing;
(iii) No Injunction. No statute, rule, regulation, executive
-------------
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement and the Transaction Documents;
(iv) No Suspensions of Trading in Common Stock. The trading in
-----------------------------------------
the Common Stock on Nasdaq shall not have been suspended by the Commission or
Nasdaq;
(v) Listing of Common Stock. The Common Stock shall have been
-----------------------
at all times since the date hereof, and on the Closing Date shall be, listed
for trading on Nasdaq;
(vi) Required Approvals. All Required Approvals shall have
------------------
been obtained and copies thereof delivered to such Purchaser;
21
<PAGE>
(vii) Shares of Common Stock. The Company shall have duly
----------------------
reserved the number of Underlying Shares required by this Agreement and the
Transaction Documents to be reserved for issuance upon conversion of the
Debentures and the exercise of the Warrants;
(viii) Change of Control. No Change of Control shall have
-----------------
occurred between the date hereof and the Closing Date. "Change of Control"
-----------------
means any event or series of events by which (i) any Person or Persons and any
Affiliates of such Person or Persons acting in concert (including a "group" as
such term is used in Section 13(d)(3) of the Exchange Act) shall acquire,
directly or indirectly, through a merger or other transaction, outstanding
shares of voting capital stock of the Company, enabling such Person or Persons
to cast more than 50% of the votes necessary for the election of directors of
the Company or possessing in excess of 50% of the total combined voting power of
the voting capital of the Company, provided, however, that the accumulation of
-------- -------
any voting capital stock of the Company by any Person or Persons listed on the
Company's Form 10-K filed with the Commission for the Company's fiscal year
ending June 30, 1997 as owning five percent (5%) or more of the Company's
outstanding common stock on such date (or by any Affiliates of such Person or
Persons) or by any Person or Affiliate thereof who has filed a Schedule 13D or
13G with the Commission as of the First Closing Date shall not be deemed a
Change of Control; or (ii) during any period of two (2) consecutive years,
individuals who at the beginning of the period constituted the Board of
Directors of the Company (or new directors whose election by the Company's
directors (or whose nomination for election by the Company's stockholders) was
approved by two-thirds (2/3) of the Company's directors then still in office who
were either directors at the beginning of the period or were previously approved
under this procedure) cease to constitute a majority of the Board of Directors
of the Company then in office;
(ix) Transfer Agent Instructions. The Irrevocable Transfer
---------------------------
Agent Instructions, in a form acceptable to the Purchasers, shall have been
delivered and acknowledged in writing by the Company's transfer agent with a
copy forwarded to each Purchaser; and
(x) Resolutions. The Board of Directors of the Company shall
-----------
have adopted resolutions consistent with Section 2.1(b) and in a form reasonably
acceptable to each Purchaser (the "Resolutions").
-----------
c. Documents and Certificates. At the Closing, the Company shall
--------------------------
have delivered to the Purchasers the following in form and substance reasonably
satisfactory to the Purchasers:
(i) Opinion. An opinion of the Company's legal counsel in the
-------
form attached hereto as Exhibit D dated as of the Closing Date;
---------
(ii) Debenture. A Debenture(s) representing the principal
---------
amount of Debentures purchased by such Purchaser as set forth next to such
Purchaser's name on Schedule I, registered in the name of such Purchaser, each
in form satisfactory to the Purchaser;
(iii) Warrant. A Warrant(s) representing the Warrants purchased
-------
by such Purchaser as set forth next to such Purchaser's name on Schedule I,
----------
registered in the name of such Purchaser;
22
<PAGE>
(iv) Registration Rights. The Company shall have executed and
-------------------
delivered the Registration Rights Agreement;
(v) Officer's Certificate. An Officer's Certificate dated the
---------------------
Closing Date and signed by an executive officer of the Company confirming the
accuracy of the Company's representations, warranties and covenants as of the
Closing Date and confirming the compliance by the Company with the conditions
precedent set forth in this Section 4.1 as of the Closing Date;
(vi) Secretary's Certificate. A Secretary's Certificate dated
-----------------------
the Closing Date and signed by the Secretary or Assistant Secretary of the
Company certifying (A) that attached thereto is a true and complete copy of the
Certificate of Incorporation of the Company, as in effect on each Closing Date,
(B) that attached thereto is a true and complete copy of the by-laws of the
Company, as in effect on the Closing Date and (C) that attached thereto is a
true and complete copy of the Resolutions duly adopted by the Board of Directors
of the Company authorizing the execution, delivery and performance of this
Agreement and of the Transaction Documents, and that such Resolutions have not
been modified, rescinded or revoked;
(vii) Certificates of Incorporation. The Company shall have
-----------------------------
delivered to each of the Purchasers a copy of a certificate evidencing the
incorporation and good standing of the Company, and the incorporation of
material Subsidiaries, in such corporation's state of incorporation issued by
the Secretary of State of such state of incorporation as of a date within ten
days of the Closing Date. The Company shall have delivered to each of the
Purchasers a copy of its Certificate of Incorporation as certified by the
Secretary of State of the State of Nevada within ten days of the Closing Date;
(viii) Transfer Agent Letter. The Company shall have delivered
---------------------
to each Purchaser a letter from the Company's transfer agent certifying the
number of shares of Common Stock outstanding as of a date within five days of
the Closing Date; and
(ix) Other Documents. The Company shall have delivered to each
---------------
Purchaser such other documents relating to the transactions contemplated by the
Transaction Documents as the Purchasers or its counsel may reasonably request.
ARTICLE V.
INDEMNIFICATION
5.1 Indemnification. Except to the extent that matters which could be
---------------
covered by this Section 5 are covered by Section 5 of the Registration Rights
Agreement, in consideration of the Purchasers execution and delivery of this
Agreement and the Transaction Documents and acquiring the Debentures, Debenture
Shares, Warrants and Warrant Shares thereunder and in addition to all of the
Company's other obligations under this Agreement and the Transaction Documents,
the Company shall defend, protect, indemnify and hold harmless each Purchaser,
its past and present Affiliates and their successors and assigns (in accordance
with the provisions of
23
<PAGE>
Section 6.5 hereof), each other holder of the Underlying Shares and all of their
stockholders, officers, directors, employees and direct or indirect investors
and any of the foregoing Person's agents or other representatives (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Indemnities") from and
against any and all actions, causes of action, suits, claims, losses,
proceedings, costs (as incurred), penalties, fees (including legal fees and
expenses), liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnity is a party to the action for which
indemnification hereunder is sought), and including interest, penalties and
attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by
any Indemnity as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in this Agreement or in the Transaction Documents, or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in this
Agreement or the Transaction Documents, or any other certificate, instrument or
document contemplated hereby or thereby, or (c) any cause of action, suit or
claim brought or made, other than by the Company, against such Indemnity and
arising out of or resulting from (i) the execution, delivery, performance or
enforcement of this Agreement or the Transaction Documents, (ii) any transaction
financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Debentures or Warrants or (iii) solely the
status of such Purchasers or holder of the Debentures, the Debenture Shares, the
Warrants or the Warrant Shares as an investor in the Company. The
indemnification obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any affiliate of the Purchasers and
partners, directors, agents, employees and controlling Persons (if any), as the
case may be, of the Purchasers and any such affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such affiliate and any
such Person. The Company also agrees that neither the Purchasers or any such
Affiliates, partners, directors, agents, employees or controlling Persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company in connection with or as a result of the consummation of
this Agreement or any of the Transaction Documents except to the extent that any
losses, claims, damages, liabilities or expenses incurred by the Company result
from the gross negligence, willful misconduct or incorrect information provided
in writing by such Purchaser or entity in connection with the transactions
contemplated by this Agreement or the Transaction Documents. To the extent that
the foregoing undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law.
ARTICLE VI.
MISCELLANEOUS
6.1 Entire Agreement. This Agreement, together with the Exhibits and
----------------
Schedules hereto and the Transaction Documents contain the entire understanding
of the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters.
24
<PAGE>
6.2 Notices. Any notices, consents, waivers or other communications
-------
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one business day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
AgriBioTech, Inc.
120 Corporate Park Drive
Henderson, Nevada 89014
Telephone: (702) 566-2440
Facsimile: (888) 800-4841
Attention: Dr. Johnny R. Thomas, Chief Executive Officer
With a copy to:
Snow Becker Krauss P.C.
605 Third Avenue
New York, New York 10158
Telephone: (212) 687-3860
Facsimile: (212) 949-7052
Attention: Elliot H. Lutzker, Esq.
If to the Transfer Agent:
Corporate Stock Transfer
370 17th Street, Suite 2350
Denver, Colorado 80202-4614
Telephone: (303) 595-3300
Facsimile: (303) 592-8821
Attention: Ms. Carylyn K. Bell
If to the Purchasers:
With a copy to:
25
<PAGE>
Each party shall provide five (5) days' prior written notice to the other party
of any change in address or facsimile number.
6.3 Amendments; Waivers. No provision of this Agreement may be waived or
-------------------
amended except in a written instrument signed, in the case of an amendment, by
both the Company and each of the Purchasers or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter. Notwithstanding the
foregoing, no such amendment shall be effective to the extent that it applies to
less than all of the holders of the Debentures outstanding. The Company shall
not offer or pay any consideration to a Purchaser for consenting to such an
amendment or waiver unless the same consideration is offered to each Purchaser
and the same consideration is paid to each Purchaser which consents to such
amendment or waiver.
6.4 Headings. The headings herein are for convenience only, do not
--------
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
6.5 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each of the Purchasers. The Purchasers may
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Company, provided, that any assignees must make the
representations and warranties set forth in Section 2.2 and otherwise comply
with the terms of this Agreement otherwise applicable to its assignor. This
provision shall not limit a
26
<PAGE>
Purchaser's right to transfer securities in accordance with all of the terms of
this Agreement or the Transaction Documents.
6.6 No Third-Party Beneficiaries. This Agreement is intended for the
----------------------------
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
6.7 Governing Law. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the nonexclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
6.8 Survival. The representations and warranties of the Company and the
--------
Purchasers contained in Sections 2.1 and 2.2, the agreements and covenants set
forth in Section 3, and the indemnification provisions set forth in Section 5,
shall survive the Closings regardless of any investigation made by or on behalf
of the such Purchaser or by or on behalf of the Company, except that, in the
case of representations and warranties such survival shall be until the Maturity
Date of the Debentures (other than with respect to any claim by a third party
against the party to this Agreement who seeks to assert a claim based on such
representations and warranties).
6.9 Counterparts. This Agreement may be executed in two or more
------------
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
6.10 Publicity. The Company and on behalf of all the Purchasers shall
---------
consult with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and neither
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed, except that no prior consent shall be
required if such disclosure is required by law, in which such case
27
<PAGE>
the disclosing party shall provide the other party with prior notice of such
public statement. The Company shall not publicly or otherwise disclose the
names of any of the Purchasers without each such Purchaser's prior written
consent.
6.11 Severability. In case any one or more of the provisions of this
------------
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
6.12 Remedies. In addition to being entitled to exercise all rights
--------
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
this Agreement or the Transaction Documents without the showing of economic loss
and without any bond or other security being required. Each of the Company and
the Purchasers (severally and not jointly) agree that monetary damages would not
be adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agree to waive in any
action for specific performance of any such obligation the defense that a remedy
at law would be adequate.
6.13 Independent Nature of Purchasers' Obligations and Rights. The
--------------------------------------------------------
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
6.14 Payment Set Aside. To the extent that the Company makes a payment or
-----------------
payments to the Purchasers hereunder or pursuant to the Transaction Documents or
the Purchasers enforce or exercise their rights hereunder or thereunder, and
such payment or payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
28
<PAGE>
6.15 Further Assurances. Each party shall do and perform, or cause to be
------------------
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
6.16 Fees and Expenses. Except as set forth in the Registration Rights
-----------------
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement; provided, however, that the Company shall
-------- -------
reimburse the Purchasers for the reasonable fees and expenses of Akin, Gump,
Strauss, Hauer & Feld, L.L.P. in connection with negotiating and preparing the
Transaction Documents and consummating the transactions contemplated thereby,
which amount shall not be greater than $50,000. The Company shall pay all stamp
and other taxes and duties levied in connection with the issuance of the
Debenture Shares and the Warrant Shares pursuant hereto.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES TO FOLLOW
29
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.
AGRIBIOTECH, INC.
By:________________________________
Name: Johnny R. Thomas
Title: Chief Executive Officer
30
<PAGE>
Exhibit A
[Form of Convertible Debenture]
<PAGE>
Exhibit B
[Form of Warrant]
<PAGE>
Exhibit C
[Registration Rights Agreement]
<PAGE>
Exhibit D
[Company's Legal Opinion]
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is made and
---------
entered into as of December 30, 1998, among AgriBioTech, a Nevada corporation
(the "Company"), and the parties who have executed this Agreement and whose
-------
names appear on Schedule I hereto (each party listed on Schedule I hereto is
sometimes individually referred to herein as a "Purchaser" and all such parties
---------
are sometimes collectively referred to herein as the "Purchasers").
----------
This Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof among the Company and the Purchasers (the "Purchase
--------
Agreement").
- ---------
The Company and the Purchasers hereby agree as follows:
1. Definitions
-----------
Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement. As used in this Agreement,
the following terms shall have the following meanings:
"Advice" has meaning set forth in Section 3(o) hereof.
------
"Affiliate" means, with respect to any Person, any other Person that
---------
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
-------
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "affiliated," controlling" and "controlled" have meanings
---------- ----------- ----------
correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any day which
------------
shall be a legal holiday or a day on which banking institutions in the State of
New York generally are authorized or required by law or other government actions
to close.
"Closing Date" shall mean the Closing Date as defined in the Purchase
------------
Agreement.
"Commission" means the Securities and Exchange Commission.
----------
"Common Stock" means the Company's Common Stock, par value $.001 per
------------
share.
"Debentures" means the Company's 5% Convertible Debentures issuable
----------
pursuant to the Purchase Agreement.
<PAGE>
"Effectiveness Date" means the earlier of (i) March 30, 1999, or (ii)
------------------
the fifth day after the Company has received notice (written or oral) from the
Commission that the Commission Staff will not be reviewing the Registration
Statement or has no further comments on the Registration Statement.
"Effectiveness Period" has the meaning set forth in Section 2(a)
--------------------
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Event" has the meaning set forth in Section 2(d) hereof.
-----
"Filing Date" means as soon as practicable but in no event later than
-----------
January 29, 1999.
"Holder" or "Holders" means the holder or holders, as the case may
------ -------
be, from time to time of Registrable Securities.
"Indemnified Party" has the meaning set forth in Section 5(c) hereof.
-----------------
"Indemnifying Party" has the meaning set forth in Section 5(c) hereof.
------------------
"Initial Registration Statement" has the meaning set forth in Section
------------------------------
2(a) hereof.
"Losses" has the meaning set forth in Section 5(a) hereof.
------
"Person" means an individual or a corporation, partnership, trust,
------
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
----------
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
----------
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"Registrable Securities" means the shares of Common Stock issued or
----------------------
issuable upon (i) conversion of or with respect to the Debentures, (ii) payment
of interest or any other payments in respect of the Debentures, (iii) exercise
of the Warrants, and (iv) any shares of the
2
<PAGE>
Company's capital stock issued with respect to (i), (ii) or (iii) as a result of
any stock split, stock dividend, recapitalization, exchange or similar event or
otherwise.
"Registration Delay Payment" has the meaning set forth in Section 2(d)
--------------------------
hereof.
"Registration Statement" means the Initial Registration Statement and
----------------------
any additional registration statements contemplated by Sections 2(a), 2(b) and
7(d), including (in each case) the Prospectus, amendments and supplements to
such registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference in
such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
--------
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to
--------
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
--------
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Special Counsel" means one special counsel to the Holders, for which
---------------
the Holders will be reimbursed by the Company pursuant to Section 4.
"Underlying Shares" means the shares of Common Stock issuable upon
-----------------
conversion of the Debentures and exercise of the Warrants.
"Underwritten Registration or Underwritten Offering" means a
--------------------------------------------------
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
"Warrants" means the warrants issuable pursuant to the Purchase
--------
Agreement.
2. Registration Requirements
-------------------------
(a) On or prior to the Filing Date, the Company shall prepare and
file with the Commission a Registration Statement (the "Initial Registration
Statement") which shall cover all Registrable Securities for an offering to be
made on a continuous basis pursuant to a "Shelf" registration statement under
Rule 415. The Initial Registration Statement shall be on Form S-3 or any
successor form (except if the Company is not then eligible to register for
resale the Registrable Securities on Form S-3, in which case such registration
shall be on another appropriate form in accordance herewith, subject to the
reasonable consent of the original
3
<PAGE>
Holders of the Registrable Securities). The Company shall (i) not permit any
securities other than the Registrable Securities to be included in the Initial
Registration Statement and (ii) use its best efforts to cause the Initial
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event on or prior to
the Effectiveness Date, and to keep such Initial Registration Statement
continuously effective under the Securities Act until the date which is four
years after the date that such Initial Registration Statement is declared
effective by the Commission or such earlier date when all Registrable Securities
covered by such Initial Registration Statement have been sold or may be sold
without volume restrictions pursuant to Rule 144 as determined by counsel to the
Company pursuant to a written opinion letter, addressed to the Holders and the
Company's transfer agent to such effect (the "Effectiveness Period"). The
---------------------
Company acknowledges that the number of shares initially included in the Initial
Registration Statement represents a good faith estimate of the maximum number of
shares issuable upon conversion of the Debentures and exercise of the Warrants.
If, at any time within the 45-day period preceding a reset of the Conversion
Price pursuant to the terms of Section 5.2 of the Debentures, the closing bid
price per share of the Common Stock on Nasdaq (or any Subsequent Market (as
defined in the Debenture) on which the Common Stock is then listed, or if there
is no such price on such date, then the closing bid price on such exchange or
quotation system on the date nearest preceding such date) is less than $9.50 for
any consecutive five (5) Trading Day period, the Company shall be required to
file within five (5) Business Days after such fifth (5th) Business Day a
Registration Statement covering the greater of (a) the product of (i) one and
one-half (1.5) and (ii) the aggregate number of Underlying Shares, less the
number of Underlying Shares for which a Registration Statement is then effective
or (b) the aggregate number of Underlying Shares, calculated as if the
Conversion Price (as defined in the Debentures) was reset on such fifth day
pursuant to the terms of Section 5.2 of the Debentures, less the number of
Underlying Shares for which a Registration Statement is then effective;
provided, however, that if on the actual reset date (pursuant to Section 5.2 of
- -------- -------
the Debentures) the Registration Statements are insufficient to register all
Underlying Shares (after giving effect to such reset), the Company shall
immediately, but in no more than five (5) Business Days, file a Registration
Statement sufficient to register such additional shares of Common Stock.
(b) In addition to the Initial Registration Statement, if the Holders
of a majority of the Registrable Securities covered by a Registration Statement
so elect on or after July 1, 1999, an offering of Registrable Securities
pursuant to such Registration Statement may be effected on no more than one (1)
occasion in the form of an Underwritten Offering; provided, however, that the
-------- -------
Company may delay any such underwritten offering one (1) time for a period of up
to ninety (90) days. In such event, and if the managing underwriters advise the
Company and such Holders in writing that in their opinion the amount of
Registrable Securities proposed to be sold in such Underwritten Offering exceeds
the amount of Registrable Securities which can be sold in such Underwritten
Offering, there shall be included in such Underwritten Offering the amount of
such Registrable Securities which in the opinion of such managing underwriters
can be sold, and such amount shall be allocated pro rata among the Holders
--- ----
proposing to sell Registrable Securities in such Underwritten Offering.
(c) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker in interest that will administer
the offering will be selected by
4
<PAGE>
the Holders of a majority of the Registrable Securities included in such
offering provided that the Company shall consent to the inclusion of such
investment banker, which consent shall not be unreasonably withheld. No Holder
may participate in any Underwritten Offering hereunder unless such Holder (i)
agrees to sell its Registrable Securities on the basis provided in any
underwriting agreements approved by the Persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such arrangements.
