<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------------------------------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
CORVAS INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Name of Issuer)
Shares of Common Stock, par value $0.001 per share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
221005 10 1
- --------------------------------------------------------------------------------
(CUSIP Number)
Artisan Equity Limited
c/o International Services Limited
P.O. Box 1186
Hamilton HMEX, Bermuda
(011-441) 292-2363
(Name, Address and Telephone Number of
Person Authorized to Receive Notices and
Communications)
Copy to:
Christopher D. Dillon, Esq.
Shearman & Sterling
555 California Street, Suite 2000
San Francisco, CA 94104
Telephone: (415) 616-1100
- --------------------------------------------------------------------------------
August 18, 1999
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 221005 10 1 PAGE OF PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Artisan Equity Limited
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
AF
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Bermuda
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
2,000,000*
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 0*
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
2,000,000*
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0*
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,000,000
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
10.6%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
CO
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 221005 10 1 PAGE OF PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Artisan Global LLC
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
AF
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
2,000,000*
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 0*
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
2,000,000*
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0*
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,000,000
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
10.6%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
CO
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 221005 10 1 PAGE OF PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Artisan Global Invest Limited
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
AF
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Bermuda
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
2,000,000*
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 0*
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
2,000,000*
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0*
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,000,000
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
10.6%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
CO
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 221005 10 1 PAGE OF PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The ART I Trust
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
PF
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Bermuda
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
2,000,000*
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 0*
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
2,000,000*
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0*
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,000,000
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
10.6%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
OO
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 221005 10 1 PAGE OF PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Butterfield Trust (Bermuda) Limited
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Bermuda
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
2,000,000*
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 0*
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
2,000,000*
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0*
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,000,000
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
10.6%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
OO
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
Item 1. Security and Issuer.
-------------------
The class of equity securities to which this Statement on Schedule 13D
(this "Statement") relates is the shares of common stock, par value $0.001 per
share (the "Common Shares"), of Corvas International, Inc. ("Corvas"), a
Delaware corporation. The principal executive offices of Corvas are located at
3030 Science Park Road, San Diego, California 92121.
Item 2. Identity and Background.
-----------------------
This Statement is being filed by Artisan Equity Limited, a company
organized under the laws of Bermuda ("AEL"). The principal business of AEL is
making investments in companies and businesses. The address of the principal
business and office of AEL is c/o International Services Limited, 22 Church
Street, Hamilton HM 11, Bermuda. The directors and officers of AEL are: Robin A.
Barnes (director and president), Michel J. Drew (director and vice president),
Dr. Wolfgang Scheuer (director), Graham C. Brooks (alternate director to Robin
A. Barnes), and Susan E. Fairhurst (secretary). All of the directors and
officers of AEL are British citizens, with the exception of Dr. Scheuer who is
German.
The present principal occupation of Mr. Barnes is Managing Director of
Butterfield Trust (Bermuda) Limited, a Bermuda trust company (the "Trustee")
whose principal address is 65 Front Street, Hamilton HM11, Bermuda. Mr. Barnes'
business address is the same as for The Bank of N.T. Butterfield & Son Limited.
The present principal occupation of Mr. Drew is President and Chief
Executive Officer of International Services Limited, a Bermuda company whose
principal business is trust and company management and administration and whose
principal address is 22 Church Street, Hamilton HM 11, Bermuda. Mr. Drew's
business address is the same as for International Services Limited.
The present principal occupation of Dr. Scheuer is as a self-employed
attorney-at-law practising in Germany. Dr. Scheuer's business address is
Grunwalder Str. 241, 81545, Munchen, Germany.
The present principal occupation of Mr. Brooks is Executive Vice
President of the Bank of N.T. Butterfield & Son Limited, a Bermuda bank whose
principal address is 65 Front Street, Hamilton HM12, Bermuda. Mr. Brooks'
business address is the same as for The Bank of N.T. Butterfield & Son Limited.
The present principal occupation of Ms. Fairhurst is Certified Public
Accountant of International Services Limited, a Bermuda company whose principal
business is trust and company management and administration and whose principal
address is 22 Church Street,
<PAGE>
Hamilton HM 11, Bermuda. Ms. Fairhurst's business address is the same as for
International Services Limited.
AEL is a wholly owned subsidiary of Artisan Global LLC, a Delaware
limited liability company. The principal business of Artisan Global LLC is
making investments in companies and businesses. The address of the principal
business and office of Artisan Global LLC is c/o International Services Limited,
22 Church Street, Hamilton HM 11, Bermuda.
Artisan Global LLC is 99% owned by its managing member, Artisan
Global Invest Limited, a company organized under the laws of Bermuda. The
principal business of Artisan Global Invest Limited is making investments in
companies and businesses. The address of the principal business and office of
Artisan Global Invest Limited is c/o International Services Limited, 22 Church
Street, Hamilton HM 11, Bermuda. The directors and officers of Artisan Global
Invest Limited are: Robin A. Barnes (director and president), Michel J. Drew
(director and vice president), Dr. Wolfgang Scheuer (director), Graham C. Brooks
(alternate director to Robin A. Barnes), and Susan E. Fairhurst (secretary).
Information with respect to the directors and officers of Artisan Global Invest
Limited is given above.
Artisan Global Invest Limited is a wholly owned subsidiary of the ART
I Trust, a trust formed under the laws of Bermuda (the "Trust"). The Trustee is
currently the sole trustee of the Trust. The Trustee is a trust company
organized under the laws of Bermuda and the address of its principal business
and office is 65 Front Street, Hamilton HM12, Bermuda. Pursuant to the Trust
Settlement, the Trustee is authorized to, and its principal business is to,
exercise discretionary authority with respect to the investments of the Trust
and therefore is the ultimate controlling shareholder of AEL.
The Trustee is a wholly owned subsidiary of The Bank of N.T.
Butterfield and Son Limited, a publicly quoted company on the Bermuda Stock
Exchange. The directors and officers of the Trustee are: Dr. James A.C. King
(director and chairman), Graham C. Brooks (director and vice chairman), C.
Wendell Emery (director), Patricia G. Lauder (director), Robin A. Barnes
(director), Christopher Kennedy (secretary) and Richard Ferrett (accountant).
Information with respect to Mr. Brooks and Mr. Barnes is given above.
Dr. King is a British citizen. The present principal occupation of
Dr. King is as a general surgeon practising in Bermuda. Dr. King's business
address is The Arches, 13 Berry Hill Road, Paget DV03, Bermuda.
Mr. Emery is a citizen of Bermuda. The present principal occupation
of Mr. Emery is as Executive Vice President of The Bank of N.T. Butterfield &
Son Limited. Mr. Emery's business address is the same as for the Trustee.
Ms. Lauder is a citizen of Bermuda. The present principal occupation
of Ms. Lauder is as Vice President of the Trustee. Ms. Lauder's business address
is the same as for the Trustee.
Mr. Kennedy is a British citizen. The present principal occupation of
Mr. Kennedy is as legal adviser of The Bank of N.T. Butterfield & Son
Limited. Mr. Kennedy's business address is the same as for the Trustee.
Mr. Ferrett is a British citizen. The present principal occupation
of Mr. Ferrett is as the Chief Financial Officer of The Bank of N.T. Butterfield
& Son Limited. Mr. Ferrett's business address is the same as for the Trustee.
During the last five years, none of AEL or any of the entities or
persons named above have been (i) convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding were or are subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
-------------------------------------------------
<PAGE>
On August 18, 1999, AEL acquired from Corvas a 5.5% convertible senior
subordinated note due 2006 (the "Convertible Note") in an aggregate principal
amount of $6,500,000 for a purchase price of $6,500,000. Accretion on the
outstanding principal amount of the Convertible Note shall accrue for the period
from August 18, 1999 to August 17, 2006, compounded semi-annually using a 360-
day year composed of twelve 30-day months, at 5.5% per annum. The accreted value
of the Convertible Note is convertible into Common Shares at an initial
conversion price, which is subject to certain adjustments, of $3.25 per Common
Share.
The Convertible Note was acquired pursuant to the Note Purchase
Agreement, dated August 18, 1999, between Corvas and AEL (the "Note Purchase
Agreement"). A copy of the Note Purchase Agreement is attached as Exhibit 1 to
this Statement on Schedule 13D. Pursuant to the Note Purchase Agreement, AEL
agreed to purchase an additional Convertible Note from Corvas in an aggregate
principal amount of $3,500,000 for a purchase price of $3,500,000, subject to
certain conditions, including, without limitation, that such purchase occurs on
or prior to December 31, 1999 and that Corvas shall have completed the sale of
additional convertible notes with the same terms and conditions as the
Convertible Notes for an aggregate purchase price of not less than $1,750,000 or
Corvas shall have sold additional Common Shares for the aggregate amount of
$1,750,000 at a price per share of not less than $2.50.
AEL acquired the funds for the purchase of the Convertible Notes on
August 18, 1999, as an indirect capital contribution from Artisan Global Invest
Limited, which acquired such funds from available funds in the Trust on July 29,
1999.
Item 4. Purpose of Transaction.
----------------------
AEL acquired the Convertible Note for the purpose of making an
investment in Corvas. AEL from time to time intends to review its investment in
Corvas on the basis of various factors, including Corvas' business, financial
condition, results of operations and prospects, general economic and industry
conditions, the securities markets in general and those for Corvas' securities
in particular, as well as other developments and other investment opportunities.
Based upon such review, AEL will take such actions in the future as it may deem
appropriate in light of the circumstances existing from time to time. If AEL
believes that further investment in Corvas is attractive, whether because of the
market price of Corvas's securities or otherwise, they may acquire Corvas
securities either in the open market or in privately negotiated transactions.
Similarly, depending on market and other factors, AEL may determine to dispose
of some or all of the Corvas securities currently owned by it or otherwise
acquired by it either in the open market or in privately negotiated
transactions.
In accordance with the Note Purchase Agreement, effective as of August
18, 1999, AEL has the right to designate one director to the Board of Directors
of Corvas. AEL
<PAGE>
has not yet designated such director. The Note Purchase Agreement provides that
so long as the Convertible Notes are outstanding, AEL shall have the right to
nominate one person to Corvas' board of directors whenever the Board of
Directors is subject to election.
Except as set forth in this Statement on Schedule 13D, AEL has not
formulated any plans or proposals which relate to or would result in: (i) the
acquisition by any person of additional securities of Corvas or the disposition
of securities of Corvas; (ii) an extraordinary corporate transaction involving
Corvas or any of its subsidiaries; (iii) a sale or transfer of a material amount
of the assets of Corvas or any of its subsidiaries; (iv) any change in the
present board of directors or management of Corvas; (v) any material change in
Corvas' capitalization or dividend policy; (vi) any other material change in
Corvas' business or corporate structure; (vii) any change in Corvas' charter or
bylaws or other instruments corresponding thereto or other action which may
impede the acquisition of control of Corvas by any person; (viii) causing a
class of Corvas' securities becoming deregistered or delisted; (ix) a class of
equity securities of Corvas becoming eligible for termination of registration or
(x) any action similar to any of those enumerated above.
Item 5. Interest in Securities of Issuer.
--------------------------------
(a) The current outstanding principal amount of the Convertible Note
that was purchased by AEL on August 18, 1999 is convertible into 2,000,000
Common Shares at the current conversion price of $3.25 per Common Share. Based
upon 15,487,277 Common Shares being outstanding as of August 18, 1999 (according
to a representation of Corvas in the Note Purchase Agreement), plus 1,300,000
Common Shares being issued to other investors on August 18, 1999, such Common
Shares would represent approximately 10.6% of the Common Shares outstanding upon
conversion.
Except for AEL, none of the other persons named in Item 2 above own
any interests in Common Shares.
(b) The number of Common Shares with respect to which AEL (i) has
sole voting power, (ii) shares voting power, (iii) has sole dispositive power
and (iv) shares dispositive power, are listed in the responses to Items 7, 8, 9
and 10, respectively, on the cover pages filed herewith, and such responses are
incorporated by reference herein.
(c) Except as described in this Statement on Schedule 13D, none of
AEL or any party referred to above, has acquired or disposed of, or entered into
any other transaction with respect to, any Common Shares during the past 60
days.
(d) None.
(e) Not applicable.
<PAGE>
Item 6. Contracts, Arrangements, Understandings or Relationships
--------------------------------------------------------
with Respect to Securities of Issuer.
------------------------------------
On August 18, 1999, AEL and Corvas entered into (i) the Note Purchase
Agreement, a copy of which is attached as Exhibit 1 to this Statement on
Schedule 13D, (ii) a Registration Rights Agreement (the "Registration Rights
Agreement"), a copy of which is attached as Exhibit 2 to this Statement on
Schedule 13D, and (iii) the Convertible Note, a copy of which is attached as
Exhibit 3 to this Statement on Schedule 13D.
Pursuant to the Registration Rights Agreement, Corvas has agreed to
file a registration statement on Form S-3 with the Securities and Exchange
Commission within 30 days after August 18, 1999 covering the resale of all of
the Common Shares to be issued upon conversion of the Convertible Notes.
Item 7. Material to Be Filed as Exhibits.
--------------------------------
<TABLE>
<CAPTION>
Exhibit Number Description Page
- -------------- ----------- ----
<S> <C> <C>
99.1 Note Purchase Agreement, dated August 18, 1999, 18
between Corvas International, Inc. and Artisan Equity
Limited
Exhibit A Form of Convertible Subordinated Promissory Note
Exhibit B Registration Rights Agreement
Exhibit C Opinion of Counsel
</TABLE>
<PAGE>
SIGNATURE
---------
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
August 27, 1999 Artisan Equity Limited
By: /s/ Michel J. Drew
-------------------------------------
Name: Michel J. Drew
Title: Director
By: /s/ Susan E. Fairhurst
-------------------------------------
Name: Susan E. Fairhurst
Title: Company Secretary
<PAGE>
SIGNATURE
---------
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
August 27, 1999 Artisan Global LLC
By: Artisan Global Invest Limited
Managing Shareholder of Artisan Global LlC
By: /s/ Michel J. Drew
----------------------------------------------
Name: Michel J. Drew
Title: Director
By: /s/ Susan E. Fairhurst
----------------------------------------------
Name: Susan E. Fairhurst
Title: Company Secretary
<PAGE>
SIGNATURE
---------
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
August 27, 1999 Artisan Global Invest Limited
By: /s/ Michel J. Drew
------------------------------------
Name: Michel J. Drew
Title: Director
By: /s/ Susan E. Fairhurst
------------------------------------
Name: Susan E. Fairhurst
Title: Company Secretary
<PAGE>
SIGNATURE
---------
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
August 27, 1999 The ART I Trust
By: Butterfield Trust (Bermuda) Limited,
as Trustee
By: /s/ Graham C. Brooks
-----------------------------------
Name: Graham C. Brooks
Title: Vice Chairman and Director
<PAGE>
SIGNATURE
---------
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
August 27, 1999 Butterfield Trust (Bermuda) Limited,
Trustee of the Art I Trust
By: /s/ Graham C. Brooks
-----------------------------------
Name: Graham C. Brooks
Title: Vice Chairman and Director
<PAGE>
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit Number Description Page
- -------------- ----------- ----
<S> <C> <C>
99.1 Note Purchase Agreement, dated August 18, 1999, 18
between Corvas International, Inc. and Artisan Equity
Limited
Exhibit A Form of Convertible Subordinated Promissory Note
Exhibit B Registration Rights Agreement
Exhibit C Opinion of Counsel
</TABLE>
<PAGE>
Exhibit 99.1
CORVAS INTERNATIONAL, INC.
NOTE PURCHASE AGREEMENT
Dated as of August 18, 1999
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
1. Authorization and Closing.............................................. 1
1.1 Authorization of the Notes...................................... 1
1.2 Purchase and Sale of Convertible Notes.......................... 1
1.3 The First Closing............................................... 1
1.4 The Second Closing.............................................. 1
2. Conditions to Purchaser's Obligation at the First Closing.............. 2
2.1 Representations and Warranties; Covenants....................... 2
2.2 Registration Rights Agreement................................... 2
2.3 Sale of Common Stock............................................ 2
2.4 Governmental Consents........................................... 2
2.5 No Material Adverse Change...................................... 2
2.6 Consents and Approvals.......................................... 2
2.7 Representation on the Board of Directors........................ 3
2.8 Opinion of the Company's Counsel................................ 3
2.9 Closing Documents............................................... 3
3. Conditions to Purchaser's Obligation at the Second Closing............. 3
3.1 Representations and Warranties; Covenants....................... 3
3.2 Registration Rights Agreement................................... 4
3.3 Sale of Convertible Notes or Stock.............................. 4
3.4 Governmental Consents........................................... 4
3.5 No Material Adverse Change...................................... 4
3.6 Opinion of the Company's Counsel................................ 4
3.7 Closing Documents............................................... 4
3.8 Second Closing Date............................................. 5
3.9 Stockholder Approval............................................ 5
4. Conditions tO Obligations of the Company at the First Closing.......... 5
4.1 Representations and Warranties True............................. 5
4.2 Consents, Permits, and Waivers.................................. 5
4.3 Registration Rights Agreement................................... 5
4.4 Sale of Stock................................................... 5
</TABLE>
i.
<PAGE>
Table of Contents
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
5. Conditions to Obligations of the Company at the Second Closing......... 5
5.1 Stockholder Approval............................................. 5
6.1 Board Representation............................................. 5
7. Transfer of Restricted Securities...................................... 6
7.1 General Provisions............................................... 6
7.2 Opinion Delivery................................................. 6
7.3 Legend Removal................................................... 6
8. Representations and Warranties of the Company.......................... 6
8.1 Organization and Standing........................................ 7
8.2 Authorization.................................................... 7
8.3 Valid and Binding Obligation..................................... 7
8.4 SEC Filings; Financial Statements; Changes....................... 7
8.5 Non-Contravention................................................ 8
8.6 No General Solicitation.......................................... 8
8.7 Capitalization................................................... 9
8.9 Governmental Consent, etc........................................ 10
8.10 Litigation, etc.................................................. 10
8.11 Employees........................................................ 10
8.12 Intellectual Property Rights..................................... 11
8.13 Environmental and Safety Laws.................................... 11
8.14 Related-Party Transactions....................................... 11
8.15 Title to Property and Assets; Leases............................. 11
8.16 Insurance........................................................ 12
8.17 System of Internal Accounting Controls........................... 12
8.18 Filing of Tax Returns............................................ 12
8.19 Investment Company............................................... 12
8.20 Real Property Holding Company.................................... 12
8.21 No Defaults...................................................... 12
8.22 Rights Agreement................................................. 13
8.23 Brokers or Finders............................................... 13
</TABLE>
<PAGE>
Table of Contents
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
8.24 Knowledge........................................................ 13
8.25 Disclosure....................................................... 13
8.26 Year 2000 Compliance............................................. 13
8.27 Form S-3 Eligibility............................................. 13
9. Representations and Warranties of Purchaser............................ 13
9.1 Requisite Power and Authority.................................... 13
9.2 Investment Representations....................................... 14
9.3 Further Assurances............................................... 15
9.4 Transfer Restrictions............................................ 15
10. Definitions............................................................ 15
10.1 Definitions...................................................... 15
11. Miscellaneous.......................................................... 18
11.1 Remedies......................................................... 18
11.2 Legends.......................................................... 18
11.3 Consent to Amendments............................................ 18
11.4 Survival of Representations and Warranties....................... 18
11.5 Indemnification.................................................. 19
11.6 Successors and Assigns........................................... 19
11.7 Severability..................................................... 19
11.8 Counterparts..................................................... 19
11.9 Descriptive Headings; Interpretation............................. 19
11.10 Governing Law.................................................... 20
11.11 Notices.......................................................... 20
11.12 No Strict Construction........................................... 20
11.13 Fees............................................................. 20
11.14 Public Statements or Releases.................................... 21
</TABLE>
<PAGE>
NOTE PURCHASE AGREEMENT
This Note Purchase Agreement (the "Agreement") is made as of August 18,
1999 (the "Effective Date") between Corvas International, Inc., a Delaware
corporation (the "Company"), and Artisan Equity Limited, a Bermuda company (the
"the Purchaser"). Except as otherwise indicated herein, capitalized terms used
herein are defined in Section 10 hereof or in the Convertible Notes (as defined
below).
Whereas, the Company wishes to sell the Purchaser 5.5% Convertible Senior
Subordinated Notes due 2006 in an aggregate principal amount up to $10,000,000,
and the Purchaser wishes to purchase from the Company such notes on the terms
and conditions of this Agreement.