(d) If (i) the Initial Registration Statement covering all the
applicable Registrable Securities and required to be filed by the Company
pursuant to this Agreement is not (A) filed with the Commission on or before the
Filing Date or (B) declared effective by the Commission on or before the
applicable Effectiveness Date, (ii) on any day after the Registration Statement
has been declared effective by the Commission (A) sales of all the Registrable
Securities required to be included on a Registration Statement cannot be made
pursuant to the Registration Statement (including, without limitation, because
of a failure to keep the Registration Statement effective, to disclose such
information as is necessary for sales to be made pursuant to the Registration
Statement, or to register sufficient shares of Common Stock) or (B) the Common
Stock is not listed or included for quotation on the National Market System of
the Nasdaq Stock Market ("Nasdaq"), the New York Stock Exchange ("NYSE") or the
------ ----
American Stock Exchange (the "AMEX") after being so listed or included for
----
quotation or (iii) the Company shall otherwise fail to file a Registration
Statement required by Section 2(a) hereof, (each such event specified in (i),
(ii) and (iii) above, an "Event"), then, as partial relief for the damages to
-----
any Holder by reason of any such delay in or reduction of its ability to sell
the Registrable Securities (which remedy shall not be exclusive of any other
remedies available at law or in equity), the Company shall pay to each Holder an
amount in cash (a "Registration Delay Payment") equal to the then outstanding
---------------------------
principal amount of the Debentures (and, in the case of Holders, the principal
amount of Debentures from which such Registrable Securities were converted) (the
"Aggregate Price") multiplied by two hundredths (.020) times the sum of: (i) the
---------------
number of months (prorated for partial months) after the end of the
Effectiveness Date and prior to the date the Registration Statement is declared
effective by the Commission, provided, however, that there shall be excluded
-------- -------
from such period any delays which are solely attributable to changes required by
the Purchasers in the Registration Statement with respect to information
relating to the Purchasers, or to the failure of the Purchasers to conduct their
review of the Registration Statement pursuant to Section 3(a); (ii) the number
of months (prorated for partial months) that sales cannot be made pursuant to
the Registration Statement after the Registration Statement has been declared
effective (including, without limitation, when sales cannot be made by reason of
the Company's failure to properly supplement or amend the Prospectus in
accordance with the terms of this Agreement, or otherwise, but excluding when
such sales cannot be made solely by reason of any act or omission solely
attributable to the Purchasers); and (iii) the number of months (prorated for
partial months) that the Common Stock is not listed or included for quotation on
the Nasdaq, NYSE or AMEX or that trading thereon is halted after the
Registration Statement has been declared effective. The Company shall pay any
Required Registration Delay Payments to each Holder in cash on the last Business
Day of each month during which an Event has occurred and is continuing. In the
event the Company fails to make a Registration Delay Payment in a timely manner,
such Registration Delay Payment shall bear interest at the rate of 2.0% per
month (prorated for partial months) until paid in full.
5
<PAGE>
(e) The Company represents and warrants that it meets the registrant
eligibility and transaction requirements for the use of Form S-3 (for primary
and secondary offerings) for the registration of the sale of Registrable
Securities by the Purchasers and any other Holders and the Company shall file
all reports required to be filed by the Company with the Commission in a timely
manner so as to maintain such eligibility for the use of Form S-3.
3. Registration Procedures
-----------------------
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Prepare and file with the Commission on or prior to the Filing
Date a Registration Statement on Form S-3 or its successor form (or if the
Company is not then eligible to register for resale the Registrable Securities
on Form S-3 such registration shall be on another appropriate form in accordance
herewith (which shall include a Plan of Distribution substantially in the form
of Exhibit A annexed hereto, unless in connection with an Underwritten
---------
Offering) or in connection with an Underwritten Offering hereunder, such other
form agreed to by the Company and by a majority-in-interest of Holders of
Registrable Securities to be covered by such Registration Statement) (except if
otherwise directed by the Holders), and cause the Registration Statement to
become effective and remain effective as provided herein; provided, however,
-------- -------
that not less than three (3) Business Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated therein by
reference), the Company shall, if reasonably practicable (i) furnish to the
Holders, their Special Counsel and any managing underwriters, copies of all such
documents proposed to be filed (including documents incorporated by reference),
which documents will be subject to the review of such Holders, their Special
Counsel and such managing underwriters, and (ii) cause its officers and
directors, counsel and independent certified public accountants to respond to
such inquiries as shall be necessary, in the reasonable opinion of respective
counsel to such Holders and such underwriters, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities, their Special Counsel, or any managing underwriters, shall
reasonably object, and will not request acceleration of such Registration
Statement without prior notice to such counsel. The sections of such
Registration Statement covering information with respect to the Holders, the
Holder's beneficial ownership of securities of the Company or the Holders
intended method of disposition of Registrable Securities shall conform to the
information provided to the Company by each of the Holders.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective for the
Effectiveness Period and prepare and file with the Commission such additional
Registration Statements in order to register for resale under the Securities Act
all of the Registrable Securities; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424 (or any similar
provisions then in force) promulgated
6
<PAGE>
under the Securities Act; (iii) respond as promptly as possible to any comments
received from the Commission with respect to the Registration Statement or any
amendment thereto and as promptly as possible provide the Holders true and
complete copies of all correspondence from and to the Commission relating to the
Registration Statement; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Holders thereof set forth in the Registration Statement as so
amended or in such Prospectus as so supplemented. In the event the number of
shares available under a Registration Statement filed pursuant to this Agreement
is insufficient to cover all of the Registrable Securities issued or issuable
upon conversion of the Debentures and exercise of the Warrants, the Company
shall amend the Registration Statement, or file a new Registration Statement (on
the short form available therefore, if applicable), or both, so as to cover all
of the Registrable Securities, in each case, as soon as practicable, but in any
event within twenty (20) Business Days after the necessity therefor arises
(based on the Conversion Price of the Debentures and other relevant factors on
which the Company reasonably elects to rely). The Company shall use its best
efforts to cause such amendment and/or new Registration Statement to become
effective as soon as practicable following the filing thereof. The provisions
of Section 2(c) above shall be applicable with respect to such obligation, with
the ninety (90) days running from the day after the date on which the Company
reasonably first determines (or reasonably should have determined) the need
therefor.
(c) Notify the Holders of Registrable Securities to be sold, their
Special Counsel and any managing underwriters as promptly as possible (and, in
the case of (i)(A) below, not less than five (5) days prior to such filing and
in the case of (i)(C) below, not later than the first Business Day after
effectiveness) and (if requested by any such Person) confirm such notice in
writing no later than one (1) Business Day following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed; (B) when the Commission notifies
the Company whether there will be a "review" of such Registration Statement and
whenever the Commission comments in writing on such Registration Statement and
(C) with respect to the Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the Commission or any
other Federal or state governmental authority for amendments or supplements to
the Registration Statement or Prospectus or for additional information; (iii) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement covering any or all of the Registrable Securities or
the initiation of any Proceedings for that purpose; (iv) if at any time any of
the representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue
7
<PAGE>
statement of a material fact or omit to state any 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.
(d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of the
Registration Statement or (ii) any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(e) If requested by any managing underwriter or the Holders of a
majority in interest of the Registrable Securities to be sold in connection with
an Underwritten Offering, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as the
Company reasonably agrees should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment;
provided, however, that the Company shall not be required to take any action
- -------- -------
pursuant to this Section 3(e) that would, in the opinion of counsel for the
Company, violate applicable law or be materially detrimental to the business
prospects of the Company.
(f) Furnish to each Holder, their Special Counsel, and any managing
underwriters, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent requested by such Person (including
those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.
(g) Promptly deliver to each Holder, their Special Counsel, and any
underwriters, without charge, as many copies of the Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request; and the Company hereby consents to the use
of such Prospectus and each amendment or supplement thereto by each of the
selling Holders and any underwriters in connection with the offering and sale of
the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Holders, any
underwriters and their Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder or underwriter
requests in writing, to keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period and to do any and
all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, however, that the Company shall not be required to qualify
-------- -------
generally to do business in any jurisdiction where it is not then so qualified
or to take any action that would subject it to general service of process in any
such jurisdiction where it is not then so
8
<PAGE>
subject or subject the Company to any material tax in any such jurisdiction
where it is not then so subject.
(i) Cooperate with the Holders and any managing underwriters to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by applicable law, of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such managing underwriters or
Holders may request at least two (2) Business Days prior to any sale of
Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(k) Cause all Registrable Securities relating to such Registration
Statement to be listed on Nasdaq and any other securities exchange, quotation
system, market or over-the-counter bulletin board, if any, on which similar
securities issued by the Company are then listed as and when required pursuant
to the Purchase Agreement.
(l) Enter into such agreements (including an underwriting agreement
in form, scope and substance as is customary in Underwritten Offerings) and take
all such other actions in connection therewith (including those reasonably
requested by any managing underwriters and the Holders of a majority of the
Registrable Securities being sold) in order to expedite or facilitate the
disposition of such Registrable Securities, and whether or not an underwriting
agreement is entered into, (i) make such representations and warranties to such
Holders and such underwriters as are customarily made by issuers to underwriters
in underwritten public offerings, and confirm the same if and when requested;
(ii) in the case of an Underwritten Offering obtain and deliver copies thereof
to the managing underwriters, if any, or in the case of non-Underwritten
Offerings, if reasonably requested by the selling Holders and at the expense of
such selling Holders, obtain and deliver copies thereof to such selling Holders,
of opinions of counsel to the Company and updates thereof addressed to each such
underwriter, in form, scope and substance reasonably satisfactory to any such
managing underwriters and Special Counsel to the selling Holders covering the
matters customarily covered in opinions requested in Underwritten Offerings and
such other matters as may be reasonably requested by such Special Counsel and
underwriters; (iii) immediately prior to the effectiveness of the Registration
Statement, and, in the case of an Underwritten Offering, at the time of delivery
of any Registrable Securities sold pursuant thereto, and, in the case of non-
Underwritten Offerings, at such time as the selling Holders may reasonably
request (at the expense of such selling Holders), obtain and deliver copies to
the Holders and the managing underwriters, if any, of "cold comfort" letters and
updates thereof from the independent certified public accountants of the Company
(and, if required, any other independent certified public accountants of any
subsidiary
9
<PAGE>
of the Company or of any business acquired by the Company for which financial
statements and financial data is, or is required to be, included in the
Registration Statement), addressed to each of the underwriters, if any, in form
and substance as are customary in connection with Underwritten Offerings; (iv)
if an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable to the selling
Holders and the underwriters, if any, than those set forth in Section 6 (or such
other provisions and procedures acceptable to the managing underwriters, if any,
and holders of a majority of Registrable Securities participating in such
Underwritten Offering; and (v) deliver such documents and certificates as may be
reasonably requested by the Holders of a majority of the Registrable Securities
being sold, their Special Counsel and any managing underwriters to evidence the
continued validity of the representations and warranties made pursuant to clause
3(1)(i) above and to evidence compliance with any customary conditions contained
in the underwriting agreement or other agreement entered into by the Company.
(m) Make available for inspection by the selling Holders, any
representative of such Holders, any underwriter participating in any disposition
of Registrable Securities, and any attorney or accountant retained by such
selling Holders or underwriters, at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
officers, directors, agents and employees of the Company and its subsidiaries to
supply all information in each case reasonably requested by any such Holder,
representative, underwriter, attorney or accountant in connection with the
Registration Statement; provided, however, that if any information is determined
-------- -------
in good faith by the Company in writing to be of a confidential nature at the
time of delivery of such information, then prior to delivery of such
information, the Company and the Holders shall enter into a confidentiality
agreement reasonably acceptable to the Company and the Holders providing that
such information shall be kept confidential, unless (i) disclosure of such
information is required by court or administrative order or is necessary to
respond to inquiries of regulatory authorities (provided, however, that the
-------- -------
Company shall be given notice of any such pending disclosure so that the Company
may seek a protective order); (ii) disclosure of such information, in the
opinion of counsel to such Person, is required by law; (iii) such information
becomes generally available to the public other than as a result of a disclosure
or failure to safeguard by such Person; or (iv) such information becomes
available to such Person from a source other than the Company and such source is
not known by such Person to be bound by a confidentiality agreement with the
Company.
(n) Comply in all material respects with all applicable rules and
regulations of the Commission and make generally available to its
securityholders earning statements satisfying the provisions of Section 11(a) of
the Securities Act and Rule 158 not later than 45 days after the end of any 12-
month period (or 90 days after the end of any 12-month period if such period is
a fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm commitment or best
efforts Underwritten Offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the Company
after the effective date of the Registration Statement, which statement shall
conform to the requirements of Rule 158.
10
<PAGE>
(o) The Company may require each selling Holder to furnish to the
Company information regarding such Holder and the distribution of such
Registrable Securities as is required by law to be disclosed in the Registration
Statement, and the Company may exclude from such registration the Registrable
Securities of any such Holder who unreasonably fails to furnish such information
within a reasonable time after receiving such request.
The Company shall hold in confidence and not make any disclosure of
information concerning a Holder provided to the Company 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 a Holder is sought
in or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to such Holder prior to making such disclosure, and
allow the Holder, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar Federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of any event
of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or
3(c)(vi), such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(j), or until it is advised in writing (the "Advice")
------
by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. Notwithstanding anything to the contrary, the Company
shall cause its transfer agent to deliver unlegended shares of Common Stock to a
transferee of a Holder in accordance with the terms of the Securities Purchase
11
<PAGE>
Agreement in connection with any sale of Registrable Securities with respect to
which an Holder has entered into a contract for sale prior to the Holder's
receipt of a notice from the Company of the happening of any event of the kind
described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi) and for
which the Holder has not yet settled.
(p) The Company agrees to respond fully and completely to any and all
comments on a Registration Statement received from the Commission staff as
promptly as possible but, for non-Underwritten Offerings, in no event later
than ten (10) Business Days of the receipt of such comments, regardless of
whether such comments are in oral or written form.
(q) Within two (2) Business Days after a Registration Statement which
covers applicable Registrable Securities is ordered effective by the Commission,
the Company shall deliver, and shall cause legal counsel for the Company to
deliver, to the transfer agent for such Registrable Securities (with copies to
the Holders whose Registrable Securities are included in such Registration
Statement) confirmation that such Registration Statement has been declared
effective by the Commission in the form attached hereto as Exhibit A.
---------
4. Registration Expenses
---------------------
All fees and expenses incident to the performance of or
compliance with this Agreement by the Company, except as and to the extent
specified below, shall be borne by the Company whether or not the Registration
Statement is filed or becomes effective and whether or not any Registrable
Securities are sold pursuant to the Registration Statement. The fees and
expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with Nasdaq
and each other securities exchange or market on which Registrable Securities are
required hereunder to be listed and (B) in compliance with state securities or
Blue Sky laws (including, without limitation, fees and disbursements of counsel
for the Holders in connection with Blue Sky qualifications of the Registrable
Securities and determination of the eligibility of the Registrable Securities
for investment under the laws of such jurisdictions as the managing
underwriters, if any, or the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is requested by the managing underwriters, if any,
or by the holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company and Special Counsel for the
Holders, (v) Securities Act liability insurance, if the Company so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. If the Holders require an
Underwritten Offering pursuant to the terms hereof, the Holders shall be
responsible for all costs, fees and expenses in connection therewith, including
the fees of the
12
<PAGE>
Company's counsel and fees relating to "cold comfort" letters and updates
thereof from the independent certified public accountants of the Company, but
excluding any fees or expenses relating to an audit of the Company or the
preparation of the Company's financial statements or quarterly reports.
5. Indemnification
---------------
(a) Indemnification by the Company. The Company shall,
------------------------------
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, investment advisors and employees
of each of them, each Person who controls any such Holder (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, agents and employees of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all
joint or several losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and attorneys' fees) and expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, "Losses"), as
------
incurred, arising out of or relating to (i) any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading (in the case of any Prospectus or form of
Prospectus or supplement thereto, in light of the circumstances under which they
were made), except to the extent, but only to the extent, that such untrue
statements or omissions are based solely upon and in conformity with information
regarding such Holder furnished in writing to the Company by such Holder
expressly for use therein, which information was reasonably relied on by the
Company for use therein or to the extent that such information relates to such
Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto (provided that the Company
amended any disclosure with respect to the method of distribution upon written
notice from the Holders that such section of the Prospectus should be revised in
any way) or (ii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any other law, including, without limitation,
any state securities law, or any rule or regulation thereunder relating to the
offer or sale of Registrable Securities. In addition, the Company shall not be
liable for any Losses to any Holder with respect to any untrue or alleged untrue
statement or omission or alleged omission if such statement or omission was made
in a preliminary Prospectus that is corrected in a final Prospectus (or any
amendment or supplement thereto) if the person asserting such Losses purchased
Common Stock from a Holder in reliance upon such preliminary Prospectus (or a
Prospectus which was subsequently amended or supplemented) or the Prospectus, as
subsequently amended or supplemented, that was made available by the Company to
such Holder at or prior to written confirmation of the sale of the Common Stock
to such person in any case where such delivery of such Prospectus (as amended or
supplemented) is required, unless such failure to deliver such final Prospectus
(as amended or supplemented) was a result of noncompliance by the Company with
Section 3(g) of this Agreement. The Company
13
<PAGE>
shall notify the Holders promptly of the institution, threat or assertion of any
Proceeding of which the Company is aware in connection with the transactions
contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not
--------------------------
jointly, indemnify and hold harmless the Company, the directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or arising solely out of or based solely upon any omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading to the extent, but only to the extent, that
such untrue statement or omission is contained in any information so furnished
in writing by such Holder to the Company specifically for inclusion in the
Registration Statement or such Prospectus and that such information was
reasonably relied upon by the Company for use in the Registration Statement,
such Prospectus or such form of prospectus or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of prospectus. In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall
--------------------------------------
be brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
- ------------------
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
------------------
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided,
---------
however, that the failure of any Indemnified Party to give such notice shall not
- -------
relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying
14
<PAGE>
Party in writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume
the defense thereof and such counsel shall be at the expense of the Indemnifying
Party). The Indemnifying Party shall not be liable for any settlement of any
such Proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten (10)
Business Days of written notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a)
------------
or 5(b) is unavailable to an Indemnified Party because of a failure or refusal
of a governmental authority to enforce such indemnification in accordance with
its terms (by reason of public policy or otherwise), then each Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Losses, in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such Indemnifying Party
and Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission of a material fact, has been
taken or made by, or relates to information supplied by, such Indemnifying Party
or Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms. In no
event shall any selling Holder be required to contribute an amount under this
Section 5(d) in excess of the net proceeds received by such Holder upon sale of
the Registrable Securities pursuant to the Registration Statement giving rise to
such contribution obligation.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the
15
<PAGE>
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. Rule 144
--------
As long as any Holder owns Registrable Securities, the Company
covenants to timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to Section 13(a) or l5(d) of the Exchange
Act and to promptly furnish the Holders with true and complete copies of all
such filings. As long as any Holder owns Registrable Securities, if the Company
is not required to file reports pursuant to Section 13(a) or l5(d) of the
Exchange Act, it will prepare and furnish to the Holders and make publicly
available in accordance with Rule 144(c) promulgated under the Securities Act
annual and quarterly financial statements, together with a discussion and
analysis of such financial statements in form and substance substantially
similar to those that would otherwise be required to be included in reports
required by Section 13(a) or 15(d) of the Exchange Act, as well as any other
information required thereby, in the time period that such filings would have
been required to have been made under the Exchange Act. The Company further
covenants that it will take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such Person to
sell Underlying Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated under the
Securities Act, including providing any legal opinions referred to in the
Purchase Agreement. Upon the request of any Holder, the Company shall deliver to
such Holder a written certification of a duly authorized officer as to whether
it has complied with such requirements.
7. Miscellaneous
-------------
(a) Remedies. In the event of a breach by the Company or by a
--------
Holder of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of its
--------------------------
subsidiaries has, as of the date hereof, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Except as disclosed in Schedule 2.1(r) of the Purchase Agreement, neither the
Company nor any of its subsidiaries has previously entered into any agreement
granting any
16
<PAGE>
registration rights with respect to any of its securities to any Person. Without
limiting the generality of the foregoing, without the written consent of the
Holders of a majority of the then outstanding Registrable Securities, the
Company shall not grant to any Person the right to request the Company to
register any securities of the Company under the Securities Act unless the
rights so granted are subordinated in all respects to the rights in full of the
Holders set forth in Section 2 herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement. This Agreement, together
with the Purchase Agreement, contain the entire understanding of the parities
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters.
(c) No Piggyback on Registrations. Except as disclosed on Schedule
-----------------------------
2.1(r) of the Purchase Agreement, neither the Company nor any of its
securityholders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in the Registration Statements and the Company
shall not after the date hereof enter into any agreement providing such right to
any of its securityholders, unless the right so granted is subordinated in all
respects to the rights in full of the Holders set forth herein, and is not
otherwise in conflict or inconsistent with the provisions of this Agreement.
(d) Piggy-Back Registrations. Except as provided herein if, at any
------------------------
time when there is not an effective Registration Statement covering the
Registrable Securities, the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, the Company shall send to each Holder of Registrable Securities
written notice of such determination and, if within ten (10) days after receipt
of such notice, any such Holder shall so request in writing, (which request
shall specify the Registrable Securities intended to be disposed of by the
Purchasers), the Company will use reasonable efforts to effect the registration
under the Securities Act of all Registrable Securities which the Company has
been so requested to register by the holder, to the extent requisite to permit
the disposition of the Registrable Securities so to be registered, provided that
if at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to such Holder and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay expenses in accordance with
Section 4 hereof), and (ii) in the case of a determination to delay registering,
shall be permitted to delay registering any Registrable Securities being
registered pursuant to this Section 7(d) for the same period as the delay in
registering such other securities. The Company shall include in such
registration statement all or any part of such Registrable Securities such
Holder requests to be registered; provided, however, that the Company shall not
-------- -------
be required to register any Registrable Securities pursuant to this Section 7(d)
that are eligible for sale pursuant to Rule 144(k) of the Securities Act. In the
case of an underwritten public offering, if the managing underwriter(s) or
underwriter(s) should reasonably object to the inclusion of the
17
<PAGE>
Registrable Securities in such registration statement, then if the Company after
consultation with the Underwriter's Representative should reasonably determine
that the inclusion of such Registrable Securities, would materially adversely
affect the offering contemplated in such registration statement, and based on
such determination recommends inclusion in such registration statement of fewer
Registrable Securities then proposed to be sold by the Holders, then (x) the
number of Registrable Securities of the Holders included in such registration
statement shall be reduced pro-rata among such Holders (based upon the number of
Registrable Securities requested to be included in the registration); provided,
--------
however, that if securities are being offered for the account of other persons
- -------
or entities as well as the Company, such reduction shall not represent a greater
fraction of the number of Registrable Securities intended to be offered by the
Holders than the fraction of similar reductions imposed on such other persons or
entities (other than the Company).