Now, Therefore, in consideration of the foregoing recitals and the mutual
promises set forth herein, the parties hereto agree as follows:
1. Authorization and Closing.
1.1 Authorization of the Notes. The Company shall authorize the issuance
and sale to the Purchaser of its 5.5% Convertible Senior Subordinated Notes due
2006 with an aggregate principal amount of up to $10,000,000 and containing the
terms and conditions and in substantially the form set forth in Exhibit A
attached hereto (each a "Convertible Note" and collectively the "Convertible
Notes").
1.2 Purchase and Sale of Convertible Notes. Subject to the terms and
conditions set forth herein, the Purchaser shall purchase from the Company, and
the Company shall issue and sell to the Purchaser the Convertible Notes.
1.3 The First Closing. The first closing of the purchase and sale of the
Convertible Notes to be issued to the Purchaser pursuant to Section 1.2 (the
"First Closing") shall take place at the offices of Cooley Godward llp, 4365
Executive Drive, Suite 1100, San Diego, California 92121 at 10:00 a.m. on August
18, 1999 or at such other place or on such other date as may be mutually
agreeable to the Company and the Purchaser (such date is hereinafter called the
"Closing Date"). At the First Closing, subject to the satisfaction of the
conditions to the closing contained herein, the Company shall deliver to the
Purchaser instruments evidencing Convertible Notes with the principal amount of
$6,500,000 to be issued to and purchased by the Purchaser (the "Principal
Amount"), payable to the order of the Purchaser or its nominee or registered in
the Purchaser's or its nominee's name, respectively, upon payment of $6,500,000
(the "Purchase Price") by a cashier's or certified check, or by wire transfer of
immediately available funds to the Company's account at Salomon Smith Barney
(the "Company Account").
1.4 The Second Closing. The second closing of the purchase and sale of the
Convertible Notes to be issued to the Purchaser (the "Second Closing") shall
take place at the offices of Cooley Godward llp, 4365 Executive Drive, Suite
1100, San Diego, California 92121 or at such other place and at such date as may
be mutually agreeable to the Company and the Purchaser (such date is hereinafter
called the "Second Closing Date"). At the Second Closing,
1.
<PAGE>
subject to the satisfaction of the conditions to the closing, the Company shall
deliver to the Purchaser instruments evidencing the Convertible Notes with a
Principal Amount of $3,500,000 to be issued to and purchased by the Purchaser,
payable to the order of the Purchaser or its nominee or registered in the
Purchaser's or its nominee's name, respectively, upon payment of the purchase
price of $3,500,000 by a cashier's or certified check, or by wire transfer of
immediately available funds to the Company's Account.
2. Conditions to Purchaser's Obligation at the First Closing. The obligation
of the Purchaser to purchase and pay for the Convertible Notes at the First
Closing is subject to the satisfaction or waiver by the Purchaser as of or prior
to the First Closing of the following conditions:
2.1 Representations and Warranties; Covenants. The representations and
warranties made by the Company in Section 8 hereof shall be true and correct at
and as of the First Closing as though then made, except to the extent of changes
caused by the transactions expressly contemplated herein, and the Company shall
have performed or complied in all material respects with all of the covenants
required to be performed by it hereunder prior to the First Closing.
2.2 Registration Rights Agreement. The Company and the Purchaser shall
have entered into a Registration Rights Agreement substantially in the form set
forth in Exhibit B attached hereto (the "Registration Rights Agreement"), and
the Registration Rights Agreement shall be in full force and effect.
2.3 Sale of Common Stock. The Company shall have completed the sale of
newly issued shares of Common Stock of the Company to IBT International
Biotechnology Trust and Sofinov Societe Financiere D'Innovation, for the
aggregate amount of $3,250,000 at a price per share of $2.50 to be purchased
pursuant to that certain Stock Purchase Agreement (the "Stock Purchase
Agreement"), dated of even date herewith, by and between the Company and such
purchasers.
2.4 Governmental Consents. The Company shall have made all filings under
all applicable federal and state securities laws necessary to consummate the
sale and issuance of the Convertible Notes at the First Closing in compliance
with such laws, except any notices of sale required to be filed with the SEC
under Regulation D of the Securities Act, or such post-closing filings as may be
required under applicable state securities laws, all of which will be timely
filed within the applicable periods therefor.
2.5 No Material Adverse Change. Since March 31, 1999, there shall have
been no change in the Company's business, operations or financial condition that
has had or could reasonably be expected to have a material adverse effect on the
Company's business, operations or financial condition.
2.6 Consents and Approvals. The Company shall have received all
authorizations, consents, orders and approvals of all governmental authorities
and officials reasonably necessary for the consummation of the transactions
contemplated by this Agreement.
2.
<PAGE>
2.7 Representation on the Board of Directors. Effective upon the First
Closing, the Company will have increased the number of directors on the
Company's Board of Directors by one seat, unless there is an existing vacancy on
the Board of Directors, and the Purchaser shall have the right to designate at
any time after the First Closing one individual to be elected to the Board of
Directors of the Company to occupy the newly created seat or fill the existing
vacancy, as the case may be.
2.8 Opinion of the Company's Counsel. The Purchaser shall have received
from Cooley Godward llp, counsel for the Company, an opinion in substantially
the form attached hereto as Exhibit C, which shall be addressed to the
Purchaser, dated as of the Closing Date.
2.9 Closing Documents. The Company shall have delivered to the Purchaser
all of the following documents:
(a) an officer's certificate, dated as of the Closing Date, stating
that the conditions specified in sections 2.1 through 2.7 have been fully
satisfied;
(b) certified copies of the resolutions duly adopted by the Company's
Board of Directors authorizing (i) the execution, delivery and performance of
this Agreement and each of the other agreements contemplated hereby, (ii) the
issuance and sale of the Convertible Notes, and (iii) the consummation of all
other transactions contemplated by this Agreement;
(c) certified copies of the Company's Certificate of Incorporation
and Bylaws, each as in effect as of the Closing Date;
(d) a copy of the duly executed Registration Rights Agreement
referenced in Section 2.2 as in effect at the Closing;
(e) copies of all third party and governmental consents, approvals
and filings required in connection with the consummation of the transactions
hereunder (including, without limitation, all blue sky law filings and waivers
of all preemptive rights and rights of first refusal), except such as may be
properly obtained subsequent to the Closing; and
(f) one or more duly executed certificates representing the
Convertible Notes being purchased by the Purchasers at the First Closing
pursuant hereto.
3. Conditions to Purchaser's Obligation at the Second Closing. The obligation
of the Purchaser to purchase and pay for the Convertible Notes at the Second
Closing is subject to the satisfaction or waiver by the Purchaser as of or prior
to the Second Closing of the following conditions:
3.1 Representations and Warranties; Covenants. The representations and
warranties made by the Company in Section 8 hereof shall be true and correct at
and as of the Second Closing as though then made, except to the extent of
changes caused by the transactions expressly contemplated herein, and the
Company shall have performed or complied in all material respects with all of
the covenants required to be performed by it hereunder prior to the Second
Closing.
3.
<PAGE>
3.2 Registration Rights Agreement. The Registration Rights Agreement shall
be in full force and effect.
3.3 Sale of Convertible Notes or Stock. The Company shall have completed
the sale of additional convertible notes with the same terms and conditions as
the Convertible Notes for an aggregate purchase price of not less than
$1,750,000 or the Company shall have sold additional shares of Common Stock of
the Company for the aggregate amount of $1,750,000 at a price per share of not
less than $2.50.
3.4 Governmental Consents. The Company shall have made all filings under
all applicable federal and state securities laws necessary to consummate the
sale and issuance of the Convertible Notes at the First Closing in compliance
with such laws, except any notices of sale required to be filed with the SEC
under Regulation D of the Securities Act, or such post-closing filings as may be
required under applicable state securities laws, all of which will be timely
filed within the applicable periods therefor.
3.5 No Material Adverse Change. Since the First Closing Date, there shall
have been no change in the Company's business, operations or financial condition
that has had or could reasonably be expected to have a material adverse effect
on the Company's business, operations or financial condition.
3.6 Opinion of the Company's Counsel. Purchaser shall have received from
Cooley Godward llp, counsel for the Company, an opinion in substantially the
form attached hereto as Exhibit C, which shall be addressed to the Purchaser,
dated as of the Second Closing Date.
3.7 Closing Documents. The Company shall have delivered to the Purchaser
all of the following documents:
(a) an officer's certificate, dated as of the Second Closing Date,
stating that the conditions specified in sections 3.1 through 3.6 have been
fully satisfied;
(b) certified copies of the resolutions duly adopted by the Company's
Board of Directors authorizing (i) the execution, delivery and performance of
this Agreement and each of the other agreements contemplated hereby, (ii) the
issuance and sale of the Convertible Notes, and (iii) the consummation of all
other transactions contemplated by this Agreement;
(c) certified copies of the Company's Certificate of Incorporation
and Bylaws, each as in effect as of the Second Closing Date;
(d) copies of all third party and governmental consents, approvals
and filings required in connection with the consummation of the transactions
hereunder (including, without limitation, all blue sky law filings and waivers
of all preemptive rights and rights of first refusal), except such as may be
properly obtained subsequent to the Closing; and
(e) one or more duly executed certificates representing the
Convertible Notes being purchased by the Purchasers at the Second Closing
pursuant hereto.
4.
<PAGE>
3.8 Second Closing Date. The Second Closing Date shall occur on or prior
to December 31, 1999.
3.9 Stockholder Approval. The Company shall have obtained any stockholder
approval that is required by law, regulation, Nasdaq rule, the Company's
Certificate of Incorporation or Bylaws for the transactions contemplated by this
Agreement and the Registration Rights Agreement.
4. Conditions to Obligations of the Company at the First Closing. The
Company's obligation to issue and sell the Convertible Notes, at the First
Closing and at the Second Closing, as applicable, is subject to the satisfaction
or waiver by the Company, on or prior to the First Closing or the Second
Closing, as applicable, of the following conditions:
4.1 Representations and Warranties True. The representations and
warranties made by the Purchaser in Section 8 hereof shall be true and correct
in all material respects at the date of the First Closing or the Second Closing,
as applicable, with the same force and effect as if they had been made on and as
of said date.
4.2 Consents, Permits, and Waivers. The Company shall have obtained any
and all consents, permits and waivers necessary or appropriate for consummation
of the transactions contemplated by this Agreement and the Registration Rights
Agreement (except for such as may be properly obtained subsequent to the First
Closing or Second Closing, as applicable).
4.3 Registration Rights Agreement. The Company and the Purchaser shall
have entered into the Registration Rights Agreement and the Registration Rights
Agreement shall be in full force and effect.
4.4 Sale of Stock. With respect to the First Closing, the Company shall
have completed the sale of the Common Stock of the Company for the aggregate
amount of $3,250,000 at a price per share of $2.50 to be purchased pursuant to
the Stock Purchase Agreement.
5. Conditions to obligations of the Company at the Second Closing.
5.1 Stockholder Approval. The Company shall have obtained any stockholder
approval that is required by law, regulation, Nasdaq rule, the Company's
Certificate of Incorporation or Bylaws for the transactions contemplated by this
Agreement and the Registration Rights Agreement.
6. Covenants
6.1 Board Representation. (a) So long as the Convertible Notes are
outstanding, the Purchaser of the Convertible Notes shall have the right to
nominate one director to the Board of Directors whenever the Board of Directors
is subject to election. Such right shall be in addition to any other voting
rights that the Purchaser may have as a holder of shares of Common Stock.
5.
<PAGE>
(b) The Company shall include as a nominee for the Board of Directors
recommended by the Board of Directors the person designated by the Purchaser in
accordance with this Section 6.1 and shall nominate such person and use its
reasonable best efforts to cause the election of such person, unless the Board
of Directors, in the exercise of its fiduciary duties, reasonably shall
determine that such person is not qualified to serve on the Board of Directors.
If the Board of Directors reasonably determines that such designee is not so
qualified, the Purchaser shall have the opportunity to specify one additional
designee who shall be so included as a nominee subject to the qualification set
forth in the immediately preceding sentence.
In the event that a vacancy is created at any time by the death,
disability, resignation or removal of any director nominated by the Purchaser or
appointed to the Board of Directors on the Closing Date in accordance with the
Purchase Agreement, the Purchaser shall have the right to designate a
replacement director to fill such vacancy and the Company agrees to take such
actions within their control as are necessary to implement the agreements set
forth in this Section 6.1.
7. Transfer of Restricted Securities.
7.1 General Provisions. The Common Stock issuable upon conversion of the
Convertible Notes is transferable only pursuant to and in accordance with (i) an
effective registration statement filed pursuant to the Securities Act covering
such Restricted Securities, (ii) Rule 144 of the Securities Act (or any similar
rule or rules then in force) if such rule is available to the holders of
Restricted Securities and (iii) subject to the conditions specified in Section
7.2 below, any other legally available means of transfer.
7.2 Opinion Delivery. In connection with the transfer of any Restricted
Securities (other than a transfer pursuant to Sections 7.1(i) or 7.1(ii) above),
the holder thereof shall deliver written notice to the Company describing in
reasonable detail the transfer or proposed transfer, together with an opinion of
outside counsel to the Purchasers which (to the Company's reasonable
satisfaction) is knowledgeable in securities law matters to the effect that such
transfer of Restricted Securities may be effected without registration of such
Restricted Securities under the Securities Act. In addition, if the holder of
the Restricted Securities delivers to the Company an opinion of such outside
counsel to the effect that no subsequent transfer of such Restricted Securities
shall require registration under the Securities Act, the Company shall promptly
upon the completion of such transfer deliver new certificates to the purchaser
of such Restricted Securities which do not bear the Securities Act legend set
forth in Section 11.2.
7.3 Legend Removal. If any Restricted Securities become eligible for sale
pursuant to Rule 144(k), the Company shall, upon the request of the holder of
such Restricted Securities, remove the legend set forth in Section 11.2 from the
certificates for such Restricted Securities.
8. Representations and Warranties of the Company. Except as set forth on a
Schedule of Exceptions delivered by the Company to the Purchaser at the First
Closing, as a material inducement to the Purchaser to enter into this Agreement
and purchase the Convertible Notes hereunder, the Company hereby represents and
warrants that:
6.
<PAGE>
8.1 Organization and Standing. The Company is a corporation duly organized
and validly existing under, and by virtue of, the laws of the State of Delaware
and is in good standing under such laws. The Company has all requisite corporate
power to own and operate its assets and to carry on its business as presently
conducted and as currently proposed to be conducted and as described in SEC
Documents (as hereafter defined). The Company is qualified to do business as a
foreign corporation in each jurisdiction in which the failure to so qualify
would have a material adverse effect on the Company's business, operations or
condition (financial or otherwise), results of operations or prospects (a
"Material Adverse Effect"). The Company has no subsidiaries.
8.2 Authorization. All corporate action on the part of the Company, its
directors and stockholders necessary for the authorization, execution, delivery
and performance of this Agreement and the Registration Rights Agreement by the
Company, the authorization, sale, issuance and delivery of the Convertible Notes
(and the Common Stock issuable upon conversion of the Convertible Notes) and the
performance of the Company's obligations under this Agreement, the Registration
Rights Agreement and the Convertible Notes has been taken or will be taken prior
to the First Closing.
8.3 Valid and Binding Obligation. This Agreement, the Registration Rights
Agreement and the Convertible Notes, when executed and delivered by the Company,
will constitute valid and binding obligations of the Company, enforceable in
accordance with their terms except as limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights; and (b) general principles of equity
that restrict the availability of equitable remedies. The Convertible Notes,
when issued in compliance with the provisions of this Agreement, will be duly
and validly issued. A total of 2,924,000 shares of Common Stock issuable upon
conversion of the Convertible Notes to be issued at the First Closing (assuming
that the Accreted Value of the Convertible Notes at the Stated Maturity is
converted at $3.25 per share) have been duly and validly reserved and, when
issued in compliance with the provisions of this Agreement and the Convertible
Notes, will be duly and validly issued, fully paid and nonassessable and not
subject to any preemptive rights; provided, however, that the Convertible Notes
(and the Common Stock issuable upon conversion of the Convertible Notes) may be
subject to restrictions on transfer under state and/or federal securities laws
as set forth herein. Prior to the Second Closing, a total of an additional
1,574,461 shares of Common Stock issuable upon conversion of the Convertible
Notes to be issued at the Second Closing (assuming that the Accreted Value of
the Convertible Notes at the Stated Maturity is converted at $3.25 per share)
will be duly and validly reserved and, when issued in compliance with the
provisions of this Agreement and the Convertible Notes, will be duly and validly
issued, fully paid and nonassessable and not subject to any preemptive rights;
provided, however, that the Convertible Notes (and the Common Stock issuable
upon conversion of the Convertible Notes) may be subject to restrictions on
transfer under state and/or federal securities laws as set forth herein.
8.4 SEC Filings; Financial Statements; Changes.
(a) The Company has delivered to the Purchaser accurate and complete
copies (excluding copies of exhibits) of each report, registration statement (on
a form other than Form S-8) and definitive proxy statement filed by the Company
with the SEC between December 31,
7.
<PAGE>
1998, and the date of this Agreement (the "SEC Documents"). As of the time it
was filed with the SEC (or, if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing): (i) each of the SEC
Documents complied in all material respects with the applicable requirements of
the Securities Act or the Securities Exchange Act (as the case may be); and (ii)
none of the SEC Documents 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 the light of the circumstances under
which they were made, not misleading.
(b) The financial statements contained in the SEC Documents: (i)
complied as to form in all material respects with the published rules and
regulations of the SEC applicable thereto; (ii) were prepared in accordance with
U.S. generally accepted accounting principles applied on a consistent basis
throughout the periods covered, except as may be indicated in the notes to such
financial statements and (in the case of unaudited statements) as permitted by
Form 10-Q of the SEC, and except that unaudited financial statements may not
contain footnotes and are subject to year-end audit adjustments; and (iii)
fairly present the financial position of the Company as of the respective dates
thereof and the results of operations and cash flows of the Company for the
periods covered thereby consistent with the books and records of the Company.
(c) Since March 31, 1999, there has not been: (i) any change in the
assets, liabilities, financial condition or operations of the Company except
changes in the ordinary course of business that have not been, in any case or in
the aggregate, materially adverse; (ii) any damage, destruction or loss, whether
or not covered by insurance, materially and adversely affecting the properties
or business of the Company; (iii) any waiver or compromise by the Company of a
material debt or obligation owed to it; or (iv) any other event or condition out
of character that has materially and adversely affected the Company's business
or prospects.
8.5 Non-Contravention. The execution and delivery by the Company of, and
the performance by the Company of its obligations under, this Agreement, the
Registration Rights Agreement and the Convertible Notes (i) will not contravene
any provision of applicable law or the certificate of incorporation or bylaws of
the Company or any agreement or other instrument binding upon the Company, or
any judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Company and (ii) will not result in the creation or
imposition of any Lien upon any property or assets of the Company pursuant to
the terms of any agreement or instrument to which it is a party or by which it
may be bound or to which any of its property or assets is subject.
8.6 No General Solicitation. None of the Company, its Affiliates or any
person acting on its or any of their behalf has engaged or will engage, in
connection with the offering of the Convertible Notes, in any form of general
solicitation or general advertising within the meaning of Rule 502(c) under the
Securities Act. Assuming due payment for the Convertible Notes and the accuracy
of the representations and warranties of the Purchaser contained in Section 8
hereof, the offer, sale and issuance of the Convertible Notes and the shares of
Common Stock upon conversion thereof will be exempt from the registration
requirements of the Securities Act.
8.
<PAGE>
8.7 Capitalization.
(a) Immediately prior to the Closing Date and the sale of the
Convertible Notes and the Shares, the authorized capital stock of the Company
shall consist of (a) 10,000,000 shares of Preferred Stock, $.001 par value, of
which 1,000,000 shares have been designated Series A Convertible Preferred
Stock, $.001 par value, all of which are issued and outstanding, of which
250,000 shares have been designated Series B Convertible Preferred Stock, $.001
par value, all of which are issued and outstanding, and of which 500,000 shares
of Series C Junior Participating Preferred Stock, $.001 par value, none of which
is issued and outstanding (b) 50,000,000 shares of Common Stock, $.001 par
value, 15,487,277 shares of which are issued and outstanding, (c) 1,699,566
options and other rights to acquire Common Stock under the Company's stock
option plan (whether currently outstanding or granted in the future), and (d)
37,836 shares of the Company's Common Stock reserved for issuance under the
Employee Stock Purchase Plan, (e) 1,983,715 currently outstanding warrants to
acquire Common Stock of the Company and (f) 1,250,000 shares of Common Stock
reserved for issuance upon the conversion of the Series A Convertible Preferred
Stock and the Series B Convertible Preferred Stock. As of the date hereof, the
Company is not subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of its capital stock or any warrants,
options or other rights to acquire its capital stock, except as set forth on
Schedule 8.7(a) and except as may be contemplated by this Agreement. As of the
date hereof, the Company is not party to any voting or similar agreement or
proxies relating to the voting of shares of its capital stock and is not aware
of any such agreements or proxies to which it is not a party except as may be
contemplated by this Agreement. As of the date hereof, all of the outstanding
shares of the Company's capital stock have been duly authorized and validly
issued, and are fully paid and nonassessable, except to the extent that such
shares may be subject to restrictions on transfer under state and/or federal
securities laws as set forth herein or as otherwise required by such law at the
time a transfer is proposed. Except as set forth herein, there are no other
options, warrants, calls, preemptive (or similar) rights, subscriptions or other
rights, agreements, arrangements or commitments of any character that obligate
the Company to issue, transfer or sell, or cause to be issued, transferred or
sold, any shares of the capital sock of the Company or other equity interests in
the Company or any securities convertible into or exchangeable for such shares
of capital stock or other equity interests. Immediately after closing the sale
of the Convertible Note pursuant to this Agreement and the 1,300,000 shares of
Common Stock being sold concurrently with such Convertible Note, the Company's
authorized capital shall not change and the number of authorized and outstanding
securities shall not change except as follows: (a) 16,787,277 shares of Common
Stock will be issued and outstanding, (b) 2,924,000 shares of Common Stock will
be reserved for issuance upon the conversion of the Convertible Notes and (c)
2,143,849 shares will be reserved for issuance under currently outstanding
warrants to acquire Common Stock of the Company.
(b) There are no statutory or contractual shareholders' preemptive
rights or rights of refusal with respect to the issuance of the Convertible
Notes hereunder or the Common Stock issuable upon conversion of the Convertible
Notes. The Company has not violated any applicable federal or state securities
laws in connection with the offer, sale or issuance of any of its capital stock,
and, assuming the accuracy of the Purchasers' representations under Section 9,
the offer, sale and issuance of the Convertible Notes hereunder and the issuance
of Common
9.
<PAGE>
Stock upon conversion of the Convertible Notes do not require registration under
the Securities Act.
8.8 Solvency. The Company is, and immediately after the Closing Date,
will be, Solvent.
8.9 Governmental Consent, etc. The Company has obtained all material
permits, consents, approvals or authorizations of, or declarations to or filings
with, any governmental authority required in connection with the execution,
delivery and performance by the Company of this Agreement, the Registration
Rights Agreement or the other agreements contemplated hereby or the Convertible
Notes, or the consummation by the Company of any other transactions contemplated
hereby, except any notices of sale required to be filed with the SEC under
Regulation D of the Securities Act, or such post-closing filings as may be
required under applicable state securities laws, all of which will be timely
filed within the applicable periods therefor.
8.10 Litigation, etc. There are no actions, suits, proceedings (except
applications for regulatory approval from the Food and Drug Administration and
foreign drug agencies), orders, investigations or claims pending or, to the
Company's knowledge, threatened against or affecting the Company (or to the
Company's knowledge, pending or threatened against or affecting any of the
officers, directors or employees of the Company with respect to its business) at
law or in equity, or before or by any governmental department, commission,
board, bureau, agency or instrumentality (including, without limitation, any
actions, suit, proceedings or investigations with respect to the transactions
contemplated by this Agreement); the Company is not subject to any arbitration
proceedings under collective bargaining agreements or otherwise or, to the
Company's knowledge, any governmental investigations or inquiries; and, to the
Company's knowledge, there is no basis for any of the foregoing. The Company is
not subject to any judgment, order or decree of any court or other governmental
agency, and the Company has not received any opinion or memorandum or legal
advice from legal counsel to the effect that it is exposed, from a legal
standpoint, to any liability or disadvantage which may result in a Material
Adverse Effect. The Company has conducted and continues to conduct its business
in accordance with all applicable laws except where the failure to comply has
not had and is not reasonably expected to have a Material Adverse Effect.
8.11 Employees. The Company is not aware that any executive or key
employee of the Company or any group of employees of the Company has any plans
to terminate employment with the Company. The Company has complied with all laws
relating to the employment of labor (including, without limitation, provisions
thereof relating to wages, hours, equal opportunity, collective bargaining and
the payment of social security and other taxes), except where the failure to
comply has not had and is not reasonably expected to have a Material Adverse
Effect, and the Company is not aware that it has any material labor relations
problems (including, without limitation, any union organization activities,
threatened or actual strikes or work stoppages or material grievances). The
Company is not, and to the Company's knowledge, none of its employees is,
subject to any non-compete, nondisclosure, confidentiality, employment,
consulting or similar agreements relating to, affecting or in conflict with the
present business activities of the Company, except for agreements between the
Company and its
10.
<PAGE>
present and former employees that do not conflict with such activities. The
Company has no collective bargaining agreements with any of its employees.
8.12 Intellectual Property Rights. To its knowledge, the Company owns or
possesses, or can acquire on reasonable terms, Intellectual Property Rights
reasonably necessary to carry on the business now operated by it. The Company
has not received any notice of and, to its knowledge there is no infringement of
or conflict with rights of others with respect to any Intellectual Property
Rights owned or used by the Company. The Company is not aware of any facts or
circumstances that would render any Intellectual Property Rights owned or used
by the Company invalid or inadequate to protect the interest of the Company
therein, and which infringement or conflict (if the subject of any unfavorable
decision, ruling or finding) or which invalidity or inadequacy, singularly or in
the aggregate, would result in a Material Adverse Effect. To the Company's
knowledge, no person or entity is infringing or threatening to infringe any
Intellectual Property Rights owned or used by the Company. All employees and
officers other than those employees who are not privy to any of the Company's
proprietary information are bound by the confidentiality and invention
assignment agreements and such agreements do not grant to such employees and
officers rights to any Intellectual Property Rights owned or used by the
Company. All non-employee directors are bound by confidentiality agreements and
such agreements do not grant to such directors rights to any Intellectual
Property Rights owned or used by the Company.
8.13 Environmental and Safety Laws. The Company is in compliance with all
applicable statutes, laws, or regulations relating to the environment or
occupational health and safety, except where the failure to comply has not had
and will not have a Material Adverse Effect, and no material expenditures are or
will be required in order to comply with any such existing statute, law or
regulation. The Company has not received any written notice, demand, letter,
claim, request for information or other written communication alleging that the
Company may be in violation of, or liable under, any statute, law, regulation or
permit.
8.14 Related-Party Transactions. No employee, officer, stockholder or
director of the Company or member of his or her immediate family is indebted to
the Company, nor is the Company indebted (or committed to make loans or extend
or guarantee credit) to any of them, other than (i) for payment of salary for
services rendered, (ii) reimbursement for reasonable expenses incurred on behalf
of the Company, and (iii) for other standard employee benefits made generally
available to all employees (including stock option agreements outstanding under
any stock option plan approved by the Board of Directors of the Company). To
the Company's knowledge, none of such persons has any direct or indirect
ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation that competes with the Company, except that employees, stockholders,
officers, or directors of the Company and members of their immediate families
may own stock in publicly traded companies that may compete with the Company.
To the Company's knowledge, no officer, director, or stockholder or any member
of their immediate families is, directly or indirectly, interested in any
material contract with the Company (other than such contracts that relate to
such person's ownership of capital stock or other securities of the Company).
11.
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8.15 Title to Property and Assets; Leases. The Company has good marketable
title to, or a valid leasehold interest in, the properties and assets used by
it, located on its premises or shown on the unaudited Balance Sheet of the
Company as of June 30, 1999 (the "Latest Balance Sheet") or acquired thereafter,
free and clear of all Liens (other than Permitted Liens), except for properties
and assets disposed of in the ordinary course of business since the date of the
Latest Balance Sheet and except for Liens disclosed on the Latest Balance Sheet
(including any notes thereto) and minor liens and encumbrances which do not
materially detract from the value of the property subject thereto or materially
impair the operations of the Company. The Company's buildings, equipment and
other tangible assets are in good operating condition in all material respects
and are fit for their intended use in the ordinary course of business. The
Company owns, or has a valid leasehold interest in, all assets necessary for the
conduct of its businesses as presently conducted.
8.16 Insurance. The Company has in full force and effect fire and casualty
insurance policies, with extended coverage, standard comprehensive general
liability insurance and product liabilities insurance (subject to reasonable
deductibles), in amounts customary for companies similarly situated to the
Company.
8.17 System of Internal Accounting Controls. The Company maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorization, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets, (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.
8.18 Filing of Tax Returns. The Company has filed all tax returns that are
required to be filed by it pursuant to foreign or domestic laws and has paid all
taxes due pursuant to such returns or pursuant to any assessment received by it
(except where the requirement for payment of such taxes is being contested in
good faith in appropriate proceedings), except where the failure to file or make
payment could not reasonably be expected to result in a Material Adverse Effect.
The charges, accruals, and reserves on the books of the Company in respect of
taxes or other governmental charges are, to the knowledge of the Company,
adequate.
8.19 Investment Company. The Company is not, and upon the issuance and sale
of the Convertible Notes as herein contemplated and the application of the net
proceeds therefrom will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended.
8.20 Real Property Holding Company. The Company is not a United States
Real Property Holding Corporation within the meaning of (S)897(c)(2) of the
Internal Revenue Code of 1986, as amended.
8.21 No Defaults. The Company has, in all material respects, performed all
obligations required to be performed by it to date and is not in default under
any of the contracts, loans, notes, mortgages, indentures, licenses, security
agreements or leases, to which it is a party
12.
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or by which it is otherwise bound, except for such defaults which in the
aggregate have not had, and could not reasonably be expected to have, a Material
Adverse Effect. To the Company's knowledge, no other party to such contracts,
loans, notes, mortgages, debentures, licenses, security agreements, agreements
or leases is in default thereunder except those which would not have a Material
Adverse Effect. The contracts listed as exhibits to the SEC Documents are all of
the material contracts (as defined in Regulation S-K adopted under the
Securities Act of 1933) to which the Company is a party.
8.22 Rights Agreement. The execution and delivery by the Company of, and
the performance by the Company of its obligations under, this Agreement, the
Registration Rights Agreement and the Convertible Notes, including the
conversion of the Convertible Notes into Common Stock pursuant to the
Registration Rights Agreement, will not contravene the Rights Agreement or
result in any Rights (as defined therein) becoming exercisable under the Rights
Agreement.
8.23 Brokers or Finders. The Company has not entered into any agreement or
arrangement giving rise to any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
the transactions contemplated hereby.
8.24 Knowledge. As used in this Section 8, the terms "knowledge" or
"aware" when used with respect to the Company shall mean and include the actual
knowledge or awareness of any of the officers of the Company (as that term is
defined in Securities Exchange Act or regulations promulgated thereunder) and
such knowledge or awareness that would be imputed to such persons after due
inquiry of management employees.
8.25 Disclosure. Neither this Agreement nor any of the exhibits or
schedules contains any untrue statement of a material fact or omits to state a
material fact necessary to make each statement contained herein or therein not
misleading.
8.26 Year 2000 Compliance. To the Company's knowledge, the hardware,
software and software products (the "Systems") used by the Company are, and will
be, able to accurately (i) process any date rollover, (ii) process calculations
or computations regardless of the dates used in such calculations whether
before, on or after January 1, 2000, (iii) accept and respond to two digit year
date input in a manner which resolves any ambiguities as to the century in an
appropriate manner, (iv) store and display date data in a manner which is
unambiguous as to the century, and (v) recognize the year 2000 as a leap year
provided in all such cases, hardware and software used by third parties in
conjunction with the Systems (a) can accurately perform in accordance with
clauses (i) through (v) above and (b) do not affect the performance of the
Systems.
8.27 Form S-3 Eligibility. The Company is eligible to file a resale
Registration Statement on Form S-3. Without limiting the generality of the
foregoing the Company has filed in a timely manner all reports required to be
filed by the Company with the Securities and Exchange Commission during the 12
calendar months and during the portion of the month immediately preceding the
date of this Agreement. The Company is not aware of any facts or circumstances
that exist as of the date of this Agreement that would cause it to lose its
eligibility.
13.
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9. Representations And Warranties of Purchaser.
The Purchaser hereby represents and warrants to the Company as follows:
9.1 Requisite Power and Authority. Purchaser has all necessary power and
authority under all applicable provisions of law to execute and deliver this
Agreement and to perform its obligations hereunder. All action on Purchaser's
part required for the lawful execution and delivery of this Agreement have been
or will be effectively taken prior to the Closing. Upon execution and delivery,
this Agreement will be a valid and binding obligation of Purchaser, enforceable
against Purchaser in accordance with its terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights, and (b) general
principles of equity that restrict the availability of equitable remedies.
9.2 Investment Representations. Purchaser understands that the Convertible
Notes have not been registered under the Securities Act. Purchaser also
understands that the Convertible Notes are being offered and sold pursuant to an
exemption from registration contained in the Securities Act based in part upon
Purchaser's representations contained in this Agreement. Purchaser hereby
represents and warrants as follows:
(a) Purchaser Bears Economic Risk. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company. Purchaser must
bear the economic risk of this investment indefinitely unless the Convertible
Notes are registered pursuant to the Securities Act, or an exemption from
registration is available. Purchaser understands that the Company has no present
intention of registering the Convertible Notes. Purchaser also understands that
there is no assurance that any exemption from registration under the Securities
Act will be available and that, even if available, such exemption may not allow
Purchaser to transfer all or any portion of the Convertible Notes under the
circumstances, in the amounts or at the times Purchaser might propose.
(b) Acquisition for Own Account. Purchaser is acquiring the
Convertible Notes for Purchaser's own account for investment only, and not with
a view towards their distribution, has no present intention of selling (in
connection with a distribution or otherwise), granting any participation in or
otherwise distributing the same, and does not presently have reason to
anticipate a change in such intention.
(c) Purchaser Can Protect Its Interest. Purchaser represents that by
reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement and in the Convertible Notes.
Purchaser is aware of no publication of any advertisement in connection with the
transactions contemplated in Agreement.
(d) Accredited Investor. Purchaser represents that it is an
"accredited investor" within the meaning of Rule 501(a) of Regulation D under
the Securities Act.
(e) Company Information. Purchaser has received and read the
unaudited balance sheet of the Company as of June 30, 1999, and the related
unaudited statements of
14.
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operations and cash flows for the three-month period then ended, and has had an
opportunity to discuss the Company's business, management and financial affairs
with directors, officers and management of the Company and has had the
opportunity to review the Company's operations and facilities. Purchaser has
also had the opportunity to ask questions of, and receive answers from, the
Company and its management regarding the terms and conditions of this
investment.
(f) Rule 144. Purchaser acknowledges and agrees that the Convertible
Notes must be held indefinitely unless they are subsequently registered under
the Securities Act or an exemption from such registration is available.
Purchaser has been advised or is aware of the provisions of Rule 144 promulgated
under the Securities Act as in effect from time to time, which permits limited
resale of restricted securities subject to the satisfaction of certain
conditions, including, among other things: the availability of certain current
public information about the Company, the resale occurring following the
required holding period under Rule 144 and the number of securities being sold
during any three-month period not exceeding specified limitations.
(g) Residence. The office or offices of Purchaser in which its
investment decision was made is located at the address or addresses of Purchaser
set forth in Section 10.11 of this Agreement.
9.3 Further Assurances. Purchaser and the Company each agrees and
covenants that at any time and from time to time, it will promptly execute and
deliver to the other party such further instruments and documents and to take
such further action as the other party may reasonably require in order to carry
out the transactions contemplated by this Agreement and the Convertible Notes.
9.4 Transfer Restrictions. The Purchaser acknowledges and agrees that the
Convertible Notes are subject to restrictions on transfer as set forth herein.
10. Definitions.
10.1 Definitions. For the purposes of this Agreement, the following terms
have the meanings set forth below:
"Affiliate" of any particular Person means any other Person directly
or indirectly controlling, controlled by or under direct or indirect common
control with such particular Person, where "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person whether through the ownership of voting
securities, by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Change in Control" means (i) the sale of all or substantially all of
Company's assets or (ii) any consolidation or merger of the Company with or into
any other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Company immediately prior to
such consolidation, merger or reorganization, own less than fifty percent (50%)
of the Company's voting power immediately after such consolidation, merger or
reorganization.
15.
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"Common Stock" means the shares of common stock, $0.001 par value, of
the Company as it exists on the date of this Agreement or any other shares of
capital stock of the Company into which the Common Stock shall be reclassified
or changed.
"Intellectual Property Rights" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service marks,
trade dress, trade names, logos and corporate names and registrations and
applications for registration thereof together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer software, data, data bases and documentation thereof, (vi) trade
secrets and other confidential information (including, without limitation,
ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial and marketing plans and customer and supplier lists and information),
and (vii) copies and tangible embodiments thereof (in whatever form or medium).
"Liens" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Company or any Affiliate, any filing or
agreement to file a financing statement as debtor under the Uniform Commercial
Code or any similar statute other than to reflect ownership by a third party of
property leased to the Company under a lease which is not in the nature of a
conditional sale or title retention agreement, or any subordination arrangement
in favor of another Person (other than any subordination arising in the ordinary
course of business).
"Permitted Liens" means:
(a) any licenses relating to the Company intellectual property that
are granted by the Company to any collaborative partners, strategic alliance
partners, universities or other parties and any nondisclosure agreements;
(b) tax liens with respect to taxes not yet due and payable or which
are being contested in good faith by appropriate proceedings and for which
appropriate reserves have been established in accordance with generally accepted
accounting principles, consistently applied;
(c) deposits or pledges made in connection with, or to secure payment
of, utilities or similar services, workers' compensation, unemployment
insurance, old age pensions or other social security obligations;
(d) purchase money security interests in any property acquired by the
Company to the extent permitted by this Agreement;
(e) interests or title of a lessor under any lease permitted by this
Agreement;
(f) mechanics', materialmen's or contractors' liens or encumbrances
or any similar lien or restriction created by statute in the ordinary course of
business;
16.
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(g) easements, rights-of-way, restrictions and other similar charges
and encumbrances not interfering with the ordinary conduct of the business of
the Company or detracting from the value of the assets of the Company; and
(h) liens outstanding on the date hereof which secure Indebtedness
and which are described in the schedules to this Agreement.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Restricted Securities" means (i) the Convertible Notes issued
hereunder, (ii) the Common Stock issuable upon conversion of the Convertible
Notes and (iii) any securities issued with respect to the securities referred to
in clauses (i) or (ii) above by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization. As to any particular Restricted Securities, such
securities shall cease to be Restricted Securities when they have (a) been
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, or (b) been distributed to the
public through a broker, dealer or market maker pursuant to Rule 144 (or any
similar provision then in force) under the Securities Act or become eligible for
sale pursuant to Rule 144(k) (or any similar provision then in force) under the
Securities Act. Whenever any particular securities cease to be Restricted
Securities, the holder thereof shall be entitled to receive from the Company,
without expense, new securities of like tenor not bearing a Securities Act
legend of the character set forth in Section 10.2.
"Rights Agreement" means the Rights Agreement, dated September 18,
1997, between the Company and American Stock Transfer and Trust Company as
rights agent.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"SEC" means the United States Securities and Exchange Commission and
includes any governmental body or agency succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended, or any similar federal law then in force.
"Solvent" means, with respect to the Company on a particular date,
that on such date (A) the fair market value of the assets of the Company is
greater than the total amount of liabilities (including contingent liabilities)
of the Company, (B) the present fair salable value of the assets of the Company
is greater than the amount that will be required to pay the probable liabilities
of the Company on its debts as they become absolute and matured, (C) the Company
is able to realize upon its assets and pay its debts and other liabilities,
including contingent obligations, as they mature, and (D) the Company does not
have unreasonably small capital in relation to its business and operations.
17.
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"Stated Maturity" when used with respect to the Convertible Notes
means August 18, 2006, which is the date specified in the Convertible Notes as
the fixed date on which an amount equal to the Accreted Value of such
Convertible Note (as defined in the Convertible Notes) is due and payable.