(e) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least two thirds of the then outstanding Registrable
Securities; provided, however, that for the purposes of this sentence,
-------- -------
Registrable Securities that are owned, directly or indirectly, by the Company,
or an Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of this
-------- -------
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.
(f) Notices. Any notice or other communication required or
-------
permitted to be given hereunder shall be in writing and shall be deemed to have
been received (a) upon hand delivery (receipt acknowledged) or delivery by telex
(with correct answer back received), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below (if received by
8:00 p.m. EST where such notice is to be received), or the first business day
following such delivery (if received after 8:00 p.m. EST where such notice is to
be received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications are (i) if to the Company to AgriBioTech, Inc., 120
Corporate Park Drive, Henderson, Nevada 89014, Attn: Dr. Johnny Thomas, Chief
Executive Officer, fax no. (888) 800-4841, with copies to Snow Becker Krauss
P.C., 605 Third Avenue, New York, New York 10158, Attn: Elliot H. Lutzker, Esq.,
fax no. (212) 949-7052 and (ii) if to any Purchaser to the address set forth on
Schedule I hereto with copies to those specified on the signature pages hereto
and to Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York,
New York 10022, Attn: James Kaye, Esq., fax no. (212) 872-1002 or such other
address as may be designated in writing hereafter, in the same manner, by such
Person.
(g) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the
18
<PAGE>
benefit of each Holder. The Company may not assign its rights or obligations
hereunder without the prior written consent of each Holder. Each Purchaser may
assign its rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement.
(h) Assignment of Registration Rights. The rights of each Holder
---------------------------------
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder if: (i) the Holder agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time after such
assignment, (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment the further disposition of such securities by the
transferee or assignees is restricted under the Securities Act and applicable
state securities laws, (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this Section, the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
of this Agreement, and (v) such transfer shall have been made in accordance with
the applicable requirements of the Purchase Agreement. The rights to assignment
shall apply to the Holders (and to subsequent) successors and assigns.
(i) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) the same with the same force and
effect as if such facsimile signature were the original thereof.
(j) Governing Law. The corporate laws of the State of Nevada shall
-------------
govern all issues concerning the relative rights of the Company and the
Purchasers as its stockholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of law. Each party hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts sitting in the
City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consent to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
(k) Cumulative Remedies. The remedies provided herein are cumulative
-------------------
and not exclusive of any remedies provided by law.
19
<PAGE>
(l) Severability. If any term, provision, covenant or restriction
------------
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(n) Shares Held by The Company and its Affiliates. Whenever the
---------------------------------------------
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW]
20
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
AGRIBIOTECH, INC.
By:________________________________
Name: Johnny R. Thomas
Title: Chief Executive Officer
21
<PAGE>
EXHIBIT A
PLAN OF DISTRIBUTION
The Company is registering the Registrable Securities on behalf of the
Holder. As used herein, the term Holder means the holder of the Registrable
Securities and includes donees and pledgees selling Registrable Securities
received from a named Holder after the date of this Prospectus. All costs,
expenses and fees in connection with the registration of the Registrable
Securities offered hereby will be borne by the Company. Brokerage commissions
and similar selling expenses, if any, attributable to the sale of Registrable
Securities will be borne by the Holders. Sales of Registrable Securities may be
effected by Holders from time to time in one or more types of transactions
(which may include block transactions) on the Nasdaq, in the over-the-counter
market, in negotiated transactions, through put or call options transactions
relating to the Registrable Securities, through short sales of Registrable
Securities, or a combination of such methods of sale, at market prices
prevailing at the time of sale, or at negotiated prices. Such transactions may
or may not involve brokers or dealers. The Holders have advised the Company
that they have not entered into any agreements, understandings or arrangements
with any underwriters or broker-dealers regarding the sale of their securities,
nor is there an underwriter or coordinated broker acting in connection with the
proposed sale of Registrable Securities by the Holders.
The Holders may enter into hedging transactions with broker-dealers or
other financial institutions. In connection with such transactions, broker-
dealers or other financial institutions may engage in short sales of the
Registrable Securities or of securities convertible into or exchangeable for the
Registrable Securities in the course of hedging positions they assume with
Holders. The Holders may also enter into options or other transactions with
broker-dealers or other financial institutions which require the delivery to
such broker-dealers or other financial institutions of Registrable Securities
offered by this Prospectus, which Registrable Securities such broker-dealer or
other financial institution may resell pursuant to this Prospectus (as amended
or supplemented to reflect such transaction).
The Holders may effect such transactions by selling Registrable
Securities directly to purchasers or to or through broker-dealers, which may act
as agents or principals. Such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from Holders and/or the purchasers
of Registrable Securities for whom such broker-dealers may act as agents or to
whom they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The Holders and any broker-dealers that act in connection with the
sale of Registrable Securities might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any commissions received by
such broker-dealers any profit on the resale of the Registrable Securities sold
by them while acting as principals might be deemed to be underwriting discounts
or commissions under the Securities Act. The Company has agreed to indemnify
each Holder against certain liabilities, including liabilities arising under the
Securities Act. The Holders may agree to indemnify any agent, dealer or broker-
dealer that participates in
23
<PAGE>
transactions involving sales of the Registrable Securities against certain
liabilities, including liabilities arising under the Securities Act.
The Holders may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act.
The Holders will be subject to the prospectus delivery requirements of
the Securities Act. The Company has informed the Holders that the anti-
manipulative provisions of Regulation M promulgated under the Exchange Act may
apply to their sales in the market.
Holders also may resell all or a portion of the Registrable Securities
in open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of such Rule.
Upon the Company being notified by a Holder that any material
arrangement has been entered into with a broker-dealer for the sale of
Registrable Securities through a block trade, special offering, exchange
distribution or secondary distribution or a purchase by a broker or dealer, a
supplement to this Prospectus will be filed, if required, pursuant to Rule
424(b) under the Securities Act, disclosing (i) the name of each such Holder and
of the participating broker-dealer(s), (ii) the number of Registrable Securities
involved, (iii) the initial price at which such Registrable Securities were
sold, (iv) the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not
conduct any investigation to verify the information set out or incorporated by
reference in this Prospectus and (vi) other facts material to the transactions.
In addition, upon the Company being notified by a Holder that a donee or pledgee
intends to sell more than [500] Registrable Securities, a supplement to this
Prospectus will be filed.
24
<PAGE>
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
Attn.:
Re: AgriBioTech
-----------
Ladies and Gentlemen:
We are counsel to AgriBioTech, a Nevada corporation (the "Company"),
and have represented the Company in connection with that certain Amended and
Restated Securities Purchase Agreement (the "Purchase Agreement") entered into
by and among the Company and the buyers named therein (collectively, the
"Holders") pursuant to which the Company issued to the Holders its 5%
Convertible Debentures due [December 30, 2001] (the "Debentures") convertible
into shares of the Company's common stock, par value $.001 per share (the
"Common Stock"), and Warrants (the "the Warrants") to acquire shares of Common
Stock. Pursuant to the Purchase Agreement, the Company also has entered into an
Amended and Restated Registration Rights Agreement with the Holders (the
"Registration Rights Agreement") pursuant to which the Company agreed, among
other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the shares of Common Stock issuable
upon conversion of the Debentures and exercise of the Warrants, under the
Securities Act of 1933, as amended (the "1933 Act"). In connection with the
Company's obligations under the Registration Rights Agreement, on
_______________, 1999, the Company filed a Registration Statement on Form S-3
(File No. 333-_____________) (the "Registration Statement") with the Securities
and Exchange Commission (the "SEC") relating to the Registrable Securities which
names each of the Holders as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
CC: [LIST NAMES OF HOLDERS]
25
<PAGE>
5% CONVERTIBLE DEBENTURES
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
No. CD-__ $ ________________
AGRIBIOTECH, INC.
5% CONVERTIBLE DEBENTURES DUE DECEMBER 30, 2001
AgriBioTech, Inc., a Nevada corporation (the "Issuer"), for value received
------
hereby promises to pay to ____________or its registered assigns the principal
sum of ____________Dollars at the Issuer's office or agency for said purpose in
New York, New York on December 30, 2001 in such coin or currency (or, as
provided herein, at the Holder's option in Common Stock) of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts at the last address of the Holder (as defined herein)
last appearing on the Register (as defined herein).
This Security is one of a duly authorized issue of 5% Convertible
Debentures, due December 30, 2001 of the Issuer (the "Security") referred to in
--------
the Securities Purchase Agreement (the "Purchase Agreement") dated as of
------------------
December 30, 1998 by and among the Issuer and the Purchasers listed on Schedule
I thereto. The Securities are subject to the terms and conditions of the
Purchase Agreement. The Issuer agrees to issue from time to time replacement
Securities in the form hereof to facilitate any transfers and assignments. In
addition, after delivery of an indemnity in form and substance reasonably
satisfactory to the Issuer, the Issuer also agrees to issue replacement
Securities for securities which have been lost, stolen, mutilated or destroyed.
The Issuer shall keep at its principal office a register (the "Register")
--------
in which shall be entered the names and addresses of the registered holders of
the Securities and particulars of the respective Securities held by them and of
all transfers of such Securities. References to the "Holder" or "Holders" shall
------ -------
mean the Person listed in the Register as the payee of any Security unless the
payee shall have presented such Security
1
<PAGE>
to the Issuer for transfer and the transferee shall have been entered in the
Register as a subsequent holder, in which case the term shall mean such
subsequent holder. The ownership of the Securities shall be proven by the
Register, absent manifest error. For the purpose of paying interest and
principal on the Securities, the Issuer shall be entitled to rely on the names
and addresses in the Register and notwithstanding anything to the contrary
contained in this Security, no Event of Default shall occur under Section 3.1 if
payment of principal is made in accordance with the names and addresses and
particulars contained in the Register.
No provision of this Security shall alter or impair the obligations of the
Issuer, which are absolute and unconditional, to pay the principal of and
interest on this Security at the place, times, rate, and in the currency, herein
prescribed.
The principal of this Security shall bear interest at the rate of 5% per
annum (the "Interest Rate") which shall accrue daily from the most recent
-------------
Interest Payment Date to which interest has been paid on this Security, or if no
interest has been paid on this Security from the date hereof until payment in
full of the principal amount has been made and be payable in cash semi-annually
on July 1 and January 1 of each year (an "Interest Payment Date"), commencing on
---------------------
July 1, 1999, to the Holder hereof until the principal amount is paid or made
available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will be paid to the Holder of the
Security at the close of business on the Record Date for the interest payable on
such Interest Payment Date. The "Record Date" for any interest payment is the
-----------
close of business on December 15 or June 15, as the case may be, whether or not
a Business Day, immediately preceding the Interest Payment Date on which such
Interest is payable.
Any amounts that have become due and payable hereunder and remain unpaid by
the Issuer shall accrue interest thereafter until payment in full of such amount
at the rate of twenty percent (20%) (the "Default Rate") per annum and shall be
------------
payable upon demand by the Holder.
Interest, whether at the Interest Rate or the Default Rate, will be
computed on the basis of a fraction, the denominator of which is 365 (or 366 for
any leap year) and the numerator of which is the actual number of days elapsed
from the date such interest begins to accrue, in the case of the Interest Rate,
or becomes due and payable, in the case of the Default Rate.
Each of the Interest Rate and the Default Rate shall be effective both
before and after any judgment may be rendered in a court of competent
jurisdiction, provided, however, that if either the Interest Rate or Default
-------- -------
Rate is deemed to be in excess of the amount permitted to be charged by the
Issuer under applicable laws, the Holder shall be entitled to collect an
Interest Rate or Default Rate, as the case may be, only at the highest rate
permitted by law, and any interest collected by the Holder in excess of such
lawful amount shall be deemed a payment in reduction of the principal amount
then outstanding under this Security and shall be so applied.
The principal of, and interest on, this Security are payable in coin or
2
<PAGE>
currency of the United States of America as at the time of payment is legal
tender for payment of public or private debts, at the last address of the Holder
last appearing on the Register, except that interest due on the principal
amount, if any (but not interest overdue for more than five days), may, at the
Issuer's option be paid in shares of Common Stock calculated based upon the
Average Price (as defined herein) on the date such interest was due. It shall be
assumed that the Issuer shall elect to make all payments of interest in cash
unless the Issuer shall have given written notice to each Holder not less than
four (4) Business Days' (as defined herein) prior to the applicable Interest
Payment Date of its intention to pay such interest in Common Stock.
Notwithstanding anything to the contrary contained herein, the Issuer may not
issue shares of Common Stock in payment of the interest on principal if: (i)
the number of shares of Common Stock at the time authorized, unissued and
unreserved for all other purposes is insufficient to pay interest hereunder in
shares of Common Stock or there is an insufficient number of authorized shares
of Common Stock reserved (pursuant to Section 3.6(b) of the Purchase Agreement)
for issue for full conversion of all of the Debentures issued pursuant to the
Purchase Agreement; (ii) such shares are not either registered for resale
pursuant to the Registration Statement (as defined in the Registration Rights
Agreement (as defined herein)) or freely transferable without volume
restrictions pursuant to Rule 144(k) promulgated under the Act, as determined by
counsel to the Issuer pursuant to a written opinion letter addressed and in form
and substance acceptable to the Holder and the transfer agent for such shares,
subject to receipt from the Holder of a representation from such Holder that it
is not an Affiliate (as defined herein) of the Issuer; (iii) such shares are not
listed or quoted on the Nasdaq (as defined herein) or a Subsequent Market (as
defined herein); (iv) the issuance of such shares would result in the recipient
thereof beneficially owning more than 4.99% of the issued and outstanding shares
of Common Stock as determined in accordance with Section 4.7 hereof; (v) an
Event of Default has occurred and is continuing or an event that, with the
passage of time or giving of notice or both would constitute an Event of
Default, has occurred and is continuing; or (vi) the Issuer has issued the
Issuable Maximum (as defined herein) upon conversion of or pursuant to the
Debentures issued pursuant to the Purchase Agreement and the Shareholder
Approval has not been obtained. In addition, at the Holder's option, any
principal payments due hereunder may be paid in shares of Common Stock, which
calculation shall be based upon the Average Price on the date such principal was
due. Payment of interest on the principal amount in shares of Common Stock is
further subject to the provisions of 4.6 hereof.
ARTICLE I
DEFINITIONS
1.1. Certain Terms Defined. The following terms (except as otherwise
---------------------
expressly provided or unless the context otherwise clearly requires) for all
purposes of this Security shall have the respective meanings specified below.
All accounting terms used herein and not expressly defined shall have the
meanings given to them in accordance with generally accepted accounting
principles, and the term "generally accepted accounting principles" shall mean
such accounting principles which are
3
<PAGE>
generally accepted as of the date hereof. Capitalized terms not otherwise
defined herein shall have the meanings assigned to them in the Purchase
Agreement. The terms defined in this Section 1.1 include the plural as well as
the singular.
"Acceleration Notice" has the meaning set forth in Section 3.1.
-------------------
"Affiliate" of any Person means any other Person directly or indirectly
---------
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Appraiser" shall mean a nationally recognized or major regional investment
---------
banking firm or firm of independent certified public accountants of recognized
standing.
"Authorization Date" has the meaning set forth in Section 4.9.
------------------
"Average Price" on any date means (x) the sum of the Per Share Market Value
-------------
for the ten (10) Trading Days immediately preceding such date minus (y) the
highest and lowest Per Share Market Value during the ten (10) Trading Days
immediately preceding such date, divided by (z) eight (8).
"Board of Directors" means either the Board of Directors of the Issuer or
------------------
any committee of such Board duly authorized to act hereunder.
"Business Day" means any day except a Saturday, Sunday or other day on
------------
which commercial banks in the City of New York are authorized or required by law
to close.
"Capital Stock" means, with respect to any Person, any and all shares,
-------------
interests, participations or other equivalents (however designated) of such
Person's capital stock whether now outstanding or issued after the Original
Issue Date, including, without limitation, all Common Stock and all Preferred
Stock.
"Change of Control" means any event or series of events by which (i) any
-----------------
Person or Persons and any Affiliates of such Person or Persons acting in concert
(including a "group" as such term is used in Section 13(d)(3) of the Exchange
Act) shall acquire, directly or indirectly, through a merger or other
transaction, outstanding shares of voting capital stock of the Issuer, enabling
such Person or Persons to cast more than 50% of the votes necessary for the
election of directors of the Issuer or possessing in excess of 50% of the total
combined voting power of the voting capital of the Issuer, provided, however,
-------- -------
that the accumulation of any voting capital stock of the Issuer by any Person or
Persons listed on the Issuer's Form 10-K filed with the Commission for the
Issuer's fiscal year ending June 30, 1997 as owning five percent (5%) or more of
the Issuer's outstanding common stock on such date (or by any Affiliates of such
Person or
4
<PAGE>
Persons) or by any Person or Affiliate thereof who has filed a Schedule 13D or
13G with the Commission as of the Closing Date shall not be deemed a Change of
Control; or (ii) during any period of two (2) consecutive years, individuals who
at the beginning of the period constituted the Board of Directors of the Issuer
(or new directors whose election by the Issuer's directors (or whose nomination
for election by the Issuer's stockholders) was approved by two-thirds (2/3) of
the Issuer's directors then still in office who were either directors at the
beginning of the period or were previously approved under this procedure) cease
to constitute a majority of the Board of Directors of the Issuer then in office.
"Common Stock" means the common stock, par value $.001 per share, of the
------------
Issuer.
"Converted Debentures" has the meaning set forth in Section 3.1.
--------------------
"Convertible Securities" has the meaning set forth in Section 4.5(g)(ii).
----------------------
"Conversion Date" has the meaning set forth in Section 4.4(a).
---------------
"Conversion Default" has the meaning set forth in Section 4.9.
------------------
"Conversion Default Date" has the meaning set forth in Section 4.9.
-----------------------
"Conversion Default Payments" has the meaning set forth in Section 4.9.
---------------------------
"Conversion Price" has the meaning set forth in Section 4.2.
----------------
"Credit Facility" means that certain Loan and Security Agreement, dated
---------------
June 23, 1998, by and between the Issuer, BankAmerica Business Credit, Inc, as
Agent, and the other parties named therein, as amended or replaced by another
revolver credit facility.
"Debt" of any Person means, at any date, without duplication, (i) all
----
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person in respect of letters of credit or bankers'
acceptance or other similar instruments (or reimbursement obligations with
respect thereto), (iv) all obligations of such Person to pay the deferred
purchase price of property or services, (v) all obligations of such Person as
lessee under capitalized leases, (vi) all Debt of others secured by a Lien on
any asset of such Person, whether or not such Debt is assumed by such Person,
provided that for purposes of determining the amount of any Debt of the type
described in this clause, if recourse with respect to such Debt is limited to
such asset, the amount of such Debt shall be limited to the fair market value of
such asset, (vii) all Debt of others guaranteed by such Person, and (viii) all
redeemable stock valued at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends.
"Debenture Shares" has the meaning set forth in the Purchase Agreement.
----------------
5
<PAGE>
"Default Rate" has the meaning set forth in the sixth paragraph hereof.
------------
"Determination Date" has the meaning set forth in Section 4.6.
------------------
"Event of Default" has the meaning set forth in Section 3.1.
----------------
"Excess Amount" has the meaning set forth in Section 4.9.
-------------
"Excess Principal" has the meaning set forth in Section 4.6.
----------------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
------------
"GAAP" or "generally accepted accounting principles" means generally
---- ----------------------------------------
accepted accounting principles in the United States, including, without
limitation, those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession.
"Holder", "Holder of Securities", "Securityholder" or other similar terms
------ -------------------- --------------
means the registered holder of any Security.
"Incurrence" means the incurrence, creation, assumption or in any other
----------
manner becoming liable with respect to, or the extension of the maturity of or
becoming responsible for the payment of, any Debt. "Incur" shall have a
comparable meaning.
"Interest Payment Date" has the meaning set forth in the fifth paragraph
---------------------
hereof.
"Interest Rate" has the meaning set forth in the fifth paragraph hereof.
-------------
"Issuable Maximum" has the meaning set forth in Section 4.6.
----------------
"Issuer" has the meaning set forth in the first paragraph hereof.
------
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
----
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Security, the Issuer shall be deemed to own subject to
a Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"Mandatory Prepayment Amount" for any Security means the greater of (i) the
---------------------------
sum of (x) 120% of the principal amount of the Security to be prepaid and (y)
all other amounts, costs, interest, expenses and liquidated damages due in
respect of such principal amount and (ii) the sum of (x) at the option of the
Holder, either (I) the principal amount of the Security to be repaid, plus all
accrued and unpaid interest thereon, divided
6
<PAGE>
by the Conversion Price on the date the Mandatory Prepayment Amount is demanded
or otherwise due, multiplied by the Average Price on the date the Mandatory
Prepayment Amount is demanded or otherwise due or (II) the principal amount of
the Security to be prepaid, plus all accrued and unpaid interest thereon,
divided by the Conversion Price on the Trading Day immediately prior to the date
the Mandatory Prepayment Amount is paid in full, multiplied by the Average Price
on the Trading Day immediately prior to the date the Mandatory Prepayment Amount
is paid in full, and (y) all other amounts, costs, interest, expenses and
liquidated damages due in respect of such principal amount.
"Maturity Date" means the date on which the principal of a Security becomes
-------------
due and payable as herein provided, whether on the Stated Maturity Date or
pursuant to acceleration upon an Event of Default.
"Nasdaq" means the Nasdaq National Market.
------
"Notice of Issuer Redemption" has the meaning set forth in Section 5.3
---------------------------
hereof.
"Notice of Conversion" has the meaning set forth in Section 4.2.
--------------------
"Options" has the meaning set forth in Section 4.5(g)(ii).
-------
"Original Issue Date" of any Security (or portion thereof) means the
-------------------
earlier of (i) the date of such Security and (ii) the date of any Security (or
portion thereof) for which such security was issued (directly or indirectly) on
registration of transfer, exchange or substitution.
"Payment Blockage Notice" has the meaning set forth in Section 6.2(b).
-----------------------
"Payment Due Date" has the meaning set forth in Section 4.5(h).
----------------
"Per Share Market Value" means (i) on any particular date the closing bid
----------------------
price per share of the Common Stock on such date (as reported by Bloomberg
Information Services, Inc., or any successor reporting service) on Nasdaq or, if
the Common Stock is not then quoted on Nasdaq, any Subsequent Market on which
the Common Stock is then listed or if there is no such price on such date, then
the closing bid price on such exchange or quotation system on the date nearest
preceding such date or (ii) if the Common Stock is not listed then on Nasdaq or
any Subsequent Market, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (iii) if the Common
Stock is not then publicly traded the fair market value of a share of Common
Stock as determined by an Appraiser selected in good faith by the holder of this
Security; provided, however, that the Issuer, after receipt of the determination
-------- -------
by such Appraiser, shall have the right to select in good faith an additional
Appraiser, in which case, the fair market value shall be equal to the average of
the determinations by each such Appraiser; and provided, further that all
-------- -------
determinations of the Per Share Market Value shall be appropriately adjusted for
any stock dividends, stock splits or other similar transactions
7
<PAGE>
during such period.
"Permitted Liens" means (a) Liens securing Debt incurred under the Credit
---------------
Facility, (b) Liens securing Debt to vendors of equipment, (c) Liens listed on
Schedule 2.1(s) to the Purchase Agreement, (d) Liens incurred to secure the
performance of statutory obligations, surety or appeal bonds, performance bonds
or other obligations of a like nature incurred in the ordinary course of
business, (e) any Lien on property or assets of the Issuer in favor of the
United States of America or any state thereof, or any instrumentality of either,
to secure certain payments pursuant to any contract or statute, (f) any Lien for
taxes or assessments or other governmental charges or levies not then due and
payable (or which, if due and payable, are being contested in good faith and for
which adequate reserves are being maintained, to the extent required by
generally accepted accounting principles), (g) any title exception, easement or
other similar Lien that does not materially impair the use of the property
subject thereto in the ordinary course of business of the Issuer or its
Subsidiaries, (h) any Lien to secure obligations under workmen's compensation
laws or similar laws, including any Lien with respect to judgments which are not
currently dischargeable, (i) any statutory warehousemen's, materialmen's or
similar Liens for sums not then due and payable (or which, if due and payable,
are being contested in good faith and with respect to which adequate reserves
are being maintained, to the extent required by generally accepted accounting
principles, (j) any judgment or other similar Liens arising in connection with
court proceedings to the extent the attachment or enforcement of such Liens
would not result in an Event of Default hereunder, and (k) Liens or claims
arising under the Food Security Act or as a result of Issuer's purchase of farm
products, including seed.
"Person" means an individual, a corporation, a partnership, an association,
------
a trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
---------------
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock whether now outstanding or issued after
the date of this Security, and includes, without limitation, all classes and
series of preferred or preference stock.
"principal", wherever used with reference to the Securities or any Security
---------
or any portion thereof, shall be deemed to include "and premium, if any."
"Property" of any Person means all types of real, personal, tangible,
--------
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person under generally accepted
accounting principles.
"Purchase Agreement" means that Securities Purchase Agreement dated as of
------------------
December 30, 1998 by and among the Issuer and the Purchasers.
8
<PAGE>
"Purchase Price" means, with respect to any Security, the purchase price
--------------
paid to the Issuer upon issuance of such Security.
"Purchasers" has the meaning ascribed thereto in the Purchase Agreement.
----------
"Record Date" has the meaning set forth in the fifth paragraph hereof.
-----------
"Redemption Date" has the meaning set forth in Section 5.3 hereof.
---------------
"Redemption Notice Date" has the meaning set forth in Section 5.1 hereof.
----------------------
"Redemption Price" has the meaning set forth in Section 5.1 hereof.
----------------
"Register" has the meaning set forth in the third paragraph hereof.
--------
"Registration Rights Agreement" means that Registration Rights Agreement
-----------------------------
dated as of December 30, 1998 by and among the Issuer and the Purchasers.
"Reserved Amount" has the meaning set forth in Section 4.9.
---------------
"Security" or "Securities" has the meaning set forth in the second
------------------------
paragraph hereof.
"Senior Indebtedness" means the Credit Facility and the bridge loan
-------------------
existing on the date hereof with DeutscheBank A.G.
"Shareholder Approval" has the meaning set forth in Section 4.6.
--------------------
"Stated Maturity Date" means December 30, 2001.
--------------------
"Stock Option Plan" means any contract, plan or agreement which has been
-----------------
approved by the Board of Directors of the Issuer, pursuant to which the Issuer's
securities may be issued to any employee, officer, director, consultant or other
Person with a business relationship with the Issuer.
Subsidiary" means, with respect to any Person, any corporation or other
----------
entity of which a majority of the Capital Stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by such Person.
"Subsequent Market" means the New York Stock Exchange, American Stock
-----------------
Exchange or Nasdaq Smallcap Market.
"Trading Day" means (a) a day on which the Common Stock is traded on Nasdaq
-----------
or, if the Common Stock is not then designated on Nasdaq, on such Subsequent
Market on which the Common Stock is then listed or quoted or (b) if the Common
Stock is not listed on Nasdaq or a Subsequent Market, a day on which the Common
Stock is traded in the over-the-counter Market, as reported by the OTC Bulletin
Board, or (c) if
9
<PAGE>
the Stock is not quoted on the OTC Bulletin Board, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
its functions or reporting prices) provided, however that in any event that the
Common Stock is not listed or quoted as set forth in (a), (b), or (c) hereof,
then a Trading Day shall mean any Business Day.
"Underlying Shares" has the meaning set forth in Section 4.5(g)(i).
-----------------
"Valuation Event" has the meaning set forth in Section 4.5(g)(vi)(A).
---------------
"Void Redemption Notice" has the meaning set forth in Section 5.4 hereof.
----------------------
"Warrants" has the meaning set forth in the Purchase Agreement.
--------
ARTICLE II
PAYMENT; THE SECURITIES
2.1. Payment of Principal and Interest. The Issuer covenants and agrees
---------------------------------
that it will duly and punctually pay or cause to be paid the principal and
interest on overdue principal (to the extent enforceable under applicable law),
with respect to each of the Securities at the place or places, at the respective
times and in the manner provided in the Securities.
2.2. Mutilated, Defaced, Destroyed, Lost and Stolen Securities. In case
---------------------------------------------------------
any temporary or definitive Security shall become mutilated, defaced or be
apparently destroyed, lost or stolen, the Issuer shall execute and deliver a new
Security, bearing a number not contemporaneously outstanding, in exchange and
substitution for the mutilated or defaced Security. In every case the applicant
for a substitute Security shall furnish to the Issuer such security or indemnity
as it may reasonably require to indemnify and defend and to save it harmless
and, in every case of destruction, loss or theft evidence to the Issuer's
satisfaction of the apparent destruction, loss or theft of such Security and of
the ownership thereof.
Upon the issuance of any substitute Security, the Issuer may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses connected therewith.
In case any Security which has matured or is about to mature, or has been called
for redemption in full, or is being surrendered for conversion in full shall
become mutilated or defaced or be apparently destroyed, lost or stolen, the
Issuer may, instead of issuing a substitute Security, with the holder's consent,
pay or authorize the payment or conversion of the same (without surrender
thereof except in the case of a mutilated or defaced Security), if the applicant
for such payment shall furnish to the Issuer such security or indemnity as it
may reasonably require to save it harmless from all risks, however remote, and,
in every
10
<PAGE>
case of apparent destruction, loss or theft, the applicant shall also furnish to
the Issuer evidence to the Issuer's reasonable satisfaction of the apparent
destruction, loss or theft of such Security and of the ownership thereof.
Every substitute Security issued pursuant to the provisions of this Section
by virtue of the fact that any Security is apparently destroyed, lost or stolen
shall constitute an additional contractual obligation of the Issuer, whether or
not the apparently destroyed, lost or stolen Security shall be at any time
enforceable by anyone and shall be entitled to all the benefits of (but shall be
subject to all the limitations of rights set forth in) this Security equally and
proportionately with any and all other Securities duly authenticated and
delivered hereunder. All Securities shall be held and owned upon the express
condition that, to the extent permitted by law, the foregoing provisions are
exclusive with respect to the replacement or payment or conversion of mutilated,
defaced, or apparently destroyed, lost or stolen Securities and shall preclude
any and all other rights or remedies notwithstanding any law or statute existing
or hereafter enacted to the contrary with respect to the replacement or payment
of negotiable instruments or other securities without their surrender.
2.3. Cancellation of Securities; Destruction Thereof. All Securities
-----------------------------------------------
surrendered for payment, redemption, registration of transfer or exchange shall
be delivered to the Issuer for cancellation, and no Securities shall be issued
in lieu thereof except as expressly permitted by any of the provisions of this
Security. The Issuer shall destroy canceled Securities held by it and deliver a
certificate of destruction to the Holder, unless otherwise required. If the
Issuer shall acquire any of the Securities, such acquisition alone shall not
operate as a redemption or satisfaction of the indebtedness represented by such
Securities unless and until such indebtedness is satisfied.
ARTICLE III
DEFAULTS
3.1. Event of Default Defined; Acceleration of Maturity; Waiver of Default.
---------------------------------------------------------------------
In case one or more of the following events ("Events of Default") (whatever the
-----------------
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall have occurred and be continuing:
a. default in the payment of all or any part of the principal of or
interest on overdue principal on, any of the Securities as and when the same
shall become due and payable either at maturity, upon any redemption, by
declaration or otherwise; or
b. failure on the part of the Issuer to duly observe or perform any other
of the covenants or agreements on the part of the Issuer (or the making by the
Issuer of any announcement, statement or threat that it does not intend to honor
the obligations described in this paragraph) contained in this Security
(including the failure to issue Common Stock upon conversion of this Security in
accordance with the terms hereof) or
11
<PAGE>
the Purchase Agreement or the Registration Rights Agreement for a period of two
(2) Business Days (other than with respect to an announcement, statement or
threat) after the date on which any officer of the Issuer shall have obtained
actual knowledge of such failure (or such announcement, statement or threat) or
after written notice thereof has been given to the Issuer by the Holder; or
c. there shall have occurred with respect to any issue or issues of Debt of
the Issuer and/or one or more Subsidiaries having an outstanding principal
amount of $500,000 or more in the aggregate for all such issues of all such
Persons, whether such Debt now exists or shall hereafter be created, an event of
default which has caused the holder thereof to declare such debt to be due and
payable prior to its stated maturity and such Debt has not been discharged in
full or such acceleration has not been rescinded or annulled within thirty (30)
days of such acceleration; or
d. a judgment or order (not covered by insurance) for the payment of money
shall be rendered against the Issuer or any Subsidiary of the Issuer in excess
of $1,000,000 in the aggregate for all such judgments or orders against all such
Persons (treating any deductibles, self insurance or retention as not so
covered) that shall not be discharged, and all such judgments and orders remain
outstanding and there shall be any period of thirty (30) consecutive days
following entry of the judgment or order in excess of $1,000,000 or the judgment
or order which causes the aggregate amount described above to exceed $1,000,000
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or
e. a court having jurisdiction in the premises shall enter a decree or
order for relief in respect of the Issuer or any of its subsidiaries in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Issuer or any of
its Subsidiaries or for any substantial part of the property of the Issuer or
any of its Subsidiaries or ordering the winding up or liquidation of the affairs
of the Issuer or any of its Subsidiaries, and such decree or order shall remain
unstayed and in effect for a period of forty-five (45) consecutive days; or
f. the Issuer or any of its Subsidiaries shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consent to the entry of an order for relief in an
involuntary case under any such law, or consent to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of the Issuer or any of its Subsidiaries or for any
substantial part of the property of the Issuer or any of its Subsidiaries, or
the Issuer or any of its Subsidiaries shall make any general assignment for the
benefit of creditors; or
g. any representation, warranty, certification or statement made by the
Issuer in the Purchase Agreement or in any certificate, financial statement or
other document delivered pursuant to the Purchase Agreement shall prove to have
been incorrect in any material respect when made; or
12
<PAGE>
h. the Common Stock shall be delisted from Nasdaq or shall be suspended
from trading on Nasdaq without resuming trading and/or being relisted thereon or
on a Subsequent Market or having such suspension lifted, as the case may be,
within ten (10) Business Days; or
i. a Registration Statement for the Underlying Securities (each as defined
in the Purchase Agreement) shall not have been declared by the Securities and
Exchange Commission on or prior to the 30th day after the Effectiveness Date (as
defined in the Registration Rights Agreement) or after its initial
effectiveness, such Registration Statement lapses in effect or sales of all of
the Registrable Securities (as defined in the Registration Rights Agreement)
otherwise cannot be made thereunder (whether by reason of the Issuer's failure
to amend or supplement the prospectus included therein in accordance with the
Registration Rights Agreement or otherwise) for more than thirty (30)
consecutive days or sixty (60) days in any twelve (12) month period; or
j. a Change of Control shall occur; or
k. an Event of Default has occurred and is continuing under any of the
other Debentures issued pursuant to the Purchase Agreement;
then, in each and every such case (other than an Event of Default specified
in Section 3.1(e) or 3.1(f) hereof), unless the principal shall have already
become due and payable, by notice in writing to the Issuer (the "Acceleration
------------
Notice"), a Holder may declare the entire principal amount of the Securities
- ------
owned by such Holder and any interest accrued thereon (and the aggregate amounts
described below) to be due and payable immediately, and upon any such
declaration the same shall become immediately due and payable. If an Event of
Default specified in Section 3.1(e) or 3.1(f) occurs, the principal of and any
accrued interest on the Securities (and the aggregate amounts described below)
shall become and be immediately due and payable without any declaration or other
act on the part of any Securityholder. In the event that the Issuer shall not
have promptly, but in any event within five (5) Business Days upon receipt of an
Acceleration Notice, paid the Holder the amount specified below, the Conversion
Price shall automatically be adjusted to equal the average Per Share Market
Value of the Common Stock during the preceding thirty (30) consecutive Trading
Days immediately preceding the date of computation; provided, that such Per
--------
Share Market Value is lower than the Conversion Price.
The aggregate amount payable upon an Event of Default described in Section
3.1(a), (e), (f) and (i) shall be equal to the sum of (i) the Mandatory
Prepayment Amount plus (ii) at the option of the Holder, the Mandatory
Prepayment Amount for the principal amount of the Securities (the "Converted
---------
Debentures") that would then be held by such Holder had the principal amount of
- ----------
Securities converted into Underlying Shares that are then held by the Holder not
been so converted; provided, that the Holder shall not be entitled to a
--------
Mandatory Prepayment Amount with respect to Converted Debentures if both the
following have occurred: (i) prior to the occurrence of an Event of Default, the
Underlying Shares into which the Converted Debentures were converted had been
held by the Holder for more than thirty (30) days and (ii) prior to the
occurrence of the Event of Default and after receipt by the Holder of the
Underlying Shares that are held by the
13
<PAGE>
Holder at the time of the occurrence of the Event of Default, the Registration
Statement with respect to such Underlying Shares had been continuously
effective, and the Common Stock has been quoted on Nasdaq, for more than thirty
(30) days.
The aggregate principal amount payable on each Event of Default other than
as described in Section 3.1(a), (e), (f) and (i) shall be equal to the sum of
(i) the Mandatory Prepayment Amount plus (ii) at the option of the Holder, the
Mandatory Prepayment Amount for the Converted Debentures that would then be held
by such Holder had the principal amount of Securities converted into Underlying
Shares (as defined herein) that are then held by the Holder not been so
converted; provided, that the Holder shall not be entitled to a Mandatory
--------
Prepayment Amount with respect to Converted Debentures if prior to the
occurrence of an Event of Default, the Underlying Shares into which the
Converted Debentures were converted had been held by the Holder for more than
three (3) Trading Days.
For purposes of this Section 3.1, principal amount of the Securities are
outstanding until such date as the Holder shall have been issued Underlying
Shares upon a conversion (or attempted conversion) thereof. Interest shall
accrue on the prepayment amount hereunder from the day after such amount is due
(being the date of an Event of Default) through the date of payment in full
thereof at the rate of 20.0% per annum, accruing daily from the date of
conversion until such amount, plus any interest thereon, if any, is paid in
full. Payment of the Mandatory Prepayment Amount pursuant to this Section 3.1
shall be in addition to any other amounts that may be due to the Holder pursuant
to this Security. Within three (3) Business Days of receipt by the Holder of
payments of amounts due to the Holder, (i) the Holder shall return the
Securities to the Issuer and (ii) in the event the Mandatory Prepayment Amount
relates to the Converted Debentures, the Holder shall return the Underlying
Shares into which such Converted Debentures were converted. In the event of the
occurrence of an Event of Default, the Holder need not provide and the Issuer
hereby waives any presentment, demand, protest or other notice of any kind, and
the Holder may immediately and without expiration of any grace period enforce
any and all of its rights and remedies hereunder and all other remedies
available to it under applicable law.
Upon delivery of any Acceleration Notice to the Issuer, the Issuer shall
provide a copy of such notice to the other Holders, if any, within one (1)
Business Day of the Issuer's receipt thereof. Failure to deliver such notice
shall not affect the validity of the notice delivered by the Holders in
accordance with the provisions referred to above.
3.2. Powers and Remedies Cumulative; Delay or Omission Not Waiver of
---------------------------------------------------------------
Default. No right or remedy herein conferred upon or reserved to the Holders is
- -------
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
No delay or omission of the Holders to exercise any right or power
14
<PAGE>
accruing upon any Event of Default occurring and continuing as aforesaid shall
impair any such right or power or shall be construed to be a waiver of any such
Event of Default or an acquiescence therein; and every power and remedy given by
the Securities or by law may be exercised from time to time, and as often as
shall be deemed expedient, by the Holders.
ARTICLE IV
EXCHANGE; CONVERSION
4.1. Right of Securityholders to Exchange Securities. Subject to and upon
-----------------------------------------------
compliance with the provisions of this Section, this Security is exchangeable
for an equal principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same; provided,
--------
however, that no exchanges shall be made for Debentures in denominations of less
- -------
than $10,000. No service charge will be made for such registration of transfer
or exchange.
4.2. Right of Securityholders to Convert Securities into Common Stock.
----------------------------------------------------------------
Subject to and upon compliance with the provisions of this Section, the
principal amount of this Security, or any portion in excess of $10,000 thereof
(and any accrued but unpaid interest thereon) may, at any time and at or before
the close of business on the Maturity Date be converted into duly authorized,
validly issued, fully-paid and nonassesable shares of Common Stock at $13.68
(the "Conversion Price"), or, in case an adjustment in the Conversion Price and,
----------------
if applicable, the securities or other property issuable upon conversion has
taken place pursuant to Article III or IV or V hereof, then at the applicable
Conversion Price and in such securities or other property as so adjusted, upon
surrender of the Security or Securities, if required, the principal amount of
which is so to be converted, to the Issuer at any time during usual business
hours at the Issuer's offices, accompanied by a written notice of election to
convert as provided in the form attached hereto as Exhibit A (a "Notice of
---------
Conversion").
- ----------
4.3. Adjustment for Dividends. No payment or adjustment will be made for
------------------------
dividends on any Common Stock except as provided herein. On conversion of a
Security, that portion of interest accrued and unpaid attributable to the period
from the Original Issuance Date to the Conversion Date with respect to the
converted Security shall not be canceled, extinguished or forfeited, but rather
shall be paid in full to the Holder thereof by the payment of an amount of cash
or shares of Common Stock valued at the Average Price equal thereto. If the
Holder converts more than one Security at the same time, the number of shares of
Common Stock issuable upon the conversion shall be based on the total principal
amount of the Securities converted.