"Year 2000 Compliant" shall mean, in regard to any internal system,
that such internal system can individually continue to be used normally and to
operate successfully (both in functionality and performance in all material
respects) over the transition into the twenty first century when used in
accordance with the documentation relating to such internal system, including
being able to, before, on and after January 1, 2000 substantially conform to the
following: (i) use logic pertaining to dates that allow users to identify and/or
use the century portion of any date fields without special processing; and (ii)
respond to all date elements and date input so as to resolve any ambiguity as to
century in a disclosed, defined and pre-determined manner and provide date
information in ways that are unambiguous as to century, either by permitting or
requiring the century to be specified or where the data element is represented
without a century, the correct century is unambiguous for all manipulations
involving that element.
11. Miscellaneous.
11.1 Remedies. Each holder of Convertible Notes shall have all rights and
remedies set forth in this Agreement and the Convertible Notes. Each holder of
Convertible Notes having any rights under any provision of this Agreement shall
be entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law.
11.2 Legends. Each certificate or instrument representing Restricted
Securities shall be imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE COMMON
STOCK ISSUABLE UPON CONVERSION OF THE SECURITIES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE CONDITIONS SPECIFIED IN THAT CERTAIN NOTE
PURCHASE AGREEMENT, DATED AS OF AUGUST 18, 1999 AS AMENDED AND
MODIFIED FROM TIME TO TIME, BETWEEN CORVAS INTERNATIONAL, INC.
(THE "COMPANY") AND ARTISAN EQUITY LIMITED, AND THE COMPANY
RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITIES
UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH
TRANSFER.
11.3 Consent to Amendments. Except as otherwise expressly provided herein,
the provisions of this Agreement may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the prior written consent of
the Purchaser or its permitted assignees then holding Convertible Note(s), which
consent shall not be unreasonably withheld. No other course of
18.
<PAGE>
dealing between the Company and the Purchaser or any Holder, or any delay in
exercising any rights hereunder or under the Convertible Notes shall operate as
a waiver of any rights of the Purchaser or any Holder.
11.4 Survival of Representations and Warranties. All representations,
warranties and covenants contained herein or made in writing by any party in
connection herewith shall remain operative and in full force and effect for
eighteen months from the Closing Date or Second Closing Date, as applicable; and
shall in no way be affected by any investigation of the subject matter thereof
made by or on behalf of the Purchaser.
11.5 Indemnification. The Company hereby agrees to indemnify and hold
harmless the Purchaser, any Affiliate of the Purchaser, any Person controlling
the Purchaser or such Affiliate and their respective directors, officers, agents
and employees (each, an "Indemnified Person") from and against any losses,
claims, damages, liabilities, costs and expenses (including, without limitation,
reasonable fees and disbursements of counsel and accountants and other costs and
expenses incident to any actual or threatened claim, suit, action or proceeding,
whether incurred in connection with a claim against the Company or a third party
claim) (collectively, "Losses") arising out of or resulting from any breach of
representation, warranty or covenant made or to be performed on the part of the
Company under this Agreement or the agreements contemplated hereby or otherwise
resulting from any action, claim or proceeding arising out of the matters or
transactions which are the subject of or contemplated by this Agreement or any
instrument or agreement referred to herein, other than Losses resulting directly
from the gross negligence or willful misconduct of such Indemnified Person. If
for any reason (other than the gross negligence or willful misconduct of the
Indemnified Person) the foregoing indemnity is unavailable or insufficient to
hold an Indemnified Person harmless, then the Company shall contribute to
amounts paid or payable by such Indemnified Person in respect of such Losses in
such proportion as appropriately reflects the relative benefits received by, and
fault of, the Company and such Indemnified Person in connection with the matters
as to which such Losses relate and other equitable considerations.
11.6 Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for Purchaser's benefit or impose
obligations upon Purchaser as a purchaser or holder of the Convertible Notes are
also for the benefit of, and impose such obligations upon and enforceable by and
against, any subsequent holder of such Convertible Notes.
11.7 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement, so long as the economic and legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party.
19.
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11.8 Counterparts. This Agreement may be executed simultaneously in one
or more counterparts, any one of which need not contain the signatures of more
than one party, but all such counterparts taken together shall constitute one
and the same Agreement.
11.9 Descriptive Headings; Interpretation. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a
substantive part of this Agreement. The use of the word "including" in this
Agreement shall be by way of example rather than by limitation.
11.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California as such laws are applied to
contracts entered into and performed entirely within the State of California by
California residents.
11.11 Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable overnight courier service (charges
prepaid) or mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to Purchaser and to the Company at the address
indicated below:
To the Company: Corvas International, Inc.
3030 Science Park Road
San Diego, California 92121
Attn: President
With a copy to: Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, California 92121
Attn: Barbara L. Borden, Esq.
To the Purchaser: Artisan Equity Limited
c/o Island Circle Limited
P.O. Box HM 1186
Hamilton HMEX, Bermuda
Attn: President
With a copy to: Shearman & Sterling
555 California Street
San Francisco, California 94104
Attn: Christopher D. Dillon, Esq.
or to such other address or to the attention of such other person as the
recipient party has specified by ten (10) days advance written notice to the
other party.
11.12 No Strict Construction. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto,
20.
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and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any of the provisions of this Agreement.
11.13 Fees. If the First Closing is effected, the Company shall reimburse
the Purchaser the reasonable fees of Shearman & Sterling, special counsel to the
Purchaser, at a rate of 2 times the fees the Company reimburses the fees of
counsel of Sofinov Societe Financiere D'Innovation pursuant to Section 7.11 of
the Stock Purchase Agreement.
11.14 Public Statements or Releases. None of the parties to this Agreement
shall make, issue, or release any announcement, whether to the public generally,
or to any of its employees, suppliers, or customers, with respect to this
Agreement or the transactions provided for herein, or make any statement or
acknowledgment of the existence of, or reveal the status of, this Agreement or
the transactions provided for herein, without the prior consent of the other
parties, which shall not be unreasonably withheld or delayed; provided, that
nothing in this Section 7.16 shall prevent any of the Parties hereto from making
such public announcements as it may consider necessary in order to satisfy its
legal obligations, but to the extent not inconsistent with such obligations, it
shall provide the other parties with an opportunity to review and comment on any
proposed public announcement before it is made
[THIS SPACE INTENTIONALLY LEFT BLANK]
21.
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In Witness Whereof, the parties hereto have executed this Agreement on the
first written above.
Corvas International, Inc.
a Delaware corporation
By: /s/ Randall E. Woods
---------------------------------------
Name: Randall E. Woods
Its: President and Chief Executive Officer
Artisan Equity Limited
a Bermuda company
By: /s/ Michael J. Drew
----------------------------------------
Name: Michael J. Drew
Title: Director
By: /s/ Susan E. Fairhurst
----------------------------------------
Name: Susan E. Fairhurst
Title: Company Secretary
[Note Purchase Agreement]
<PAGE>
LIST OF EXHIBITS
Exhibit A Form of Convertible Subordinated Promissory Note
Exhibit B Registration Rights Agreement
Exhibit C Opinion of Counsel
<PAGE>
Exhibit A
FORM OF 5.5% CONVERTIBLE SENIOR
SUBORDINATED PROMISSORY NOTE
<PAGE>
THE SECURITIES REPRESENTED BY THIS INSTRUMENT AND THE COMMON STOCK ISSUABLE UPON
CONVERSION OF THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THE TRANSFER OF THE SECURITIES REPRESENTED HEREBY IS
SUBJECT TO THE CONDITIONS SPECIFIED IN THAT CERTAIN NOTE PURCHASE AGREEMENT,
DATED AS OF AUGUST 18, 1999 AS AMENDED AND MODIFIED FROM TIME TO TIME, BETWEEN
CORVAS INTERNATIONAL, INC. AND ARTISAN EQUITY LIMITED, AND THE COMPANY RESERVES
THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE
BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER.
CORVAS INTERNATIONAL, INC.
5.5% CONVERTIBLE SENIOR
SUBORDINATED NOTE DUE 2006
August 18, 1999 Principal Amount: $6,500,000.00
San Diego, California
Corvas International, Inc., a Delaware corporation (together with its
successors, the "Company"), for value received hereby promises to pay to the
order of Artisan Equity Limited, a Bermuda company (the "Purchaser") and its
successors and permitted assigns, the sum equal to the Accreted Value (as
defined in Section 1.1 below) on August 18, 2006.
Accretion on the outstanding Principal Amount of this Convertible Note
shall accrue for the period from August 18, 1999 to August 17, 2006, compounded
semi-annually using a 360-day year composed of twelve 30-day months, at 5.5% per
annum.
This Convertible Note was issued pursuant to that certain Note Purchase
Agreement, dated as of August 18, 1999 (as amended and modified from time to
time, the "Purchase Agreement"), between the Company and the Purchaser. The
Purchase Agreement contains additional rights and obligations of the Purchaser,
and all provisions of the Purchase Agreement are hereby incorporated herein in
full by reference. Except as defined in this Convertible Note, capitalized
terms used in this Convertible Note and not otherwise defined shall have the
same meanings set forth in the Purchase Agreement.
After delivery of an indemnity in form and substance from an indemnitor
reasonably satisfactory to the Company, the Company agrees to issue a
replacement Convertible Note if this Convertible Note has been lost, stolen,
mutilated or destroyed.
1.
<PAGE>
1. 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 Convertible Note shall have the respective meanings specified
below. The terms defined in this Section 1 include the plural as well as the
singular.
"Accreted Value" means, for any Specified Date, the amount calculated
pursuant to (i), (ii) or (iii), as the case may be, for the Convertible Notes
per $1,000 of the Principal Amount specified on the face hereof:
(i) if the Specified Date occurs on one of the following dates (each
a "Semi-annual Accrual Date"), the Accreted Value will equal the amount set
forth below for such Semi-annual Accrual Date:
Accreted Value
Semi-annual per $1,000 of (Without
Accrual Date Principal Amount Rounding)
------------------- ------------------- --------------
February 18, 2000 1,028 1,027.5
August 18, 2000 1,056 1,055.8
February 18, 2001 1,085 1,084.8
August 18, 2001 1,115 1,114.6
February 18, 2002 1,145 1,145.3
August 18, 2002 1,177 1,176.8
February 18, 2003 1,209 1,209.1
August 18, 2003 1,242 1,242.4
February 18, 2004 1,277 1,276.5
August 18, 2004 1,312 1,311.7
February 18, 2005 1,348 1,347.7
August 18, 2005 1,385 1,384.8
February 18, 2006 1,423 1,422.9
August 17, 2006 1,462 1,462.0
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(ii) if the Specified Date occurs before the first Semi-annual Accrual
Date, the Accreted Value will equal the sum of (a) $1,000.00 and (b) an
amount equal to the product of (1) $27.5 multiplied by (2) a fraction, the
numerator of which is the number of days from the issue date of the
Convertible Notes to the Specified Date, using a 360-day year of twelve 30-
day months, and the denominator of which is 180; or
2.
<PAGE>
(iii) if the Specified Date occurs between two Semi-annual Accrual
Dates, the Accreted Value will equal the sum of (a) the Accreted Value for
the Semi-annual Accrual Date immediately preceding such Specified Date and
(b) an amount equal to the product of (1) the Accreted Value for the
immediately following Semi-annual Accrual Date less the Accreted Value for
the immediately preceding Semi-annual Accrual Date multiplied by (2) a
fraction, the numerator of which is the number of days from the immediately
preceding Semi-annual Accrual Date to the Specified Date, using a 360-day
year of twelve 30-day months, and the denominator of which is 180.
"Accretion Portion" means, for any Specified Date, the amount equal to
the difference between (i) the Accreted Value as of such Specified Date of a
specified Principal Amount of the Convertible Notes and (ii) such specified
Principal Amount of the Convertible Notes.
"Affiliate" of any particular Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such particular Person, where "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Board of Directors" means the board of directors of the Company.
"Board Resolution" means a resolution duly adopted by the Board of
Directors or any duly authorized committee of such Board.
"Business Day" means any day except a Saturday, Sunday or other day in
which commercial banks in the City of New York, New York or San Diego,
California are authorized by law to close.
"Change in Control" means (i) the sale of all or substantially all of
the Company's assets, (ii) any consolidation or merger of the Company with or
into any other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Company immediately prior to
such consolidation, merger or reorganization own less than fifty percent (50%)
of the Company's voting power immediately after such consolidation, merger or
reorganization, or (iii) individuals who on the Closing Date constitute the
Board of Directors (together with any new directors whose appointment by the
Board of Directors was approved by a vote of at least a majority of the members
of the Board of Directors then in office who either were members of the Board of
Directors on the Closing Date or whose appointment was previously so approved)
cease for any reason to constitute a majority of the Board of Directors then in
office.
"Common Stock" means the shares of common stock, $0.001 par value, of
the Company as it exists on the date of this Convertible Note or any other
shares of capital stock of the Company into which the Common Stock shall be
reclassified or exchanged.
3.
<PAGE>
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Event of Default" means any event or condition specified as such in
Section 5.1 which shall have continued for the period of time, if any, therein
designated.
"Exchange Act" means the United States Securities and Exchange Act of
1934, as amended.
"Holder" means the Purchaser and any successor or permitted assigns.
The Holder may transfer this Convertible Note to one or more Holders in minimum
increments of $1,000 provided that the Company consents to any proposed
assignments, such consent not to be withheld or delayed unreasonably; provided,
however, that no such consent shall be required in connection with any transfer
by a Holder to (i) Affiliates of such Holder or (ii) shareholders, partners or
members of such Holder.
"Indebtedness" of any Person means at a particular time, without
duplication, (i) all obligations of such Person for borrowed money or issued in
substitution for or exchange of indebtedness for borrowed money, (ii) all
obligations of such Person evidenced by any note, bond, debenture or other debt
security, (iii) all obligations for the deferred purchase price of property or
services with respect to which a Person is liable, contingently or otherwise, as
obligor or otherwise (other than trade payables and other current liabilities
incurred in the ordinary course of business), (iv) all commitments by which a
Person assures a creditor against loss (including, without limitation,
contingent reimbursement obligations with respect to letters of credit or other
similar instruments), (v) all obligations guaranteed in any manner by a Person
(including, without limitation, guarantees in the form of an agreement to
repurchase or reimburse), (vi) all obligations under capitalized leases with
respect to which a Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or with respect to which obligations a Person assures a
creditor against loss, (vii) all obligations secured by a Lien on a Person's
assets, whether or not such obligations are assumed by such Person, and (viii)
any unsatisfied obligation for "withdrawal liability" to a "multi-employer plan"
as such terms are defined under ERISA.
"Market Price" means, as of any specified date, the average of the
daily closing sales prices of one share of Common Stock as reported in the
composite transactions for the principal United States securities exchange on
which the Common Stock is traded or, if the Common Stock is not listed on a
United States national or regional securities exchange, as reported by the
National Association of Securities Dealers Automated Quotation System for the 20
consecutive trading days ending one Business Day prior to such date.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
4.
<PAGE>
"Redemption Date" means the date specified for redemption of the
Convertible Notes in accordance with the terms hereof and the Purchase
Agreement.
"Securities Act" means the United States Securities Act of 1933, as
amended, or any similar federal law then in force.
"Senior Indebtedness" means all Indebtedness of the Company permitted
by the Convertible Notes and the Purchase Agreement other than the Convertible
Notes, whether outstanding on the date of execution of this instrument or
thereafter created, incurred or assumed, except (x) any such Indebtedness that
by the terms of the instrument or instruments by which such Indebtedness was
created or incurred expressly provides that it (i) is junior in right of payment
to the Convertible Notes or (ii) ranks pari passu in right of payment with the
---- -----
Convertible Notes and (y) any amendments, modifications or supplements to, or
any renewals, extensions, deferrals, refinancings and refundings of, any of the
foregoing; provided that the term "Senior Indebtedness" shall not include (a)
--------
any Indebtedness of the Company to any employee, director or Affiliate of the
Company or any of its Subsidiaries (except as required by applicable law) or (b)
any Indebtedness of the Company that is convertible or exchangeable into shares
of Common Stock.
"Specified Date" means any date of redemption or conversion of the
Convertible Notes, any date on which the Convertible Notes first become due and
payable after an Event of Default or the date of maturity of the Convertible
Notes.
"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.
1.2 Other Defined Terms. The following additional terms have the
respective meanings set forth in the following sections:
Term Section
---- -------
Additional Amounts 8.9
Company 1/st/ introductory paragraph
Constituent Person 7.9
Conversion Price 7.1(a)
Payment Blockage Notice 5.2
Purchase Agreement 3rd introductory paragraph
Purchaser 1/st/ introductory paragraph
Redemption Price 4.1(a)
Semi-annual Accrual Date Definition of Accreted Value
Trigger Event 7.4(d)
Withholding Taxes 8.9
5.
<PAGE>
2. PAYMENT OF ACCRETED VALUE. No provision of the Convertible Notes shall
alter or impair the obligations of the Company, which are absolute and
unconditional, to pay the Accreted Value of the Convertible Notes at the place,
times, and rate, and in the currency, herein prescribed.
3. METHOD OF PAYMENT. The Company will make all payments prescribed hereunder
to the Holder who surrenders the Convertible Note to the Company. The Company
will pay cash amounts either by check or by wire transfer of immediately
available funds, to a bank account designated by such Holder in money of the
United States that, at the time of payment, is legal tender for payment of
public and private debts; provided, however, so long as the Purchaser is the
Holder, the Company shall pay such amounts by wire transfer.
4. REDEMPTION OF CONVERTIBLE NOTES.
4.1 Redemption at the Option of the Company
(a) The Company may, at its option, at any time after August 18,
2002, redeem all, or from time to time any part of, this Convertible Note, in an
aggregate Principal Amount of $100,000 or an integral multiple of $1,000 in
excess thereof (or, if the Principal Amount on the Redemption Date is less than
$100,000, then the remaining Principal Amount of this Convertible Note at such
time), at a purchase price ("Redemption Price") equal to 100% of the Accreted
Value of the specified Principal Amount on such Redemption Date. Any optional
redemption of any Convertible Note pursuant to this Section 4.1 shall be made by
redeeming all Convertible Notes then outstanding in whole or in part and, if in
part, pro rata in proportion to their respective aggregate Principal Amount at
the time of such redemption.
(b) On the Redemption Date, the Company will pay to the Holder in
cash the portion of the Redemption Price equal to 100% of the specified
Principal Amount of any Convertible Notes to be redeemed pursuant to Section
4.1. The Company at its option may, on the Redemption Date, pay the Accretion
Portion of the Redemption Price of any redeemed Convertible Notes in cash, in
the number of shares of Common Stock of the Company sufficient to pay such
Accretion Portion or a combination of cash and Common Stock. The Company shall
designate, in its redemption notice delivered pursuant to Section 4.2, whether
the Company will pay such Accretion Portion in cash, Common Stock or any
combination of cash and Common Stock, and if a combination thereof, the
percentages of such Accretion Portion to be paid in cash or Common Stock;
provided that the Company will pay cash for any fractional interests of
- --------
Common Stock. On the Redemption Date, the Company will pay that portion of such
Accretion Portion specified in the redemption notice to be paid by the Company
through the issuance of Common Stock by issuing the number of shares of Common
Stock equal to the quotient obtained by dividing (i) the amount of cash that the
Holder would have been entitled to receive had the Company elected to pay that
percentage of such Accretion Portion in cash by (ii) the Market Price as of the
date of the redemption notice delivered pursuant to Section 4.2.
(c) The Company will not issue a fractional share of Common Stock in
payment of any part of such Accretion Portion. Instead the Company will pay cash
for the current market value of any such fractional share, determined by
multiplying the Market Price as
6.
<PAGE>
of the date of the redemption notice delivered pursuant to Section 4.2 by such
fraction and rounding the product to the nearest whole cent.
(d) The Company's right to pay all or any part of such Accretion
Portion in Common Stock shall be conditioned upon (i) the registration of the
shares of Common Stock to be issued in respect of such payment under the
Securities Act, if required, and the quotation of such shares on the Nasdaq
National Market or the listing of such shares on a national securities exchange,
(ii) any necessary qualification or registration under applicable state
securities laws or the availability of an exemption from such qualification or
registration and (iii) receipt by the holder of a legal opinion from the
Company's counsel to the effect that the shares of Common Stock to be issued by
the Company in payment of all or any part of such Accretion Portion have been
duly authorized, and when issued and delivered pursuant to the terms of this
Convertible Note in payment of all or any part of such Accretion Portion will be
validly issued, fully paid and nonassessable.
(e) From and after the Redemption Date, all rights of the holders of
Convertible Notes (except the right to receive the Redemption Price) shall
terminate.