4.4. Issuance of Shares Upon Conversion.
----------------------------------
a. As promptly as practicable, but in any event no later than two (2)
Trading Days after delivery of a Notice of Conversion and, if required, the
surrender, as herein provided, of any Security or
15
<PAGE>
securities for conversion, the Issuer shall deliver or cause to be delivered to,
or upon the written order of, the holder of the Security or securities so
surrendered a certificate or certificates representing the number of duly
authorized, validly issued, fully-paid and nonassesable shares of Common Stock,
into which such Security or Securities may be converted in accordance with the
provisions of this Article IV. Such conversion shall be deemed to have been made
at the time and on the date the Notice of Conversion is delivered to the Issuer,
provided, that if required the Security or Securities being converted are
- --------
promptly delivered to the Issuer and the rights of the Holder of such Security
or Securities as a Holder (subject to the Issuer's satisfaction of its
obligations hereunder with respect to such conversion) shall cease at such time
with respect to the Converted Debentures and, the Person or Persons entitled to
receive the shares of Common Stock, upon conversion of such Security or
Securities shall be treated for all purposes as having become the record holder
or holders of such shares of Common Stock at such time and such conversion shall
be at the Conversion Price in effect at such time (the "Conversion Date").
---------------
Subject to paragraph 4.4(b), in the case of any Security which is converted in
part only, upon such conversion the Issuer shall execute and deliver to the
holder thereof, as requested by such holder, a new Security or securities of
authorized denominations in aggregate principal amount equal to the unconverted
portion of such Security. Without in any way limiting the Holder's right to
pursue other remedies, including actual damages and/or equitable relief, the
parties hereto agree that in the event that the Issuer fails to deliver the
shares of Common Stock required to be issued upon the conversion of such
Security or Securities pursuant to this Section 4.4 within the two (2) Trading
Day period referred above, the Issuer shall pay to the Holder upon demand an
amount of cash (at the Holder's option) equal to: (i) the commissions, discounts
and similar expenses of the Holder in purchasing the number of shares of Common
Stock no greater than the number of shares of Common Stock required to be issued
upon the conversion of the Security or Securities, or (ii) the product of (w)
the number of shares of Common Stock required to be issued upon the conversion
of the Security or Securities and (x) the Per Share Market Value of such shares
on the Conversion Date, (y) the number of days after such two (2) day period
that such shares are not delivered to the Holder, multiplied by (z) 0.005.
b. Notwithstanding anything to the contrary set forth herein, upon
conversion of a Security in accordance with the terms thereof, the Holder shall
not be required to physically surrender the Security to the Issuer unless the
entire unpaid principal amount of the Security is so converted. The Holder and
the Issuer 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 Issuer, so as not to require physical
surrender of the Security upon each such conversion. In the event of any
dispute or discrepancy, such records of the Issuer shall be controlling and
determinative in the absence of manifest error. Notwithstanding the foregoing,
if any portion of the Security is converted as aforesaid, the Holder may not
transfer the Security unless the Holder first physically surrenders the Security
to the Issuer, whereupon the Issuer shall forthwith issue and deliver upon the
order of the Holder a new Security 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 the
Security. The Holder and any assignee, by acceptance of the Security,
acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of a Security, the unpaid and unconverted
principal amount of
16
<PAGE>
such Security represented by such Security may be less than the amount stated on
the face thereof.
c. In lieu of delivering physical certificates representing the Debenture
Shares, provided the Issuer's transfer agent is participating in the Depositary
--------
Trust Issuer Fast Automated Securities Transfer ("FAST") program, upon request
----
of the Holder and in compliance with the provisions of Sections 4.1, 4.2 and
4.4, the Issuer shall use its best efforts to cause its transfer agent to
electronically transmit the shares of Common Stock issuable upon conversion of
the Security to the Holder by crediting the account of the Holder's Prime Broker
with DTC through its Deposit Withdrawal Agent Commission system. The time
period for delivery described in the immediately preceding paragraph shall apply
to the electronic transmittals described herein.
4.5. Adjustment of Conversion Price. In addition to any adjustment to the
------------------------------
Conversion Price provided elsewhere in this Security, the Conversion Price in
effect at any time shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
a. Common Stock Dividends; Common Stock Splits; Reverse Common Stock
-----------------------------------------------------------------
Splits. If the Issuer, at any time while this Security is outstanding, (a)
- ------
shall pay a stock dividend on its Common Stock, (b) subdivide outstanding shares
of Common Stock into a larger number of shares, (c) combine outstanding shares
of Common Stock into a smaller number of shares, or (d) issue by
reclassification of shares of Common Stock any shares of Capital Stock of the
Issuer, the Conversion Price shall be multiplied by a fraction the numerator of
which shall be the number of shares of Common Stock (excluding treasury shares,
if any) outstanding before such event and the denominator of which shall be the
number of shares of Common Stock outstanding after such event. Any adjustment
made pursuant to this paragraph 4.5(a) shall become effective immediately after
the record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
b. Rights; Warrants. If the Issuer, at any time prior to the Maturity
----------------
Date, shall issue rights or warrants to all of the holders of Common Stock
entitling them to subscribe for or purchase shares of Common Stock at a price
per share less than the Conversion Price, the Conversion Price shall be
multiplied by a fraction, the denominator of which shall be the number of shares
of Common Stock (excluding treasury shares, if any) outstanding on the date of
issuance of such rights or warrants plus the number of additional shares of
Common Stock offered for subscription or purchase, and the numerator of which
shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding on the date of issuance of such rights or warrants plus the
number of shares which the aggregate offering price of the total number of
shares so offered would purchase at the Conversion Price. Such adjustment shall
be made whenever such rights or warrants are issued, and shall become effective
immediately after the record date for the determination of shareholders entitled
to receive such rights or warrants.
17
<PAGE>
c. Certain Events. In case of (A) any reclassification of the Common Stock,
--------------
(B) any consolidation or merger of the Issuer with or into another Person
pursuant to which (i) a majority of the Issuer's Board of Directors will not
constitute a majority of the board of directors of the surviving entity or (ii)
less than 51% of the outstanding shares of the Capital Stock of the surviving
entity will be held by the same shareholders of the Issuer prior to such
consolidation or merger, (C) the sale or transfer of all or substantially all of
the assets of the Issuer or (D) any compulsory share exchange pursuant to which
the Common Stock is converted into other securities, cash or property (clauses
(A) through (D) above referred to as an "Event"), the Holder shall have the
-----
right thereafter to convert the Security for the shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such Event, and the Holder shall be entitled upon such
Event to receive such amount of securities, cash or property as the shares of
the Common Stock of the Issuer into which the Security could have been converted
immediately prior to such Event would have been entitled. Prior to the
consummation of an Event, the Issuer shall make appropriate provisions (in form
and substance satisfactory to the Holders of Securities representing a majority
of the principal amount of the Securities then outstanding) to insure that each
of the Holders of the Securities will thereafter have the right to acquire and
receive in lieu of or in addition to (as the case may be) the shares of Common
Stock immediately theretofore acquirable and receivable upon the conversion of
such Holder's Securities such shares of stock, securities or assets that would
have been issued or payable in such Event with respect to or in exchange for the
number of shares of Common Stock which would have been acquirable and receivable
upon the conversion of such Holder's Securities as of the date of such Event
(without taking into account any limitations or restrictions on the
convertibility of the Securities).
d. Rounding. All calculations under this Section 4.5 shall be made to the
--------
nearest cent or the nearest l/l00th of a share, as the case may be.
e. Notice of Adjustment. Whenever the Conversion Price is adjusted
--------------------
pursuant to paragraphs 4.5(a), (b) or (c), the Issuer shall promptly mail to the
holder of this Security, a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
f. Reclassification, Etc. If:
----------------------
(i) the Issuer shall declare a dividend (or any other distribution)
on its Common Stock; or
(ii) the Issuer shall declare a special nonrecurring cash dividend on
or a redemption of its Common Stock; or
(iii) the Issuer shall authorize the granting to all the holders of
the Common Stock rights or warrants to subscribe for or purchase any shares of
Capital Stock of any class or of any rights; or
18
<PAGE>
(iv) the approval of any shareholders of the Issuer shall be required
in connection with any reclassification of the Common Stock of the Issuer, any
consolidation or merger to which the Issuer is a party, any sale or transfer of
all or substantially all of the assets of the Issuer, or any compulsory share
exchange whereby the Common Stock is converted into other securities, cash or
property; or
(v) the Issuer shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Issuer;
then the Issuer shall cause to be filed at each office or agency maintained for
the purpose of conversion of this Security, and shall cause to be mailed to the
holder of this Security, at least ten (10) Business Days prior to the applicable
record or effective date hereinafter specified, a notice (provided such notice
shall not include any material non-public information) stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided, however, that the failure to mail such notice or any
-------- -------
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
g. Adjustment to Conversion Price. In order to prevent dilution of the
------------------------------
rights granted under this Security, at any time prior to the Maturity Date, the
Conversion Price will be subject to adjustment from time to time as provided in
this Section 4.5(g).
(i) Adjustment of Conversion Price upon Issuance of Common Stock. If
-------------------------------------------------------------
at any time the Issuer issues or sells, or is deemed to have issued or sold, any
shares of Common Stock (other than the shares of Common Stock underlying the
Warrants or the Securities or shares issued upon exercise of the Warrants or
conversion of the Securities (collectively, the "Underlying Shares")) or shares
-----------------
of Common Stock deemed to have been issued by the Issuer in connection with a
Stock Option Plan, or shares of Common Stock issuable upon the exercise of any
options or warrants outstanding on the date hereof and listed in Schedule 2.1(c)
of the Purchase Agreement or shares of Common Stock issued or deemed to have
been issued as consideration for an acquisition by the Issuer of a division,
assets or business (or stock constituting any portion thereof) from another
Person), for a consideration per share less than the Conversion Price in effect
immediately prior to such issuance or sale, then immediately after such issuance
or sale and for a period of five (5) Trading Days after the date the Holders
receive written notice from the Company of such issuance or sale, the Conversion
Price then in effect shall be reduced to an amount equal to the consideration
per share of
19
<PAGE>
Common Stock in such issuance or sale; provided, however, that such five (5)
-------- -------
Trading Day period shall be tolled during any period in which the Holders shall
be unable to sell such Securities under an effective Registration Statement. The
Conversion Price of any Security not converted during such five (5) Trading Day
period shall automatically revert on the day after such five (5) Trading Day
period to the last Conversion Price immediately prior to such five (5) Trading
Day period, subject to adjustments as provided herein.
(ii) Issuance of Options. If at any time the Issuer in any manner grants
-------------------
any rights or options to subscribe for or to purchase Common Stock or any stock
or other securities convertible into or exchangeable for Common Stock (other
than the Underlying Shares or shares of Common Stock deemed to have been issued
by the Issuer in connection with a Stock Option Plan, or shares of Common Stock
issuable upon the exercise of any options or warrants outstanding on the date
hereof and listed in Schedule 2.1(c) of the Purchase Agreement, or shares of
Common Stock issued or deemed to have been issued as consideration for an
acquisition by the Issuer of a division, assets or business (or stock
constituting any portion thereof) from another Person) (such rights or options
being herein called "Options" and such convertible or exchangeable stock or
-------
securities being herein called "Convertible Securities") and the price per share
----------------------
for which Common Stock is issuable upon the exercise of such Options or upon
conversion or exchange of such Convertible Securities is less than the
Conversion Price in effect immediately prior to such grant, then immediately
after such issuance or sale and for a period of five (5) Trading Days after the
date the Holders receive written notice from the Company of such issuance or
sale, the Conversion Price then in effect shall be reduced to equal the price
per share for which Common Stock is issuable upon the exercise of such Options
or upon the conversion or exchange of such Convertible Securities. The
Conversion Price of any Security not converted during such five (5) Trading Day
period shall automatically revert on the day after such five (5) Trading Day
period to the last Conversion Price immediately prior to such five (5) Trading
Day period, subject to adjustment as provided herein; provided, however, that
-------- -------
such five (5) Trading Day period shall be tolled during any period in which the
Holders shall be unable to sell such Securities under an effective Registration
Statement. No adjustment of the Conversion Price shall be made upon the actual
issuance of such Common Stock or of such Convertible Securities upon the
exercise of such Options or upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
(iii) Issuance of Convertible Securities. If at any time the Issuer in any
----------------------------------
manner issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon such conversion or
20
<PAGE>
exchange (other than the Underlying Shares or shares of Common Stock deemed to
have been issued by the Issuer in connection with a Stock Option Plan, shares of
Common Stock issuable upon the exercise of any options or warrants outstanding
on the date hereof and listed in Schedule 2.1(c) of the Purchase Agreement,
shares of Common Stock issued or deemed to have been issued as consideration for
an acquisition by the Issuer of a division, assets or business (or stock
constituting any portion thereof) from another Person) is less than the
Conversion Price in effect immediately prior to issuance or sale, then
immediately after such issuance or sale and for a period of five (5) Trading
Days after the date the Holders receive written notice from the Company of such
issuance or sale, the Conversion Price then in effect shall be reduced to an
amount equal to the price per share for which the Common Stock is issuable upon
the conversion or exchange of such Convertible Securities. The Conversion Price
of any Security not converted during such five (5) Trading Day period shall
automatically revert on the day after such five (5) Trading Day period to the
last Conversion Price immediately prior to such five (5) Trading Day period,
subject to adjustment as provided herein; provided, however, that such five (5)
-------- -------
Trading Day period shall be tolled during any period in which the Holders shall
be unable to sell such Securities under an effective Registration Statement.
(iv) Change in Option Price or Rate of Conversion. If there is a change at
--------------------------------------------
any time in (i) the Purchase Price provided for in any Options, (ii) the
additional consideration, if any, payable upon the issue, conversion or exchange
of any Convertible Securities or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock, then
immediately after such change in option price or rate of conversion and for a
period of five (5) Trading Days after the Holders receive notice thereof, the
Conversion Price in effect at the time of such change shall be readjusted to the
Conversion Price which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such changed Purchase
Price, additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold. The Conversion Price of any
Security not converted during such five (5) Trading Day period shall
automatically revert on the day after such five (5) Trading Day period to the
last Conversion Price immediately prior to such five (5) Trading Day period;
provided, however, that such five (5) Trading Day period shall be tolled during
- -------- -------
any period in which the Holders shall be unable to sell such Securities under an
effective Registration Statement. Notwithstanding the foregoing, no adjustment
shall be made if such adjustment would result in an increase of the Conversion
Price then in effect.
(v) Adjustment to Conversion Price Prior to Effectiveness Date.
----------------------------------------------------------
Notwithstanding anything to the contrary contained herein, in the event of an
occurrence of any of the events specified in Sections 4.5(g)(i)-
21
<PAGE>
(iv) herein prior to the Effectiveness Date of the Registration Statement (as
such terms are defined in the Registration Rights Agreement), the Conversion
Price (i) shall not revert to the original Conversion Price following such five
(5) Trading Day period described herein, and (ii) shall remain subject to
further adjustment in accordance with the terms of this Security.
(vi) Effect on Conversion Price of Certain Events. For purposes of
--------------------------------------------
determining the adjusted Conversion Price under this Section 4.5(g), the
following shall be applicable:
(A) Calculation of Consideration Received. If any Common Stock,
-------------------------------------
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be deemed
to be the net amount received by the Issuer therefor. In case any Common
Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of the consideration other than
cash received by the Issuer will be the fair value of such consideration,
except where such consideration consists of securities, in which case the
amount of consideration received by the Issuer will be the arithmetic
average of the Per Share Market Values of such security for the five (5)
consecutive Trading Days immediately preceding the date of receipt. In case
any Common Stock, Options or Convertible Securities are issued to the
owners of the non-surviving entity in connection with any merger in which
the Issuer is the surviving entity the amount of consideration therefor
will be deemed to be the fair value of such portion of the net assets and
business of the non-surviving entity as is attributable to such Common
Stock, Options or Convertible Securities, as the case may be. The fair
value of any consideration other than cash or securities will be determined
jointly by the Issuer and the Holders of Securities representing a majority
of the aggregate principal amount of Securities then outstanding. If such
parties are unable to reach agreement within ten (10) days after the
occurrence of an event requiring valuation (the "Valuation Event"), the
---------------
fair value of such consideration will be determined within forty-eight (48)
hours of the tenth (10th) day following the Valuation Event by an Appraiser
selected in good faith by the Issuer. The determination of such Appraiser
shall be binding upon all parties absent manifest error.
(B) Integrated Transactions. In case any Option is issued in
-----------------------
connection with the issue or sale of other securities of the Issuer,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto,
22
<PAGE>
the Options will be deemed to have been issued for an aggregate
consideration of $.001.
(C) Treasury Shares. The number of shares of Common Stock
---------------
outstanding at any given time does not include shares owned or held by or
for the account of the Issuer, and the disposition of any shares so owned
or held will be considered an issue or sale of Common Stock.
(D) Record Date. If the Issuer takes a record of the holders of
-----------
Common Stock for the purpose of entitling them (1) to receive a dividend or
other distribution payable in Common Stock, Options or in Convertible
Securities or (2) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date will be deemed to be the date
of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(vii) Certain Events. If any event occurs of the type contemplated by the
--------------
provisions of Section 4.5(g) (subject to the exceptions stated therein) but not
expressly provided for by such provisions (including, without limitation, the
granting of stock appreciation rights, phantom stock rights or other rights with
equity features), then the Issuer's Board of Directors will make an appropriate
adjustment in the Conversion Price so as to protect the rights of the Holder, or
assigns, of this Security; provided, however, that no such adjustment will
increase the Conversion Price as otherwise determined pursuant to this Section
4.5(g).
(viii) Notices. The Issuer shall give the Holder written notice of the
-------
occurrence of any of the events specified in paragraphs (i), (ii), (iii) or (iv)
above as soon as practicable, but in no event later than three (3) Business
Days, after such event and shall publicly disclose such event prior to or
concurrently with the giving of such notice. Such notice shall contain at
least: (A) a description of the event, (B) the adjusted Conversion Price with a
reference to the applicable paragraph in Section 4.5(g) hereof, (C) the dates of
the five (5) Trading Day period during which the adjusted Conversion Price is in
effect.
h. Delay in Payment to Holder. If the Issuer fails for any reason,
--------------------------
voluntarily or involuntarily (including, without limitation, the Issuer's
failure to make payments which, but for Article VI, would be due and payable and
required to be made to the Holder), to pay any amount of money to the Holder
(including, without limitation, the principal of or interest on the Security,
default interest, penalties or liquidated damages) in full on the date such
amount is due to the Holder (the "Payment Due Date"), then, as partial relief
----------------
for the delay in such payment to the Holder (which remedy shall not be
23
<PAGE>
exclusive of any other remedies available at law or in equity and shall not
excuse or waive the Issuer's obligation to make such payment), from and after
the Payment Due Date the Conversion Price in effect on the Payment Due Date
shall be adjusted to the lesser of (i) the Conversion Price in effect on the
Payment Due Date and (ii) 80% of the lowest Per Share Market Value on any day
during the period beginning on and including the Payment Due Date and ending on
the including the date, if ever, the Issuer pays in full to the Holder all
amounts the Issuer's failure of which to pay is the basis for this adjustment,
subject to further adjustment pursuant to this paragraph or other provisions of
the Security. No adjustments will be made under this paragraph if the Issuer's
failure to pay is due solely to delays caused by the Securities and Exchange
Commission, so long as the Issuer has not breached or failed to observe or
perform any covenant or agreement contained in this Security, the Purchase
Agreement or the Registration Rights Agreement.
4.6. Nasdaq Limitation. If on any date (the "Determination Date") (a) the
----------------- ------------------
Common Stock is listed for trading on Nasdaq or the Nasdaq SmallCap Market, (b)
the Conversion Price then in effect is such that the aggregate number of shares
of Common Stock that would then be issuable upon conversion in full of the then
outstanding principal amount of the Securities as if all such Securities were
converted on such Determination Date (without regard to any limitations on
conversions) and as payment of interest thereon, as would equal or exceed 20% of
the number of shares of the Common Stock outstanding immediately prior to the
Closing Date (the "Issuable Maximum"), and (c) the Issuer shall not have
----------------
previously obtained the vote of the shareholders of the Issuer (the "Shareholder
-----------
Approval"), if any, as may be required by the applicable rules and regulations
- --------
of Nasdaq (or any successor entity) to approve the issuance of shares of Common
Stock in excess of the Issuable Maximum in a private placement whereby shares of
Common Stock are deemed to have been issued at a price that is less than the
greater of book value or fair market value of the Common Stock, then with
respect to the aggregate principal amount of the Securities then held by the
Holders for which a conversion in accordance with the Conversion Price would
result in an issuance of shares of Common Stock in excess of such Holder's pro
rata allocation (as described below) or the Issuable Maximum (the "Excess
------
Principal") the Issuer may elect to prepay cash to the Holders in an amount
- ---------
equal to the Mandatory Prepayment Amount. Any such election by the Issuer must
be made in writing to the Holders within five (5) Trading Days after the first
such Determination Date and the payment of such Mandatory Prepayment Amount
applicable to such prepayment must be made in full to the Holders with ten (10)
Business Days after the date such notice is delivered. If the Issuer does not
deliver timely a notice of its election to prepay under this Section or shall,
if it shall have delivered such a notice, fail to pay the prepayment amount
hereunder within ten (10) Business Days thereafter, then each Holder shall have
the option by written notice to the Issuer, to, if applicable, declare any such
notice given by the Issuer, if given, to be null and void and require the Issuer
to either: (i) use its best efforts to obtain the Shareholder Approval
applicable to such issuance as soon as is possible, but in any event not later
than the 60th day after such request unless the Issuer has previously used its
best efforts to, but has failed to, obtain such approval (provided, that if the
Issuer shall fail to obtain the Shareholder Approval during such 60-day period,
the Holder may demand the cash payment set forth in Section 4.6(ii) herein) or
(ii) pay cash to such Holder, within five (5) Business Days of such Holder's
notice, in an amount equal to the Mandatory Prepayment
24
<PAGE>
Amount for such Holder's portion of the Excess Principal. The payment of the
Mandatory Prepayment Amount to each Holder pursuant to this Section shall be
determined on a pro rata basis upon the principal amount of the Securities held
by such Holder on the Determination Date which is in excess of the pro rata
allocation of the Issuable Maximum. If the Issuer fails to pay the Mandatory
Prepayment Amount in full pursuant to this Section within five Business Days
after the date payable, the Issuer will pay interest thereon at a rate of 20%
per annum to the converting Holder, accruing interest daily from the date of
conversion until such amount, plus all such interest thereon, if any, is paid in
full. Until the Issuer has received the Shareholder Approval no Holder of the
Securities shall be issued, upon conversion of Securities, shares of Common
Stock in an amount greater than such Holder's allocated portion of the Issuable
Maximum pursuant to Section 4.15.
In no event shall the Issuer be required to issue shares of Common Stock
upon conversion of the Securities if such issuance would violate the rules of
Nasdaq. In the event that any Holder's pro rata allocation amount is exceeded
on any Determination Date and the Shareholder Approval has not been obtained,
the Holders of at least a majority of the principal amount of the Securities
then outstanding, including any Securities submitted for redemption pursuant to
Article V hereof with respect to which the applicable Redemption Price has not
been paid, may direct to Issuer to immediately delist the Common Stock from
Nasdaq or the Nasdaq SmallCap Market or from any other exchange or automated
quotation system on which the Common Stock is traded and have the Common Stock,
at such Holders' option, traded in the electronic bulletin board or the "pink
sheets".
4.7. Restriction on Conversion by Either the Holder or the Issuer.
------------------------------------------------------------
Notwithstanding anything herein to the contrary, in no event shall any Holder or
the Issuer have the right or be required to convert any or all of the aggregate
principal amount and interest accrued thereon of this Security if as a result of
such conversion the aggregate number of shares of Common Stock beneficially
owned by such Holder and its Affiliates would exceed 4.99% of the outstanding
shares of the Common Stock following such conversion. For purposes of this
Section 4.7, beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended.
4.8. Officer's Certificate. Whenever the number of shares purchasable upon
---------------------
conversion shall be adjusted as required by the provisions of Section 4.5, the
Issuer shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted number of shares determined as herein
provided, setting forth in reasonable detail the facts requiring such adjustment
and the manner of computing such adjustment. Each such officer's certificate
shall be signed by the chairman, president or chief financial officer of the
Issuer and by the secretary or any assistant secretary of the Issuer. Each such
officer's certificate shall be made available at all reasonable times for
inspection by any holder of the Securities and the Issuer shall, forthwith after
each such adjustment, mail a copy, by first class mail, of such certificate to
the each of the Holders.
4.9. Reservation of Shares. The Issuer covenants that it will at all
---------------------
25
<PAGE>
times reserve and keep available out of its authorized shares of Common Stock,
free from preemptive rights, solely for the purpose of issue upon conversion of
the Securities as herein provided, such number of shares of the Common Stock as
shall then be issuable upon the conversion of all outstanding Securities into
Common Stock in accordance with Section 3.6(b) of the Purchase Agreement (the
"Reserved Amount"). The Issuer covenants that all shares of the Common Stock
---------------
issued upon conversion of the Security which shall be so issuable shall, when
issued, be duly and validly issued and fully paid and non-assessable.
If, at any time a Holder of this Security submits a Notice of Conversion,
and the Issuer does not have sufficient authorized but unissued shares of Common
Stock available to effect such conversion in accordance with the provisions of
this Article IV (a "Conversion Default"), subject to Section 4.15, the Issuer
------------------
shall issue to the Holder all of the shares of Common Stock which are then
available to effect such conversion. The portion of this Security which the
Holder included in its Conversion Notice and which exceeds the amount which is
then convertible into available shares of Common Stock (the "Excess Amount")
-------------
shall, notwithstanding anything to the contrary contained herein, not be
convertible into Common Stock in accordance with the terms hereof until (and at
the Holder's option at any time after) the date additional shares of Common
Stock are authorized by the Issuer to permit such conversion at which time the
Conversion Price in respect thereof shall be the lesser of (i) the Per Share
Market Value on the Conversion Default Date (as defined below) and (ii) the
Conversion Price on the Conversion Date thereafter elected by the Holder in
respect thereof. In addition, the Issuer shall pay to the Holder payments
("Conversion Default Payments") for a Conversion Default in the amount of (x)
---------------------------
the sum of (1) the then outstanding principal amount of this Security plus (2)
accrued and unpaid interest on the unpaid principal amount of this Security
through the Authorization Date (as defined below) plus (3) Default Interest, if
any, on the amounts referred to in clauses (1) and/or (2), multiplied by (y)
.24, multiplied by (z) (N/365), where N equals the number of days from the day
the holder submits a Notice of conversion giving rise to a Conversion Default
(the "Conversion Default Date") to the date (the "Authorization Date") that the
----------------------- ------------------
Issuer authorizes a sufficient number of shares of Common Stock to effect
conversion of the full outstanding principal balance of this Security. The
Issuer shall use its best efforts to authorize a sufficient number of shares of
Common Stock as soon as practicable following the earlier of (i) such time that
the Holder notifies the Issuer or that the Issuer otherwise becomes aware that
there are or likely will be insufficient authorized and unissued shares to allow
full conversion thereof and (ii) a Conversion Default. The Issuer shall send
notice to the Holder of the authorization of additional shares of Common Stock,
the Authorization Date and the amount of Holder's accrued Conversion Default
Payments. The accrued Conversion Default Payments for each calendar month shall
be paid in cash or shall be convertible into Common Stock (at such time as there
are sufficient authorized shares of Common Stock following the Authorization
Date) at the applicable Conversion Price, at the Holder's option, as follows:
(a) In the event Holder elects to take such payment in cash, cash payment
shall be made to Holder by the fifth (5th) Business Day of the month following
the month in which it has accrued; and
26
<PAGE>
(b) In the event Holder elects to take such payment in Common Stock, the
Holder may convert such payment amount into Common Stock at the lesser of the
Conversion Price (as in effect at the time of conversion) and the Per Share
Market Value (on the fifth day of the month referred to below) at any time after
the fifth day of the month following the month in which it has accrued in
accordance with the terms of this Article IV (so long as there is then a
sufficient number of authorized shares of Common Stock).
The Holder's election shall be made in writing to the Issuer at any time
prior to 9:00 p.m., New York City Time, on the third day of the month following
the month in which Conversion Default payments have accrued. If no election is
made, the Holder shall be deemed to have elected to receive cash. Nothing
herein shall limit the Holder's right to pursue actual damages (to the extent in
excess of the conversion Default Payments) for the Issuer's failure to maintains
a sufficient number of authorized shares of Common Stock, and each Holder shall
have the right to pursue all remedies available at law or in equity (including
degree of specific performance and/or injunctive relief).
4.10. Compliance With Governmental Requirements. The Issuer covenants that
-----------------------------------------
if any shares of Common Stock required to be reserved for purposes of conversion
of Securities hereunder require registration with or approval of any
governmental authority under any Federal or state law, or any national
securities exchange, before such shares may be issued upon conversion, the
Issuer will use its best efforts to cause such shares to be duly registered or
approved, as the case may be.
4.11. Fractional Shares. Upon a conversion hereunder, the Issuer shall not
-----------------
be required to issue stock certificates representing fractions of shares of the
Common Stock, but may if otherwise permitted, make a cash payment in respect of
any final fraction of a share based on the Per Share Market Value at such time.
If the Issuer elects not, or is unable, to make such a cash payment, the holder
shall be entitled to receive, in lieu of the final fraction of a share, one
whole share of Common Stock.
4.12. Payment of Tax Upon Issue or Transfer. The issuance of certificates
-------------------------------------
for shares of the Common Stock on conversion of the Securities shall be made
without charge to the Holders thereof for any documentary stamp or similar taxes
that may be payable in respect of the issue or delivery of such certificate,
provided that the Issuer shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issuance and delivery of any
such certificate upon conversion in a name other than that of the Holder of such
Securities so converted and the Issuer shall not be required to issue or deliver
such certificates unless or until the Person or Persons requesting the issuance
thereof shall have paid to the Issuer the amount of such tax or shall have
established to the satisfaction of the Issuer that such tax has been paid.
4.13. Notices. Any notice or other communication required or permitted to
-------
be given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the
27
<PAGE>
address or number designated below (if received by 8:00 p.m. EST where such
notice is to be received), or the first Business Day following such delivery (if
received after 8:00 p.m. EST where such notice is to be received) or (b) on the
second Business Day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses for such communications are
(i) if to the Issuer to AgriBioTech, Inc., 120 Corporate Park Drive, Henderson,
Nevada 89014, Attn: Dr. Johnny R. Thomas, Chief Executive Officer, fax no. (888)
800-4841, with copies to Snow Becker Krauss P.C., 605 Third Avenue, New York,
New York 10158, Attn: Elliot Lutzker, fax no. (212) 949-7052 and (ii) if to any
Holder to the address set forth on Schedule II to the Purchase Agreement with
copies to Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New
York, New York 10022, Attn: James Kaye, fax no. (212) 872-1002 or such other
address as may be designated in writing hereafter, in the same manner, by such
Person.
4.14. Limitations on Liens. The Issuer will not and will not permit any of
--------------------
its Subsidiaries to, directly or indirectly, enter into, create, incur, assume
or suffer to exist any Liens of any kind, other than Permitted Liens, on or with
respect to any of its property or assets now owned or hereafter acquired or any
interest therein or any income or profits therefrom.
4.15. Allocations of Issuable Maximum and Reserved Amount. The Issuable
---------------------------------------------------
Maximum and Reserved Amount shall be allocated pro rata among the holders of
Debentures based on the principal amount of such Debentures issued to each
holder. Each increase to the Issuable Maximum and Reserved Amount shall be
allocated pro rata among the holders of Debentures based on the principal amount
of such Debentures held by each holder at the time of the increase in the
Issuable Maximum or Reserved Amount. In the event a Holder shall sell or
otherwise transfer any of such holder's Debentures, each transferee shall be
allocated a pro rata portion of such transferor's Issuable Maximum and Reserved
Amount. Any portion of the Issuable Maximum or Reserved Amount which remains
allocated to any person or entity which does not hold any Debentures shall be
allocated to the remaining holders of Debentures, pro rata, based on the
principal amount of such Debentures then held by such Holders.
4.16. Repayment of the Overdraft. If the Issuer shall default (which shall
--------------------------
include any event that with the passage of time or giving of notice or both
would constitute an event of default) in the payment of any amount due with
respect to the overdraft (the "Overdraft") owed to all lenders under the Loan
and Security Agreement, dated June 23, 1998, among Bankamerica Business Credit,
Inc., as agent, and the lenders and the administrative agent named therein (as
such agreement may have been amended, modified or restated), then the Conversion
Price shall adjust to the lesser of (i) the Conversion Price in effect on the
day of such default and (ii) the Per Share Market Value on the date of such
default. On every fifth (5th) Trading Date while such default has not been
cured, the Conversion Price shall adjust to the lesser of (i) the Conversion
Price in effect on such Trading Date and (ii) the Per Share Market Value on such
Trading Date. The Company shall give prompt notice (not later than 1 day) of
the occurrence of any default with respect to the Overdraft.
28
<PAGE>
ARTICLE V
OPTIONAL REDEMPTION
5.1. Optional Redemption. The Security will not be redeemable at the
-------------------
option of the Issuer prior to June 30, 1999. So long as (i) no Event of Default
(or any event that with the passage of time or giving of notice or both would
constitute an Event of Default) shall have occurred and be continuing and no
Determination Date shall have occurred, (ii) any Registration Statement required
to be filed and be effective pursuant to the Registration Rights Agreement is
then in effect and has been in effect and sales of all of the Registrable
Securities can be made thereunder for at least twenty (20) days prior to the
Redemption Notice Date (as defined below) and (iii) the Issuer has a sufficient
number of authorized shares of Common Stock reserved for issuance upon full
conversion of the Debentures, on each of the dates listed below (each,
"Redemption Notice Date"), the principal amount of the Security will be
----------------------
redeemable at the option of the Issuer, in whole at any time or in part from
time to time, at the following prices (a "Redemption Price") (expressed in
----------------
percentages of the principal amount thereof) in each case together with interest
accrued to the redemption date (subject to the right of the Holder on the Record
Date to receive interest due on the Interest Payment Date):
<TABLE>
<CAPTION>
Redemption Notice Date Percentage
- ---------------------- ----------
<S> <C>
June 30 1999 120%
December 30, 1999 135%
June 30, 2000 150%
December 30, 2000 165%
June 30, 2001 180%
</TABLE>
5.2. Reset of Conversion Price. In the event that the Issuer does not
-------------------------
deliver a Notice of Issuer Redemption (as defined below) on the applicable
Redemption Notice Date or does not redeem all the outstanding Securities on the
applicable Redemption Date, the Conversion Price of the Securities outstanding
shall be reset, at the option of the Holder to an amount equal to closing bid
price on the last Trading Day immediately preceding such Redemption Notice Date
but only if such closing bid price is lower than the Conversion Price then in
effect, as further adjusted for any adjustments previously made pursuant to
Article IV hereof and such Conversion Price as reset shall be subject to
adjustments pursuant to Artivle IV hereof.
5.3. Mechanics of Redemption. The Issuer shall exercise its right to redeem
-----------------------
by delivering written notice by facsimile and overnight courier ("Notice of
---------
Issuer Redemption") to each Holder on the Redemption Notice Date. Such Notice
- -----------------
of Issuer Redemption shall indicate (A) the maximum, if any, aggregate dollar
amount of Redemption Price which the Issuer will pay for any Redemption, (B)
each Holder's pro rata allocation of such maximum amount, (C) the Redemption
Price, and (D) confirm the date ("Redemption Date") the Issuer shall effect the
---------------
Redemption, which date shall be not
29
<PAGE>
less than five (5) Business Days and not more than sixty (60) calendar days
after the Redemption Notice Date. If the Issuer elects not to redeem all the
Securities outstanding, the Issuer shall allocate for redemption from each
Holder an amount of the Redemption Price equal to such Holder's pro rata amount
(based on the principal amount of the Security held by such Holder on the date
of the Notice of Issuer Redemption relative to the total principal of the
Securities outstanding on such date). Notwithstanding anything in this Section
5.3, the Issuer shall convert any Security pursuant to Section 4 if the
Conversion Notice for a Security submitted for conversion is (i) before the
Redemption Date, (ii) for a Conversion Price greater than or equal to the
Redemption Price (appropriately adjusted in accordance with the terms hereof) or
(iii) in excess of such Holder's pro rata allocation of the maximum Redemption
Price indicated in its Notice of Issuer Redemption.
5.4. Payment of Redemption Price. The Issuer shall pay the applicable
---------------------------
Redemption Price to the Holder of the Securities being redeemed in cash on the
Redemption Date. If the Issuer shall fail to pay the applicable Redemption
Price to such Holder within three Trading Days after the Redemption Date, in
addition to any remedy such Holder may have under this Debenture and the
Purchase Agreement, such unpaid amount shall bear interest at the rate of 1.5%
per month until paid in full. Until the Issuer pays such unpaid applicable
Redemption Price in full to each Holder, each Holder submitted for redemption
pursuant to this Section 5 and for which the applicable Redemption Price has not
been paid, shall have the option, in lieu of redemption, (A) to require the
Issuer to promptly return to such Holder all of the Securities that were
submitted for redemption by such Holder under this Section 5 and for which the
applicable Redemption Price has not been paid or (B) to convert those Securities
for which the applicable Redemption Price has not been paid at a Conversion
Price equal to the lesser of (I) the Conversion Price applicable to such
conversion on the Redemption Date and (II) the lowest Per Share Market Value
from the Redemption Date to the date the Holder gives a Void Redemption Notice
by sending written notice thereof to the Issuer via facsimile (the "Void
----
Redemption Notice"). Upon the Issuer's receipt of such Void Redemption
- -----------------
Notice(s) requesting the return of the Securities and prior to payment of the
full applicable Redemption Price to each Holder, (i) the redemption shall be
null and void with respect to those Securities submitted for redemption and for
which the applicable Redemption Price has not been paid, (ii) the Issuer shall
immediately return any Securities submitted to the Issuer by each Holder for
redemption under this Section 5 and for which the applicable Redemption Price
has not been paid and (iii) the Conversion Price of such returned Securities
shall be adjusted to the lesser of (I) the Conversion Price applicable to such
conversion on the date on which such Securities were originally presented for
redemption and (II) the lowest Per Share Market Value from the Redemption Date
to the date the Holder gives a Void Redemption Notice. If the Issuer fails to
timely effect a redemption in accordance with this Section 5, the Issuer shall
not be allowed to submit another Notice of Issuer Redemption without (i) the
prior written consent of Holders of at least two-thirds (2/3) of the principal
amount of the Securities then outstanding or (ii) evidence reasonably
satisfactory to Holders of at least two-thirds (2/3) of the principal of the
Securities then outstanding that the Issuer has immediately available funds for
the redemption procedure.
30
<PAGE>
ARTICLE VI
SUBORDINATION OF SECURITIES
6.1. Securities Subordinate to Senior Indebtedness. The Issuer covenants
---------------------------------------------
and agrees, and each Holder of a Security, by his acceptance thereof, likewise
covenants and agrees, that, to the extent and in the manner hereinafter set
forth in this Article, the payment of the principal of (and premium, if any) and
interest on each and all of the Securities are hereby expressly made subordinate
and subject in right of payment to the prior payment in full of all Senior
Indebtedness.
6.2. No Payment on Securities in Certain Circumstances.
-------------------------------------------------
a. No payment or distribution of cash or property (other than Common Stock
of the Issuer or other securities of the Issuer that are subordinated to Senior
Indebtedness to at least the same extent as the Securities) of the Issuer will
be made on account of principal of or interest on the Securities, or to defease
or acquire any of the Securities, or on account of the redemption provisions of
the Securities and no action shall be taken (judicial or otherwise) to collect
any such payment or distribution (i) upon the maturity of any Senior
Indebtedness by lapse of time, acceleration or otherwise, unless and until all
Senior Indebtedness shall first be paid in full in cash, or such payment duly
made in a manner satisfactory to the holders of such Senior Indebtedness or (ii)
in the event that the Issuer defaults in the payment of any principal of,
premium, if any, or interest on or any other amounts payable on or due in
connection with any Senior Indebtedness when it becomes due and payable, whether
at maturity or at a date fixed for prepayment or by declaration or otherwise,
unless and until such default has been waived in writing by the holders of the
Senior Indebtedness.
b. If any default other than a default contemplated by Section 6.2(a)(ii)
----- ----
above shall have occurred and be continuing that would permit the holders of the
Senior Indebtedness to accelerate the maturity of Senior Indebtedness, upon
written notice (a "Payment Blockage Notice") of the default given to the Issuer
-----------------------
and the Holders by the holders of, or an agent, trustee or other representative
for, such Senior Indebtedness, then, unless and until such default has been
waived in writing, no payment or distribution of cash or property (other than
Common Stock of the Issuer or other securities of the Issuer that are
subordinated to Senior Indebtedness to at least the same extent as the
Securities) shall be made by the Issuer with respect to the principal of or
interest on the Securities or on account of redemption of the Securities or to
acquire or repurchase any of the Securities for cash or property other than
Common Stock of the Issuer, and no action shall be taken (judicial or otherwise)
to collect any such payment or distribution. If such Senior Indebtedness is not
declared due and payable within 180 days after written notice of the event of
default is given, promptly after the end of the 180-day period the Issuer will
pay all sums due in respect of the Securities and not paid during the 180-day
period. Payments on the Securities may and shall be resumed in the case of a
payment default only upon the date on which such default is waived in writing by
the holders of the
31
<PAGE>
Senior Indebtedness or their agent. During any 360-day consecutive period, only
one such period during which payment with respect to the Securities may not be
made as the result of a Payment Blockage Notice may commence and the duration of
such period may not exceed 180 days. No nonpayment default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the Holders
shall be, or be made, the basis for a subsequent Payment Blockage Notice unless
such default shall have been waived for a period of not less than 90 days.
c. If any payment or distribution of assets of the Issuer is received by
any Holder in respect of the Securities at a time when that payment or
distribution should not have been made because of paragraph (a) or (b) of this
Section 6.2, and provided that prior to the Issuer's disbursement of such
distribution or payment, the Holders shall have received a written notice from
the Issuer or from an agent or representative for one or more holders of Senior
Indebtedness, such payment or distribution will be received and held and will be
paid over to the holders of Senior Indebtedness (pro rata as to each of such
holders on the basis of the respective amounts of Senior Indebtedness held by
them) until all such Senior Indebtedness has been paid in full, after giving
effect to any concurrent payment or distribution or provision therefor to the
holders of such Senior Indebtedness.