4.2 Redemption Notice. At least 45 days but not more than 60 days before
a Redemption Date, the Company shall mail a notice of redemption by first-class
mail, postage prepaid, to the Holder of the Convertible Note. The notice shall
identify the Principal Amount of the Convertible Note to be redeemed and shall
state: (1) the Redemption Date; (2) the Accreted Value of such Principal Amount
on such Redemption Date and the applicable Redemption Price; (3) whether the
Company will pay the Accretion Portion of the Redemption Price in cash, Common
Stock or any combination of cash and Common Stock, and if a combination thereof,
the percentages of such Accretion Portion to be paid in cash or Common Stock,
and the applicable Market Price; and (4) the then applicable Conversion Price.
Once notice of redemption is given, the portion of the Principal Amount called
for redemption becomes due and payable on the Redemption Date at the Redemption
Price stated in the notice, except for the Principal Amount of Convertible Notes
converted in accordance with the terms of the Convertible Notes.
4.3 Redemption of Convertible Notes at the Option of the Holder upon a
Change in Control. If on or prior to the Stated Maturity, there shall have
occurred a Change in Control, the Convertible Notes shall be redeemed by the
Company, at the option of each Holder of Convertible Notes, at the Redemption
Price as of the date that is 30 Business Days after the occurrence of the Change
in Control. On the Redemption Date, the Company will pay the Redemption Price of
any Convertible Notes to be redeemed pursuant to this Section 4.3 to the Holder
in cash, or the Company may, at its option, on the Redemption Date, pay the
Accretion Portion of the Redemption Price of any Convertible Notes redeemed
pursuant to this Section 4.3 in cash, in the number of shares of Common Stock of
the Company sufficient to pay such Accretion Portion or a combination of cash
and Common Stock upon the same terms and conditions as a redemption at the
option of the Company pursuant to Section 4.1. Within ten Business Days after
the occurrence of a Change in Control, the Company shall mail a written notice
of the Change in Control to the Holder of the Convertible Note by first class
mail, postage pre-paid; provided that no failure of the Company to give such
--------
notice shall limit the rights of the Holders hereunder. The notice shall briefly
describe the events causing the Change in Control
7.
<PAGE>
and shall specify: (1) the Redemption Date; (2) the Accreted Value of the
outstanding Principal Amount of the Convertible Notes on such Redemption Date
and the applicable Redemption Price; (3) whether the Company will pay the
Accretion Portion of the Redemption Price in cash, Common Stock or any
combination of cash and Common Stock, and if a combination thereof, the
percentages of such Accretion Portion to be paid in cash or Common Stock, and
the applicable Market Price; and (4) the then applicable Conversion Price. Any
Holder wishing to exercise its rights hereunder shall deliver to the Company, on
or before such Redemption Date, written notice of such Holder's exercise of such
right, which notice shall set forth the name of the Holder and the Principal
Amount of a Convertible Note or portion thereof which is $100,000 or integral
multiple of $1,000 in excess thereof (or, if less, the remaining Principal
Amount of such Convertible Note) held by such Holder as to which an election to
exercise its rights under this Section 4.3 is being made. The delivery of
Convertible Notes to the Company prior to, or after the Redemption Date, against
delivery of the Redemption Price shall be a condition to the receipt by a Holder
of the Redemption Price. Any Holder exercising its option to have Convertible
Notes redeemed may withdraw such exercise at any time prior to the close of
business on the Redemption Date by delivery of a written notice to the Company
of withdrawal of such exercise. Upon receipt by the Company of a notice of
exercise of the redemption option that is not withdrawn, the Holder of the
Convertible Note shall thereafter be entitled to receive the Redemption Price.
5. Subordination.
5.1 Extent of Subordination. The indebtedness evidenced by this
Convertible Note is hereby expressly subordinated and junior, to the extent and
in the manner hereinafter set forth, in right of payment to the prior payment in
full of all the Company's Senior Indebtedness.
5.2 Default on Senior Indebtedness. If there shall occur an event of
default which has been declared in writing with respect to any Senior
Indebtedness, as event of default is defined in the instrument under which it is
outstanding, permitting the holder of such Senior Indebtedness to accelerate the
maturity thereof, then, the Company shall deliver a notice of such event of
default to the Holders (a "Payment Blockage Notice") and, unless and until such
event of default shall have been cured or waived or shall have ceased to exist,
or all Senior Indebtedness shall have been paid in full, no payment shall be
made in respect of this Convertible Note, unless within one hundred eighty (180)
days after the happening of such event of default, the maturity of such Senior
Indebtedness shall not have been accelerated; provided, however, that no new
period of payment blockage on the Convertible Notes pursuant to this Section 5.2
may commence hereunder unless and until 365 days have elapsed since the initial
effectiveness of the immediately prior Payment Blockage Notice.
5.3 Insolvency Proceedings. If there shall occur any receivership,
insolvency, assignment for the benefit of creditors, bankruptcy, reorganization,
or arrangements with creditors (whether or not pursuant to bankruptcy or other
insolvency laws), sale of all or substantially all of the assets, dissolution,
liquidation, or any other marshaling of the assets and liabilities of the
Company, (a) no amount shall be paid by the Company in respect of this
Convertible Note, unless and until the principal of and interest on the Senior
Indebtedness then outstanding shall be paid in full, and (b) no claim or proof
of claim shall be filed by or on behalf of the Holders which shall assert any
right to receive any payments in respect of this Convertible
8.
<PAGE>
Note, except subject to the payment in full of the principal of and interest on
all of the Senior Indebtedness then outstanding.
5.4 Reliance of Holders of Senior Indebtedness. The Holder, by its
acceptance hereof, shall be deemed to acknowledge and agree that the foregoing
subordination provisions are, and are intended to be, an inducement to and a
consideration of each holder of Senior Indebtedness, whether such Senior
Indebtedness was created or acquired before or after the creation of the
indebtedness evidenced by this Convertible Note, and each such holder of Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and holding, or in continuing to hold, such Senior
Indebtedness.
5.5 Further Assurances. Notwithstanding any other provision herein, by its
acceptance of this Convertible Note, the Holder agrees to execute and deliver
customary forms of subordination agreements requested from time to time by the
Company or the holders or prospective holders of Senior Indebtedness and, as a
condition to the Holder's rights hereunder, the Company may require that the
Holder execute such forms of subordination agreements, provided that such forms
shall not impose on the Holder terms less favorable than those provided herein,
in order to implement the foregoing provisions of this Section 5.
5.6 Subrogation. Subject to the payment in full of all Senior
Indebtedness, the Holders shall be subrogated to the rights of the holder(s) of
such Senior Indebtedness (to the extent of payments or distributions made to the
holder(s) of such Senior Indebtedness pursuant to the provisions of Section 5.3
above) to receive payments or distributions of assets of the Company applicable
to the Senior Indebtedness. No such payments or distributions applicable to the
Senior Indebtedness shall, as between the Company and its creditors, other than
the holders of Senior Indebtedness and the Holder, be deemed to be a payment by
the Company to or on account of this Convertible Note; and for purposes of such
subrogation, no payments or distributions to the holders of Senior Indebtedness
to which the Holder would be entitled except for the provisions of this Section
5 shall, as between the Company and its creditors, other than the holders of
Senior Indebtedness and the Holder, be deemed to be a payment by the Company to
or on account of the Senior Indebtedness.
5.7 No Impairment. Subject to the rights, if any, of the holders of Senior
Indebtedness under this Section 5 to receive cash, securities or other
properties otherwise payable or deliverable to the Holder, nothing contained in
this Section 5 shall impair, as between the Company and the Holder, the
obligation of the Company, subject to the terms and conditions hereof, to pay to
the Holder amounts as and when the same become due and payable, or shall prevent
the Holder, upon default hereunder, from exercising all rights, powers and
remedies otherwise provided herein or by applicable law.
5.8 Lien Subordination. Any lien or security interest of the Holder,
whether now or hereafter existing in connection with the amounts due under this
Convertible Note, on any assets or property of the Company or any proceeds or
revenues therefrom which the Holder may have at any time as security for any
amounts due and obligations under this Convertible Note, shall be subordinate to
all liens or security interests now or hereafter granted to a holder of Senior
Indebtedness by the Company or by law notwithstanding the date, order or method
of attachment or perfection of any such lien or security interest or the
provisions of any applicable law.
9.
<PAGE>
5.9 Applicability of Priorities. The priority of the holder of the Senior
Indebtedness provided for herein with respect to security interests and liens is
applicable only to the extent that such security interests and liens are
enforceable and perfected and have not been avoided; if a security interest or
lien is judicially determined to be unenforceable or unperfected or is
judicially avoided with respect to any claim of the holder of the Senior
Indebtedness or any part thereof, the priority provided for herein shall not be
available to such security interest or lien to the extent that it is avoided or
determined to be unenforceable or unperfected. The foregoing notwithstanding,
the Holder covenants and agrees that it shall not challenge, attack or seek to
avoid any security interest or lien to the extent that it secures any holder of
the Senior Indebtedness. Nothing in this Section 5.9 affects the operation of
any subordination of indebtedness or turnover of payment provisions hereof, or
of any other agreements among any of the parties hereto.
6. Events Of Default.
6.1 Definition. For purposes of this Convertible Note, an "Event of
Default" shall be deemed to have occurred if:
(a) the Company fails to timely pay any amounts that become due and
payable on the Convertible Note, as and when the same shall become due and
payable, whether at maturity, upon any redemption, by declaration or otherwise
if such default is not cured by the Company within two (2) Business Days after
the Purchaser has given the Company written notice of such default; or
(b) the Company fails to deliver to the Holder shares of Common Stock
or cash in lieu thereof when such Common Stock or cash is required to be
delivered upon redemption or conversion of all or any portion of the Convertible
Notes and such default continues to exist for a period of five (5) Business Days
after written notice specifying such failure is given to the Company; or
(c) the Company fails to comply with any of the other covenants or
agreements of the Company contained in this Convertible Note or in the Purchase
Agreement (other than those covered by clauses (a) or (b) above) for a period of
45 days after written notice specifying such failure is given to the Company,
provided that no Event of Default shall be deemed to have occurred under this
subparagraph (c) if the Company has exercised, and continues to exercise,
commercially reasonable efforts to expeditiously cure the Event of Default (if
cure is possible) and cures such Event of Default within 90 days after the
original notice of such default; or
(d) the Company shall fail to make any payment at maturity in respect
of any Indebtedness of the Company (other than the Convertible Notes) in a
principal amount exceeding $1,000,000 individually or in the aggregate if such
default is not cured within 30 days after such payment is due and payable; or
(e) any event or condition shall occur which results in the
acceleration of the maturity of any Indebtedness of the Company in a principal
amount in excess of $1,000,000;
10.
<PAGE>
(f) if a final judgment or order (not otherwise covered by the
Company's insurance) is rendered for the payment of money against the Company in
excess of $1,000,000 in the aggregate which continues unsatisfied and unstayed
for a period of 60 days; or
(g) the Company makes an assignment for the benefit of creditors; or
an order, judgment or decree is entered adjudicating the Company bankrupt or
insolvent; or any order for relief with respect to the Company is entered under
the Federal Bankruptcy Code; or the Company petitions or applies to any tribunal
for the appointment of a custodian, trustee, receiver or liquidator of the
Company, or of any substantial part of the assets of the Company, or commences
any proceeding (other than a proceeding for the voluntary liquidation and
dissolution of any Subsidiary) relating to the Company under any bankruptcy
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction; or any such petition or application is
filed, or any such proceeding is commenced, against the Company and such
petition, application or proceeding is not dismissed within 90 days; or
(h) any representation or warranty made by the Company pursuant to
the Purchase Agreement or in any certificate, financial statement or other
document delivered pursuant to the Purchase Agreement is proven to have been
incorrect when made and such breach is material to the financial condition,
operations or assets of the Company or to the validity or enforceability of the
Convertible Notes or the Company's performance of its obligations under the
Convertible Notes or the Purchase Agreement.
The foregoing shall constitute Events of Default whatever the reason or
cause for any such Event of Default and whether it is voluntary or involuntary
or is 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.
6.2 Consequences of Events of Default.
(a) If an Event of Default of the type described in Section 5.1(g)
occurs, the Accreted Value of this Convertible Note (together with all such
other amounts due thereon (if any)) shall become immediately due and payable
without any action on the part of the Holder, and the Company shall immediately
pay to the Holder all amounts due and payable with respect to this Convertible
Note.
(b) If an Event of Default (other than under Section 5.1(g)) has
occurred and is continuing, the Holder may declare all or any portion of the
Accreted Value of the outstanding Principal Amount of this Convertible Note to
be immediately due and payable and may demand immediate payment of all or any
portion of the Accreted Value of the outstanding Principal Amount of this
Convertible Note (together with all such other amounts then due and payable). If
the Holder demands immediate payment of all or any portion of this Convertible
Note, the Company shall immediately pay to the Holder all amounts due and
payable with respect to this Convertible Note or such portion hereof.
(c) The Holder shall also have any other rights that the Holder may
have been afforded under any contract or agreement at any time and any other
rights that the Holder may have pursuant to applicable law. No right or remedy
herein conferred upon or reserved to any
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Holder 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 any
Holder to exercise any right or power 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 Convertible Notes
or by law may be exercised from time to time, and as often as shall be deemed
expedient, by any Holder.
(d) The Company hereby waives diligence, presentment, protest and
demand and notice of protest and demand, dishonor and nonpayment of this
Convertible Note, and expressly agrees that this Convertible Note, or any
payment hereunder, may be extended from time to time and that the Holder may
accept security for this Convertible Note or release security for this
Convertible Note, all without in any way affecting the liability of the Company
hereunder.
6.3 Waiver of Past Defaults. The Holder may, by notice to the Company and
in accordance with Section 9, waive an existing Default or Event of Default
hereunder and its consequences. Upon any such waiver, such Default shall cease
to exist and be deemed to have been cured and not to have occurred, and any
Event of Default arising therefrom shall be deemed to have been cured, and not
to have occurred for every purpose of the Convertible Notes, but no such waiver
shall extend to any subsequent or other Default or Event of Default or impair
any consequent right.
7. Conversion.
7.1 Optional Conversion. (a) The Holder of this Convertible Note is
entitled, at its option, at any time until the close of business on August 18,
2006, or in case this Convertible Note or a portion hereof is called for
redemption, then in respect of this Convertible Note or such portion hereof,
until and including but (unless the Company defaults in making the payment due
upon redemption) not after, the close of business on the Redemption Date, to
convert this Convertible Note (or any portion of the Principal Amount hereof
which is $100,000 or an integral multiple of $1,000 in excess thereof (or, if
the Principal Amount on the conversion date is less than $100,000, then the
remaining Principal Amount of this Convertible Note)) at the Accreted Value of
such Principal Amount, or of such portion, into that number of fully paid shares
(calculated as to each conversion to the nearest 1/100 of a share) of Common
Stock obtained by dividing such Accreted Value by a conversion price (the
''Conversion Price") equal to $3.25 (or at the current adjusted Conversion Price
if an adjustment has been made as provided herein) by surrender of this
Convertible Note to the Company accompanied by written notice to the Company
that such Holder elects to convert this Convertible Note, or if less than the
entire Principal Amount of this Convertible Note is to be converted, the portion
thereof to be converted, which shall be $100,000 or integral multiple of $1,000
in excess thereof (or, if the Principal Amount on the conversion date is less
than $100,000, then the remaining Principal Amount of this Convertible Note) in
accordance with Section 7.2.
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(b) At the option of the Company, in lieu of converting the Accretion
Portion of the Principal Amount of a Convertible Note to be converted into
shares of Common Stock in accordance with Section 7.1(a), the Company may (i)
pay the Holder an amount in cash equal to such Accretion Portion, or (ii) issue
to the Holder the number of shares of Common Stock equal to the quotient
obtained by dividing the amount of the Accretion Portion by the Market Price as
of the date of the conversion notice delivered pursuant to Section 7.2, or (iii)
pay the Holder an amount in cash equal to a part of such Accretion Portion and
issue to the Holder the number of shares of Common Stock equal to the quotient
obtained by dividing the amount of the remaining Accretion Portion by the Market
Price as of the date of the conversion notice delivered pursuant to Section 7.2.
(c) No fractional shares of Common Stock shall be issued upon
conversion of Convertible Notes. If more than one Convertible Note shall be
surrendered for conversion at one time by the same Holder, the number of fully
paid shares of Common Stock which shall be issuable upon conversion thereof
shall be computed on the basis of the aggregate Accreted Value of the
Convertible Notes (or specified portions thereof) so surrendered. Instead of any
fractional share of Common Stock that would otherwise be issuable upon
conversion of any Convertible Note or Convertible Notes (or specified portions
thereof), the Company shall pay a cash adjustment in respect of such fractional
share in an amount equal to such fraction multiplied by the closing sales price
of one share of Common Stock as reported in the composite transactions for the
principal United States securities exchange on which the Common Stock is traded
or, if the Common Stock is not listed on a United States national or regional
securities exchange, as reported by the National Association of Securities
Dealers Automated Quotation System, on the day of conversion (or, if such day is
not a trading day on such exchange or quotation system, on the trading day
immediately preceding such day).
7.2 Exercise of Conversion Right. To convert the Convertible Note, the
holder must complete and manually sign a conversion notice and deliver such
notice to the Company and surrender the Convertible Note to the Company. The
notice shall identify the Principal Amount of the Convertible Note to be
converted.
7.3 Effect of Conversion. (a) Convertible Notes shall be deemed to have
been converted immediately prior to the close of business on the day of
surrender of such Convertible Notes for conversion in accordance with the
foregoing provisions, and at such time the rights of the Holders of such
Convertible Notes as Holders shall cease, and the Person or Persons entitled to
receive the shares of Common Stock issuable upon conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
and after such time. On the conversion date, the Company shall cause the shares
of Common Stock issued on conversion to be registered in the name of the Holders
of such Convertible Notes. Within five Business Days after the conversion date,
the Company shall issue and shall deliver a certificate or certificates (or
shareholding statement) for the number of fully paid shares of Common Stock
issuable upon conversion, together with payment in lieu of any fraction of a
share, as provided in Section 7.1(b).
(b) In the case of any Convertible Note which is converted in part
only, upon such conversion the Company shall execute and deliver to the Holder
thereof, at the expense of
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the Company, a new Convertible Note or Convertible Notes in aggregate Accreted
Value equal to the unconverted portion of the Accreted Value of such Convertible
Note.
(c) The Company shall at all times reserve and keep available, free
from preemptive rights, out of the authorized but unissued shares of Common
Stock, for the purpose of effecting the conversion of Convertible Notes, the
full number of shares of Common Stock then issuable upon the conversion of all
outstanding Convertible Notes, assuming that the Accreted Value of the
Convertible Notes at the Stated Maturity is converted at $3.25 per share.
7.4 Adjustment of Conversion Price.
(a) Stock Dividends. In case the Company shall make a dividend or
other distribution on the Common Stock exclusively in shares of Common Stock,
the Conversion Price shall be reduced by multiplying the Conversion Price in
effect immediately prior to the close of business on the date fixed for such
dividend or distribution by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding at the close of business on the
date fixed for such determination and the denominator shall be the sum of such
number of shares of Common Stock and the total number of shares of Common Stock
constituting such dividend or other distribution, such reduction to become
effective immediately prior to the opening of business on the day following such
date.
(b) Subdivisions and Combinations. In case outstanding shares of
Common Stock shall be subdivided into a greater number of shares of Common
Stock, the Conversion Price in effect immediately prior to the close of business
on the date such subdivision becomes effective shall be proportionately reduced,
and, conversely, in case outstanding shares of Common Stock shall be combined
into smaller number of shares of Common Stock, the Conversion Price in effect
immediately prior to the close of business on the date such combination becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately prior to the opening of business on
the day following the day upon which subdivision or combination becomes
effective.
(c) Distributions in Kind. Subject to the last sentence of this
paragraph (c) and the last sentence of paragraph (d) of this Section 7.4, in
case the Company shall, by dividend or otherwise, distribute to holders of
Common Stock evidences of its indebtedness, shares of any class of its capital
stock, cash or other assets (including securities, but excluding (i) any
outstanding rights or warrants, (ii) any dividend or distribution paid
exclusively in cash and (iii) any dividend or distribution referred to in
paragraph (a) of this Section 7.4), the Conversion Price shall be reduced by
multiplying the Conversion Price in effect immediately prior to the close of
business on the date fixed for the determination of shareholders entitled to
such distribution by a fraction of which the numerator shall be (i) the "current
market price" (determined as provided in paragraph (e) of this Section 7.4) on
such date less (ii) the aggregate fair market value (as determined by the Board
of Directors, whose determination shall be conclusive and described in a Board
Resolution) on such date of the evidences of indebtedness, shares of capital
stock, cash and other assets to be distributed divided by the number of shares
of Common Stock outstanding at the close of business on such date, and the
denominator shall be such current market price, such reduction to become
effective immediately prior to the opening of business on the day following such
date. If the Board of Directors determines the fair market value of any
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distribution for purposes of this paragraph (c) by reference to the actual or
when-issued trading market for any securities comprising part or all of such
distribution, it must in doing so consider to the extent possible, the prices in
such market over the same period used in computing the current market price
pursuant to paragraph (e) of this Section 7.4.