6.3. Securities Subordinated to Prior Payment of all Senior Indebtedness on
----------------------------------------------------------------------
Dissolution, Liquidation or Reorganization. Upon any distribution of assets of
- ------------------------------------------
the Issuer upon any dissolution, winding up, liquidation or reorganization of
the Issuer (whether in bankruptcy, insolvency, receivership or similar
proceedings relating to the Issuer or its property or upon an assignment for the
benefit of creditors or any marshalling of the Issuer's assets or liabilities or
otherwise):
a. the holders of all Senior Indebtedness will first be entitled to receive
payment in full of the principal of and interest due on Senior Indebtedness
(including interest accruing after the commencement of a bankruptcy or
insolvency at the rate specified in the applicable Senior Indebtedness documents
and including, without limitation, in respect of premiums, indemnities or
otherwise, and all indebtedness under the Credit Facility which is disallowed,
avoided or subordinated pursuant to Section 548 of Title 11, United States Code
or any applicable state fraudulent conveyance law) before the Holders are
entitled to receive any payment or distribution on account of the principal of
or interest on the Securities;
b. any payment or distribution of assets of the Issuer of any kind or
character, whether in cash, property or securities (except that Holders may
receive securities that are subordinated at least to the same extent as the
Securities to Senior Indebtedness and any securities issued in exchange for
Senior Indebtedness), to which Holders would be entitled except for the
provisions of this Section 6.3 will be paid by the liquidating trustee or agent
or other persons make such a payment or distribution directly to the holders of
Senior Indebtedness (pro rata to such holders on the basis of the respective
amounts of Senior Indebtedness held by such holders) or their representatives to
the extent necessary to make or provide for payment in full in cash of all
Senior Indebtedness remaining unpaid, after giving effect to any concurrent
payment or
32
<PAGE>
distribution to the holders of such Senior Indebtedness or provision for that
payment or distribution; and
c. if, notwithstanding the foregoing, any payment or distribution of assets
of the Issuer of any kind or character, whether in cash, property or securities
(except that Holders may receive securities that are subordinated at least to
the same extent as the Securities to Senior Indebtedness and any securities
issued in exchange for Senior Indebtedness) is received by the Holders on
account of the principal of or interest on the Securities before all Senior
Indebtedness is paid in full, such payment or distribution will be received and
held in trust for and will be forthwith paid over to the holders of the Senior
Indebtedness remaining unpaid or unprovided for or their representatives for
application (in the cash of cash) to, or as collateral (in the case of non-cash
property or securities) for the payment of such Senior Indebtedness until all
such Senior Indebtedness has been paid in full, after giving effect to any
concurrent payment or distribution or provision therefor to the holders of such
Senior Indebtedness.
The Issuer will give prompt written notice to the Holders of any
dissolution, winding up, liquidation or reorganization of it or any assignment
for the benefit of its creditors.
6.4. Subrogation to Rights of Holders of Senior Indebtedness. Subject to
-------------------------------------------------------
the payment in full of all Senior Indebtedness, the Holders shall be subrogated
to the rights of the holders of Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Issuer applicable to the
Senior Indebtedness until all amounts owing on the Securities shall be paid in
full; and, for the purposes of such subrogation:
a. no payments or distributions to the holders of the Senior Indebtedness
of any cash, property or securities to which the Holders would be entitled
except for the provisions of this Article VI and no payment pursuant to the
provisions of this Article VI to the holders of Senior Indebtedness by the
Holders shall, as between the Issuer, its creditors (other than holders of
Senior Indebtedness) and the Holders, be deemed to be a payment by the Issuer to
or on account of the Senior Indebtedness; and
b. no payment or distributions of cash, property or securities to or for
the benefit of the Holders pursuant to the subrogation provision of this Article
VI, which would otherwise have been paid to the holders of Senior Indebtedness,
shall be deemed to be a payment by the Issuer to or for the account of the
Securities.
6.5. Provisions Solely to Define Relative Rights. The provisions of this
-------------------------------------------
Article are and are intended solely for the purpose of defining the relative
rights of the Holders on the one hand and the holders of Senior Indebtedness on
the other hand. Nothing contained in this Article or elsewhere in this Security
or in the Securities is intended to or shall (a) impair, as among the Issuer,
its creditors other than holders of Senior Indebtedness and the Holders of the
Securities, the obligation of the Issuer, which is absolute and unconditional to
pay to the Holders of the Securities the principal of (any premium, if any) and
interest on the Securities as and when the same shall become due
33
<PAGE>
and payable in accordance with their terms; or (b) affect the relative rights
against the Issuer of the Holders of the Securities and creditors of the Issuer
other than the holders of Senior Indebtedness; or (c) prevent the Holder of any
Security from exercising all remedies otherwise permitted by applicable law upon
default under this Security, subject to the rights, if any, under this Article
VI of the holders of Senior Indebtedness to receive cash, property and
securities otherwise payable or deliverable to the Holder upon the exercise of
any such remedy.
6.6. Right to File Proof of Claim. In the event of any dissolution,
----------------------------
winding up, liquidation or reorganization of the Issuer (whether in bankruptcy,
insolvency, receivership, reorganization or similar proceedings or upon any
assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business and assets of the Issuer, with respect to the filing
of a claim for the unpaid balance of any Holder's Securities in the form
required in those proceedings, if the Holder does not file a proper claim or
proof of debt in the form required in such proceeding at least thirty (30) days
before the expiration of the time to file such claim or claims, then the holders
of Senior Indebtedness and their agents, trustees, or other representatives
(including, without limitation, any agent under the Credit Facility) are hereby
authorized to have the right to file, and are hereby authorized to file, an
appropriate claim for and on behalf of each such Holder.
6.7. No Waiver of Subordination Provisions. No right of any present or
-------------------------------------
future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Issuer or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Issuer with the
terms, provisions and covenants of this Security, regardless of any knowledge
thereof any such holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Indebtedness may, at any time and from time to time, without
the consent of or notice to the Holders of the Securities, without incurring
responsibility to the Holders of the Securities and without impairing or
releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Securities to the holders of Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness
or any instrument evidencing the same or any agreement under which Senior
Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii)
release any Person liable in any manner for the collection of Senior
Indebtedness; and (iv) exercise or refrain from exercising any rights against
the Issuer and any other Person.
6.8. Notice to Holders. The Issuer shall give prompt written notice to the
-----------------
Holders of any fact known to the Issuer which would prohibit the making of any
payment to or by the Holders in respect of the Securities. Notwithstanding the
provisions of this Article or any other provision of this Security, the Holders
shall not be charged
34
<PAGE>
with knowledge of the existence of any facts which would prohibit the making of
any payment to the Holders in respect of the Securities, unless and until the
Holders shall have received written notice thereof from the Issuer or a holder
of Senior Indebtedness; and, prior to the receipt of any such written notice,
the Holders shall be entitled in all respects to assume that no such facts
exist; provided, however, that if the Holders shall not have received the notice
provided for in this Section at least two Business Days prior to the date upon
which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of, and premium, if
any, or interest on any Security), then, anything herein contained to the
contrary notwithstanding, the Holders shall have full power and authority to
receive such money and to apply the same to the purpose for which such money was
received and shall not be affected by any notice to the contrary which may be
received by it within two Business Days prior to such date.
The Holders shall be entitled to rely on the delivery to them of a written
notice by a Person representing himself to be a holder of Senior Indebtedness
(or a representative thereof) to establish that such notice has been given by a
holder of Senior Indebtedness (or representative thereof). In the event that
the Holders determines in good faith that further evidence is required with
respect to the right of any Person as a holder of Senior Indebtedness (or a
representative thereof) to participate in any payment or distribution pursuant
to this Article, the Holders may request such Person to furnish evidence to the
reasonable satisfaction of the Holders as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article, and if such evidence is not furnished, the
Holders may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
6.9. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon
--------------------------------------------------------------
the payment or distribution of assets of the Issuer referred to in this Article,
the Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such Proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of the creditors, agent or other
Person making such payment or distribution, delivered to the Holders of
Securities, for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of the Senior Indebtedness and
other indebtedness of the Issuer, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article VI.
6.10. No Adverse Modification to Security. Neither the Holders nor the
-----------------------------------
Issuer shall enter into any modification of the Securities which is in any way
adverse to the holders of the Senior Indebtedness.
6.11. Notice to Holders of Senior Indebtedness. The Issuer will furnish to
----------------------------------------
the holders of Senior Indebtedness no less frequently than once per fiscal
quarter, or at any time upon request therefor, a true and correct copy of the
then most
35
<PAGE>
current Securities Register setting forth the names and addresses of the Holders
as of such date.
ARTICLE VII
MISCELLANEOUS
7.1. Modification of Securities. The Securities may be modified without
--------------------------
prior notice to any Holder upon the written consent of the Issuer and the
Holders of more than 75% of the principal amount of the Securities then
outstanding. The Holders of more than 75% of the principal amount of the
Securities then outstanding may waive compliance by the Issuer with any
provision of the Securities without prior notice to any Holder. However, without
the consent of each Holder affected, an amendment, supplement or waiver may not
(1) reduce the amount of Securities whose Holders must consent to an amendment,
supplement or waiver, (2) reduce the principal amount of or extend the fixed
maturity of any Security or (3) make any Security payable in money or property
other than as stated in the Securities.
7.2. Miscellaneous. This Security shall be governed by and construed and
-------------
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the nonexclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. The parties hereto, including all
guarantors or endorsers, hereby waive presentment, demand, notice, protest and
all other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Security, except as specifically provided
herein, and assent to extensions of the time of payment, or forbearance or other
indulgence without notice. The Holder of this Security by acceptance of this
Security agrees to be bound by the provisions of this Security which are
expressly binding on such Holder.
7.3. Rank and Subordination. Except as expressly provided herein, no
----------------------
provision of this Security shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal of, interest and
liquidated damages (if any) on, this Security at the time, place, and rate, and
in the coin or currency (or, as provided herein, in Common Stock), herein
prescribed. This Security is a direct obligation of the Issuer.
7.4. Securities Owned by Issuer Deemed Not Outstanding. In determining
-------------------------------------------------
whether the holders of the requisite aggregate principal amount of Securities
have concurred in any direction, consent or waiver under this Security,
Securities which are owned by the Issuer or any other obligor on the Securities
or by any Person directly
36
<PAGE>
or indirectly controlling or controlled by or under direct or indirect common
control with the Issuer or any other obligor on the Securities shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination; provided that any Securities owned by the Purchasers shall be
deemed outstanding for purposes of making such a determination. Securities so
owned which have been pledged in good faith may be regarded as outstanding if
the pledgee establishes to the satisfaction of the Issuer the pledgee's right so
to act with respect to such Securities and that the pledgee is not the Issuer or
any other obligor upon the securities or any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Issuer or any other obligor on the Securities.
7.5. Notice to Securityholders Prior to Taking Certain Types of Action. In
-----------------------------------------------------------------
case:
a. the Issuer shall authorize the issuance, at any time from and after the
Original Issue Date, to all holders of any class or series of its Capital Stock,
of rights or warrants to subscribe for or purchase shares of its capital stock
or of any other right;
b. the Issuer shall authorize, at any time from and after the Original
Issue Date, the distribution to all holders of any class or series of its
Capital Stock, of evidences of its indebtedness or assets;
c. of any subdivision, combination or reclassification of any class or
series of Capital Stock of the Issuer at any time from and after the Original
Issue Date or of any consolidation or merger to which the Issuer is a party and
for which approval by the shareholders of the Issuer is required, or of the sale
or transfer of all or substantially all of the assets of the Issuer; or
d. of the voluntary or involuntary dissolution, liquidation or winding up
of the Issuer;
then the Issuer shall cause to be mailed to the holders of Securities, at their
last addresses as they shall appear upon the registration books of the Issuer,
at least 10 days prior to the applicable record date hereinafter specified, a
notice stating (i) the date as of which the holders of record of such class or
series of Capital Stock are to be entitled to receive any such rights, warrants
or distribution are to be determined, or (ii) the date on which any such
subdivision, combination, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation, winding up or other action is expected to
become effective, and the date as of which it is expected that holders of record
of such class or series of Capital Stock record shall be entitled to exchange
their stock for securities or other property, if any, deliverable upon such
subdivision, combination, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation, winding up or other action.
The failure to give the notice required by this Section 7.5 or any defect
therein shall not affect the legality or validity of any distribution, right,
warrant, subdivision, combination, reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation, winding up or other action, or the
vote upon any of the foregoing.
37
<PAGE>
7.6. Effect of Headings. The Section headings herein are for convenience
------------------
only and shall not affect the construction hereof.
7.7. No Rights as Stockholder. This Security shall not entitle the Holder
------------------------
to any rights as a stockholder of the Issuer, including without limitation, the
right to vote, to receive dividends and other distributions, or to receive
notice of, or to attend, meetings of stockholders or any other proceedings of
the Issuer, unless and to the extent converted into shares of Common Stock in
accordance with the terms hereof.
7.8. Failure or Indulgence 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.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGES FOLLOW.
38
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed as of the date hereof.
AGRIBIOTECH, INC.
By _________________________________
Name: Johnny R. Thomas
Title: Chief Executive Officer
Dated as of: December 30, 1998
Attest:
____________________________
Name:
39
<PAGE>
EXHIBIT A
AGRIBIOTECH
CONVERSION NOTICE
Reference is made to the Debenture issued by AgriBioTech (the "Debenture").
In accordance with and pursuant to the Debenture, the undersigned hereby
irrevocably elects to convert the principal amount of the Debenture, indicated
below into shares of Common Stock, par value $.001 per share (the "Common
Stock"), of the Issuer, by tendering the Debenture specified below as of the
date specified below.
Date of Conversion:_____________________________________________________________
Aggregate Principal Amount to be converted:_____________________________________
Debenture no(s). of Debenture to be converted:__________________________________
Please confirm the following information:
Conversion Price:_______________________________________________________________
Number of shares of Common Stock to be issued:__________________________________
Please issue the Common Stock into which the Debenture is being converted and,
if applicable, any check drawn on an account of the Issuer in the following name
and to the following address:
Issue to:_______________________________________________________________________
Facsimile Number:_______________________________________________________________
Authorization: By:_______________________________
Title:
Dated:_______________________________
Account Number (if electronic book entry transfer):_____________________________
Transaction Code Number (if electronic book entry transfer):____________________
40
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT.
Warrant to Purchase ________ Shares of Common Stock
Warrant No. CDW-__
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF
AGRIBIOTECH, INC.
This is to certify that, FOR VALUE RECEIVED, __________ ("Holder"), having
------
an office at ___________, Attn: __________, is entitled to purchase, subject to
the provisions of this Warrant, from AgriBioTech, Inc., a Nevada corporation
(the "Company"), _____________ (_____) fully paid, validly issued and non-
-------
assessable shares of Common Stock (the "Common Stock"), par value $.001 per
------------
share, of the Company at any time or from time to time for three years from the
date hereof until 5:00 PM. Pacific Time, on December 29, 2001 (the "Exercise
--------
Period"), at a price of $15.00 per share (the "Exercise Price"). This Warrant
- ------ --------------
was issued at a cost of $1.00 per share as part of the private placement of 5%
Convertible Debentures (the "Debentures") sold on this date by the Company to
----------
the Holder.
The number of shares of Common Stock to be received upon the exercise of
this Warrant and the price to be paid for each share of Common Stock may be
adjusted from time to time as hereinafter set forth. The shares of Common
Stock deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares".
--------------
1. Exercise of Warrant. This Warrant may be exercised in whole or
-------------------
in part (but no partial exercise shall be for less than ten thousand (10,000)
Warrant Shares or such lesser number of Warrant Shares for which the remainder
of the Warrant is exercisable) at any time or from time to time on or after the
Closing Date (as defined in the Purchase Agreement) up to and including December
29, 2001; provided, however, that if such day is a day on which banking
-------- -------
institutions in the State of Nevada are authorized by law to close, then this
Warrant may be
1
<PAGE>
exercised on the next succeeding day which shall not be such a day. This Warrant
may be exercised by presentation and surrender hereof to the Company at its
principal office or to the Company's warrant agent, if any has been so
appointed, with the Warrant Exercise Form annexed hereto as Exhibit A duly
---------
executed and accompanied by payment of the Exercise Price, in cash or by
certified or bank cashier's check, for the number of Warrant Shares specified in
such form. As soon as practicable after each such exercise of the Warrants, but
in no event later than the date which is two (2) Business Days after the
exercise of the Warrants, the Company shall issue or cause to be issued and
delivered to the Holder a certificate or certificates for the Warrant Shares
issuable upon such exercise, registered in the name of the Holder. The Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the date of any such exercise, provided such exercise is in
accordance with the provisions set forth herein. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the Warrant Shares purchasable
thereunder in such denominations requested by the Holder, but not to purchase
less than 10,000 Warrant Shares or such lesser number of Warrant Shares for
which the remainder of the Warrant is exercisable. Upon receipt by the Company
of this Warrant at its office in proper form for exercise, the Holder shall be
deemed to be the holder of record of the shares of Common Stock issuable upon
such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such shares of Common
Stock shall not then be physically delivered to the Holder.
Notwithstanding the foregoing, commencing ninety (90) days from the
Filing Date (as defined in the Registration Rights Agreement), if, and only if,
at the time of exercise of this Warrant, the Warrant Shares are not saleable
pursuant to an effective registration statement, then in addition to the
exercise of all or a part of this Warrant by payment of the Exercise Price in
cash as provided above, and in lieu of such payment, the Holder shall have the
right at any time and from time to time as provided above to exercise this
Warrant in whole or in part by surrendering this Warrant in exchange for the
number of shares of Common Stock equal to the product of (x) the number of
shares as to which this Warrant is being exercised multiplied by (y) a fraction
the numerator of which is the Per Share Market Value of the Common Stock less
the Exercise Price then in effect and the denominator of which is the Per Share
Market Value (in each case adjusted for fractional shares as herein provided).
2. Reservation of Shares. The Company shall at all times reserve
---------------------
for issuance and/or delivery upon exercise of this Warrant such number of shares
of its Common Stock as shall be required for issuance and delivery upon exercise
of this Warrant. The Company covenants and agrees that all shares of Common
Stock that may be issued upon the exercise of this Warrant shall, upon issuance,
be duly and validly issued, fully paid and nonassessable, and free from all
taxes, liens and charges with respect to the purchase and the issuance of the
shares.
2
<PAGE>
3. Fractional Shares. No fractional shares or script representing
-----------------
fractional shares shall be issued upon the exercise of this Warrant. No
adjustment shall be made in respect of cash dividends on Warrant Shares
delivered upon exercise of any Warrant. With respect to any fraction of a share
called for upon exercise hereof, the Company shall pay to the Holder an amount
in cash equal to such fraction multiplied by the average closing bid and asked
prices of the Common Stock on the last available date for which quotations are
available immediately preceding the date of exercise of this Warrant, or if the
bid and asked prices are not so reported, then the current market value shall be
an amount, not less than the book value thereof as at the end of the most recent
fiscal year of the Company ending prior to the date of the exercise of the
Warrant, determined in such reasonable manner as may be prescribed by the Board
of Directors of the Company.
4. Exchange or Loss of Warrant. This Warrant is exchangeable,
---------------------------
without expense, at the option of the Holder, upon presentation and surrender
hereof to the Company for other Warrants of different denominations entitling
the holder thereof to purchase in the aggregate the same number of shares of
Common Stock purchasable hereunder. This Warrant may be divided or combined
with other Warrants which carry the same rights upon presentation hereof at the
principal office of the Company with a written notice specifying the
denominations in which new Warrants are to be issued and signed by the Holder
hereof. The term "Warrant" as used herein includes any Warrants into which this
Warrant may be divided or exchanged. Upon receipt by the Company or its
warrant agent, if any, of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will execute and deliver
a new Warrant of like tenor and date.
5. Tender. In lieu of physical delivery of the Warrant Shares
------
pursuant to Section 1, provided the Company's transfer agent is participating in
the Depositary Trust Company Fast Automated Securities Transfer ("FAST")
----
program, upon request of the Registered Owner and in compliance with the
provisions hereof, the Company shall use its best efforts to cause its transfer
agent to electronically transmit the shares of Common Stock issuable upon
exercise of the Warrant to the Registered Owner by crediting the account of the
Registered Owner's Prime Broker with DTC through its Deposit Withdrawal Agent
Commission system. The time period for delivery described herein shall apply to
the electronic transmittals described herein.