(d) Stock Reclassifications. The reclassification of Common Stock
into securities which include securities other than Common Stock (other than any
reclassification upon a consolidation or merger to which Section 7.9 applies)
shall be deemed to involve (i) a distribution of such securities other than
Common Stock to all holders of Common Stock within the meaning of paragraph (c)
of this Section 7.4 (and the effective date of such reclassification shall be
deemed to be "the date fixed for the determination of shareholders entitled to
such distribution" within the meaning of paragraph (c) of this Section 7.4), and
(ii) a subdivision or combination, as the case may be, of the number of shares
of Common Stock outstanding immediately prior to such reclassification into the
number of shares of Common Stock outstanding immediately thereafter within the
meaning of paragraph (b) of this Section 7.4 (and the effective date of such
reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective",
as the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of paragraph (b) of this Section 7.4).
Rights or warrants issued by the Company to all holders of Common Stock
entitling the holders thereof to subscribe for or purchase shares of Common
Stock (either initially or under certain circumstances), which rights or
warrants (i) are deemed to be transferred with such shares of Common Stock, (ii)
are not exercisable and (iii) are also issued in respect of future issuances of
Common Stock, in each case in clauses (i) through (iii) until the occurrence of
a specified event or events ("Trigger Event"), shall for the purposes of this
Section 7.4 not be deemed issued until the occurrence of the earliest Trigger
Event.
(e) Current Market Price. For the purpose of any computation under
paragraph (c) of this Section 7.4, the "current market price" per share of
Common Stock on any date shall be deemed to be the Market Price as of the date
of determination of shareholders entitled to the distribution or dividend
specified in subsection (c) above (or, if earlier, the related ex date).
(f) Sales of Shares Below $2.50.
(i) If at any time or from time to time after the First Closing
and until August 18, 2000, the Company issues or sells, or is deemed by the
express provisions of this paragraph (f) of this Section 7.4 to have issued or
sold, Additional Shares of Common Stock (as defined in paragraph (f)(iv) below),
other than as a dividend or other distribution on any class of stock as provided
in paragraphs (a) or (c) above, and other than a subdivision or combination of
shares of Common Stock as provided in paragraph (b) above, for an Effective
Price (as defined in paragraph (f)(iv) below) less than $2.50 (as adjusted for
any stock dividends, combinations, splits, recapitalizations and the like with
respect to such shares), then the existing Conversion Price shall be
automatically reduced, as of the opening of business on the date of such issue
or sale, to a price determined by multiplying such Conversion Price by a
fraction (i) the numerator of which shall be (A) the number of shares of Common
Stock deemed outstanding (as defined below) immediately prior to such issue or
sale, plus (B) the number of shares of Common Stock
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which the aggregate consideration received (as defined in paragraph (f)(ii)) by
the Company for the total number of Additional Shares of Common Stock so issued
would purchase at such Conversion Price and (ii) the denominator of which shall
be (C) the number of shares of Common Stock deemed outstanding (as defined
below) immediately prior to such issue or sale plus (D) the total number of
Additional Shares of Common Stock so issued. For the purposes of the preceding
sentence, the number of shares of Common Stock deemed outstanding as of a given
date shall be the sum of (A) the number of shares of Common Stock actually
outstanding, (B) the number of shares of Common Stock into which the then
outstanding Convertible Notes could be converted if fully converted on the date
immediately preceding the given date and (C) the number of shares of Common
Stock which could be obtained through the exercise or conversion of all other
rights, options and convertible securities outstanding on the day immediately
preceding the given date.
(ii) For the purpose of making any adjustment required under
this paragraph (f), the consideration received by the Company for any issue or
sale of securities shall (A) to the extent it consists of cash, be computed at
the net amount of cash received by the Company after deduction of any
underwriting or similar commissions, compensation or concessions paid or allowed
by the Company in connection with such issue or sale but without deduction of
any expenses payable by the Company; (B) to the extent it consists of property
other than cash, be computed at the fair value of that property as determined in
good faith by the Board of Directors, after deduction of any underwriting or
similar commissions, compensation or concessions paid or allowed by the Company
in connection with such issue or sale, but without deduction of any expenses
payable by the Company; or (C) if Additional Shares of Common Stock, Convertible
Securities (as defined in paragraph (f)(iii)) or rights or options to purchase
either Additional Shares of Common Stock or Convertible Securities are issued or
sold together with other stock or securities or other assets of the Company for
a consideration which covers both, be computed as the portion of the
consideration so received that may be reasonably determined in good faith by the
Board of Directors to be allocable to such Additional Shares of Common Stock,
Convertible Securities or rights or options.
(iii) For the purpose of the adjustment required under this
paragraph (f), if the Company issues or sells any rights or options for the
purchase of, or stock or other securities convertible into, Additional Shares of
Common Stock (such convertible stock or securities being herein referred to as
"Convertible Securities") and if the Effective Price of such Additional Shares
of Common Stock is less than the Conversion Price, in each case the Company
shall be deemed to have issued at the time of the issuance of such rights or
options or Convertible Securities the maximum number of Additional Shares of
Common Stock issuable upon exercise or conversion thereof and to have received
as consideration for the issuance of such shares an amount equal to the total
amount of the consideration, if any, received by the Company for the issuance of
such rights or options or Convertible Securities, plus, in the case of such
rights or options, the minimum amount of consideration, if any, payable to the
Company upon the exercise of such rights or options, plus, in the case of
Convertible Securities, the minimum amount of consideration, if any, payable to
the Company (other than by cancellation of liabilities or obligations evidenced
by such Convertible Securities) upon the conversion thereof; provided that if in
the case of Convertible Securities the minimum amount of such consideration
cannot be ascertained, but is a function of antidilution or similar protective
clauses, the Company
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shall be deemed to have received the minimum amount of consideration without
reference to such clauses; provided further that if the minimum amounts of
consideration payable to the Company upon the exercise or conversion of rights,
options or Convertible Securities is reduced over time or on the occurrence or
nonoccurrence of specified events other than by reason of antidilution
adjustments, the Effective Price shall be recalculated using the figure to which
such minimum amount of consideration is reduced; provided further that if the
minimum amount of consideration payable to the Company upon the exercise or
conversion of such rights, options, or Convertible Securities is subsequently
increased, the Effective Price shall be again recalculated using the increased
minimum amount of consideration payable to the Company upon the exercise or
conversion of such rights, options or Convertible Securities.
No further adjustment of the Conversion Price, as adjusted upon the
issuance of such rights, options or Convertible Securities, shall be made as a
result of the actual issuance of Additional Shares of Common Stock on the
exercise of any such rights or options or the conversion of any such Convertible
Securities. If any such rights or options or the conversion privilege
represented by any such Convertible Securities shall expire without having been
exercised, such Conversion Price as adjusted upon the issuance of such rights,
options or Convertible Securities shall be readjusted to such Conversion Price
which would have been in effect had an adjustment been made on the basis that
the only Additional Shares of Common Stock so issued were the Additional Shares
of Common Stock, if any, actually issued or sold on the exercise of such rights
or options or rights of conversion of such Convertible Securities, and such
Additional Shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting of all
such rights or options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually converted,
plus the consideration, if any, actually received by the Company (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities, provided that such
readjustment shall not apply to prior conversions of Convertible Notes.
(iv) "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Company or deemed to be issued pursuant to this
paragraph (f), whether or not subsequently reacquired or retired by the Company,
other than: (1) shares of Common Stock issued pursuant to the Stock Purchase
Agreement or to satisfy the condition set forth in Section 3.3 of the Purchase
Agreement; (2) shares of Common Stock issued upon conversion of the Convertible
Notes; (3) shares of Common Stock and/or options, warrants or other rights (as
adjusted for any stock dividends, combinations, splits, recapitalization and the
like) after the First Closing Date to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board; (4) shares of Common Stock, or any warrant therefor or other convertible
security, issued in conjunction with equipment lease financing arrangements; (5)
shares issued after repurchase pursuant to any restricted stock purchase
agreement following a termination; (6) shares of Common Stock issued pursuant to
the exercise or conversion of options, warrants or convertible securities
outstanding as of the First Closing Date, (7) shares issued for consideration
other than cash pursuant to a merger, consolidation,
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acquisition or similar business combination and (8) shares issued in connection
with the proposed settlement between the Company and Vascular Genomics, Inc.
The "Effective Price" of Additional Shares of Common Stock shall mean
the quotient determined by dividing the total number of Additional Shares of
Common Stock issued or sold, or deemed to have been issued or sold by the
Company under this paragraph (f), into the aggregate consideration received, or
deemed to have been received by the Company for such issue under this paragraph
(f), for such Additional Shares of Common Stock.
(g) Miscellaneous. No adjustment in the Conversion Price shall be
required unless such adjustment (plus any other adjustments not previously made
by reason of this paragraph (g)) would require an increase or decrease of at
least 1% in the Conversion Price; provided that any adjustments which by reason
of this paragraph (g) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section shall be made to the nearest cent, to the nearest one-hundredth of a
percentage point or to the nearest one-hundredth of a share, as the case may be.
7.5 Notice of Adjustments of Conversion Price. Whenever the Conversion
Price is adjusted as herein provided: the Company shall compute the adjusted
Conversion Price in accordance with Section 7.4 and shall prepare a certificate
signed by the President or Chief Financial Officer of the Company setting forth
the adjusted Conversion Price and showing in reasonable detail the facts upon
which such adjustment is based, and such certificate shall forthwith be
delivered to each Holder.
7.6 Notice of Certain Corporate Action. In case:
(a) the Company shall declare a stock dividend (or any other
distribution) on its Common Stock or a subdivision or combination of the
outstanding shares of Common Stock; or
(b) of any reclassification of the Common Stock (other than a
subdivision or combination of the outstanding shares of Common Stock), or of any
consolidation, merger or share exchange to which the Company is a party and for
which approval of any stockholders of the Company is required, or of the sale or
transfer of all or substantially all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(d) the Company shall commence a tender offer for all or a portion of
the outstanding shares of Common Stock (or shall amend any such tender offer to
change the maximum number of shares being sought or the amount or type of
consideration being offered therefor);
then the Company shall cause to be delivered to the Holder, at least ten days
prior to the applicable record, effective or expiration date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such stock dividend, or, if a record is not to be
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taken, the date as of which the holders of Common Stock of record who will be
entitled to such dividend are to be determined, (y) the date on which such
reclassification is expected to become effective, 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, share exchange, sale,
transfer, dissolution, liquidation or winding up, or (z) the date on which such
tender offer commenced, the date on which such tender offer is scheduled to
expire unless extended, the consideration offered and the other material terms
thereof (or the material terms of any amendment thereto). Neither the failure to
give any such notice nor any defect therein shall affect the legality or
validity of any action described in clauses (a) or (b) of this Section 7.6.
7.7 Taxes on Conversions. The Company will pay any and all original
issuance, transfer, stamp and other similar taxes that may be payable in respect
of the issue or delivery of shares of Common Stock on conversion of the
Convertible Notes pursuant hereto.
7.8 Covenant as to Common Stock. The Company covenants that all shares of
Common Stock which may be issued upon conversion of Convertible Notes will upon
issue be validly issued, fully paid and will rank equally and be of the same
class as the shares of Common Stock outstanding on the conversion date.
7.9 Provisions as to Consolidation, Merger or Sale of Assets. In case of
any consolidation of the Company with, or merger of the Company into, any other
Person, any merger of another Person into the Company where the Company is not
the surviving person (other than a merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock) or any sale or transfer of all or substantially all of the assets
of the Company, the Person formed by such consolidation or resulting from such
merger or which acquires such assets, as the case may be, shall execute and
deliver to the Holder an agreement to assume the Convertible Notes providing
that the Holder of each Convertible Note then outstanding shall have the right
thereafter, during the period such Convertible Note shall be convertible as
specified in Section 7.1, to convert such Convertible Note into the kind and
amount of securities, cash and other property, if any, receivable upon such
consolidation, merger, sale or transfer by a holder of the number of shares of
Common Stock into which such Convertible Note might have been converted
immediately prior to such consolidation, merger, sale or transfer, assuming such
holder of Common Stock (i) is not a Person with which the Company consolidated
or into which the Company merged or which merged into the Company or to which
such sale or transfer was made, as the case may be (a "Constituent Person"), or
an Affiliate of a Constituent Person and (ii) failed to exercise his rights of
election, if any, as to the kind or amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer. Such
supplemental instrument shall provide for adjustments which, for events
subsequent to the effective date of such supplemental instrument, shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section. The above provisions of this Section 7.9 shall similarly apply to
successive consolidations, mergers, sales or transfers.
8. Covenants. The Company agrees that, so long as any amount payable under
this Convertible Note remains unpaid:
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8.1 Payment of Securities. The Company shall promptly make all payments in
respect to the Convertible Notes on the dates and in the manner provided for in
the Convertible Notes or pursuant to the Purchase Agreement.
8.2 Current Public Information. The Company shall file all reports
required to be filed by it under the Securities Act and the Securities Exchange
Act and the rules and regulations adopted by the SEC thereunder to the extent
required to enable the holders of Restricted Securities to sell Restricted
Securities pursuant to (i) Rule 144 adopted by the SEC under the Securities Act
(as such rule may be amended from time to time) or any similar rule or
regulation hereafter adopted by the SEC or (ii) a registration statement on Form
S-3 or any similar registration form hereafter adopted by the SEC. Upon request,
the Company shall deliver to any holder of Restricted Securities a written
statement as to whether it has complied with such requirements.
8.3 Financial Statements and Other Information. The Company shall deliver
to the Holders (so long as any Holder holds any Convertible Note):
(a) as soon as available but in any event within 45 days after the
end of each quarterly accounting period in each fiscal year, unaudited
statements of operations and cash flows of the Company for such quarterly period
and for the period from the beginning of the fiscal year to the end of such
quarterly period, and unaudited balance sheets of the Company as of the end of
such quarterly period, each of which statements shall be true and correct in all
material respects prepared in accordance with generally accepted accounting
principles, consistently applied (subject to the absence of footnote disclosures
and to normal year-end adjustments for recurring adjustments) and shall be
certified by the Company's chief financial officer;
(b) within 90 days after the end of each fiscal year, audited
statements of operations and cash flows of the Company for such fiscal year, and
an audited balance sheet of the Company as of the end of such fiscal year, each
of which statements shall be true and correct in all material respects all
prepared in accordance with generally accepted accounting principles
consistently applied;
(c) promptly upon receipt thereof, any additional reports, management
letters or other detailed information concerning significant aspects of the
Company's operations or financial affairs given to the Company by its
independent accountants (and not otherwise contained in other materials provided
to such Holder hereunder);
(d) promptly (but in any event within five Business Days) after the
discovery or receipt of notice of any Default or Event of Default, any default
under any other material agreement to which the Company is a party, or any other
material adverse change, event or circumstance affecting the Company (including,
without limitation, the filing of any material litigation against the Company or
the existence of any dispute with any Person which involves a reasonable
likelihood of such litigation being commenced), a certificate of the Company's
Chief Executive Officer or Chief Financial Officer specifying the nature and
period of existence thereof and what actions the Company has taken and proposes
to take with respect thereto; and
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(e) within ten days after transmission thereof, copies of all
financial statements, proxy statements, reports and any other general written
communications which the Company sends to its stockholders and copies of all
registration statements and all regular, special or periodic reports which it
files with the SEC or with any securities exchange on which any of its
securities are then listed and copies of all press releases and other statements
made available generally by the Company to the public concerning material
developments in the Company's business.
8.4 Compliance Certificate. The Company shall deliver to the Holders
within 100 days after the end of each fiscal year of the Company (beginning with
the fiscal year ending on December 31, 1999) a certificate of the Company's
Chief Executive Officer or Chief Financial Officer stating whether or not to the
best knowledge of the signer thereof the Company is in default in the
performance and observation of any of the terms, provisions and conditions of
the Convertible Notes or the Purchase Agreement (without regard to any period of
grace or requirement of notice provided hereunder) and if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
8.5 Use of Proceeds. The Company shall use the proceeds from the sale of
the Convertible Notes under the Purchase Agreement to fund the Company's
continued research in its cardiovascular, cancer and other major disease
programs and general working capital. The Company shall not use the proceeds
from the sale of the Convertible Notes under the Purchase Agreement, directly or
indirectly, for the purposes of purchasing or carrying any "margin securities"
within the meaning of Regulation G or T promulgated by the Board of Governors of
the Federal Reserve Board or for the purpose of arranging for the extension of
credit, secured directly or indirectly, in whole or in part by collateral that
includes any "margin securities."
8.6 Senior Indebtedness. So long as any amounts under the Convertible
Notes remaining outstanding, the Company shall not without the prior written
consent of a majority of the Holders of the Convertible Notes then outstanding,
authorize, issue, incur, assume, guarantee, suffer to exist or enter into any
agreement providing for the issuance of, any Senior Indebtedness that in the
aggregate exceeds $5,000,000. The Company shall not incur, assume, guarantee or
suffer to exist any Indebtedness, other than Indebtedness evidenced by the
Convertible Notes, that is subordinate in right of payment to any Senior
Indebtedness, unless such Indebtedness, by its terms, or the terms of the
instrument creating or evidencing it, is pari passu with or subordinate in right
----------
of payments to the Convertible Notes.
8.7 Consolidation or Merger. The Company shall consolidate or merge with
or into another Person only if (i) such Person shall expressly assume the due
and punctual payment of the Accreted Value of the Convertible Notes and the
performance or observance of every covenant on the part of the Company to be
performed or observed and shall have provided for the conversion rights in
accordance with the terms of the Convertible Notes, (ii) immediately after
giving effect to such transaction, no Event of Default shall have occurred and
be continuing, (iii) such consolidation, merger, conveyance, transfer or lease
does not adversely affect the validity or enforceability of the Convertible
Notes and (iv) the Person formed by such consolidation or into which the Company
is merged shall not be a United States Real Property Holding Corporation within
the meaning of Section 897(c)(2) of the Internal Revenue Code of 1986, as
amended.
21.
<PAGE>
8.8 Nasdaq Quotation. Promptly after the Closing Date, the Company shall
promptly prepare and submit to the Nasdaq National Market (or any other exchange
or quotation system on which the Company's Common Stock is then traded) a
listing application covering the Common Stock to be issued to the Holders upon
conversion of the Convertible Notes.
8.9 Additional Amounts. Any and all amounts payable by the Company to each
Holder, under or with respect to the Convertible Notes will be paid without any
deduction or withholding for or on account of any present or future tax, duty,
levy, impost, assessment or other governmental charge (including any interest or
penalties with respect thereto) imposed or levied by or on behalf of any
jurisdiction or by any authority or agency therein or thereof having power to
tax (hereinafter "Withholding Taxes") unless the Company or any other person is
required by any law or regulation (or by the interpretation or administration
thereof) to make any deduction or withholding from any payment with respect to
Withholding Taxes. In such an event, the Company will pay an additional amount
in cash ("Additional Amount") as will result (after deduction of such
Withholding Taxes) in the payment to the Holder of such Convertible Note of the
amount that would have been payable in respect of such Convertible Note had no
such withholding or deduction been required, except that no Additional Amount
shall be so payable for or on account of: (1) any Withholding Tax that would not
have been imposed but for the fact that such Holder was a resident, domiciliary
or national of, or engaged in business or maintained a permanent establishment
or was physically present in, the United States or otherwise has some connection
with the United States other than the mere ownership of, or receipt of payment
under, such Convertible Note; (2) subject to the provision relating to a gross
basis tax set forth below, any tax, assessment or other governmental charge
which is payable otherwise than by withholding from payments on the Convertible
Notes (which non-excluded taxes shall include only taxes imposed on a gross tax
basis by the United States or any political subdivision thereof); (3) any
Withholding Tax that is imposed or withheld by reason of the failure to comply
by the Holder of such Convertible Note after the written request by the Company,
(a) to provide information concerning the nationality, residence or identity of
such Holder or such beneficial owner or (b) to make any declaration or other
similar claim or satisfy any information or reporting requirement, which, in the
case of (a) or (b), is required or imposed by a statute, treaty, regulation or
administrative practice of the United States or any political subdivision or
taxing authority thereof or therein as a precondition to exemption from all or
part of such withholding, deduction, tax, assessment or other governmental
charge and which Holder is lawfully entitled to provide or make; or (4) any
combination of clauses (1), (2) and (3); nor shall such Additional Amounts be
paid with respect to any payment on any such Convertible Note to any such Holder
who is a fiduciary or partnership to the extent that such payment would be
required by the laws of the United States or any political subdivision or taxing
authority thereof or therein to be included in the income for tax purposes of a
settlor with respect to such fiduciary or a member of such partnership who would
not have been entitled to such Additional Amounts had it been the Holder of the
Convertible Note; nor, if such Holder is not the Purchaser, shall any Additional
Amounts be payable in excess of the Additional Amounts that would be payable if
such Holder was the Purchaser. Whenever there is mentioned, in any context, any
payment on the Convertible Notes, such mention shall be deemed to include
mention of the payment of Additional Amounts to the extent that, in such
context, Additional Amounts are, were or would be payable in respect thereof. In
addition, for these purposes, if and to the extent a gross basis tax is being
imposed on the Holder as a substitute for any Withholding Tax for
22.
<PAGE>
which an Additional Amount would otherwise be payable, such Additional Amount
would still be payable by the Company in the form of reimbursement to Holder,
and the Company agrees to pay any interest, penalties or addition to the gross
basis tax only in the event that such interest, penalties or addition to the
gross basis tax is directly attributable to actions taken or omissions made by
or on behalf of the Company. The Company shall pay to the relevant taxing or
other authority the full amount of the deduction or withholding made by it and
promptly forward to such Holder copies of official receipt or other evidence
showing that the full amount of any such deduction or withholding has been paid
over to the relevant taxation or other authority before the date on which
penalties attach thereto.
8.10 Cash Dividends. So long as any amounts under the Convertible Notes
remain outstanding, the Company shall not authorize for issuance or pay any cash
dividend on the Common Stock of the Company until such time as the Company has
paid the accrued but unpaid Accretion Portion of any outstanding Convertible
Notes.
8.11 Incurrence of Indebtedness. So long as any amounts under the
Convertible Notes remain outstanding, the Company shall not incur any
Indebtedness that by the terms of the instrument or instruments by which such
Indebtedness was created or incurred expressly provides (A) that it (i) is
junior in right of payment to the Convertible Notes or (ii) ranks pari passu in
right of payment with the Convertible Notes and any amendments, modifications or
supplements to, or any renewals, extensions, deferrals, refinancings and
refundings of, any of the foregoing, and (B) that it is secured by any lien on
any asset or property of the Company now owned or hereafter acquired by the
Company; provided, however, this covenant shall not apply to any capital leases
or assets subject to purchase money security interests.
9. Amendment And Waiver. Except as otherwise expressly provided herein, the
provisions of this Convertible Note may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of Holders
of at least a majority in Accreted Value of the Convertible Notes then
outstanding; provided that no such amendment or waiver shall (i) extend the
final maturity of any Convertible Note, or reduce the Accreted Value thereof, or
reduce any amount payable on the redemption thereof, or impair or affect the
rights of any Holder to institute suit for the payment thereof or adversely
affect the ranking of the Convertible Notes with respect to the outstanding
Indebtedness of the Company, or adversely affect the right to convert any
Convertible Note, without the consent of each Holder of each Convertible Note so
affected, or (ii) reduce the aforesaid percentage of Accreted Value of the
Convertible Notes, the consent of the Holders of which is required for any such
amendment or waiver, without the consent of the Holders of all Convertible Notes
then outstanding. The Company shall promptly notify all Holders of Convertible
Notes after the making of any amendment or waiver pursuant to this Section 9.
10. Cancellation. After all amounts at any time owed on this Convertible Note
have been indefeasibly paid in full, this Convertible Note shall be surrendered
to the Company for cancellation and shall not be reissued.
11. Place Of Payment. Payments on the Convertible Notes shall be made to the
Holder at the following address:
23.
<PAGE>
Artisan Equity Limited
c/o Island Circle Limited
P.O. Box HM 1186
Hamilton HMEX, Bermuda
Attn: President
or to such other address or to the attention of such other person or, in the
case of wire transfer, to the bank account, specified by prior written notice to
the Company.
12. Business Days. If any payment is due, or any time period for giving notice
or taking action expires, on a day that is not a Business Day, the payment shall
be due and payable on, and the time period shall automatically be extended to,
the next Business Day immediately following such day, and the principal shall
continue to accrue in value at the required rate hereunder until any such
payment is made.
13. Usury Laws. It is the intention of the Company and the Holder to conform
strictly to all applicable usury laws now or hereafter in force, and any of the
Accretion Portion payable under this Convertible Note shall be subject to
reduction to the amount not in excess of the maximum legal amount allowed under
the applicable usury laws as now or hereafter construed by the courts having
jurisdiction over such matters. If the maturity of this Convertible Note is
accelerated by reason of an election by the Holder resulting from an Event of
Default, voluntary prepayment by the Company or otherwise, then the Accretion
Portion may never include more than the maximum amount permitted by law,
computed from the date hereof until payment, and any Accretion Portion in excess
of the maximum amount permitted by law shall be canceled automatically and, if
theretofore paid, shall at the option of the Holder either be rebated to the
Company or credited on the Principal Amount of this Convertible Note, or if this
Convertible Note has been paid, then the excess shall be rebated to the Company.
The aggregate of all the Accretion Portion (whether designated as Accretion
Portion, service charges, points or otherwise) contracted for, chargeable, or
receivable under this Convertible Note shall under no circumstances exceed the
maximum legal rate upon the unpaid principal balance of this Convertible Note
remaining unpaid from time to time. If the Accretion Portion does exceed the
maximum legal rate, it shall be deemed a mistake and such excess shall be
canceled automatically and, if theretofore paid, rebated to the Company or
credited on the principal amount of this Convertible Note, or if this
Convertible Note has been repaid, then such excess shall be rebated to the
Company.
14. Governing Law. This Convertible Note shall be governed by and construed and
enforced in accordance with the laws of the State of California, excluding
conflict of law principles, that would cause the application of laws of any
other jurisdiction.
15. Notices. Any notice, request or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered or if telegraphed or mailed by registered or certified
mail, postage prepaid, at the respective addresses of the parties as set forth
below:
24.
<PAGE>
To Company: Corvas International, Inc.
3030 Science Park Road
San Diego, California 92121
Attn: President or Chief Executive Officer
Phone (619) 455-9800
To Holder: Artisan Equity Limited
c/o Island Circle Limited
P.O. Box HM 1186
Hamilton HMEX, Bermuda
Attn: President
Phone (441) 292-2363
Fax (441) 295-4614
or to such other address or to the attention of such other
person specified by prior notice to the Company
[THIS SPACE INTENTIONALLY LEFT BLANK]
25.
<PAGE>
In Witness Whereof, the Company has executed and delivered this Convertible
Note on August 18th, 1999.
Corporate seal Corvas International, Inc.
a Delaware corporation
By: ______________________________________
Name: Randall E. Woods
Its: President and Chief Executive Officer
Artisan Equity Limited
a Bermuda company
By: ______________________________________
Name: Michael J. Drew
Title: Director
By: ______________________________________
Name: Susan E. Fairhurst
Title: Company Secretary
Attested:
_____________________________________________
Name: Carolyn Felzer
Title: Assistant Secretary
[5.5% Convertible Senior Subordinated Note Due 2006]
<PAGE>
Exhibit B
REGISTRATION RIGHTS AGREEMENT
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement, dated as of August 18, 1999 (this
"Agreement"), is made by and among Corvas International, Inc., a Delaware
corporation (the "Company") and Artisan Equity Limited, the purchaser of the
Company's 5.5% Senior Subordinated Convertible Notes due 2006 (the "Purchaser,
and together with the Company, the "Parties").
This Agreement is made pursuant to the Convertible Note Purchase Agreement,
dated as of August 18, 1999 (as amended and modified from time to time, the
"Purchase Agreement"), between the Company and Purchaser, which provides for the
sale by the Company to Purchaser of up to $10,000,000 principal amount of the
Company's 5.5% Senior Subordinated Convertible Notes due 2006. In order to
induce Purchaser to enter into the Purchase Agreement, the Company has agreed to
provide the registration rights set forth in this Agreement. The execution of
this Agreement is a condition to the closing under the Purchase Agreement.
The Parties hereby agree as follows:
1. Certain Definitions. Except as defined in this Agreement, capitalized
terms used herein and not otherwise defined shall have the meaning ascribed to
them in the Purchase Agreement. As used in this Agreement, the following terms
shall have the following respective meanings:
"SEC" means the United States Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value $0.001 per
share.
"Convertible Notes" means the 5.5% Senior Subordinated Convertible Notes
due 2006 of the Company to be issued to Purchaser pursuant to the Purchase
Agreement.
"Holder" means any person owning of record Registrable Securities that have
not been sold to the public or any permitted assignee of record of such
Registrable Securities in accordance with the Purchase Agreement.
"Registrable Securities" means (a) the shares of Common Stock to be issued
upon the conversion of the issued and outstanding Convertible Notes that are
Restricted Securities, (b) the shares of Common Stock to be issued upon the
redemption of the issued and outstanding Convertible Notes that are Restricted
Securities and (c) any Common Stock of the Company issued as (or issuable upon
the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, such above-described securities.
"Restricted Securities" means any and all Convertible Notes upon original
issuance thereof (and any shares of Common Stock issuable upon conversion
thereof or upon the payment of any accretion on the Convertible Notes other than
pursuant to an effective registration statement under the Securities Act) and at
all times subsequent thereto until, as to any restricted security, (i) the sale
of such restricted security has been effectively registered under the Securities
Act and such restricted security has been disposed of in accordance with the
method of
<PAGE>
distribution set forth in the Registration Statement relating thereto, or (ii)
it is distributed to the public, or is otherwise able to be sold, pursuant to
Rule 144(k) (or any similar provision then in force, but not Rule 144A) under
the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the SEC thereunder,
all as the same shall be in effect at the time.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
SEC thereunder, all as the same shall be in effect at the time.
"Selling Expenses" means all underwriting discounts and selling commissions
applicable to the sale.
"Special Counsel" means Shearman & Sterling, special counsel to Purchaser,
or such other special counsel as may be designated in writing to the Company by
the holders of a majority in aggregate Principal Amount at maturity of
Registrable Securities outstanding.
2. Shelf Registration.
(a) Restrictions on Transfer. Each holder of Registrable Securities
agrees not to make any disposition of all or any portion of the Registrable
Securities unless and until:
(i) there is in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound by the
terms of this Agreement, (B) such holder of Registrable Securities shall have
notified the Company of the proposed disposition and shall have furnished the
Company with a detailed statement of the circumstances surrounding the proposed
disposition, and (C) if reasonably requested by the Company, such holder of
Registrable Securities shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company, that such disposition will not
require registration of such shares under the Securities Act. It is agreed that
the Company will not require opinions of counsel for transactions made pursuant
to Rule 144 except in unusual circumstances or for transfers by a Purchaser to
an affiliate (as defined in Rule 405 of the Securities Act).
(b) First Closing. Within 30 days after the Closing Date, the Company
shall file a registration statement on Form S-3 (or successor form) or if at the
time of the filing the Company is no longer eligible to file on Form S-3, on
Form S-1 (the "First Registration Statement") pursuant to Rule 415 (or any
similar rule that may be adopted by the SEC) under the Securities Act, covering
the resale of all of the Registrable Securities assuming that the total number
of Registrable Securities equals the Accreted Value at the Stated Maturity of
the Convertible Notes issued at First Closing divided by $3.25. The Company
agrees to use its reasonable best efforts to cause the First Registration
Statement to be declared effective by the SEC within 90 days of the Closing Date
and thereafter to maintain the effectiveness of the First Registration Statement
until the earlier to occur of: (i) such time as all the Registrable
<PAGE>
Securities registered in the First Registration Statement have been sold, or
(ii) such time as all the Registrable Securities are salable in the public
markets within a three month period under the volume restrictions under Rule 144
as promulgated under the Securities Act.
(c) Second Closing. In the event that a Second Closing occurs
pursuant to the Purchase Agreement (the "Second Closing Date"), within 30 days
after the Second Closing Date, the Company shall file a registration statement
on Form S-3 (or successor form) (the "Second Registration Statement") pursuant
to Rule 415 (or any similar rule that may be adopted by the SEC) under the
Securities Act, covering the resale of all of the Registrable Securities not
covered by the First Registration Statement assuming that the total number of
Registrable Securities equals the Accreted Value at the Stated Maturity of the
Convertible Notes issued at the Second Closing divided by $3.25. The Company
agrees to use its reasonable best efforts to cause the Second Registration
Statement to be declared effective by the SEC within 90 days of the Second
Closing Date and thereafter to maintain the effectiveness of the Second
Registration Statement until the earlier to occur of: (i) such time as all the
Registrable Securities registered on the Second Registration Statement have been
sold, or (ii) such time as all the Registrable Securities are salable in the
public markets within a three month period under the volume restrictions under
Rule 144 as promulgated under the Securities Act.
3. Registration Procedures. If and whenever the Company is required by
the provisions of Section 2 to effect the registration of any Registrable
Securities under the Securities Act, the Company shall, as expeditiously as
reasonably possible:
(a) Prepare and file with the SEC within the time period specified in
Section 2 hereof, a registration statement with respect to such Registrable
Securities and use its reasonable best efforts to cause such registration
statement to become effective;
(b) As expeditiously as reasonably practicable, prepare and file with
the SEC such amendments and post-effective amendments to the registration
statement as may be necessary to keep the registration statement effective for
the applicable period, cause the related Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) under the Securities Act;
(c) promptly notify the Special Counsel and notify such registered
holders of Registrable Securities (and in each case, if requested, confirm any
such oral or telephonic notice in writing), (i) when a Prospectus or any
Prospectus supplement or post-effective amendment related to such Registrable
Securities (A) has been filed and (B) with respect to a registration statement
or any post-effective amendment related to such Registrable Securities, when the
same has been filed and has become effective, (ii) of the receipt of any
comments from the SEC relating to a registration statement, (iii) of any request
by the SEC for amendments or supplements to a registration statement or related
Prospectus or for additional information, (iv) of the issuance by the SEC of any
stop order suspending the effectiveness of a registration statement or the
initiation of any proceedings for that purpose, (v) if at any time the
representations and warranties of the Company contained in the Purchase
Agreement or the 5.5% Convertible Senior Subordinated Note due August 18, 2006
in connection with the sale of Restricted Securities by selling holders thereof
cease to be true and correct in all material respects, (vi) 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 or
<PAGE>
exchange in any jurisdiction of the United States of America or the initiation
of any proceeding for such purpose, (vii) of the happening of any event that
makes any statement of a material fact made in such registration statement or
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue or that requires the making of any changes in a
registration statement or related Prospectus so that such documents will not
contain any untrue 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
(provided that the timely filing of a report under the Securities Exchange Act
which is incorporated by reference in the registration statement and related
Prospectus shall constitute effective notice under this subsection (vii)), and
(viii) of the determination of the Company that a post-effective amendment to a
registration statement would be appropriate;
(d) use its reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of a registration statement or the lifting of
any suspension of the qualification (or exemption from qualification) of any of
the Registrable Securities for sale or exchange in any jurisdiction of the
United States of America, as promptly as practicable;
(e) if reasonably requested by any Holder of Registrable Securities
covered by a registration statement, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment such information as such Holder
reasonably requests to be included therein as is required by applicable law or
as necessary so that the registration statement does not include an untrue
statement of a material fact or omit to state a material fact with respect to
such Holder or such Holder's planned method of distribution, (ii) make all
required filings of such Prospectus supplement or such post-effective amendment
as soon as the Company has received notification of the matters to be
incorporated in such Prospectus supplement or such post-effective amendment, and
(iii) supplement or make amendments to any registration statement as is required
by applicable law;
(f) furnish to each selling Holder of Registrable Securities upon
request, and the Special Counsel, without charge, at least one conformed copy of
the registration statement or statements and any post-effective amendment
thereto, including financial statements and schedules, without charge, as well
as all documents incorporated therein by reference or deemed incorporated
therein by reference and all exhibits (including those previously furnished or
incorporated by reference), at the earliest practicable time under the
circumstances after the filing of such documents with the SEC;
(g) promptly deliver to each Holder of Registrable Securities and the
Special Counsel, without charge, such number of copies of the Prospectus or
Prospectuses (including each preliminary prospectus) and any amendment or
supplement thereto as they may reasonably request; the Company consents to the
use of such Prospectus or any amendment or supplement thereto in accordance with
applicable law by each of the selling Holders of Registrable Securities in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus or any amendment or supplement thereto in accordance with
applicable law;
(h) prior to any public offering of Registrable Securities, use its
reasonable best efforts to register or qualify or cooperate with the selling
Holder of Registrable Securities and the Special Counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale, as the case
may be, under the securities or Blue Sky laws of such state or local
jurisdictions in the United
<PAGE>
States as any seller reasonably requests in writing; keep each such registration
or qualification (or exemption therefrom) effective during the period such
registration statement is required to be kept effective and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the applicable
registration statement; provided, however, that the Company will not be required
to (i) qualify generally to do business in any jurisdiction where it is not then
so qualified, (ii) take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject, (iii) take any
action that would subject it to taxation in any jurisdiction where it is not
then subject or (iv) register or qualify securities prior to the effective date
of any registration statement under Section 2 hereof; and
(i) upon the occurrence of any event contemplated by paragraph
3(c)(vii) or 3(c)(viii) above, as promptly as practicable thereafter, prepare
and file with the SEC a supplement or post-effective amendment to the applicable
registration statement or a supplement to the related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities being
sold thereunder, such Prospectus will not 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.
4. Information and Limitations on Distributions. If and whenever the
Company is required by the provisions of Section 2 to effect the registration of
any Registrable Securities under the Securities Act, the Company may require
each selling Holder of Registrable Securities as to which any registration is
being effected to furnish to the Company such information regarding the
distribution of such securities as the Company may from time to time reasonably
request in writing. Notwithstanding any other provision of the Agreement,
following the effectiveness of any registration statement filed pursuant to
Section 2 hereunder, the Company may, at any time before the Convertible Notes
are converted into Common Stock of the Company pursuant to the terms of the
Purchase Agreement, suspend the effectiveness of such registration statement for
up to no longer than an aggregate of ninety (90) days in any 12 month period,
and at any time after the Convertible Notes are converted into Common Stock of
the Company pursuant to the terms of the Purchase Agreement, suspend the
effectiveness of such registration statement for up to no longer than an
aggregate of forty-five (45) days in any 12 month period (a "Suspension
Period"), by delivering a signed certificate of an authorized officer to Holder
that in the good faith judgment of the Board of Directors of the Company, it
would be seriously detrimental to the Company and its stockholders to disclose
any previously undisclosed material corporate development that would be required
to be disclosed if the registration statement is not suspended. The Company will
use its best efforts to minimize the length of any Suspension Period. Each
Holder agrees that, upon the receipt of any notice from the Company of a
Suspension Period, each Holder will not sell any Registrable Securities pursuant
to any registration statement covering such Registrable Securities until such
Holder (i) is advised in writing by the Company that the use of the applicable
prospectus may be resumed, (ii) has received copies of any additional,
supplemental or amended prospectus, if applicable, and (iii) has received copies
of any additional or supplemental filings which are incorporated or deemed to be
incorporated by reference in such prospectus.
5. Termination of Registration Rights. All registration rights granted
under Section 2 shall terminate and be of no further force and effect upon the
earlier to occur of: (i)
<PAGE>
such time as all the Registrable Securities registered in the Registration
Statement have been sold or (ii) such time as all the Registrable Securities are
salable by the Holders thereof in the public markets within a three month period
under the volume restrictions under Rule 144 as promulgated under the Securities
Act
6. Rule 144 Reporting. With a view of making available to the holders of
Registrable Securities the benefits of certain rules and regulations of the SEC
which may permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 or any similar or analogous rule promulgated
under the Securities Act;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Securities Exchange Act; and
(c) So long as any holder of Registrable Securities owns any
Registrable Securities, furnish to such holder forthwith upon request: a written
statement by the Company as to its compliance with the reporting requirements of
said Rule 144 of the Securities Act, and of the Exchange Act; a copy of the most
recent annual or quarterly report of the Company; and such other reports and
documents as a holder may reasonably request in availing itself of any rule or
regulation of the SEC allowing it to sell any such securities without
registration.