6. Rights of The Holder. The Holder shall not, by virtue hereof, be
--------------------
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein
and in any warrant agreement entered into by and between the Company and a
warrant agent with respect to the Warrants. In the event the Company enters
into a warrant agreement with a warrant agent, the terms of the Warrant shall be
embodied in the warrant agreement; and the acceptance of this Warrant by the
Holder shall be deemed consent by the Holder for the Company to enter into any
such warrant agreement, upon such terms and
3
<PAGE>
conditions mutually agreeable between the Company and any such warrant agent,
provided such warrant agreement does not adversely affect any of the rights of
the Holder, as set forth in this Warrant.
7. Further Adjustment OF Exercise Price.
------------------------------------
a. Common Stock Dividends; Common Stock Splits; Reverse Common Stock
-----------------------------------------------------------------
Splits. If the Company, at any time while this Warrant is outstanding, (a) shall
- ------
pay a stock dividend on its Common Stock, (b) subdivide outstanding shares of
Common Stock into a larger number of shares, (c) combine outstanding shares of
Common Stock into a smaller number of shares, or (d) issue by reclassification
of shares of Common Stock any shares of capital stock of the Company, (i) the
Exercise Price shall be multiplied by a fraction the numerator of which shall be
the number of shares of Common Stock (excluding treasury shares, if any)
outstanding before such event and the denominator of which shall be the number
of shares of Common Stock outstanding after such event and (ii) the number of
Warrant Shares issuable upon exercise of this Warrant shall be appropriately
adjusted such that the proportion of the number of Warrant Shares hereunder
immediately after such event to the total number of Common Stock of the Company
outstanding immediately after such event is equal to the same proportion as
prior to such event. Any adjustment made pursuant to this paragraph (6)(a) shall
become effective immediately after the record date for the determination of
shareholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
b. Rights; Warrants. If the Company, at any time while this Warrant is
----------------
outstanding, shall issue rights or warrants to all of the holders of Common
Stock entitling them to subscribe for or purchase shares of Common Stock at a
price per share less than the Exercise Price, the Exercise Price shall be
multiplied by a fraction, the denominator of which shall be the number of shares
of Common Stock (excluding treasury shares, if any) outstanding on the date of
issuance of such rights or warrants plus the number of additional shares of
Common Stock offered for subscription or purchase, and the numerator of which
shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding on the date of issuance of such rights or warrants plus the
number of shares which the aggregate offering price of the total number of
shares so offered would purchase at the Exercise Price. Such adjustment shall be
made whenever such rights or warrants are issued, and shall become effective
immediately after the record date for the determination of shareholders entitled
to receive such rights or warrants.
c. Rounding. All calculations under this Section 7 shall be made to the
--------
nearest cent or the nearest l/l00/th/ of a share, as the case may be.
d. Notice of Adjustment. Whenever the Exercise Price is adjusted
--------------------
pursuant to paragraphs 6(a)or (b), the Company shall promptly mail to the holder
of the Warrant, a notice setting forth the Exercise Price after such adjustment
and setting forth a brief statement of the
4
<PAGE>
facts requiring such adjustment.
e. Redemption Event. In case of (A) any reclassification of the Common
----------------
Stock, (B) any consolidation or merger of the Company with or into another
person pursuant to which (i) a majority of the Company's Board of Directors will
not constitute a majority of the board of directors of the surviving entity or
(ii) less than 51% of the outstanding shares of the capital stock of the
surviving entity will be held by the same shareholders of the Company prior to
such consolidation or merger, (C) the sale or transfer of all or substantially
all of the assets of the Company, (D) any compulsory share exchange pursuant to
which the Common Stock is converted into other securities, cash or property,
(clauses (A) through (D) above referred to as a "Redemption Event"), the holder
----------------
of the Warrant shall have the right thereafter to exercise the Warrant for the
shares of stock and other securities, cash and property receivable upon or
deemed to be held by holders of Common Stock following such Redemption Event,
and the holder of the Warrant shall be entitled upon such event to receive such
amount of securities, cash or property as the shares of the Common Stock of the
Company into which the Warrant could have been converted immediately prior to
such Redemption Event would have been entitled.
f. Reclassification, Etc. If:
----------------------
(i) the Company shall declare a dividend (or any other distribution)
on its Common Stock; or
(ii) the Company shall declare a special nonrecurring cash dividend on
or a redemption of its Common Stock; or
(iii) the Company shall authorize the granting to the holders of the
Common Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; or
(iv) the approval of any shareholders of the Company shall be required
in connection with any reclassification of the Common Stock of the Company,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share of exchange whereby the Common Stock is converted into
other securities, cash or property; or
(v) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company;
then the Company shall cause to be filed at each office or agency
maintained for the purpose of exercise of this Warrant, and shall cause to be
mailed to the holder of this Warrant at its address as it shall appear below, at
least 10 calendar days prior to the applicable record or effective date
hereinafter specified, a notice (provided such notice shall not include any
material non-public
5
<PAGE>
information) stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or warrants, or if a
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distributions, redemption, rights or
warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange;
provided, however, that the failure to mail such notice or any defect therein or
- -------- -------
in the mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice.
8. Registration Rights. The Registration Rights Agreement executed
-------------------
on the date hereof is incorporated herein by reference and shall govern the
registration of the Warrant Shares.
9. Transferability; Investment Representation. This Warrant shall
------------------------------------------
be fully transferrable, except as provided herein. No transfer may take place
in violation of any securities laws or regulations. As of the date hereof, the
Holder is acquiring the Warrant for its own account and not with a present view
to, or for, resale (except to or with the Company's consent), distribution or
fractionalization thereof, in whole or in part, and such Warrant may only be
transferred, subject to compliance with the legend set forth on the first page;
provided, however, that by making the representations herein, such Holder does
not agree to hold this Warrant for any minimum or other specific term. Unless
the shares issuable upon the exercise of this Warrant are registered under the
Securities Act of 1933, as amended (the "Securities Act"), or the shares have
been received as a result of a cashless exercise the Holder, upon exercise of
this Warrant, will be required to provide the Company with an investment letter
and the certificates representing such shares will contain a legend to the
effect that the Holder may not transfer, sell, pledge or hypothecate such shares
unless the registration provisions of the Securities Act have been complied with
and unless the Company has received an opinion of counsel that such registration
is not required.
10. Mandatory Conversion. This Warrant shall be automatically converted
--------------------
by the Company into Common Stock, if it has not previously been exercised, upon
five (5) Business Days prior written notice (the fifth (5/th/) day being the
"Conversion Date") to the Holder of the Company's intent to exercise the right
of mandatory conversion, provided that the Closing sale price of the Company's
Common Stock has closed at or above $25.00 per share for twenty (20) Trading
Days out of any thirty (30) consecutive Trading Day period, ending within
fifteen (15) calender days of the Company's mailing of the notice of conversion
concerning the Warrant Shares and provided there is an effective registration
statement under the Securities Act relating to the Warrant Shares so that the
Holder may freely offer and sell such shares of Common Stock without further
registration under the Securities Act or compliance with Rule 144 thereunder or
any other exemptive provision or rule thereunder so long as the Registered Owner
is not an
6
<PAGE>
Affiliate of the Company.
The Warrant Shares shall be delivered to the Holder of converted
Warrants within two (2) Business Days after the Conversion Date specified in the
notice of such conversion to such Holder; provided, however, that the Company
shall not be obligated to deliver any Warrant Shares unless either the Warrants
are delivered to the Company or its Warrant agent as provided in Section 1, or
the Holder notifies the Company or the Warrant Agent that such certificates have
been lost, stolen or destroyed and executes an agreement satisfactory to the
Company to indemnify the Company from any loss incurred by it in connection with
such certificates.
In the event that neither the Warrants are delivered to the Company or
its Warrant Agent or a satisfactory indemnity is not delivered to the Company as
set forth in the preceding sentence prior to the Conversion Date, the Holder's
right to convert this Warrant shall terminate and be null and void and the
Company shall have the right to have this Warrant transferred on its transfer
books to a standby purchaser who shall be entitled to exercise same. The
transfer shall be deemed to have occurred simultaneous with the Conversion Date.
11. Notices. Any notice or other communication required or
-------
permitted to be given hereunder shall be in writing and shall be deemed to have
been received (a) upon hand delivery (receipt acknowledged) or delivery by telex
(with correct answer back received), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below (if received by
8:00 p.m. EST where such notice is to be received), or the first Business Day
following such delivery (if received after 8:00 p.m. EST where such notice is to
be received) or (b) on the second Business Day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications are (i) if to the Company to AgriBioTech, Inc., 120
Corporate Park Drive, Henderson, Nevada 89014, Attn: Dr. Johnny R. Thomas, Chief
Executive Officer, fax no. (888) 800-4841 with copies to Snow Becker Krauss
P.C., 605 Third Avenue, New York, New York 10158, Attn: Elliot Lutzker, fax no.
(212) 949-7052 and (ii) if to any Holder to the address set forth herein with
copies to Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New
York, New York 10022, Attn: James Kaye, fax no. (212) 872-1002 or such other
address as may be designated in writing hereafter, in the same manner, by such
Person.
12. NASDAQ Limitation. If on any date (the "Determination Date") (a)
----------------- ------------------
the Common Stock is listed for trading on Nasdaq or the Nasdaq SmallCap Market,
(b) the Exercise Price then in effect is such that the aggregate number of
shares of Common Stock that would then be issuable upon exercise in full of the
then outstanding Warrants as if all such Warrants were exercised on such
Determination Date (without regard to any limitations on exercise) would equal
or exceed 20% of the number of shares of the Common Stock outstanding
immediately prior to the Closing Date (the "Issuable Maximum"), and (c) the
----------------
Company shall not have previously obtained the vote of the shareholders of the
Company (the "Shareholder Approval"),
7
<PAGE>
if any, as may be required by the applicable rules and regulations of Nasdaq (or
any successor entity) to approve the issuance of shares of Common Stock in of
the Issuable Maximum in a private placement whereby shares of Common Stock are
deemed to have been issued at a price that is less than the greater of book
value or fair market value of the Common Stock, then with respect to the
Warrants then held by the Holders for which an exercise would result in an
issuance of shares of Common Stock in excess of such Holder's pro rata
allocation (as described below) or the Issuable Maximum (the "Excess Shares")
-------------
the Company may elect to prepay cash to the Holders in an amount equal to the
product of (a) the Exercise Price and (b) the number of outstanding Warrants
underlying the Excess Shares (the "Prepayment Amount"). Any such election by the
-----------------
Company must be made in writing to the Holders within five (5) Trading Days
after the first such Determination Date and the payment of such Prepayment
Amount shall be made in full to the Holders with ten (10) Business Days after
the date such notice is delivered. If the Company does not deliver timely a
notice of its election to prepay under this section or shall, if it shall have
delivered such a notice, fail to pay the Prepayment Amount hereunder within ten
(10) Business Days thereafter, then the Holders of a majority of the Warrants
then outstanding shall have the option by written notice to the Company to, if
applicable, declare any such notice given by the Company, if given, to be null
and void and require the Company to either: (i) use its best efforts to obtain
the Shareholder Approval applicable to such issuance as soon as is possible, but
in any event not later than the 60/th/ day after such request unless the Company
has previously used its best efforts to, but has failed to, obtain such approval
(provided, that if the Company shall fail to obtain the Shareholder Approval
during such 60-day period, the Holder may demand the cash payment set forth in
Section 12(ii)) herein or (ii) pay cash to such Holder, within five (5) Business
Days of such Holder's notice, in an amount equal to the Prepayment Amount for
such Holder's portion of the Excess Shares. The payment of the Prepayment Amount
to each Holder pursuant to this section shall be determined on a pro rata basis
upon the number of Warrants held by such Holder on the Determination Date which
is in excess of the pro rata allocation of the Issuable Maximum. If the Company
fails to pay such Prepayment Amount in full pursuant to this Section 12 within
five Business Days after the date payable, the Company will pay interest thereon
at a rate of 20% per annum to the exercising Holder, accruing interest daily
from the date of conversion until such amount, plus all such interest thereon,
if any, is paid in full. Until the Company has received the Shareholder Approval
no Holder of the Warrants shall be issued, upon exercise of the Warrants, shares
of Common Stock in an amount greater than such Holder's allocated portion of the
Issuable Maximum.
In no event shall the Company be required to issue shares of Common
Stock upon exercise of the Warrants if such issuance would violate the rules of
Nasdaq.
13. Restriction on Conversion by Either The Holder or The Company.
-------------------------------------------------------------
Notwithstanding anything herein to the contrary, in no event shall any Holder or
the Company have the right or be required to exercise this Warrant if as a
result of such conversion the aggregate number of shares of Common Stock
beneficially owned by such Holder and its Affiliates would exceed 4.9% of the
outstanding shares of the Common Stock following such
8
<PAGE>
exercise. For purposes of this Section 13, beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended.
14. Officer's Certificate. Whenever the number of shares purchasable
---------------------
upon exercise shall be adjusted as required by the provisions of Section 7, the
Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted number of shares determined as herein
provided, setting forth in reasonable detail the facts requiring such adjustment
and the manner of computing such adjustment. Each such officer's certificate
shall be signed by the chairman, president or chief financial officer of the
Company and by the secretary or any assistant secretary of the Company. Each
such officer's certificate shall be made available at all reasonable times for
inspection by any holder of the Warrants and the Company shall, forthwith after
each such adjustment, mail a copy, by first class mail, of such certificate to
the each of the Holders.
15. Definitions. Capitalized terms used herein and not otherwise
-----------
defined herein shall have the meanings given to such terms in the Purchase
Agreement. As used in this Warrant, the following terms have the following
meanings:
"Affiliate" means, with respect to any Person, any other Person that
---------
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
-------
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," controlling" and "controlled" have meanings
---------- ----------- ----------
correlative to the foregoing.
"Appraiser" shall mean a nationally recognized or major regional investment
---------
banking firm or firm of independent certified public accountants of recognized
standing.
"Business Day" means any day except Saturday, Sunday and any day which
------------
shall be a legal holiday or a day on which banking institutions in the state of
New York generally are authorized or required by law or other government actions
to close.
"Closing Date" has the meaning set forth in Section 1.2 of the Purchase
------------
Agreement.
"Common Stock" means the shares of the Company's Common Stock, par
------------
value $.001 per share.
"Company" means AgriBioTech, Inc., a Nevada corporation.
-------
"Debentures" has the meaning set forth assigned to it in the first
----------
paragraph hereof.
"Determination Date" has the meaning assigned to it in Section 12
------------------
hereof.
9
<PAGE>
"Excess Shares" has the meaning assigned to it in Section 12 hereof.
-------------
"Exercise Period" has the meaning assigned to it in the first
---------------
paragraph hereof.
"Exercise Price" has the meaning assigned to it in the first paragraph
--------------
hereof.
"Holder" has the meaning assigned to it in the first paragraph hereof.
------
"Issuable Maximum" has the meaning assigned to it in Section 12
----------------
hereof.
"Per Share Market Value" means on any particular date (i) the closing
------------------------
bid price per share of the Common Stock on such date (as reported by Bloomberg
Information Services, Inc. any successor reporting service) on Nasdaq or, if the
Common Stock is not then quoted on Nasdaq, any Subsequent Market on which the
Common Stock is then listed or if there is no such price on such date, then the
closing bid price on such exchange or quotation system on the date nearest
preceding such date, or (ii) if the Common Stock is not listed then on the
Nasdaq or any Subsequent Market, the closing bid price for a share of Common
Stock in the over-the-counter market, as reported by the National Quotation
Bureau Incorporated (or similar organization or agency succeeding to its
functions of reporting prices) at the close of business on such date, or (iii)
if the Common Stock is not then publicly traded the fair market value of a share
of Common Stock as determined by an Appraiser selected in good faith by the
holder of this Warrant; provided, however, that the Company, after receipt of
-------- -------
the determination by such Appraiser, shall have the right to select in good
faith an additional Appraiser, in which case, the fair market value shall be
equal to the average of the determinations by each such Appraiser; and provided,
--------
further that all determinations of the Per Share Market Value shall be
- -------
appropriately adjusted for any stock dividends, stock splits or other similar
transactions during such period.
"Prepayment Amount" has the meaning assigned to it in Section 12
-----------------
hereof.
"Purchase Agreement" means that certain Securities Purchase Agreement,
------------------
dated December 30, 1998 among the Company and the Purchasers.
"Purchasers" has the meaning assigned to it in the Purchase Agreement.
----------
"Redemption Event" has the meaning assigned to it in Section 7(e)
----------------
hereof.
"Registered Owner" means the Holder or such other Person as shown on
----------------
the records of the Company as being the registered owner of this Warrant.
"Registration Rights Agreement" means that certain Amended and
-----------------------------
Restated Registration Rights Agreement, dated January 5, 1999 among the Company
and the Purchasers.
"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------
"Shareholder Approval" has the meaning assigned to it in Section 12
--------------------
hereof.
10
<PAGE>
"Subsequent Market" means the New York Stock Exchange, American Stock
-----------------
Exchange or Nasdaq Smallcap Market.
"Trading Day(s)" means any day on which the primary market on which
--------------
shares of Common Stock are listed is open for trading.
"Warrant(s)" means the warrants issuable at the Closing.
----------
"Warrant Shares" has the meaning assigned to it in the first paragraph
--------------
hereof.
16. Compliance With Governmental Requirements. The Company covenants
-----------------------------------------
that if any shares of Common Stock required to be reserved for purposes of
exercise of Warrants hereunder require registration with or approval of any
governmental authority under any Federal or state law, or any national
securities exchange, before such shares may be issued upon exercise, the Company
will use its best efforts to cause such shares to be duly registered or
approved, as the case may be.
17. Payment of Tax Upon Issue of Transfer. The issuance of
-------------------------------------
certificates for shares of the Common Stock upon exercise of the Warrants shall
be made without charge to the Holder thereof for any documentary stamp or
similar taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate upon exercise in a name other than that of the Holder of
such Warrant so converted and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
18. Miscellaneous. This Agreement contains the entire Agreement and
-------------
supersedes all prior agreements and understandings, oral or written, between the
parties hereto with respect to the subject matter hereof. This Warrant may not
be changed orally, but only by an agreement in writing signed by the party
against whom any waiver, change, amendment, modification or discharge is sought,
provided, however, that this Warrant may be amended or modified without the
consent of the Holder if such amendment or modification does not adversely
affect the rights of the Holder hereunder. This Warrant will not be assigned by
the Company. This Warrant shall be interpreted under the laws of the State of
New York without application to the principles of conflicts of laws. The Company
and the Holder hereby irrevocably submits to the nonexclusive jurisdiction of
the state and federal courts sitting in the City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is improper. Each such
party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address for
11
<PAGE>
such notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. THE COMPANY AND EACH HOLDER HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
19. Warrants Owned By Company Deemed Not Outstanding. In determining
------------------------------------------------
whether the holders of the outstanding Warrants have concurred in any direction,
consent or waiver under this Warrant, warrants which are owned by the Company or
any other obligor on the warrants or by any person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any other obligor on the warrants shall be disregarded and deemed not
to be outstanding for the purpose of any such determination; provided that any
Warrants owned by the Purchasers (as defined in the Purchase Agreement) shall be
deemed outstanding for purposes of making such a determination. Warrants so
owned which have been pledged in good faith may be regarded as outstanding if
the pledgee establishes to the satisfaction of the Company the pledgee's right
so to act with respect to such warrants and that the pledgee is not the Company
or any other obligor upon the securities or any person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any other obligor on the warrants.
20. Effect of Headings. The section heading herein are for
------------------
convenience only and shall not affect the construction hereof.
[Remainder of this page intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer as of the date first above.
AGRIBIOTECH, INC.
By:________________________________
Name: Johnny R. Thomas
Title: Chief Executive Officer
Dated as of : December 30, 1998
ATTEST:
__________________________
Name:
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<PAGE>
EXHIBIT A
Warrant Exercise Form
---------------------
TO: AGRIBIOTECH, INC.
The undersigned hereby: (1) irrevocably subscribes for and offers to
purchase _______shares of Common Stock of AgriBioTech, Inc., pursuant to
Warrant No. ___ heretofore issued to ___________________ on ____________, 1998;
(2) encloses a payment of $__________ for these shares at a price of $____ per
share (as adjusted pursuant to the provisions of the Warrant); and (3) requests
that a certificate for the shares be issued in the name of the undersigned and
delivered to the undersigned at the address specified below.
Date: ____________________________
Investor Name: ____________________________
Taxpayer Identification ____________________________
Number: ____________________________
By: ____________________________
Printed Name: ____________________________
Title: ____________________________
Address: ____________________________
Note: The above signature should correspond exactly with
the name on the face of this Warrant Certificate or
with the name of assignee appearing in assignment
form below.
AND, if said number of shares shall not be all the shares purchasable under the
within Warrant, a new Warrant Certificate is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder less
any fraction of a share paid in cash and delivered to the address stated above.
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