7. Expenses. The Company shall pay all fees and expenses incurred by it
or each Holder incident to the performance of or compliance with this Agreement
by the Company including, without limitation, (i) all Securities Act and
Securities Exchange Act, stock exchange registration and filing fees, (ii) all
fees and expenses incurred in connection with compliance with state securities
or Blue Sky laws, and (iii) all expenses in preparing or assisting in preparing,
printing and distributing any Registration Statement, any Prospectus, any
amendments or supplements thereto, or other documents relating to the Company's
performance of and compliance with this Agreement, including without limitation,
any fees and expenses of legal counsel and accountants of the Company (the
"Authorized Registration Expenses"). Such expenses shall not include expenses,
fees and disbursements of Special Counsel, any printing costs incurred at the
election of each Holder, Selling Expenses and all other expenses, fees and
disbursements incident to any registration either initiated or effected pursuant
to this Agreement which are not explicitly included as Authorized Registration
Expenses.
8. Indemnification. In the event any Registrable Securities are included
in a registration statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers and directors of each Holder,
any underwriter (as defined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Securities Exchange Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Securities Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a
<PAGE>
"Violation") by the Company: (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Securities Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Securities Exchange Act or any state securities law in connection with
the offering covered by such registration statement; and the Company will pay as
incurred to each such Holder, partner, officer, director, underwriter or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided however, that the indemnity agreement contained in
this Section 8 shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company, which consent shall not be unreasonably withheld, nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, director, underwriter or controlling person of
such Holder.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration qualifications or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, its officers and each person, if
any, who controls the Company within the meaning of the Securities Act, any
underwriter and any other Holder selling securities under such registration
statement or any of such other Holder's partners, directors or officers or any
person who controls such Holder, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, underwriter or other such Holder, or partner,
director, officer or controlling person of such other Holder may become subject
under the Securities Act, the Securities Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder, the
partners, officers and directors of each Holder, any underwriter (as defined in
the Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Securities
Exchange Act under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such Holder
will pay as incurred any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person, underwriter or other
Holder, or partner, officer, director or controlling person of such other Holder
in connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 8 shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld; provided
further, that in no event shall any indemnity under this Section 8 exceed the
net proceeds from the offering received by such Holder.
<PAGE>
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 8, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding; and provided, further,
that no failure of an indemnified party to deliver such notice to the
indemnifying party shall relieve the indemnifying party from any of its
obligations to the indemnified party under this Agreement except to the extent
that the indemnifying party is materially prejudiced by such failure, and shall
not relieve the indemnifying party from any other obligation or liability that
it may have to any indemnified party otherwise than under this Agreement.
(d) The obligations of the Company and each Holder under this Section
8 shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement. No indemnifying
party, in the defense of any such claim or litigation, shall, except with the
consent of each indemnified party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation.
9. Contribution. If for any reason the indemnity set forth in Section 8
is unavailable or is insufficient to hold harmless an indemnified party, then
the indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of the aggregate losses, claim, damages,
liabilities and expenses of the nature contemplated by said indemnity (i) in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and such indemnified party on the other
(determined by reference to, among other things, whether the untrue statement of
a material fact or omission to state a material fact relates to information
supplied by the indemnifying party or such indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission), or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law or provides a lesser sum
to such indemnified party than the amount hereinafter calculated, in such
proportion as is appropriate to reflect not only the relative fault of the
indemnifying party and such indemnified party but also the relative benefits
received by the indemnifying party on the one hand and such indemnified party on
the other, as well as any other relevant equitable considerations.
The Parties agree that it would not be just and equitable if contribution
pursuant to this Section 9 were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or expenses referred to in such paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such
<PAGE>
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 9, a Holder shall not
be required to contribute any amount in excess of the amount by which the net
proceeds of the sale of Registrable Securities sold by such Holder and
distributed to the public exceeds the amount of any damages which such Holder
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person which is not guilty of such
fraudulent misrepresentation.
10. Arbitration. A party asserting the existence of any dispute or
controversy arising out of or in connection with this Agreement (a "Dispute"),
including any Dispute relating to the existence, materiality or cure of a
claimed material breach, shall notify the other parties to this Agreement in
writing of the existence and subject matter of the Dispute. For a thirty (30)
day period following such notification, the parties shall meet and negotiate in
good faith to attempt to resolve the Dispute and shall escalate the Dispute to
the respective Chief Executive Officers of the parties if resolution is not made
within the first fifteen (15) days. If such efforts do not resolve the Dispute
within such thirty (30) day period, the Dispute shall be referred to and finally
resolved by arbitration under the rules of the American Arbitration Association,
and except for proceedings commenced to enforce an arbitration award, each party
hereby irrevocably waives its right to commence any proceeding in any court with
respect to any matter arising under this Agreement. The tribunal shall consist
of a sole arbitrator appointed jointly by the parties. In the case of the
parties failing to choose a sole arbitrator, the tribunal shall consist of three
arbitrators, two of whom shall be appointed by the respective parties and the
third arbitrator shall be appointed jointly by the first two. The place of
arbitration shall be San Diego County, California or such other location as the
parties shall agree. The language of the arbitration shall be English. No
arbitrator shall be an affiliate, employee, officer or director of either party
or of their respective affiliates, nor shall any arbitrator have any interest
that would be affected in any material respect by the outcome of the Dispute.
The decision of the sole arbitrator or of a majority of the arbitrators, where
applicable, shall be final and binding on the parties and their respective
successors and assigns. The decision shall not be subject to appeal or judicial
review except in circumstances of fraud. The prevailing party in any such
arbitration shall be entitled to recover reasonable fees of attorneys and other
professionals in addition to all court costs and arbitrator's fees which that
party may incur as a result. Judgment upon the award granted by the
arbitrator(s) may be entered in any court having jurisdiction over the relevant
party or its assets
11. Miscellaneous.
(a) All covenants and agreements contained in this Agreement by or on
behalf of any of the signatories shall bind and inure to the benefit of the
respective successors and permitted assigns of the signatories, whether so
expressed or not.
(b) All notices, consents and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given when
(a) delivered by hand, (b) sent by telecopier (with receipt confirmed), provided
that a copy is mailed by registered mail, return receipt requested, or (c) when
received by the addressee, if sent by Express Mail, Federal Express or other
express delivery service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate as to itself by notice to the other
parties):
<PAGE>
(i) If to the Company: 3030 Science Park Road, San Diego, CA
92121, Attention: President, telecopier no. (619) 455-5169; or
(ii) If to Purchaser: at the address set forth on the signature
page hereof.
(c) This Agreement shall be governed in all respects by the law of
the State of California, without giving effect to its principles regarding
conflicts of law.
(d) This Agreement may not be amended or modified, and no provision
hereof may be waived, except upon the approval of the Company and of the Holders
of at least sixty-six and two-thirds percent (66 2/3%) of the Registrable
Securities; provided, however, this Agreement may be amended to add additional
parties without the consent of any Holder. The failure of any of the Parties to
insist upon strict adherence to any term of this Agreement on any occasion shall
not be considered a waiver of that term or deprive such Party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Agreement.
(e) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(f) In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be in any way impaired thereby
so long as the economic and legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party, it being
intended that all of the rights and privileges of each Holder shall be
enforceable to the fullest extent permitted by law.
(g) This Agreement is intended by the parties as a final expression
of their agreement and a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, warranties or undertakings other
than those set forth or referred to herein. This Agreement supersedes all prior
agreements and understandings between the Parties with respect to such subject
matter.
<PAGE>
In Witness Whereof, the parties hereto have executed this Agreement on the
date first written above.
Corvas International, Inc.
a Delaware corporation
By: /s/ Randall E. Woods
------------------------------
Name: Randall E. Woods
Its: President and Chief Executive
Officer
Artisan Equity Limited
a Bermuda company
c/o Island Circle Limited
P.O. Box HM 1186
Hamilton HMEX, Bermuda
By: /s/ Michael J. Drew
------------------------------
Name: Michael J. Drew
Title: Director
By: /s/ Susan E. Fairhurst
------------------------------
Name: Susan E. Fairhurst
Title: Company Secretary
<PAGE>
Exhibit C
OPINION OF COUNSEL
<PAGE>
[LETTERHEAD OF ARTISAN EQUITY LIMITED APPEARS HERE]
August 18, 1999
Artisan Equity Limited
c/o Island Circle Limited
P.O. Box HM 1186
Hamilton HMEX, Bermuda
Re: Corvas International, Inc.
Ladies and Gentlemen:
We have acted as counsel for Corvas International, Inc., a Delaware corporation
(the "Company"), in connection with the issuance and sale of 5.5% Convertible
Senior Subordinated Note due 2006 dated August 18, 1999 (the "Convertible
Note"), to the Purchaser under the Note Purchase Agreement dated as of August
18, 1999 (the "Agreement"). We are rendering this opinion pursuant to Section
2.8 of the Agreement. Except as otherwise defined herein, capitalized terms
used but not defined herein have the respective meanings given to them in the
Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Agreement, the Convertible Note and the Registration Rights
Agreement dated August 18, 1999 between the Company and the Purchaser
(collectively with the Convertible Note, the "Related Agreements") by the
various parties and originals or copies certified to our satisfaction, of such
records, documents, certificates, opinions, memoranda and other instruments as
in our judgment are necessary or appropriate to enable us to render the opinion
expressed below. Where we render an opinion "to the best of our knowledge" or
concerning an item "known to us" or our opinion otherwise refers to our
knowledge, it is based solely upon (i) an inquiry of attorneys within this firm
who perform legal services for the Company, (ii) receipt of a certificate
executed by an officer of the Company covering such matters, and (iii) such
other investigation, if any, that we specifically set forth herein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Agreement and the Related Agreements), where
authorization, execution and delivery are prerequisites to the effectiveness of
such documents. We have also assumed: that all individuals executing and
delivering documents had the legal capacity to so execute and deliver; that you
have received all documents you were to receive under the Agreement and the
Related Agreements; that the Agreement and the Related Agreements are
obligations binding upon you;
<PAGE>
Artisan Equity Ltd.
August 18, 1999
Page Two
if you are a corporation or other entity, that you have filed any required
California franchise or income tax returns and have paid any required California
franchise or income taxes; and that there are no extrinsic agreements or
understandings among the parties to the Agreement or the Related Agreements that
would modify or interpret the terms of the Agreement and the Related Agreements
or the respective rights or obligations of the parties thereunder.
With your permission, we have assumed, without investigation, that: (a) the
Purchaser will purchase the Convertible Note in accordance with the terms of the
Agreement and the Related Agreements and (b) the Purchaser will act fairly, in
good faith and in a commercially reasonable manner in exercising its rights.
Our opinion is expressed only with respect to the federal laws of the United
States of America and the laws of the State of California and the General
Corporation Law of the State of Delaware. We express no opinion as to whether
the laws of any particular jurisdiction apply, and no opinion to the extent that
the laws of any jurisdiction other than those identified above are applicable to
the subject matter hereof.
We express no opinion as to the enforceability of provisions in the Agreement
and the Related Agreements restricting prepayment of an indebtedness or imposing
late charges, premiums, penalties, or forfeitures, including, without
limitation, a requirement for the payment thereof upon acceleration of the
Convertible Note.
We express no opinion regarding compliance with any law, rule or regulation
regarding maximum allowable interest rates.
We express no opinion with respect to the applicability or effect of any
pension, employee benefit or tax laws, including, without limitation, the
Internal Revenue Code, the California Revenue and Taxation Code and the Employee
Retirement Income Security Act of 1974, as amended, and other similar laws,
statutes, acts, regulations or ordinances, or any decrees or decisional law with
respect thereto. We are not rendering any opinion as to compliance with any
antifraud law, rule or regulation relating to securities or to the sale or
issuance thereof.
Our opinion in paragraph 1 below as to the good standing of the Company in the
State of Delaware is based solely upon our review of a good standing certificate
issued by the State of the State of Delaware. We have made no further
investigation.
With regard to our opinion in paragraph 4 below, we have examined and relied
solely upon a certificate executed by the Company's transfer agent, American
Stock Transfer & Trust Company, as to the number of shares of Common Stock,
Series A Preferred Stock and Series B Preferred Stock that are issued and
outstanding as reflected in the transfer's agents records. In addition, with
regard to our opinion in paragraph 4 below as to the number of shares of Common
<PAGE>
Artisan Equity Ltd.
August 18, 1999
Page Three
Stock reserved for issuance under outstanding options and warrants, we have
relied upon a certificate executed by an officer of the Company as to the
adjusted number of shares reserved for issuance and have made no further
investigation.
With regard to our opinion expressed in paragraph 7 below with respect to legal
proceedings, our inquiry has been limited to (i) obtaining a certificate from
officers of the Company to the effect that there are no legal proceedings
pending or threatened of the type described in such paragraph, (ii) reviewing
our files respecting all pending litigation matters to determine that we are not
acting as counsel of record for the Company on any such matters, and (iii) an
inquiry of attorneys within this firm who perform legal services for the Company
as to whether they are aware of any such pending or threatened action. We have
conducted no further investigation.
With regard to our opinion in paragraph 8 below with respect to the offer and
sale of (i) the Convertible Note and (ii) the shares of Common Stock issuable
upon conversion of the Convertible Note (the "Shares"), our opinion is given on
the basis of applicable law and the Agreement and the Related Agreements as of
the date hereof, and we do not give any opinion with respect to any changes in
the foregoing after the date hereof, and we have assumed compliance by the
Purchaser with its covenants in the Agreement and the Related Agreements.
With regard to our opinion in paragraph 9 below, we have relied upon the fact
that the conversion rate of $3.25 per share as set forth in the Convertible Note
is more than the greater of the book or market value of the Company's Common
Stock as of the date of issuance because (1) the Company's Common Stock had a
closing price of $2.626 per share on the Nasdaq Stock Market on August 17, 1999
as reported on Nasdaq-Amex.com and had a five day average closing price of
$2.682 on the Nasdaq Stock Market for the five trading days ending on August 17,
1999, based upon the closing prices reported on the Nasdaq-Amex.com and (2)
because, in reliance upon a certificate executed by an officer of the Company,
the market value of the Company's Common Stock is greater than the book value
per share of the Company's Common Stock.
We express no opinion nor have we undertaken any independent investigation to
determine whether the Company is insolvent, whether the Company will be rendered
insolvent by the transactions contemplated by the Agreement or the Related
Agreements, and after giving effect to such transactions, whether the Company
will be left with unreasonably small capital with which to engage in its
anticipated business and whether the Company will have intended to incur, or
will have believed it has incurred, debts beyond its ability to pay as such
debts mature.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
<PAGE>
Artisan Equity Ltd.
August 18, 1999
Page Four
1. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Delaware.
2. The Company has the requisite corporate power to own its property and
assets and to conduct its business as it is currently being conducted, is
qualified as a foreign corporation to do business in California, and, to the
best of our knowledge, is not required to qualify as a foreign corporation to do
business in any other jurisdiction in the United States.
3. The Agreement and the Related Agreements have been duly and validly
authorized, executed and delivered by the Company and constitute valid and
binding agreements of the Company enforceable against the Company in accordance
with their terms, except to the extent that enforcement thereof may be limited
by: (a) except as rights to indemnity under the Agreement and the Registration
Rights Agreement may be limited by applicable laws; (b) general equity
principles and the limitations on the availability of equitable relief,
including, without limitation, specific performance; (c) the effect of
applicable bankruptcy, insolvency, fraudulent transfer or conveyance,
reorganization, arrangement, suretyship, dissolution, moratorium, receivership
or other similar laws relating to or affecting creditor's rights generally; (d)
limitations created by or arising under statute or case law on a debtor's
ability to waive rights or benefits; (e) limitations created by or arising under
statute or case law on the enforceability of certain covenants and provisions of
agreements where (i) the breach of such covenants or provisions imposes
restrictions or burdens upon the debtor and it cannot be demonstrated that the
enforcement of such restrictions or burdens is reasonably necessary for the
protection of the creditor or (ii) the creditor's enforcement of such covenants
or provisions under the circumstances would violate the creditor's implied
covenant of good faith and fair dealing; (f) the effect of California Civil Code
Section 1717 and other statutes and judicial decisions on the recovery of
attorneys' fees in contract actions; (g) the effect of California Civil Code
Section 3433; (h) limitations imposed by applicable law on the appointment of
receivers; and (i) limitations imposed by law and public policy on
indemnification and exculpation.
4. Immediately prior to the issuance of the Convertible Note and the
simultaneous sale of 1,300,000 shares of Common Stock pursuant to Stock Purchase
Agreement, the Company's authorized capital stock consists of (a) 50,000,000
shares of Common Stock, $.001 par value, of which (excluding the shares to be
issued at closing) 15,487,277 shares are issued and outstanding, (b) 10,000,000
shares of Preferred Stock, $.001 par value, of which (1) 1,000,000 shares have
been designated Series A Convertible Preferred Stock, $.001 par value, all of
which are issued and outstanding, (2) 250,000 shares have been designated Series
B Convertible Preferred Stock, $.001 par value, all of which are issued and
outstanding, and (3) 500,000 shares have been designated Series C Junior
Participating Preferred Stock, $.001 par value, none of which is issued and
outstanding. To our best knowledge, there are no options, warrants, conversion
privileges, preemptive rights or other rights presently outstanding to
<PAGE>
Artisan Equity Ltd.
August 18, 1999
Page Five
purchase any of the authorized but unissued capital stock of the Company other
than the conversion privileges of Series A Convertible Preferred Stock, the
Series B Convertible Preferred Stock and the Series C Junior Participating
Preferred Stock, 710,493 shares of the Company's Common Stock reserved for
issuance under the Company's 1991 Incentive and Compensation Plan, 1,699,566
shares of Common Stock subject to outstanding options, 37,836 shares of the
Company's Common Stock reserved for issuance under the Employee Stock Purchase
Plan and 1,983,715 shares of the Company's Common Stock reserved for issuance
under outstanding warrants.
5. Upon issuance and delivery of the Convertible Note against payment
therefor in accordance with the Agreement, the Convertible Note shall be
convertible at the option of the holder thereof in accordance with the terms of
the Convertible Note. The Shares issuable upon conversion of the Convertible
Note have been duly authorized, and upon issuance and delivery against payment
therefor in accordance with the terms of the Convertible Note, will be validly
issued, fully paid and nonassessable.
6. The execution and delivery by the Company of, and the performance by
the Company of its obligations under, the Agreement and the Related Agreements
do not and will not (i) result in any violation of any provision of the
Company's Certificate of Incorporation or Bylaws or (ii) contravene any
provision of applicable law or any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Company entered against the
Company of which we are aware, the violation or contravention of which would
materially and adversely affect the Company, its assets, financial condition or
operations, or the transactions contemplated by the Agreement and the Related
Agreements.
7. To our knowledge, there are no legal or governmental proceedings
pending or overtly threatened against the Company or to which any of the
properties of the Company is subject which seek to enjoin or prevent the
issuance and sale of the Convertible Note and the transactions contemplated in
the Agreement and the Related Agreements.
8. In reliance on the representations and warranties of the Purchaser in
the Agreement, all consents, approvals, authorizations, or orders of, and
filings, registrations, and qualifications with any regulatory authority or
governmental body in the United States required for the consummation by the
Company for (i) the offer and sale of the Convertible Note and (ii) the offer
and sale of the Shares, have been made or obtained, except for (a) the filing of
a Form D pursuant to Securities and Exchange Commission Regulation D, (b) the
filing of a Notice of Transaction Pursuant To Section 25102(f) of the California
Corporate Securities Law of 1968 and any other applicable "blue sky" laws and
(c) the listing of the Shares on the Nasdaq National Market, as to which we
express no opinion.
<PAGE>
Artisan Equity Ltd.
August 18, 1999
Page Six
9. Assuming that the entire $6,500,000 principal of the Convertible Note
were converted into Shares as of the date hereof, the Company is not obligated
to obtain stockholder approval under Rule 4310(c)(25)(H)(d) of the NASD Manual
in effect as of the date hereof in order to issue and sell the Convertible Note
or to issue the Shares.
This opinion is intended solely for your benefit and is not to be made available
to or be relied upon by any other person, firm, or entity without our prior
written consent.
Very truly yours,
Cooley Godward llp
By: /s/ M. Wainwright Fishburn
----------------------------------
M. Wainwright Fishburn
